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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 of 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
Commission File Number 1-1969
CERIDIAN CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 52-0278528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8100 34th Avenue South
Minneapolis, Minnesota 55425
(Address of principal executive offices)
Telephone No.: (612) 853-8100
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which
registered:
Common Stock, par value $.50 New York Stock Exchange,
Inc.; The Chicago Stock
Exchange; and Pacific Stock
Exchange
Depositary Shares, each representing
a One One-Hundredth Interest in a
Share of 5/% Cumulative Convertible
Exchangeable Preferred Stock,
Par Value $100........................ New York Stock Exchange, Inc.
5/% Cumulative Convertible
Exchangeable Preferred Stock,
Par Value $100........................ None
5/% Convertible Subordinated
Debentures Due 2008................... None
Has the Registrant (1) filed all reports required by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and (2)
been subject to such 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 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. (X)
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of February 28, 1995 was $1,418,184,842.
The shares of Common Stock outstanding as of February 28, 1995 were
45,534,311.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1994 Annual Report to Stockholders of Registrant: Parts I & II
Portions of the Proxy Statement for Annual Meeting of Stockholders, May 10,
1995: Parts III and IV
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CERIDIAN CORPORATION
PART I
Item 1. Business.
Ceridian Corporation ("Ceridian" or the "Company"), known as Control
Data Corporation until June 1992, has been significantly reshaped through
divesting or discontinuing various business units and by narrowing and
reorienting the focus of certain of its continuing operations. As a result
of these reshaping efforts, the Company is comprised of two business
segments, Information Services and Defense Electronics.
Information Services Segment
The Information Services segment, which consists of Ceridian Employer
Services ("Employer Services") and Arbitron, provides technology-based
services on a repetitive or subscription basis as well as applications
software. The Information Services businesses collect, manage and analyze
data on behalf of customers, report information resulting from that process
to customers, and provide customers with related software applications and
services. The products and services provided by the Information Services
businesses address specified information management needs of other
businesses to help them to improve their productivity and competitive
position. The technology-based products and services of the Information
Services businesses are typically provided through long-term customer
relationships that result in a high level of recurring revenue.
Information regarding Information Services' revenue, operating profit or
loss and identifiable assets for the years 1992-1994 is in Note G, Segment
Data, on page 48 of the Company's 1994 Annual Report to Stockholders, which
is incorporated herein by reference.
Employer Services. Employer Services offers a broad range of products
and services designed to help employers more effectively manage their work
forces and the information that is integral to human resource processes.
These products and services include payroll processing, payroll tax filing
and training services; payroll, human resources management and benefits
administration software; and employee assistance programs. Employer
Services' revenue for the years 1992, 1993 and 1994 was $209.9 million,
$232.6 million and $303.3 million, respectively.
Markets. The employer services market covers a comprehensive range of
information management services and software and employer/employee
assistance services. These products and services include transaction-
oriented information management services such as payroll, tax filing and
benefits administration services; management support software and services
such as human resource information, skills management, time and attendance
and applicant tracking systems; employee-focused services such as employee
assistance programs; and other services such as compensation and benefits
consulting. The market for these products and services is expected to
continue to grow as companies continue to outsource administrative
services, seek to further automate internal processes, and avail themselves
of external expertise to foster high performance workplaces. The factors
driving the movement toward outsourcing include the increasing scope and
complexity of legislation regulating businesses and their employees, the
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rising costs of providing payroll and other employer services in-house and
the introduction of new types of employer services.
Traditionally, the employer services market consisted of payroll
processing, payroll tax filing and other services that were transaction-
based, generally routinized and technology-oriented. Although these types
of services continue to account for a significant portion of the employer
services market and demand for them continues to grow, the employer
services market is expanding into other value-added services that address
other aspects of the employment relationship, such as human resource
management, benefits administration, compensation, staffing, training
development and employee relations. For example, employers seek to combine
records for payroll and these value-added services to create a single
database of employee information for on-line inquiry, updating and
reporting in areas important to human resource administration and
management. Employer Services believes that the ability to provide a
number of these other services and to integrate payroll and human resource
information databases can be an important factor in customer retention
because it provides customers with a stronger connection to their payroll
service provider and offers a means to distinguish their service from
others provided in the market. Accordingly, it is increasingly important
for companies in the employer services market, particularly for those
targeting medium and large employers, to offer a wide range of services
that are designed to address a broad spectrum of employer services needs.
The Company segments the employer services market by classifying
employers into three categories: small (fewer than 75 employees), medium
(75 to 5,000 employees) and large (over 5,000 employees). Small employers
in the payroll services market are relatively price sensitive, tend to
focus more narrowly on payroll services and payroll tax filing and have low
costs in switching from one provider to another. Medium and large
employers generally require more complex, customized payroll services, have
a greater need for additional services and integrated databases and have
higher costs in switching from one provider to another.
Services. During 1994, payroll processing and payroll tax filing
services accounted for 82% of Employer Services' total revenue. Payroll
processing consists primarily of preparing and furnishing employee payroll
checks, direct deposit advices and supporting journals, summaries and other
reports. Payroll tax filing services consist primarily of processing
federal, state and local withholding taxes on behalf of employers based on
payroll information provided, and remitting those taxes along with
necessary reports to the appropriate taxing authorities. These payroll-
related services are typically priced on a fee-per-item-processed basis,
and quarterly revenue consequently fluctuates with the volume of items
processed. Revenue from payroll tax filing services also includes
investment income Employer Services receives from tax filing deposits
temporarily held pending remittance on behalf of customers to taxing
authorities. Over half of Employer Services' 1994 payroll tax filing
revenue was attributable to such investment income. As a result, quarterly
revenue and profitability will vary as a result of changes in interest
rates and in the amount of tax filing deposits held by Employer Services.
Because the volume of payroll items processed increases in the first and
fourth quarters of each year in connection with employers' year-end
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reporting requirements, and because the amount of tax filing deposits also
tends to be greatest in the first quarter, Employer Services' revenue and
profitability tend to be greater in those quarters.
Payroll processing is currently conducted by Employer Services at 31
district offices located throughout the United States, all of which are
linked in a nationwide network. Employer Services' payroll system allows
customers to input their own payroll data via personal computers, transmit
the data on-line to Employer Services for processing, retrieve reports and
data files from Employer Services and print reports and, in certain
instances, payroll checks or direct deposit advices on site. Customers can
also input payroll data by telephone or batch transmittal, with payroll
checks and related reports prepared by Employer Services at one of its
district processing centers. Employer Services' payroll system also
interfaces with both customer and third-party transaction processing
systems to facilitate services such as direct deposit of payroll checks.
Through its MiniData Services, Inc. subsidiary, the Company provides
payroll services to customers in the mid-Atlantic states with fewer than
100 employees.
Because Employer Services' existing payroll processing system
incorporates older technology, particularly the payroll processing software
utilized, the system requires a significant amount of manual intervention
and is relatively labor intensive to install, maintain and customize. As a
result, the Company decided in 1993 to upgrade that software in order to
achieve a payroll processing system that would be more highly automated,
easier and less costly to install and maintain and would provide greater
flexibility to customers in terms of product and service options. Toward
that end, the Company acquired Tesseract Corporation ("Tesseract") in
June 1994. Tesseract, which provides proprietary payroll processing
software to very large companies that process their payrolls internally,
has provided the Company with a proven payroll processing software
application that contains the features desired by the Company and is being
adapted to run in Employer Services' multi-customer data center
environment. The Company is capitalizing certain costs of this software
adaptation effort.
In connection with the decision to enhance its payroll processing
software, Employer Services also determined in late 1993 to seek additional
operational efficiencies by discontinuing payroll data processing in its
district offices and consolidating such processing in centralized
facilities. Toward that end, the Company entered into a technology
services agreement with Integrated Systems Solutions Corporation
("ISSC"), a wholly-owned subsidiary of International Business Machines
Corporation in January 1995. Under that agreement, the term of which
extends through December 31, 2004, ISSC will provide the centralized
payroll data processing services required by Employer Services in
connection with the program to consolidate payroll data processing from the
district offices into centralized facilities. The other aspects of
Employer Services' payroll processing activities, such as the printing of
checks and reports, will continue to occur in its district offices.
Employer Services believes that the technology services agreement with ISSC
represents the most expeditious, cost-effective and technologically sound
and secure means for it to effect the consolidation of its payroll data
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processing. The timing of this consolidation will principally be
determined by the timing of the Company's introduction of its enhanced
payroll processing software. The Company expects that beta testing of this
software with selected new and existing customers will begin in mid-1995,
that all new customers and additional existing customers will begin
utilizing the this software in the first quarter 1996, and that the
transition of the remainder of the existing customer base to the enhanced
software will begin in mid-1996 and continue for approximately eighteen
months.
Also in the fourth quarter 1993, Employer Services decided to
consolidate most aspects of telephonic customer support from its district
offices into a single national telephone customer support center. By
creating a national telephone support center, Employer Services believes
that it can improve customer service by creating a single point of contact
for most customer inquiries involving payroll processing or tax filing,
while at the same time eliminating inefficiencies inherent in the current
system involving multiple points of contact. Completion of the phased
transition of customers to the national center is expected to be completed
by the end of the first quarter 1995. Employer Services will, however,
retain the capability in the district offices to address certain customer
support needs.
Employer Services' payroll tax filing services are provided by its
Systems Tax Service ("STS") division located in Fountain Valley,
California. STS was acquired by the Company in October 1993 to provide the
Company with a more highly automated payroll tax filing system, and 1994
payroll tax filing processing for all of Employer Services' tax filing
customers was conducted on STS' system. The STS acquisition also expanded
Employer Services' tax filing customer base beyond employers who utilize
Employer Services' payroll processing service to include local and regional
payroll processors who utilize STS' tax filing service for their customers.
Further increasing the tax filing customer base was the December 1994
acquisition of the assets of Payroll Tax Management, Inc., a payroll tax
filing processor which had fiscal 1994 revenue of $3.8 million. As noted
earlier, compensation for providing tax filing services is a combination of
fee generated revenue and investment income from tax payments held pending
remittance to taxing authorities. During 1994, the Company established a
tax filing trust to hold these funds to more clearly evidence the fiduciary
capacity in which such funds are held.
Employer Services' human resource information service provides
application software to customers that enables them to combine their
payroll and human resource information databases and can serve as a
"front-end" to Employer Services' payroll processing system. This
enables the customer to create a single database of employee information
for on-line inquiry, updating and reporting in areas important to human
resource administration and management. Employer Services has developed
and expects to offer during 1995 an integrated human resource/payroll
information management software to run in a Windows* environment in
conjunction with its enhanced payroll processing software. Employer
* "Windows" is a trademark of Microsoft Corporation.
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Services also provides related human resources information management
consulting services.
Employer Services' employee assistance service provides confidential,
around-the-clock assessment and referral services to customers' employees
to help them address legal and financial problems, substance abuse, child
care, eldercare and other personal problems. Employer Services maintains a
network of professional counselors who are available to work with employees
to solve problems and to provide referrals to specialists if such referrals
are warranted by the circumstances. Employer Services expanded its
presence in the employee assistance field during 1994 by acquiring the
customer base of Human Effectiveness, Inc., which generated approximately
$1 million of revenue in 1994.
The acquisition of Tesseract and User Technology Services, Inc.
("UserTech") during 1994 have enabled Employer Services to further expand
its range of products and services. In addition to providing the Company
with the payroll processing software that will be the core of Employer
Services' enhanced payroll processing system, the Tesseract acquisition
provided payroll processing, human resources management and benefits
administration software offerings for large customers with complex
information management needs that prefer to handle such tasks in-house.
Although Tesseract's product offerings have historically been mainframe-
based, it is developing client/server versions of these offerings.
UserTech, which was acquired in October 1994 and had fiscal 1994 revenue of
$4.4 million, provides training, communications and other services to
facilitate customers' effective utilization of information management
systems.
Employer Services expects that the enhancement of its payroll
processing system software and the development of a new generation of human
resources information software, including applications in Windows and
client/server environments, will require a relatively high level of
investment in technology (a portion of which will be capitalized) and may
entail certain risks, such as possible delays in the development process,
that can often occur in software development projects. In addition, the
transition of customers from payroll processing on the existing system in
district offices to centralized processing on the enhanced system is
expected to be a complicated undertaking that must be carefully managed to
maintain acceptable levels of customer satisfaction during the transition
process. This process is also expected to entail a relatively high level
of incremental costs, such as costs to temporarily provide duplicate
processing of payrolls at district offices and the centralized facilities,
associated with a conversion plan intended to insure that customers will
incur no interruption of or decline in service during the transition
period. The portion of these incremental costs relating to the
discontinuance of processing in the district offices is covered by existing
restructuring reserves.
Sales and Marketing. Employer Services markets its products and
services through a direct sales force operating through about three dozen
offices located throughout the U.S. A modest decrease in the size of
Employer Services' sales force during 1994 reflected increased
concentration of sales and marketing efforts on medium and large employers.
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Employer Services also has established marketing relationships with banks,
accounting firms and insurance companies, pursuant to which Employer
Services offers its services to the business clients of these entities.
Employer Services has also entered into a marketing agreement with ISSC
under which ISSC will remarket Employer Services' payroll and tax filing
services and Tesseract software and services where payroll software and
services are required as part of a larger information technology
outsourcing project, and Employer Services will jointly market with ISSC
its information technology services where a customer requires information
technology outsourcing beyond Employer Services' payroll services.
Employer Services markets its payroll processing and tax filing
services by identifying customers that use or are contemplating using a
third party service provider. Although Employer Services' most significant
source of customer leads for such services are referrals from existing
customers and from the numerous banks and accounting firms with which it
has relationships, it also identifies potential customers through newspaper
articles, periodicals, trade publications and, to a limited extent, direct
mailings. Customer leads for Employer Services' other products and
services are generally obtained through referrals, trade shows and direct
sales efforts. Employer Services currently has somewhat more than 30,000
contracts with approximately 25,000 different customers from a wide range
of industries and markets, with no single customer representing more than
1% of Employer Services' 1994 revenue.
Employer Services believes that further increasing the effectiveness
of its sales and marketing efforts will be an important factor in achieving
its profitability and growth objectives. Toward that end, Employer
Services is increasingly orienting sales and marketing efforts toward
medium and large employers, which tend to purchase a greater variety of
services, require more flexibility and customization in services offerings
and have higher costs associated with changing providers. At the same
time, the previously described efforts to upgrade technology and expand
product and service offerings should also increase sales effectiveness by
shortening the length of the sales/installation cycle and by building
greater variety and flexibility into service offerings. Employer Services'
goal is to identify the overall human resource information management needs
arising out of the employment relationship, and address those needs through
a broad range of integrated customer-driven solutions, such as outsourcing
services, software applications and consulting services. The Company
believes that broadening and integrating its product and service offerings
should also play an important role in attracting and retaining customers by
differentiating Employer Services from other service providers and by
providing customers with a stronger connection to Employer Services.
Competition. The employer services industry is characterized by
intense competition in the small, medium and large employer segments of the
market. Competitors in this market include national, regional and local
third party providers, banks, in-house payroll processors, software
companies and consulting firms.
A substantial portion of the overall payroll processing and tax filing
market is supported in-house with the remainder supported by third party
providers. Automatic Data Processing, Inc. ("ADP") is the dominant third
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party provider in this market, with Employer Services and Paychex, Inc.
("Paychex") comprising the other two large, national providers. ADP
serves all segments of this market, while Paychex focuses on the small
employer segment of the market. The remainder of the third party payroll
market is highly fragmented and is represented by smaller regional and
local competitors. Consolidation within this industry continues as the
larger national providers acquire smaller regional and local providers and
as banks sell their payroll service operations. In addition, software
companies, including Tesseract, market application software to customers
that allows these customers to support their payroll services in-house.
The market for the non-payroll portion of the employer services industry is
evolving and is not dominated by any one competitor.
Currently, the principal competitive factors in the employer services
market are price, quality and service. Employer Services believes that it
is able to compete effectively in the overall employer services market with
respect to all of these competitive factors. In addition, Employer
Services believes that offering a broad range of information management
products and services applicable to the employment relationship will become
an increasingly important competitive factor, particularly with respect to
medium and large employers.
Employer Services' ability to continue to compete effectively in the
employer services market will depend in large measure on its ability to
implement and effectively use new technology, offer additional products and
services, and increase its market penetration. Employer Services intends
to seek additional strategic acquisition and partnering opportunities that
would better enable it to achieve these objectives.
Arbitron.
Arbitron is the leading provider of radio audience
measurement information in terms of revenue and market share, and also
provides electronic media and marketing information to radio and television
broadcasters, cable operators, advertising agencies and advertisers.
Arbitron's proprietary data regarding radio audience size and demographics
is provided to customers through multi-year license agreements. In
addition, through acquisitions, joint ventures and the introduction of new
products, Arbitron has obtained access to or developed services that
provide data regarding product purchasing decisions.
Arbitron's revenue for the years 1992, 1993 and 1994 was $178.3
million, $172.2 million and $121.3 million, respectively. The greatest
portion of the revenue decrease from 1993 to 1994 was due to the
discontinuance of Arbitron's syndicated television and cable ratings
service, effective at the end of 1993. Through this service, Arbitron had
provided local market television and cable audience measurement information
gathered electronically and through written diaries. This service provided
approximately 26% of Arbitron's 1993 revenue.
Markets. Because of the significant amounts spent by advertisers on
radio advertising, radio broadcasters, advertising agencies and advertisers
all have a strong interest in information regarding the size and
composition of audiences for radio broadcasts. Nevertheless, the market
for audience measurement of radio broadcasts, from which Arbitron currently
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derives most of its revenue, has grown slowly in recent years due in large
measure to consolidation within the radio broadcast industry and
competition from other forms of media. However, as advertisers
increasingly seek to tailor advertising strategies to target specific
demographic groups through specific media, and as audiences become more
fragmented with increased programming choices, the audience information
needs of radio broadcasters, advertising agencies and advertisers become
more complex. Increasingly, more detailed information regarding the
demographics and buying behavior of audiences is required, as well as more
sophisticated means to analyze such information. The Company believes
these trends represent growth opportunities for Arbitron.
These trends are not confined to the radio broadcast industry, but
also affect other media. As the importance of reaching niche audiences
with targeted marketing strategies increases, broadcasters, publishers,
advertising agencies and advertisers increasingly require that information
regarding exposure to advertising be provided on an individualized rather
than a household basis and that such information be coupled with
information regarding shopping patterns and purchaser behavior. The need
for such qualitative information may create opportunities for innovative
approaches to satisfy these information needs, particularly as
technological advances increase the alternatives available to advertisers
for reaching potential customers, including the possibilities of
interactive communication.
Services. Arbitron estimates audience size and demographics in the
U.S. for local radio stations, and reports this and related data to its
customers. This information is used by radio stations to price and sell
advertising time and by advertising agencies and large corporate
advertisers in purchasing advertising time. Arbitron uses listener diaries
to gather radio listener data from sample households in the 261 local
markets for which it currently provides radio ratings. Respondents mail
the diaries to Arbitron's processing center in Columbia, Maryland, where
Arbitron compiles periodic audience measurement estimates. The Company
believes that the proprietary database which Arbitron has developed and
maintains through its position as the leading provider of radio audience
measurement data in the U.S. is a very valuable asset. Arbitron also
provides software applications that give customers flexible and unlimited
access to Arbitron's database, and enable them to more effectively analyze
and understand that information and develop sales strategies for maximum
effectiveness. Arbitron is also developing applications that will enable
customers to link information provided by Arbitron's database with
information from other databases (such as product purchase behavior) so
as to enable customers to further refine sales strategies and compete more
effectively for advertising dollars. Additional efforts to enhance
Arbitron's radio audience measurement service include projects to increase
the sample size and response rate of Arbitron's radio surveys as cost-
effective means of enhancing the reliability of its audience estimates.
The radio audience measurement service represented slightly less than 90%
of Arbitron's revenue during 1994.
Arbitron is also exploring opportunities to expand its information
service offerings to the radio industry in the areas of marketing and
promotion systems and systems to provide perceptual data for programmers.
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In that regard, in December 1994, the Company acquired the assets of
MediaMaps International (now known as Media Marketing Technologies), which
provides Arbitron with a proprietary marketing analysis system that creates
block group-coded data bases of radio listeners and provides segmentation
analyses and map displays of key listener segments.
Arbitron believes it will become increasingly important to address the
more comprehensive information needs of the broadcast and cable industries
by providing customers with services and technology that link audience
measurement data with product purchasing data to enable customers to make
more productive marketing decisions. Arbitron took several actions toward
that end during 1994. In December 1994, the Company exchanged its interest
in the Competitive Media Reporting ("CMR") joint venture with VNU
Business Information Services, Inc. ("VNU") for an interest in the
business of VNU's Scarborough Research Corporation subsidiary, which
produces the "Scarborough Report" that provides qualitative information
regarding product/service usage and media usage in 58 major U.S. markets.
The Scarborough Report measures products purchased based on a sample of
consumers in the relevant markets. Under the terms of this arrangement,
Arbitron will have the exclusive right to market the Scarborough Report to
radio broadcasters and cable systems. The CMR joint venture had provided
Arbitron with access to services which, among other things, monitored
commercials and tracked advertising expenditures. Also during 1994,
Arbitron introduced in eleven smaller markets its LocalMotion service,
which is a locally oriented, qualitative audience research service. The
service, which utilizes diaries and telephone surveys, provides a profile
of the broadcast audience in terms of local media, retail and consumer
preferences so that local radio and television broadcasters and cable
systems will have information that helps them develop targeted sales and
programming strategies.
Arbitron intends to further develop its capabilities and technologies
through acquisitions, alliances and licensing arrangements that will enable
it to provide the comprehensive information management services that
broadcasters, cable systems, telecommunications companies, advertising
agencies and advertisers will require to market their products and services
more effectively. Arbitron obtained a minority equity interest in the
second quarter 1994 in ADcom Information Services, Inc., which is
developing hardware and software technology to provide cost-effective,
electronic audience measurement systems to the cable industry. Arbitron is
also involved in a cooperative effort to develop a passive, personalized
electronic measurement device to record broadcast listening or viewing.
Sales and Marketing. Arbitron provides its radio audience measurement
and related services to almost 2,500 radio stations and about 2,200
advertising agencies nationwide. Contracts with customers vary in length
from one to seven years, and no single customer represented more than 4% of
Arbitron's 1994 revenue. Arbitron markets its products and services
through a direct sales force operating through offices in six cities around
the U.S.
Competition. Arbitron competes with providers of other forms of
research used by broadcasters, cable systems, advertising agencies and
advertisers. The principal competition for Arbitron's radio audience
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measurement service consists of a company utilizing a different methodology
that is seeking to establish itself.
Defense Electronics Segment - Computing Devices International
The Defense Electronics segment, consisting of Computing Devices
International ("Computing Devices"), develops, manufactures and markets
electronic systems, subsystems and components, and provides systems
integration and other services, primarily to government defense agencies.
In addition, its Business Information Services division runs custom data
processing applications for customers (primarily the U.S. government) and
delivers them via a timesharing network. Computing Devices' revenue for
the years 1992, 1993 and 1994 was $412.4 million, $461.3 million and $486.3
million, respectively. Information regarding Computing Devices' operating
profit and identifiable assets for the years 1992-1994 is in Note G,
Segment Data, on page 48 of the Company's 1994 Annual Report to
Stockholders, which is incorporated herein by reference.
Markets. The defense contracting market has undergone dramatic change
in recent years. With changing geo-political conditions and government
budgetary constraints, defense spending has declined and the number of
companies serving the defense industry has decreased. At the same time,
the defense market focus has shifted from strategic defense (nuclear) to
tactical defense (non-nuclear), as the threat of military conflicts shifts
toward regional and ethnic conflicts.
The reduction in overall defense spending and the shift in focus
toward tactical defense needs, coupled with advances in commercially-
available technologies, is also shifting the focus of defense spending.
Computing Devices believes that customers will increasingly emphasize, and
that therefore the most attractive business opportunities in the defense
contracting market will exist in, areas such as (i) weapons sophistication,
electronics, surveillance and intelligence; (ii) extending the service life
of existing military equipment by upgrading, enhancing and retrofitting
such equipment, including the insertion of new technology, in order to
reduce the costs (including substantial training costs) associated with the
development and production of new equipment; and (iii) incorporating lower
cost commercial off-the-shelf technology and components into military
equipment.
Products and Services. Computing Devices' products and services
feature its capabilities in signal processing, digital image manipulation,
"ruggedized" subsystems for harsh environments and real-time software
systems. These products and services are produced primarily through its
operations in the U.S. and Canada, with only a small portion produced in
the United Kingdom ("U.K."). A majority of Computing Devices' revenue is
attributable to products and services relating to avionics systems,
including the AN/AYK-14 standard Navy airborne mission computer systems;
communications systems, including the Iris contract described below; and
intelligence and surveillance systems, including advanced parallel
processing, reconnaissance systems and imaging software. In December 1994,
Computing Devices complemented its imaging capabilities through the
acquisition of Paragon Imaging, Inc., a provider of imaging software to
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U.S. defense department intelligence agencies and service commands, which
emphasizes commercial off-the-shelf technology and had fiscal 1994 revenue
of $4.2 million. The remainder of Computing Devices' revenue is primarily
attributable to products and services relating to shipboard subsystems,
anti-submarine warfare subsystems, ground subsystems, space processing,
display subsystems and tactical reconnaissance systems. Computing Devices
employs technology developed through internal research and development,
contract research and development and customer funded development programs.
During 1991, Computing Devices secured, through its Canadian
subsidiary, a contract to modernize the tactical command, control and
communications system used by the Canadian armed forces in defense and
peacekeeping situations. This system, called Iris, incorporates a broad
range of technologies, including satellite, fiber optic and microwave
communication. During 1994 and 1993, Computing Devices recorded revenue
from this contract of $154 million and $105 million, respectively,
representing about 32% and 23%, respectively, of Computing Devices' revenue
in those years. This contract has a remaining term of approximately six
years and estimated total remaining revenue of $751 million over the life
of the contract. Although Computing Devices' Canadian subsidiary is the
prime contractor under this contract, a significant portion of the contract
has been subcontracted to other communications technology companies.
Computing Devices is also seeking to expand the scope of its product
offerings and the markets its serves, including the application of existing
products and technologies to business opportunities in other worldwide
defense markets and in civilian and civil government markets. In so doing,
Computing Devices may, from time to time, establish cooperative
arrangements with other entities where their expertise or familiarity with
other markets, products or technologies would prove beneficial. For
example, Computing Devices, Sextant Avionique and Northwest Airlines have
collaborated on the development of an on-board maintenance terminal to
facilitate information management in connection with the maintenance of
commercial airliners. In January 1995, the Company also obtained a
minority equity investment in Key Idea Development, LLC, which is
developing a lightweight, voice-activated wearable computer. In connection
therewith, the Company obtained an exclusive license to develop military
applications for this computer.
Sales and Marketing. Computing Devices markets its products and
services through a direct sales force operating in the U.S., Canada, the
U.K., France and Malaysia. Sales of products and services are made
principally through competitive proposals in response to requests for bids
from government agencies and prime contractors. In addition, Computing
Devices has independent sales agents who represent Computing Devices'
products and services in a number of European and Asian markets.
Competition. Computing Devices faces intense competition with respect
to all of its products and services. Competition has increased in recent
years, largely reflecting factors such as reduced defense spending,
consolidation among defense contractors, increasing vertical integration
(and a corresponding decrease in subcontracting) on the part of larger
defense contractors, and procurement reform efforts (such as an increasing
emphasis on the use of commercial off-the-shelf technology). Although many
12
<PAGE>
of Computing Devices' competitors are companies (or divisions or
subsidiaries of companies) that are larger and have substantially greater
financial resources, Computing Devices believes that smaller companies
within the defense contracting industry may at times be able to adjust more
quickly to changes in the defense contracting environment.
The principal competitive factors include price, compliance with
technical specifications, service and ability to perform in accordance with
the established schedule. Due to the diversity and specialized nature of
the products and services provided and the governmental security
restrictions applicable to certain of Computing Devices' activities, it is
difficult to generalize as to Computing Devices' market position in certain
segments of its business. Computing Devices does believe, however, that it
is able to compete effectively in each of its market segments with respect
to these competitive factors. In particular, Computing Devices believes
that its high rate of schedule adherence is one of its principal
competitive advantages. The demonstrated ability to complete a project
within the required time schedule is an important factor to governments and
prime contractors in selecting companies for new projects. Computing
Devices currently has preferred supplier status with two prime contractors.
In light of market conditions such as decreases in defense spending,
increasing price sensitivity from government customers, and over-capacity
and consolidation among defense contractors, Computing Devices believes
that the ability to become a low cost provider of products and services
will be an increasingly important competitive factor.
Government Contracts. Approximately 46% and 50%, respectively, of
Computing Devices' revenue for 1994 and 1993 was derived from contracts
with the U.S. Government or with prime contractors to the U.S. Government,
and approximately 36% and 30%, respectively, of Computing Devices' revenue
for 1994 and for 1993 was derived from contracts with the Canadian
Government or with prime contractors to the Canadian Government. Companies
which do business with governments are subject to certain unique business
risks. Among these are dependence on annual government appropriations,
changing procurement policies and regulations, complexity of design and
possible cost overruns. In addition, government efforts to detect and
eliminate irregularities in defense procurement programs have increased the
complexity and cost of doing business for government contractors.
Moreover, any government contractor determined to be in noncompliance with
applicable laws and regulations may be subject to penalties and debarment
or suspension from receiving additional U.S. Government contracts. Any
government contract may also be terminated by the government at any time it
believes that such termination would be in its best interests. In such
event, Computing Devices would generally be entitled to receive payments
for its allowable costs and, in general, a proportionate share of its fee
or profit for the work actually performed.
Approximately 81% of Computing Devices' 1994 revenue came from
government contracts that were fixed price contracts, including the Iris
contract. Under this type of contract, the price paid to Computing Devices
is not subject to adjustment by reason of the costs incurred by the Company
in the performance of the contract, except for costs incurred due to
contract changes ordered by the government. Thus, under fixed price
13
<PAGE>
contracts, the Company bears the risk of cost overruns, which may result
from factors such as the need to bid on programs in advance of design
completion, unforseen technological difficulties, design complexity and
uncertain cost factors, particularly in connection with multi-year
contracts. Multi-year fixed price contracts in Canada and the U.K. do,
however, normally allow for price revision based on government price
indices.
Computing Devices is usually entitled to invoice governments monthly
on fixed price and cost reimbursable contracts. Computing Devices does not
normally acquire inventory in advance of contract award, and does not
maintain significant stocks of finished products for sale. Moreover,
Computing Devices obtains advance funding from customers in connection with
certain of its contracts. The amount of progress payments and customer
advances and the amount of the holdback from such payments and advances
affect the amount of working capital necessary for Computing Devices to
finance work-in-process costs in the performance of these contracts.
Governments typically do not recognize interest or other costs associated
with the use of capital and, therefore, the timing of payments may affect
Computing Devices' profitability either positively or negatively.
Computing Devices also performs work under cost reimbursable and
incentive type contracts. Cost reimbursable contracts provide for
reimbursement of costs incurred, to the extent such costs are allowable
under applicable government regulations, plus a fee. Under incentive type
contracts, the amount of profit or fee realized varies with the attainment
of incentive goals such as costs incurred, delivery schedule, quality and
other criteria. Fixed price contracts normally carry a higher profit rate
than cost reimbursable and incentive type contracts to compensate for
higher business risk. In addition, laws and regulations applicable to
government contracting provide that certain types of costs may not be
included in either the directly-billed cost or the indirect overheads for
which the government is responsible. Many of these so-called "unallowable"
costs include ordinary costs of doing business in a commercial context.
These costs must be borne out of the pretax profit of the corporation and,
thus, tend to reduce margins on government work.
Recognition of profits is based upon estimates of final performance,
which may change as contracts progress. Work may be performed prior to
formal authorization or adjustment of contract price for increased work
scope, change orders and other funding adjustments. Because of the
complexity of government contracts and applicable regulations, contract
disputes may occur. The resolution of such disputes may affect the
profitability of Computing Devices in performing these contracts. The
Company believes that adequate provision has been made in its financial
statements for these and other normal uncertainties incident to its
Computing Devices business.
International Sales. International sales of Computing Devices'
products and services totaled approximately $258 million and $216 million,
respectively, or 53% and 47%, respectively, of Computing Devices' total
revenue in 1994 and in 1993. About 90% of these products and services were
produced by the Company's Canadian or U.K. subsidiaries for customers in
those countries. Because most of Computing Devices' sales involve
14
<PAGE>
technologically advanced products, services and expertise, export control
regulations can limit the type of products and services that may be offered
and the countries and governments to which sales may be made. Computing
Devices' international sales are subject to risks inherent in foreign
commerce, including currency fluctuations and devaluations, changes in
foreign governments and their policies, differences in foreign laws and
difficulties in negotiating and litigating with foreign governments.
Computing Devices believes that the location of its international
operations tends to minimize certain of these risks, and that it has
mitigated other of these risks by obtaining letters of credit and advance
payments, by contractual protections on currency fluctuations and by
denominating contracts in U.S. dollars where possible.
Divestitures
The Company sold its TeleMoney Services business in May 1994.
TeleMoney provided network-based transaction services, credit and debit
card authorization and check verification. In February 1994, the Company
disposed of the remaining Business and Technology Center it owned, as well
as its remaining interest in five Business and Technology Center
partnerships.
Additional Information
Patents. The Company owns or is licensed under a number of patents
which relate to its products and are of importance to its business.
However, the Company believes that none of its businesses is materially
dependent upon any particular patent or license, or any particular group of
patents or licenses. Instead, the Company believes that its success and
growth are far more dependent, among other things, on the quality of its
services and products and its reputation with its customers.
Backlog. The Company's backlog is attributable to the Defense
Electronics segment, since no backlog amount is determinable for revenue
from the Company's Information Services businesses. Backlog does not
include those portions of government contracts for which funding has not
yet been approved, but does include the remaining value of the Iris
contract.
As of December 31, 1994, the backlog of the Company's orders was
$1,209 million, of which $751 million relates to the Iris contract and $458
million relates to other contracts and programs. At December 31, 1993, the
comparable total backlog was $1,213 million, of which Iris represented $862
million and other contracts and programs represented $351 million. The
portion of the backlog at the end of 1994 expected to be reflected in 1995
revenue is $362 million (30%), of which Iris represents $147 million and
other contracts and programs represent $215 million.
The portion of the total backlog under government prime contracts and
subcontracts was 95% at December 31, 1994 and 97% at December 31, 1993,
while the portion of government contract backlog under fixed-price
contracts was 95% at December 31, 1994 and 1993. In each case, these
percentages include the Iris contract, which is a fixed-price contract with
the Canadian government.
15
<PAGE>
Research and Development. The table below sets forth the amount of
the Company's research and development expenses for the periods indicated.
Year ended December 31,
1994 1993 1992
(Dollars in millions)
Research and development $35.4 $33.4 $30.5
Percent of revenues 3.9% 3.8% 3.7%
Customer sponsored research
and development $78.2 $77.4 $59.6
The Company's research and development efforts, including those
sponsored cooperatively by the Company and other participants, are
generally described earlier in this Item in the descriptions of the
Company's business segments. The amounts shown above as customer sponsored
research and development primarily represent government funded product
development efforts.
Geographic Segment Data. For financial information regarding the
Company's U.S. and international operations, see Note G, Segment Data, on
page 49 of the Company's 1994 Annual Report to Stockholders, which is
incorporated herein by reference.
Employees. As of December 31, 1994, the Company employed
approximately 7,500 people on a full- or part-time basis.
16
<PAGE>
Item 2. Properties.
At February 28, 1995, the Company's principal production and office
facilities were located in the metropolitan areas of Minneapolis,
Minnesota; Atlanta, Georgia; Columbia, Maryland; New York, New York;
Fountain Valley and San Francisco, California; St. Louis, Missouri; Ottawa
and Calgary, Canada; and Hastings, England.
The following table summarizes the usage and location of the Company's
facilities as of February 28, 1995.
FACILITIES
(In thousands of square feet)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Type of Property
U.S. Non-U.S. Worldwide
Interest 341 428 769
Owned
Leased 3,276 205 3,481
Total Square 3,617 633 4,250
Feet
Utilization
Manufacturing &
Warehousing 294 449 743
Office, Computer
Center & Other 1,753 184 1,937
Vacant/Idle 422 -- 422
Leased or Subleased
to Others 1,148 -- 1,148
Total Square Feet 3,617 633 4,250
</TABLE>
The 4.3 million square feet of aggregate space is essentially
unchanged from February 28, 1994. Space subject to assigned leases is not
included in the table above, and the Company remains secondarily liable
under all such leases. These assigned leases involve 1.7 million square
feet of space and future rental obligations totaling $41.4 million. The
principal elements of these amounts are 0.5 million square feet and $7.6
million related to the spinoff of Control Data Systems, Inc. and 1.1
million square feet and $33.5 million related to the 1989 sale of Imprimis
Technology Incorporated to Seagate Technology, Inc. The Company does not
anticipate any material nonperformance by the assignees of these leases.
17
<PAGE>
Except for one building utilized by Computing Devices' Canadian
subsidiary (which is subject to a mortgage securing $6.1 million in debt
obligations), no facilities owned by the Company are subject to any major
encumbrances.
The Company believes that all of the facilities it currently utilizes
in its continuing operations are adequate for their intended purposes and
are adequately maintained. Utilization of those facilities varies among
the Company's operations. Generally, most of the facilities relating to
the Company's information services segment are reasonably necessary for
current and anticipated output levels of those businesses, although
Arbitron has vacant space as a result of the consolidation of its
processing activities following the discontinuance of its syndicated
television ratings service, and some excess space is expected to develop in
Employer Services' district offices as customer telephone support and
payroll data processing are consolidated. Both Arbitron and Employer
Services have established restructuring reserves for the expected cost of
such facilities in excess of continuing requirements. There is also excess
production capacity in the Defense Electronics segment. Efforts are
ongoing to identify operations and facilities that can be consolidated and
to dispose of excess or idle space.
Item 3. Legal Proceedings.
Information regarding legal proceedings involving the Company and its
subsidiaries is contained in Note O, Legal Matters, on page 56 of the
Company's 1994 Annual Report to Stockholders, which is incorporated herein
by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
18
<PAGE>
Executive Officers of the Registrant
The executive officers of Ceridian as of March 1, 1995, are as
follows:
Executive
Name (Age) Position Officer Since
Lawrence Perlman Chairman, President and 1980
(56) Chief Executive Officer
John R. Eickhoff Vice President and 1989
(54) Chief Financial Officer
Loren D. Gross (49) Vice President and 1993
Corporate Controller
Linda J. Jadwin (51) Vice President, Corporate 1990
Communications
Glenn W. Jeffrey Executive Vice President 1990
(48)
James D. Miller (46) Vice President, Strategic 1993
Initiatives
Stephen B. Morris Vice President and 1992
(51) President,
Arbitron
Steven J. Olson (54) Vice President and General 1994
Counsel
Patrick C. Sommers Vice President and 1992
(47) President, Ceridian
Employer Services
Ronald L. Turner Vice President and 1993
(48) President,
Computing Devices
International
The executive officers of the Company are elected by the Board of
Directors and serve at the pleasure of the Board of Directors and the Chief
Executive Officer. They are customarily elected each year at the first
meeting of the Board of Directors immediately following the annual meeting
of stockholders.
Lawrence Perlman has been President and Chief Executive Officer of the
Company since January 1990, and was appointed Chairman in November 1992.
Mr. Perlman was President and Chief Operating Officer of the Company from
December 1988 to January 1990. He is a director of Inter-Regional
Financial Group, Inc.; Seagate Technology, Inc.; The Valspar Corporation;
Computer Network Technology Corporation; and Bio-Vascular, Inc. He is also
19
<PAGE>
a member of the National Advisory Board of the Chemical Banking
Corporation. Mr. Perlman has been a director of the Company since 1985.
John R. Eickhoff has been Vice President and Chief Financial Officer
of the Company since June 1993. Mr. Eickhoff was Vice President and
Corporate Controller of the Company from July 1989 to June 1993.
Loren D. Gross has been Vice President and Corporate Controller of the
Company since July 1993. Mr. Gross was Assistant Corporate Controller of
the Company from March 1987 to July 1993.
Linda J. Jadwin has been Vice President, Corporate Communications of
the Company since March 1990. Ms. Jadwin was Vice President,
Communications and Administration of the Company's Computer Products
business from April 1989 to March 1990.
Glenn W. Jeffrey has been Executive Vice President of the Company
since December 1992. Mr. Jeffrey was Executive Vice President,
Organization Resources of the Company from June 1990 to December 1992;
President of Jeffrey & Associates, an executive and organization
development firm, from September 1989 to June 1990; and Vice President,
Human Resources, Corporate Staff and Restaurants, for The Pillsbury
Company, a food and restaurant company, from August 1988 to April 1989.
James D. Miller has been Vice President, Strategic Initiatives of the
Company since January 1993. From February 1989 to January 1993, Mr. Miller
was Vice President and Associate General Counsel for the Company.
Stephen B. Morris has been Vice President of the Company and President
of Arbitron since December 1992. Mr. Morris was President and Chief
Executive Officer, Vidcode, Inc., which electronically monitors, verifies
and reports the broadcast of television commercials, from August 1990 to
December 1992; and Director and co-founder of Spectra Marketing Systems, a
micro-marketing firm, from March 1987 to March 1992. Prior to that time,
he spent seventeen years at General Foods Corporation, the last three as
General Manager/President of the Maxwell House Division.
Steven J. Olson has been Vice President and General Counsel of the
Company since October 1994. From October 1984 to October 1994, Mr. Olson
was Vice President and Associate General Counsel for the Company.
Patrick C. Sommers has been Vice President of the Company and
President of Ceridian Employer Services since November 1992. Mr. Sommers
was President, GTE Industry Services, a group of diversified companies
providing software, medical information, networking and publishing products
and services, from April 1990 to November 1992; and President, D&B
Information Resources, Inc., a subsidiary of Dun & Bradstreet Corporation
which collects and assimilates information into databases, from May 1988 to
April 1990.
Ronald L. Turner has been Vice President of the Company and President
of Computing Devices International since January 1993. Mr. Turner was
President and Chief Executive Officer, GEC-Marconi Electronics Systems
Corporation, a defense electronics company, from March 1987 to January
1993. Mr. Turner is a director of Advanced Technology Services, Inc. and
FLIR Systems, Inc.
20
<PAGE>
PART II
All information incorporated by reference into Items 5 through 8 below
is contained in the financial portion of the Company's 1994 Annual Report
to Stockholders, which is filed with this Report as Exhibit 13.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company's common stock, par value $.50 per share ("Common Stock"),
is listed and trades on the New York Stock Exchange as well as on the
Chicago and Pacific Stock Exchanges. The following table sets forth the
high and low sales prices for a share of Common Stock on the New York Stock
Exchange.
<TABLE>
<CAPTION>
<S> 1994 1993
<C> <C> <C> <C>
High Low High Low
1st Quarter 24 3/4 18 1/2 16 1/8 14 3/8
2nd Quarter 25 5/8 21 1/2 16 1/8 13
3rd Quarter 27 1/2 24 18 1/2 14 3/8
4th Quarter 27 1/8 23 1/2 19 7/8 17 1/2
</TABLE>
The number of holders of record of Common Stock on February 28, 1995
was 18,157. No dividends have been declared or paid on the Common Stock
since 1985. The Company's domestic revolving credit agreement (which
expires May 30, 1995) limits the amount of cash the Company may expend to
pay dividends on its Common Stock or to repurchase shares of its Common
Stock or 5 1/2% Preferred Stock to 25% of the amount of the Company's net
income in profitable quarters after the first quarter of 1993. Pursuant to
a program approved by the Board of Directors in 1994, the Company
repurchased 70,000 shares of Common Stock in the open market during 1994
for $1.8 million. As of December 31, 1994, the additional amount the
Company could expend for additional stock repurchases or cash dividends
totaled $22.6 million.
Item 6. Selected Financial Data.
See "Selected Five-Year Data" on page 1, which 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 of Financial Condition
and Results of Operations" on pages 22 through 35, which is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
21
<PAGE>
The financial statements described in Item 14(a)1 of this Report are
incorporated herein by reference. See "Supplementary Quarterly Data
(Unaudited)" on page 57, which is incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
See information regarding the directors and nominees for director of
Ceridian under the heading "Nominees for Director" on pages 4 and 5 of the
Proxy Statement for the Annual Meeting of Stockholders, May 10, 1995 (the
"Proxy Statement"), which is incorporated herein by reference.
See the information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 under the heading "Compliance With Section
16(a) of the Securities Exchange Act" on page 25 of the Proxy Statement,
which is incorporated herein by reference.
Information regarding the executive officers of Ceridian is on pages
18 and 19 of this Report, and is incorporated herein by reference.
Item 11. Executive Compensation.
See information under the headings "Directors' Compensation" on pages
6 and 7 of the Proxy Statement and "Executive Compensation" on pages 17
through 22 of the Proxy Statement, all of which is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
See information under the heading "Share Ownership Information" on
pages 23 and 24 of the Proxy Statement, which is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
See information under the heading "Compensation Committee Interlocks
and Insider Participation" on page 7 of the Proxy Statement, which is
incorporated herein by reference.
22
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements of Registrant
Incorporated by reference from the
pages indicated in the Company's
1994 Annual Report to Stockholders
into Part II, Item 8, of this Report:
Page
Report of Management.....................................36
Independent Auditors' Report.............................37
Consolidated Statements of
Operations for the years ended
December 31, 1994, 1993 and 1992.........................38
Consolidated Balance Sheets as of
December 31, 1994 and 1993...............................39
Consolidated Statements of Cash Flows
for the years ended
December 31, 1994, 1993 and 1992......................40-41
Notes to Consolidated Financial Statements for
the three years ended December 31, 1994...............42-56
(a) 2. Financial Statement Schedules of Registrant
Included in Part IV of this Report:
Page
Independent Auditors' Report on financial
statement schedule... .................................27
Schedule II - Valuation and qualifying accounts.......28-29
All other financial statement schedules are omitted as the required
information is inapplicable or the information is presented in the
consolidated financial statements or related notes.
23
<PAGE>
(a) 3. Exhibits
The following is a complete list of Exhibits filed or incorporated by
reference as part of this report.
Exhibit Description
2.01 Asset Purchase Agreement, dated as of March 4, 1992, as amended,
among the Company, as seller, and Video Lottery Technologies, Inc.
and Automated Wagering International, Inc., as purchasers
(incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated June 23, 1992 (File No. 1-1969))
2.02 Asset Purchase Agreement, dated as of March 14, 1993, between the
Company and Siemens Energy & Automation, Inc. (incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992 (File No. 1-1969))
2.03 Transfer Agreement between the Company and Control Data Systems,
Inc., dated as of July 15, 1992 (incorporated by reference to
Exhibit 10.1 to Amendment No. 1, dated July 10, 1992, to Control
Data Systems, Inc.'s Registration Statement on Form 10
(File No. 0-20252))
2.04 Distribution Agreement between Control Data Systems, Inc. and the
Company dated as of July 15, 1992 (incorporated by reference to
Exhibit 10.2 to Amendment No. 1, dated July 10, 1992, to Control
Data Systems, Inc.'s Registration Statement on Form 10
(File No. 0-20252))
2.05 Agreement and Plan of Reorganization, dated as of May 25, 1994,
among Tesseract Corporation, Braemar Acquisition Corp. and the
Company (incorporated by reference to Exhibit 2 to the Company's
Current Report on Form 8-K dated June 24, 1994, as amended
(File No. 1-1969))
3.01 Restated Certificate of Incorporation of the Company (incorporated
by reference to Exhibit 4.01 to the Company's Registration
Statement on Form S-8 (File No. 33-54379))
3.02 Bylaws of the Company, as amended (incorporated by reference to
Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 (File No. 1-1969))
4.01 Form of Deposit Agreement, dated as of December 23, 1993, between
The Bank of New York and the Company (incorporated by reference to
Exhibit 4.5 to the Company's Registration Statement on Form S-3
(File No. 33-50959))
4.02 Form of Indenture, with respect to the 5 1/2% Convertible
Subordinated Debentures Due 2008, dated as of December 23, 1993,
between The Bank of New York and the Company (incorporated by
24
<PAGE>
reference to Exhibit 4.7 to the Company's Registration Statement
on Form S-3 (File No. 33-50959))
10. 01* Executive Employment Agreement between the Company and Lawrence
Perlman, dated February 1, 1994 (incorporated by reference to
Exhibit 10.01 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 1-1969))
10.02* Executive Employment Agreement between the Company and Ronald L.
Turner, dated February 3, 1995
10.03* Executive Employment Agreement between the Company and Patrick C.
Sommers, dated February 3, 1995
10.04* Executive Employment Agreement between the Company and Stephen B.
Morris, dated February 3, 1995
10.05* Executive Employment Agreement between the Company and John R.
Eickhoff, dated February 3, 1995
10.06* Employee Non-Statutory Stock Option Award Agreement between the
Company and Patrick C. Sommers, dated as of January 3, 1994
10.07* Employee Non-Statutory Stock Option Award Agreement between the
Company and John R. Eickhoff, dated as of January 3, 1994
10.08* Directors Deferred Compensation Plan - 1993 Restatement (As amended
through December 13, 1993) (incorporated by reference to Exhibit
10.05 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-1969))
10.09* Directors' Benefit Protection Trust Agreement, dated as of December
1, 1994, between the Company and First Trust National Association
10.10* 1993 Non-Employee Director Stock Plan (incorporated by reference
to Exhibit 2 to the Company's Proxy Statement for Annual Meeting
of Stockholders, May 12, 1993 (File No. 1-1969))
10.11* 1993 Long-Term Incentive Plan (As amended through October 21, 1994)
10.12* 1990 Long-Term Incentive Plan (1992 Restatement) (As amended
through October 21, 1994)
10.13* Description of the Company's Annual Executive Incentive Plan
10.14* Benefit Equalization Plan, as amended (Effective generally as of
January 1, 1994)
10.15* Employees' Benefit Protection Trust Agreement, dated as of December
1, 1994, between the Company and First Trust National Association
10.16* Deferred Compensation Plan
10.17* Form of Indemnification Agreement between the Company and its
Directors (incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 1-1969))
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this report.
25
<PAGE>
10.18 Agreement for Information Technology Services, dated as of January
10, 1995, between the Company and Integrated Systems Solutions
Corporation
10.19 Amended and Restated Credit Agreement, dated as of May 13, 1994,
among the Company, Bank of America N.T. & S.A., as Agent, and the
Other Financial Institutions Parties Thereto (incorporated by
reference to Exhibit 10.01 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 (File No. 1-1969))
10.20 Form of Underwriting Agreement among the Company, Bear, Stearns &
Co. Inc., Cowen & Company and Piper Jaffray, Inc., dated December
16, 1993 (incorporated by reference to Exhibit 1.1 to the
Company's Registration Statement on Form S-3 (File No. 33-50959))
11. Statement re computation of earnings (loss) per share
12. Statements re computation of ratio of earnings to fixed charges
13. 1994 Annual Report to Stockholders of the Company
22. Subsidiaries of the Company
24. Consent of Independent Auditors
25. Power of Attorney
27. Financial Data Schedule
If requested, the Company will provide copies of any of the exhibits
listed above upon payment of its reasonable expenses in furnishing such
exhibits. The Company will provide to the Securities and Exchange
Commission, upon request, any schedule to any of the foregoing exhibits
which has not been filed.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
December 31, 1994. A report on Form 8-K dated January 19, 1995 was filed
by the Company, reporting in "Item 5: Other Events" the signing of
technology services and marketing agreements with ISSC and the announcement
of the Company's financial results for the quarter and year ended December
31, 1994. Included in that report were the Company's consolidated
statements of operations for the three and twelve month periods ended
December 31, 1994 and 1993, and condensed consolidated balance sheets for
the Company as of December 31, 1994 and 1993. The Company also filed on
January 25, 1995 an amendment to a report on Form 8-K dated June 24, 1994,
which reported the acquisition of Tesseract Corporation by the Company.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION:
Under date of January 24, 1995, we reported on the consolidated
balance sheets of Ceridian Corporation and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations and
cash flows for each of the years in the three-year period ended December
31, 1994, as contained in the 1994 Annual Report to Stockholders. These
consolidated financial statements and our report thereon are incorporated
by reference in the Annual Report on Form 10-K for the year 1994. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules
as listed in the accompanying index (see Item 14.(a)2.). These financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
As discussed in notes A and I to the consolidated financial
statements, the Company changed its method of accounting for postretirement
benefits other than pensions in 1992.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 24, 1995
27
<PAGE>
<TABLE>
<CAPTION>
SCHEDU
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Restructure and Discontinued Operations Reserves (1)
<S> <C> <C> <C> <C> <C>
Employer Computing
Arbitron Arbitron Services Devices
TV ScanAm Consolidation Severance Oth
Reserve Balance 12/31/91 $ $
- - $ $ 5.1
- $ 113
1992 Restructure Loss (2) 29.9 8.8 1.1
Cash Payments 44
(0.8) (1.7) (5.2)
Asset Write-Off (79
(28.5) (1.1)
Discontinued Operations(3) (2
Adoption of FAS 106 (4) 71
Other Non-cash Items (14
0.1
Reserve Balance 12/31/92 $ $ 0.6
- $ 6.0 $ 1.1 $ 133
1993 Restructure Loss (2) 57.0 18.9 5.5
Cash Payments 0
(4.1) (0.6) (4.0) (6.1)
Asset Write-Off (44
(26.8)
Adoption of FAS 112 (4) (15
(12
Other Non-cash Items (0
Reserve Balance 12/31/93 $ 26.1 $ $ 20.9
- $ 0.5 $ 60
1994 Restructure Loss (2) 15
Sale of TeleMoney (5) 14
Cash Payments (17.4) (8.5) (0.5) (27
Other Non-cash Items 2.4 2
Reserve Balance 12/31/94 $ 11.1 $ - $ 12.4 $ $ 64
-
(1) For additional information, see Note B to the consolidated financial stateme
(2) Does not include restructure gains of $7.6 in 1992, $14.7 in 1993 and $15.0
(3) Represents obligations related to the disposition of discontinued operations
(4) Represents the reclassification to other liabilities of FAS 106 and FAS 112
obligations as described in Notes A and I to the consolidated financial stat
(5) Represents obligations undertaken in connection with the sale of TeleMoney.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II (CONT.)
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Allowance for Doubtful Accounts Receivable Year Ended December 31
<S> <C> <C> <C>
1994 1993 1992
Balance at beginning of year $ 5.4 $ 4.3 $ 3.8
Additions charged to costs and
expenses 0.9 1.7 1.1
Write-offs and other adjustments* (0.1) (0.6) (0.6)
Balance at end of year $ 6.2 $ 5.4 $ 4.3
(*)Other adjustments include balances removed as a result of sales of
businesses.
Investments and Advances Year Ended December 31,
1994 1993 1992
Balance of Seagate note
at beginning of year $ 10.0 $ 10.0 $ 47.9
Principal payment received (37.9)
Discount on Seagate note
as initially recorded or
at beginning of year (6.2)
Amortization/Recovery of discount 6.2
Balance of Seagate note
at end of year $ 10.0 $ 10.0 $ 10.0
</TABLE>
29
<PAGE>
SIGNATURES
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, on
March 21, 1995.
CERIDIAN CORPORATION
By /s/Lawrence Perlman
Lawrence Perlman
Chairman, President 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 and in the capacities indicated on March 21, 1995.
/s/Lawrence Perlman /s/J. R. Eickhoff
Lawrence Perlman John R. Eickhoff
Chairman, President and Chief Vice President and Chief
Executive Officer (Principal Financial Officer
Executive Officer) and (Principal Financial Officer)
Director
/s/Loren D. Gross
Loren D. Gross */s/George R. Lewis
Vice President and Corporate George R. Lewis, Director
Controller (Principal Accounting
Officer) */s/Charles Marshall
Charles Marshall, Director
*/s/Ruth M. Davis */s/Carole J. Uhrich
Ruth M. Davis, Director Carole J. Uhrich, Director
*/s/Allen W. Dawson */s/Richard W. Vieser
Allen W. Dawson, Director Richard W. Vieser, Director
*/s/Ronald James */s/Paul S. Walsh
Ronald James, Director Paul S. Walsh, Director
*/s/Richard G. Lareau /s/John A. Haveman
Richard G. Lareau, Director *By: John A. Haveman
Attorney-in-fact
30
<PAGE>
Exhibit 10.13
Description of the Ceridian Corporation Annual Executive Incentive Plan
The Company's Annual Executive Incentive Plan provides yearly cash
bonuses to Company executives, although the Board's Compensation and Human
Resources Committee (the "Committee" ) may, in its discretion, permit
individuals to elect to receive part or all of their annual bonus in the
form of stock options rather than cash. The annual determination of an
individual executive's target bonus, expressed as a percentage of base
salary, is based on a subjective assessment by the Committee of the
responsibilities of the position, competitive practice and the Committee's
desire to give greater weight to performance-based compensation at higher
levels of responsibility within the Company.
For 1994, target bonus percentages for executives ranged from 20% to
65% of base salary, with the maximum possible bonus generally one and one-
half times the target amount. Of the total potential bonus, 80% consisted
of a financial component, and 20% was based on a subjective assessment of
the executive's individual performance in the areas of quality improvement
and fostering work force diversity. The financial component consisted of a
requirement that the Company achieve a specified level of earnings per
share ("EPS") during 1994 and, for executives assigned to operating units,
a requirement that the operating unit achieve specified financial goals,
generally a specified level of pre-tax earnings. With respect to the
financial component, bonus payments at, above or below the target
percentages could be made depending on whether the financial performance of
the Company (and, if applicable, the business unit to which the executive
is assigned) met, exceeded or fell short of the applicable targeted
financial goal. The targeted financial component of the bonus would be
payable if budgeted earnings were achieved, but no bonus would be payable
if an earnings threshold amount were not achieved. For 1994, both the
financial and non-financial components of the annual incentive program were
paid at or slightly above the superior level for executives, resulting in
bonus payments for executives ranging between 30% and 97.5% of base salary.
The Committee retains discretion to adjust upward the annual incentive if,
in its judgment, such an action is warranted under the circumstances.
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
CERIDIAN CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS (LOSS) PER SHARE
(Amounts in thousands, except per
share data) Year Ended December 31
<S> <C> <C> <C>
1994 1993 1992
Net earnings (loss) applicable to
common stockholders - primary $ 65,626 $ (30,676) $ (392,800)
Discontinued operations (321,600)
Extraordinary loss (8,400)
Change in accounting (FAS 106) (41,800)
Earnings (Loss) from continuing
operations 65,626 (22,276) (29,400)
Restore dividends on convertible
preferred stock (a) 12,980 325
Restore interest expense on
convertible debentures (a) (b) 13,900
Net earnings (loss) for fully $ 78,606 $ (21,951) $ (15,500)
diluted earnings per share
Weighted average common shares 44,504 43,131 42,617
outstanding
Common share equivalents from stock 1,361
options (c)
Weighted average common shares and 45,865 43,131 42,617
equivalents outstanding - primary
Shares issuable assuming conversion 10,384 260
of preferred stock (a)
Shares issuable assuming 6,794
conversion of debentures (a)
Weighted average common shares and 56,249 43,391 49,411
equivalents outstanding - adjusted
for full dilution
Primary earnings (loss) per share:
Continuing operations $ 1.43 $ (0.52) $ (0.69)
Discontinued operations (7.55)
Extraordinary loss (0.19)
Change in accounting (FAS 106) (0.98)
Total $ 1.43 $ (0.71) $ (9.22)
Fully diluted earnings (loss) per $ 1.40 $ (0.51) $ (0.31)
share (c)
(a) Convertible preferred stock issued and convertible debentures
redeemed in December 1993.
(b) Net of income tax effect which is nil.
(c) Common stock equivalents and shares issuable assuming
conversion of convertible debentures
not reported in 1993 and 1992 because the result is anti-
dilutive or additional dilution is less than 3%
as prescribed by APBO No. 15. This calculation is
submitted in accordance with
Regulation S-X item
601(b)(11).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
CERIDIAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1994 1993 1992 1991 1990
Earnings (Loss) before
income taxes and other
items(1) . . . . . . $ 85.2 $ (18.2) $(186.3) $ 1.9 $ 15.9
Less undistributed earnings
and non-guaranteed losses
from less than 50% owned
affiliates included above -- -- (0.6) (2.6) 1.3
Total earnings (loss)
before income taxes
and other items. . . $ 85.2 ($18.2) (185.7) (4.5) 14.6
Add:
Interest . . . . . . . 1.6 16.4 17.7 25.4 43.8
Interest portion
of rentals (2) . . . 11.9 12.4 31.8 17.2 31.6
Adjusted earnings (loss)
before income taxes
and other items. . . . $ 98.7 $ 10.6 $(150.8) $ 61.7 $ 90.0
referred stock dividends $ 13.0 $ 0.3 $ 0.3 $ 0.5 $ 0.5
Pre-tax to net
income ratio (3) . . . 100% 100% 100% 100% 100%
Preferred dividend factor
on a pre-tax basis . . 13.0 0.3 0.3 0.5 0.5
Interest . . . . . . . . 1.6 16.4 17.7 25.4 43.8
Interest portion
of rentals (2) . . . . 11.9 12.4 17.2 31.8 31.6
Total fixed charges and
preferred dividends $ 26.5 $ 29.1 $ 35.2 $ 57.7 $ 75.9
Ratio of earnings to
fixed charges and
preferred dividends. . 3.72 1.07 1.19
Earnings to combined fixed
charges and preferred
stock deficiency. . . $18.05 $ 186.0
(1) Results include discontinued operations.
(2) Assumed to be one-third of rental expense.
A tax gross-up would not have a material effect in any year.
(3)
</TABLE>
-33-
<PAGE>
Exhibit 22
CERIDIAN CORPORATION
SUBSIDIARIES
AT DECEMBER 31, 1994
State or
other Jurisdiction
Name of Incorporation
CD Plus S.A. France
Ceridian Properties, Inc. Delaware
Computing Devices Canada Ltd. Canada
Computing Devices Company Limited (Hastings) United Kingdom
Computing Devices Hastings Limited United Kingdom
Computing Devices Eastborne Limited United Kingdom
Computing Devices International Employment, Inc. Delaware
Earth Energy Systems, Inc. New Jersey
Paragon Imaging, Inc. Florida
ScanAmerica, L.P. (Limited Partnership) Delaware
Scarborough Research Delaware
Tesseract Corporation California
User Technology Services Inc. New York
VTC C-MOS Incorporated Delaware
34
<PAGE>
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
OF CERIDIAN CORPORATION
We consent to incorporation by reference in Registration Statements
Nos. 2-97570, 2-67753, 33-15920, 2-93345, 2-81865, 33-26839, 33-34045, 33-
49601, 33-54379, 33-56325 and 33-56833 on Forms S-8 of Ceridian Corporation
of our reports dated January 24, 1995. Such reports relate to the
consolidated financial statements and related financial statement schedule
of Ceridian Corporation and subsidiaries as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994
and are included or incorporated by reference in the 1994 Annual Report on
Form 10-K of Ceridian Corporation.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 21, 1995
35
<PAGE>
Exhibit 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Ceridian Corporation (the "Company"), a Delaware corporation, do hereby
make, nominate and appoint JOHN R. EICKHOFF, STEVEN J. OLSON and JOHN A.
HAVEMAN, and each of them, to be my attorney in fact for three months from
the date hereof, with full power and authority to sign his name on the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended; provided that such Form
10-K is first reviewed by the Audit Committee of the Board of Directors of
the Company and by my attorney in fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed such
Form 10-K.
IN WITNESS WHEREOF, I have signed this Power of Attorney as of
February 3, 1995.
/s/Lawrence Perlman /s/George R. Lewis
Lawrence Perlman George R. Lewis
/s/Ruth M. Davis /s/Charles Marshall
Ruth M. Davis Charles Marshall
s/Allen W. Dawson /s/Carole J. Uhrich
llen W. Dawson Carole J. Uhrich
s/Ronald James /s/Richard W. Vieser
onald James Richard W. Vieser
s/Richard G. Lareau /s/Paul S. Walsh
ichard G. Lareau Paul S. Walsh
-36-
<PAGE>
EXHIBIT INDEX
Exhibit Description
2.01 Asset Purchase Agreement, dated as of IBR
March 4, 1992, as amended, among the
Company, as seller, and Video Lottery
Technologies, Inc. and Automated Wagering
International, Inc., as purchasers
(incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K
dated June 23, 1992 (File No. 1-1969))
2.02 Asset Purchase Agreement, dated as of IBR
March 14, 1993, between the Company and
Siemens Energy & Automation, Inc.
(incorporated by reference to Exhibit
10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31,
1992 (File No. 1-1969))
2.03 Transfer Agreement between the Company IBR
and Control Data Systems, Inc., dated as
of July 15, 1992 (incorporated by reference
to Exhibit 10.1 to Amendment No. 1, dated
July 10, 1992, to Control Data Systems,
Inc.'s Registration Statement on Form 10
(File No. 0-20252))
2.04 Distribution Agreement between Control IBR
Data Systems, Inc. and the Company dated
as of July 15, 1992 (incorporated by
reference to Exhibit 10.2 to Amendment
No. 1, dated July 10, 1992, to Control
Data Systems, Inc.'s Registration Statement
on Form 10 (File No. 0-20252))
2.05 Agreement and Plan of Reorganization, IBR
dated as of May 25, 1994, among Tesseract
Corporation, Braemar Acquisition Corp.
and the Company (incorporated by reference
to Exhibit 2 to the Company's Current
Report on Form 8-K dated June 24, 1994,
as amended (File No. 1-1969))
3.01 Restated Certificate of Incorporation IBR
of the Company (incorporated by reference
to Exhibit 4.01 to the Company's Registration
Statement on Form S-8 (File No. 33-54379))
3.02 Bylaws of the Company, as amended (incorporated IBR
by reference to Exhibit 3.01 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993 (File No. 1-1969))
1
<PAGE>
4.01 Form of Deposit Agreement, dated as of December 23, IBR
1993, between The Bank of New York and the Company
incorporated by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-3 (File
No. 33-50959))
4.02 Form of Indenture, with respect to the 5 1/2% IBR
Convertible Subordinated Debentures Due 2008,
dated as of December 23, 1993, between the
The Bank of New York and the Company
(incorporated by reference to Exhibit 4.7
to the Company's Registration Statement on
Form S-3 (File No. 33-50959))
10. 01* Executive Employment Agreement between the IBR
Company and Lawrence Perlman, dated
February 1, 1994 (incorporated by reference
to Exhibit 10.01 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-1969))
10.02* Executive Employment Agreement between the E
Company and Ronald L. Turner, dated
February 3, 1995
10.03* Executive Employment Agreement between the E
Company and Patrick C. Sommers, dated
February 3, 1995
10.04* Executive Employment Agreement between the E
Company and Stephen B. Morris, dated
February 3, 1995
10.05* Executive Employment Agreement between the E
Company and John R. Eickhoff, dated
February 3, 1995
10.06* Employee Non-Statutory Stock Option Award E
Agreement between the Company and Patrick C.
Sommers, dated as of January 3, 1994
10.07* Employee Non-Statutory Stock Option Award E
Agreement between the Company and John R.
Eickhoff, dated as of January 3, 1994
10.08* Directors Deferred Compensation Plan - IBR
1993 Restatement (As amended through
December 13, 1993) (incorporated by
reference to Exhibit 10.05 to the Company's
Annual Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-1969))
10.09* Directors' Benefit Protection Trust Agreement, E
2
<PAGE>
dated as of December 1, 1994, between the
Company and First Trust National Association
10.10* 1993 Non-Employee Director Stock Plan IBR
incorporated by reference to Exhibit 2 to
the Company's Proxy Statement for Annual
Meeting of Stockholders, May 12, 1993
File No. 1-1969))
10.11* 1993 Long-Term Incentive Plan (As amended E
through October 21, 1994)
10.12* 1990 Long-Term Incentive Plan (1992 E
Restatement) (As amended through
October 21, 1994)
10.13* Description of the Company's Annual E
Executive Incentive Plan
10.14* Benefit Equalization Plan, as amended E
Effective generally as of January 1, 1994)
10.15* Employees' Benefit Protection Trust Agreement, E
dated as of December 1, 1994, between the Company
and First Trust National Association
10.16* Deferred Compensation Plan E
10.17* Form of Indemnification Agreement between the IBR
Company and its Directors (incorporated by
reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-1969))
10.18 Agreement for Information Technology Services, E
dated as of January 10, 1995, between the Company
and Integrated Systems Solutions Corporation
10.19 Amended and Restated Credit Agreement, dated IBR
as of May 13, 1994, among the Company, Bank of
America N.T. & S.A., as Agent, and the Other
Financial Institutions Parties Thereto
incorporated by reference to Exhibit 10.01
to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994
File No. 1-1969))
10.20 Form of Underwriting Agreement among the IBR
Company, Bear, Stearns & Co. Inc., Cowen &
Company and Piper Jaffray, Inc., dated
December 16, 1993 (incorporated by reference
*Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this report.
3
<PAGE>
to Exhibit 1.1 to the Company's Registration
Statement on Form S-3 (File No. 33-50959))
11. Statement re computation of earnings (loss) E
per share
12. Statements re computation of ratios E
13. 1994 Annual Report to Stockholders of E
the Company
22. Subsidiaries of the Company E
24. Consent of Independent Auditors E
25. Power of Attorney E
27. Financial Data Schedule E
4
<PAGE>
EXHIBIT 10.02
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
Ceridian Corporation (a Delaware Corporation)
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
and
RONALD L. TURNER ("Executive")
Date: February 3, 1995
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or
her services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with
Ceridian or engage in recruitment of Ceridian's employees for a
reasonable period of time after termination of employment, and
Executive is willing to refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance
of, and continuance in, Executive's position with Ceridian and
agreement to be bound by the terms of this Agreement represents a
substantial commitment to Ceridian in terms of Executive's personal
and professional career and a foregoing of present and future career
options by Executive, for all of which Ceridian receives substantial
value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position
and responsibilities and substantially frustrate the purpose of
Executive's commitment to Ceridian and forebearance of options.
-1-
<PAGE>
G. The parties recognize that in light of the above-described commitment
and forebearance of options, it is essential that, for the benefit of
Ceridian and its stockholders, provision be made for a Change of
Control Termination (as defined below) in order to enable Executive to
accept and effectively continue in Executive's position in the face of
inherently disruptive circumstances arising from the possibility of a
Change of Control of the Parent Corporation (as defined below),
although no such change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and
undertakings with respect to the Executive's employment and Change of
Control occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and
continuance in Executive's employment for the term of this Agreement and
the parties' agreement to be bound by the terms contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Base Salary" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "Board" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "Ceridian" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
any successor in interest by way of consolidation, operation of
(b)
law, merger or otherwise.
1.04 "Confidential Information" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting,
or marketing activities;
(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes, formulae,
plans or methods used in the development, manufacture or
marketing of Ceridian's software, products or services;
2
<PAGE>
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces,
visual displays, technical documentation, user manuals, data
files and databases; and
(f) any similar information of the type described above which
Ceridian obtained from another party and which Ceridian treats as
or designates as being proprietary, private or confidential,
whether or not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Executive outside the scope of employment or contrary
to the requirements of this Agreement will not be considered to have
been properly published, and therefore will not be in the public
domain for purposes of this Agreement.
1.05 "Disability" shall mean the inability of Executive to perform his or
her duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "Parent Corporation" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law,
merger or otherwise. "Parent Corporation" shall not include any
Subsidiary.
1.07 "Subsidiary" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by Parent
Corporation and/or one or more Subsidiaries; and (b) any division or
business unit (or portion thereof) of Parent Corporation or a
corporation described in clause (a) of this Section 1.07.
3
<PAGE>
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 Employment. Upon the terms and conditions set forth in this
Agreement, Ceridian hereby employs Executive, and Executive accepts
such employment. Except as expressly provided herein, termination of
this Agreement by either party shall also terminate Executive's
employment by Ceridian.
2.02 Duties. Executive shall devote his or her full-time and best efforts
to Ceridian and to fulfilling the duties of his or her position which
shall include such duties as may from time to time be assigned him or
her by Ceridian, provided that such duties are reasonably consistent
with Executive's education, experience and background. Executive
shall comply with Ceridian's policies and procedures to the extent
they are not inconsistent with this Agreement in which case the
provisions of this Agreement prevail.
2.03 Term. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June
30, 1997; and (b) two years after a Change of Control which occurs
prior to June 30, 1997. In any event, the Agreement shall
automatically terminate without notice when Executive reaches 65 years
of age. If employment is continued after the age of 65 by mutual
agreement, it shall be terminable at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 Base Salary. For all services rendered under this Agreement during
the term of Executive's employment, Ceridian shall pay Executive a
minimum Base Salary at the annual rate currently being paid or, if
Executive is not currently in Ceridian's employ, at the annual rate
specified in the written offer of employment. If Executive's salary
is increased from time to time during the term of this Agreement, the
increased amount shall be the Base Salary for the remainder of the
term and any extensions.
3.02 Bonus and Incentive. Bonus or incentive compensation shall be in the
sole discretion of Ceridian. Except as otherwise provided in Article
VII, Ceridian shall have the right in accordance with their terms to
alter, amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 Business Expenses. Ceridian shall, in accordance with, and to the
extent of, its policies in effect from time to time, bear all ordinary
and necessary business expenses incurred by Executive in performing
his or her duties as an employee of Ceridian, provided that Executive
accounts promptly for such expenses to Ceridian in the manner
prescribed from time to time by Ceridian.
ARTICLE IV
EARLY TERMINATION
4
<PAGE>
4.01 Early Termination. Subject to the respective continuing obligations
of the parties pursuant to Articles V, VI, and IX, this Article sets
forth the terms for early termination of this Agreement; provided,
however, that this Article shall not apply to a Change of Control
Termination which is governed solely by the provisions of Article VII.
4.02 Termination for Cause. Ceridian may terminate this Agreement
immediately for cause. For the purpose hereof "cause" means (a)
fraud, (b) misrepresentation, (c) theft or embezzlement of Ceridian
assets, (d) intentional violations of law involving moral turpitude,
(e) the continued failure by Executive to satisfactorily perform his
or her duties as reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of 60 days after a
written demand for such satisfactory performance which specifically
identifies the manner in which it is alleged Executive has not
satisfactorily performed such duties. In the event of termination for
cause pursuant to this Section 4.02, Executive shall be paid at the
usual rate of Executive's annual Base Salary through the date of
termination specified in any notice of termination.
4.03 Termination Without Cause. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement
and of Executive's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual
Base Salary through the date of termination specified in such
notice (but not to exceed 75 days);
if the notice of termination is given by Ceridian and effective
(b)
prior to Executive's 65th birthday, (1) Executive shall be paid
at the usual rate of his or her annual Base Salary through the
date of termination specified in the notice provided, however,
that Ceridian shall have the option of making termination of the
Agreement and Executive's employment effective immediately upon
notice in which case Executive shall be paid through a notice
period of 75 days; and (2) Executive shall receive, within 15
days following termination, a lump sum payment equivalent to two
years' Base Salary.
(c) If the notice of termination is given by Ceridian to be effective
on or after Executive's 65th birthday Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in any notice.
(d) In the event that termination occurs pursuant to Sections 4.03(b)
or 4.03(c), then, in addition to the payments specified in said
Sections, Ceridian shall pay to Executive any amount equal to
(1) the bonus, if any, to which Executive would otherwise have
become entitled under all Ceridian bonus plans in effect at the
time of termination of this Agreement had Executive remained
continuously employed for the full fiscal year in which
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termination occurred and continued to perform his or her duties
in the same manner as they were performed immediately prior to
termination, multiplied by (2) a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which termination occurred and the denominator of which
is 12. The amount payable pursuant to this Section 4.03(d) shall
be paid within 15 days after the date such bonus would have been
paid had Executive remained employed for the full fiscal year.
4.04 Termination In The Event of Death or Disability. This Agreement shall
terminate in the event of death or disability of Executive.
(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the
time of Executive's death plus the amount Executive would have
received in annual incentive plan bonus for the year in which
termination occurs had "target" goals been achieved. Such amount
shall be paid (1) to the beneficiary or beneficiaries designated
in writing to Ceridian by Executive, (2) in the absence of such
designation to the surviving spouse, or (3) if there is no
surviving spouse, or such surviving spouse disclaims all or any
part, then the full amount, or such disclaimed portion, shall be
paid to the executor, administrator or other personal
representative of Executive's estate. The amount shall be paid
as a lump sum as soon as practicable following Ceridian's receipt
of notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month
period of Executive's inability to perform his or her duties
occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to
(1) the amount Executive would have received in annual incentive
plan bonus for the year in which termination occurs had "target"
goals been achieved, multiplied by (2) a fraction, the numerator
of which shall be the number of whole months Executive was
employed in the year in which the death or disability occurred
and the denominator of which is 12. The amount payable pursuant
to this Section 4.04(c) shall be paid within 15 days after the
date such bonus would have been paid had Executive remained
employed for the full fiscal year.
4.05 Entire Termination Payment. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy
for such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive
under any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
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5.01 Confidentiality. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by Ceridian. If Executive leaves the employ of Ceridian,
Executive will not, without Ceridian's prior written consent, retain
or take away any drawing, writing or other record in any form
containing any Confidential Information.
5.02 Business Conduct and Ethics. During the term of employment with
Ceridian, Executive will engage in no activity or employment which may
conflict with the interest of Ceridian, and will comply with
Ceridian's policies and guidelines pertaining to business conduct and
ethics.
5.03 Disclosure. Executive will disclose promptly in writing to
Ceridian all inventions, discoveries, software, writings and other
works of authorship which are conceived, made, discovered, or written
jointly or singly on Ceridian time or on Executive's own time,
providing the invention, improvement, discovery, software, writing or
other work of authorship is capable of being used by Ceridian in the
normal course of business, and all such inventions, improvements,
discoveries, software, writings and other works of authorship shall
belong solely to Ceridian.
5.04 Instruments of Assignment. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Ceridian, at the request and the expense of Ceridian,
and Executive will do all acts and sign all instruments of assignment
and other papers Ceridian may reasonably request relating to
applications for patents, patents, copyrights, and the enforcement and
protection thereof. If Executive is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Executive,
Executive agrees to do so, and if Executive leaves the employ of
Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to
Executive and Ceridian, plus reasonable traveling or other expenses.
5.05 Inventions Developed on Executive's Own Time. The two
immediately preceding sections entitled "Disclosure" and "Instruments
of Assignment" do not apply to inventions in which a Ceridian claim
of any rights will create a violation of Chapter 47 Minnesota Revised
Statutes, Section 1-181.78, reproduced below and constituting the
written notification of its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
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Any provision in an employment agreement which provides that an
Executive shall assign or offer to assign any of his rights in an
invention to his employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the
employer was used and which was developed entirely on the employee's
own time, and (1) which does not relate (a) directly to the business
of the employer or (b) to the employer's actual or demonstrably
anticipated research or development, or (2) which does not result from
any work performed by the employee for the employer. Any provision
which purports to apply to such an invention is to that extent against
the public policy of this state and is to that extent void and
unenforceable.
Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS
A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF
HIS RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO,
AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO
THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR
WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF
THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE
EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE
BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.
5.06 Executive's Declaration. Executive has no inventions,
improvements, discoveries, software, writings or other works of
authorship useful to Ceridian in the normal course of business, which
were conceived, made or written prior to the date of this Agreement
and which are excluded from this Agreement.
5.07 Survival. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
6.01 General. The parties hereto recognize and agree that (a) Executive is
a senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is
conducted on a worldwide basis, and (d) provision for non-competition
and non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's
Confidential Information. In light of these considerations, this
Article VI sets forth the terms and conditions of Executive's
obligations of non-competition and non-recruitment subsequent to the
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termination of this Agreement and/or Executive's employment for any
reason.
6.02 Non-Competition.
(a) Unless the obligation is waived or limited by Ceridian in
accordance with subsection (b) of this Section 6.02, Executive
agrees that for a period of two years following termination of
employment for any reason, Executive will not directly or
indirectly, alone or as a partner, officer, director, shareholder
or employee of any other firm or entity, engage in any commercial
activity in competition with any part of Ceridian's business as
conducted as of the date of such termination of employment or
with any part of Ceridian's contemplated business with respect to
which Executive has Confidential Information as governed by
Article V of this Agreement. For purposes of this subsection
(a), "shareholder" shall not include beneficial ownership of less
than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange. Also for
purposes of this subsection (a), "Ceridian's business" shall
include business conducted by Ceridian or its affiliates and any
partnership or joint venture in which Ceridian or its affiliates
is a partner or joint venturer; provided that, "affiliate" as
used in this sentence shall not include any corporation in which
Ceridian has ownership of less than fifteen percent (15%) of the
voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written
notice shall describe the proposed employment or consulting
services and the firm to which they will be rendered. Ceridian's
failure to respond or object to such notice shall not in any way
constitute acquiescence or waiver of Ceridian's rights under this
Article VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination.
There shall be credited against Ceridian's obligation to make
such payments any other payments made by Ceridian to Executive
pursuant to Article IV of this Agreement. In the event that
Ceridian elects, pursuant to subsection (b) of this Section 6.02,
to waive all or any portion of the non-competition obligation, no
payment shall be required by Ceridian with respect to the portion
of the non-competition period which has been waived.
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6.03 Non-Recruitment. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from
responding to a request (other than by Executive's employer) for a
reference with respect to an individual's employment qualifications.
6.04 Survival. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
ARTICLE VII
CHANGE OF CONTROL
7.01 Definitions. For purposes of this Article VII, the following
definitions shall be applied:
"Change of Control" shall mean any of the following events:
(a)
(1) a merger or consolidation to which Parent Corporation is a
party if the individuals and entities who were stockholders
of Parent Corporation immediately prior to the effective
date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power for election of directors of
the surviving corporation immediately following the
effective date of such merger or consolidation; or
(2) the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in the
aggregate of securities of Parent Corporation representing
twenty-five percent (25%) or more of the total combined
voting power of Parent Corporation's then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert; or
(3) the sale of the properties and assets of Parent Corporation,
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of Parent Corporation.
(4) the stockholders of Parent Corporation approve any plan or
proposal for the liquidation of Parent Corporation; or
(5) a change in the composition of the Board at any time during
any consecutive 24 month period such that the "Continuity
Directors" cease for any reason to constitute at least a
seventy percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those members
of the Board who either:
(A) were directors at the beginning of such consecutive 24
month period; or
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(B) were elected by, or on the nomination or recommendation
of, at least a two-thirds (2/3) majority of the then-
existing Board.
(b) "Change of Control Actions" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation,
to or for the benefit of Executive under any arrangement, which
is considered contingent on a Change of Control for purposes of
Section 280G of the Internal Revenue Code. As used in this
definition, the term "arrangement" includes, without limitation,
any agreement between Executive and Ceridian and any and all of
Ceridian's salary, bonus, incentive, restricted stock, stock
option, compensation or benefit plans, programs or arrangements,
and shall include this Agreement.
"Change of Control Termination"
(c) shall mean, with respect to
Executive, any of the following events occurring within two years
after a Change of Control:
(1) Termination of Executive's employment by Ceridian for any
reason other than (A) fraud, (B) theft or embezzlement of
Ceridian assets, (C) intentional violations of law involving
moral turpitude, or (D) the substantial and continuing
failure by Executive to satisfactorily perform his or her
duties as reasonably assigned to Executive pursuant to
Section 2.02 of Article II of this Agreement for a period of
60 days after a written demand for such satisfactory
performance which specifically identifies the manner in
which it is alleged Executive has not satisfactorily
performed such duties.
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII. A Change of
Control Termination by Executive shall not, however, include
termination by reason of death.
(d) "Good Reason" shall mean a good faith determination by Executive,
in Executive's reasonable judgment, that any one or more of the
following events has occurred, without Executive's express
written consent, after a Change of Control:
(1) A change in Executive's reporting responsibilities, titles
or offices as in effect immediately prior to the Change of
Control, or any removal of Executive from, or any failure to
re-elect Executive to, any of such positions, which has the
effect of materially diminishing Executive's responsibility
or authority;
(2) A reduction by Ceridian in Executive's Base Salary as in
effect immediately prior to the Change of Control or as the
same may be increased from time to time;
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(3) Ceridian requiring Executive to be based anywhere other than
within 25 miles of Executive's job location at the time of
the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive at
least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to continue
in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating immediately
prior to a Change of Control; or (B) the taking of any
action by Ceridian that would materially adversely affect
Executive's participation or materially reduce Executive's
benefits under any of such plans, programs or arrangements;
(5) The failure by Ceridian to provide office space, furniture,
and secretarial support at least comparable to that provided
Executive immediately prior to the Change of Control or the
taking of any similar action by Ceridian that would
materially adversely affect the working conditions in or
under which Executive performs his or her employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or any
other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII in
full force and effect and operative as if a Change of
Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately after
the purchase/transfer becomes effective, and (B) such
purchaser/transferee has a creditworthiness reasonably
equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
(e) "Internal Revenue Code" -- Any reference to a section of the
Internal Revenue Code shall mean that section of the Internal
Revenue Code of 1986, or to the corresponding section of such
Code as from time to time amended.
7.02 Change of Control Termination Right. For a period of two years
following a Change of Control, Executive shall have the right, at any
time and within Executive's sole discretion, to terminate employment
with Ceridian for Good Reason. Such termination shall be accomplished
by, and effective upon, Executive giving written notice to Ceridian of
Executive's decision to terminate. Except as otherwise expressly
provided in this Agreement, upon the exercise of said right, all
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obligations and duties of Executive under this Agreement shall be of
no further force and effect.
7.03 Change of Control Termination Payment. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of
Control Compensation" contained in Section 7.04, then, and without
further action by the Board, Compensation Committee or otherwise,
Parent Corporation shall, within five days of such termination, make a
lump sum payment to Executive in an amount equal to one dollar ($1.00)
less than three times the average annualized compensation as defined
by Section 280G of the Internal Revenue Code, received by Executive
from Ceridian and includible in Executive's gross income for federal
income tax purposes, for the five most recent taxable years of the
Executive ending before the date upon which the Change in Control
occurred (or such portion of such period during which Executive was an
employee of Ceridian).
7.04 Limitation on Change of Control Compensation. Notwithstanding any
other provisions of this Agreement or of any other agreement, contract
or understanding heretofore or hereafter entered into between Ceridian
and Executive, Executive shall not be entitled to receive any Change
of Control Action which would, with respect to Executive, constitute a
"parachute payment" for purposes of Section 280G of the Internal
Revenue Code. In the event any Change of Control Action would, with
respect to Executive, constitute a "parachute payment", Executive
shall have the right to designate those Change of Control Action(s)
which would be reduced or eliminated so that Executive will not
receive a "parachute payment".
7.05 Interest. In the event Parent Corporation does not make timely
payment in full of the Change of Control Termination payment described
in Section 7.03, Executive shall be entitled to receive interest on
any unpaid amount at the lower of: (a) prime rate of interest (or
such comparable index as may be adopted) established from time to time
by the Norwest Bank Minneapolis, N.A., Minneapolis, Minnesota; or (b)
the maximum rate permitted under Section 280G(d)(4) of the Internal
Revenue Code.
7.06 Attorneys' Fees. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall
be entitled to recover from Ceridian any expenses for attorneys' fees
and disbursements incurred.
7.07 Benefits Continuation. In the event of a Change of Control
Termination, Executive (and anyone entitled to claim under or through
Executive) shall, until age 65, be entitled to receive from Ceridian
the same or equivalent health, dental, accidental death and
dismemberment, short and long-term disability, life insurance
coverages, and all other insurance policies and health and welfare
benefits programs, policies or arrangements, at the same levels and
coverages as Executive was receiving on the day immediately prior to
the Change of Control. To the extent that election of continuation of
any of such coverages, programs, policies, or arrangements is made
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available to employees terminating at age 55 with 15 or more years of
service, Executive shall be required to pay no more for continuation
than is required of such employees on the day immediately prior to the
Change of Control. If no such continuation program is available,
Executive shall be required to pay no more than he/she paid as an
active employee, or if provided by Ceridian at no cost to employees on
the day immediately prior to the Change of Control, they shall
continue to be made available to Executive on this basis.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any
reason Parent Corporation's ownership interest in any such Subsidiary falls
below the level specified in Section 1.07, (b) Executive's primary
employment duties are with the Subsidiary at the time of the occurrence of
such event, and (c) Executive does not, in conjunction therewith, transfer
employment directly to Parent Corporation or another Subsidiary, then:
(1) If Executive gives his or her written consent to the assignment
of this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment
is accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
(2) If such assignment is not accepted by the Subsidiary or
purchaser, then this Agreement shall be deemed to have been
terminated by Ceridian without cause pursuant to Section 4.03 of
Article IV; and
(3) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 No Adequate Remedy. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense
that such party has an adequate remedy at law.
9.02 Successors and Assigns. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary,
whether by way of merger, consolidation, operation of law, assignment,
purchase or other acquisition of substantially all of the assets or
business of Ceridian, and any such successor or assign shall
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absolutely and unconditionally assume all of Ceridian's obligations
hereunder.
9.03 Notices. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed
address. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed dispatched
on the registered date or that stamped on the certified mail
receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is
sooner.
9.04 Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and
any and every legal proceeding arising out of or in connection with
this Agreement shall be brought in the appropriate courts of the State
of Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this
Governing Law provision is essential in light of the fact that Parent
Corporation's corporate headquarters and its principal executive
offices are located within the State of Minnesota, and there is a
critical need for uniformity in the interpretation and enforcement of
the employment agreements between Ceridian and its senior executives.
9.06 Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
9.07 Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
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the exercise of any other right or remedy granted hereby or by any
related document or by law.
9.08 Modification. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein agreed upon. This Agreement replaces in full all prior
employment agreements or understandings of the parties hereto, and any
and all such prior agreements or understandings are hereby rescinded
by mutual agreement.
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IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
Ronald L. Turner By: /s/Ronald L. Turner
Title:President, Computing Devices
Address:
8800 Queen Avenue South
Bloomington, MN 55440
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EXHIBIT 10.03
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
Ceridian Corporation (a Delaware Corporation)
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
and
PATRICK C. SOMMERS ("Executive")
Date: February 3, 1995
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or
her services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with
Ceridian or engage in recruitment of Ceridian's employees for a
reasonable period of time after termination of employment, and
Executive is willing to refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance
of, and continuance in, Executive's position with Ceridian and
agreement to be bound by the terms of this Agreement represents a
substantial commitment to Ceridian in terms of Executive's personal
and professional career and a foregoing of present and future career
options by Executive, for all of which Ceridian receives substantial
value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position
and responsibilities and substantially frustrate the purpose of
Executive's commitment to Ceridian and forebearance of options.
G. The parties recognize that in light of the above-described commitment
and forebearance of options, it is essential that, for the benefit of
Ceridian and its stockholders, provision be made for a Change of
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Control Termination (as defined below) in order to enable Executive to
accept and effectively continue in Executive's position in the face of
inherently disruptive circumstances arising from the possibility of a
Change of Control of the Parent Corporation (as defined below),
although no such change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and
undertakings with respect to the Executive's employment and Change of
Control occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and
continuance in Executive's employment for the term of this Agreement and
the parties' agreement to be bound by the terms contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Base Salary" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "Board" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "Ceridian" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
any Subsidiary (as that term is defined in Section 1.07); and
(a)
(b) any successor in interest by way of consolidation, operation of
law, merger or otherwise.
1.04 "Confidential Information" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting,
or marketing activities;
(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes, formulae,
plans or methods used in the development, manufacture or
marketing of Ceridian's software, products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
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(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces,
visual displays, technical documentation, user manuals, data
files and databases; and
(f) any similar information of the type described above which
Ceridian obtained from another party and which Ceridian treats as
or designates as being proprietary, private or confidential,
whether or not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Executive outside the scope of employment or contrary
to the requirements of this Agreement will not be considered to have
been properly published, and therefore will not be in the public
domain for purposes of this Agreement.
1.05 "Disability" shall mean the inability of Executive to perform his or
her duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "Parent Corporation" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law,
merger or otherwise. "Parent Corporation" shall not include any
Subsidiary.
1.07 "Subsidiary" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by Parent
Corporation and/or one or more Subsidiaries; and (b) any division or
business unit (or portion thereof) of Parent Corporation or a
corporation described in clause (a) of this Section 1.07.
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 Employment. Upon the terms and conditions set forth in this
Agreement, Ceridian hereby employs Executive, and Executive accepts
such employment. Except as expressly provided herein, termination of
this Agreement by either party shall also terminate Executive's
employment by Ceridian.
2.02 Duties. Executive shall devote his or her full-time and best efforts
to Ceridian and to fulfilling the duties of his or her position which
shall include such duties as may from time to time be assigned him or
her by Ceridian, provided that such duties are reasonably consistent
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with Executive's education, experience and background. Executive
shall comply with Ceridian's policies and procedures to the extent
they are not inconsistent with this Agreement in which case the
provisions of this Agreement prevail.
2.03 Term. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June
30, 1997; and (b) two years after a Change of Control which occurs
prior to June 30, 1997. In any event, the Agreement shall
automatically terminate without notice when Executive reaches 65 years
of age. If employment is continued after the age of 65 by mutual
agreement, it shall be terminable at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 Base Salary. For all services rendered under this Agreement during
the term of Executive's employment, Ceridian shall pay Executive a
minimum Base Salary at the annual rate currently being paid or, if
Executive is not currently in Ceridian's employ, at the annual rate
specified in the written offer of employment. If Executive's salary
is increased from time to time during the term of this Agreement, the
increased amount shall be the Base Salary for the remainder of the
term and any extensions.
3.02 Bonus and Incentive. Bonus or incentive compensation shall be in the
sole discretion of Ceridian. Except as otherwise provided in Article
VII, Ceridian shall have the right in accordance with their terms to
alter, amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 Business Expenses. Ceridian shall, in accordance with, and to the
extent of, its policies in effect from time to time, bear all ordinary
and necessary business expenses incurred by Executive in performing
his or her duties as an employee of Ceridian, provided that Executive
accounts promptly for such expenses to Ceridian in the manner
prescribed from time to time by Ceridian.
ARTICLE IV
EARLY TERMINATION
4.01 Early Termination. Subject to the respective continuing obligations
of the parties pursuant to Articles V, VI, and IX, this Article sets
forth the terms for early termination of this Agreement; provided,
however, that this Article shall not apply to a Change of Control
Termination which is governed solely by the provisions of Article VII.
4.02 Termination for Cause. Ceridian may terminate this Agreement
immediately for cause. For the purpose hereof "cause" means (a)
fraud, (b) misrepresentation, (c) theft or embezzlement of Ceridian
assets, (d) intentional violations of law involving moral turpitude,
(e) the continued failure by Executive to satisfactorily perform his
or her duties as reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of 60 days after a
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written demand for such satisfactory performance which specifically
identifies the manner in which it is alleged Executive has not
satisfactorily performed such duties. In the event of termination for
cause pursuant to this Section 4.02, Executive shall be paid at the
usual rate of Executive's annual Base Salary through the date of
termination specified in any notice of termination.
4.03 Termination Without Cause. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement
and of Executive's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual
Base Salary through the date of termination specified in such
notice (but not to exceed 75 days);
(b) if the notice of termination is given by Ceridian and effective
prior to Executive's 65th birthday, (1) Executive shall be paid
at the usual rate of his or her annual Base Salary through the
date of termination specified in the notice provided, however,
that Ceridian shall have the option of making termination of the
Agreement and Executive's employment effective immediately upon
notice in which case Executive shall be paid through a notice
period of 75 days; and (2) Executive shall receive, within 15
days following termination, a lump sum payment equivalent to two
years' Base Salary.
(c) If the notice of termination is given by Ceridian to be effective
on or after Executive's 65th birthday Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in any notice.
(d) In the event that termination occurs pursuant to Sections 4.03(b)
or 4.03(c), then, in addition to the payments specified in said
Sections, Ceridian shall pay to Executive any amount equal to
(1) the bonus, if any, to which Executive would otherwise have
become entitled under all Ceridian bonus plans in effect at the
time of termination of this Agreement had Executive remained
continuously employed for the full fiscal year in which
termination occurred and continued to perform his or her duties
in the same manner as they were performed immediately prior to
termination, multiplied by (2) a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which termination occurred and the denominator of which
is 12. The amount payable pursuant to this Section 4.03(d) shall
be paid within 15 days after the date such bonus would have been
paid had Executive remained employed for the full fiscal year.
4.04 Termination In The Event of Death or Disability. This Agreement shall
terminate in the event of death or disability of Executive.
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(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the
time of Executive's death plus the amount Executive would have
received in annual incentive plan bonus for the year in which
termination occurs had "target" goals been achieved. Such amount
shall be paid (1) to the beneficiary or beneficiaries designated
in writing to Ceridian by Executive, (2) in the absence of such
designation to the surviving spouse, or (3) if there is no
surviving spouse, or such surviving spouse disclaims all or any
part, then the full amount, or such disclaimed portion, shall be
paid to the executor, administrator or other personal
representative of Executive's estate. The amount shall be paid
as a lump sum as soon as practicable following Ceridian's receipt
of notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month
period of Executive's inability to perform his or her duties
occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to
(1) the amount Executive would have received in annual incentive
plan bonus for the year in which termination occurs had "target"
goals been achieved, multiplied by (2) a fraction, the numerator
of which shall be the number of whole months Executive was
employed in the year in which the death or disability occurred
and the denominator of which is 12. The amount payable pursuant
to this Section 4.04(c) shall be paid within 15 days after the
date such bonus would have been paid had Executive remained
employed for the full fiscal year.
4.05 Entire Termination Payment. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy
for such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive
under any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 Confidentiality. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by Ceridian. If Executive leaves the employ of Ceridian,
Executive will not, without Ceridian's prior written consent, retain
or take away any drawing, writing or other record in any form
containing any Confidential Information.
5.02 Business Conduct and Ethics. During the term of employment with
Ceridian, Executive will engage in no activity or employment which may
conflict with the interest of Ceridian, and will comply with
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Ceridian's policies and guidelines pertaining to business conduct and
ethics.
5.03 Disclosure. Executive will disclose promptly in writing to
Ceridian all inventions, discoveries, software, writings and other
works of authorship which are conceived, made, discovered, or written
jointly or singly on Ceridian time or on Executive's own time,
providing the invention, improvement, discovery, software, writing or
other work of authorship is capable of being used by Ceridian in the
normal course of business, and all such inventions, improvements,
discoveries, software, writings and other works of authorship shall
belong solely to Ceridian.
5.04 Instruments of Assignment. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Ceridian, at the request and the expense of Ceridian,
and Executive will do all acts and sign all instruments of assignment
and other papers Ceridian may reasonably request relating to
applications for patents, patents, copyrights, and the enforcement and
protection thereof. If Executive is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Executive,
Executive agrees to do so, and if Executive leaves the employ of
Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to
Executive and Ceridian, plus reasonable traveling or other expenses.
5.05 Inventions Developed on Executive's Own Time. The two
immediately preceding sections entitled "Disclosure" and "Instruments
of Assignment" do not apply to inventions in which a Ceridian claim
of any rights will create a violation of Chapter 47 Minnesota Revised
Statutes, Section 1-181.78, reproduced below and constituting the
written notification of its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
Any provision in an employment agreement which provides that an
Executive shall assign or offer to assign any of his rights in an
invention to his employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the
employer was used and which was developed entirely on the employee's
own time, and (1) which does not relate (a) directly to the business
of the employer or (b) to the employer's actual or demonstrably
anticipated research or development, or (2) which does not result from
any work performed by the employee for the employer. Any provision
which purports to apply to such an invention is to that extent against
the public policy of this state and is to that extent void and
unenforceable.
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Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS
A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF
HIS RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO,
AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO
THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR
WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF
THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE
EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE
BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.
5.06 Executive's Declaration. Executive has no inventions,
improvements, discoveries, software, writings or other works of
authorship useful to Ceridian in the normal course of business, which
were conceived, made or written prior to the date of this Agreement
and which are excluded from this Agreement.
5.07 Survival. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
6.01 General. The parties hereto recognize and agree that (a) Executive is
a senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is
conducted on a worldwide basis, and (d) provision for non-competition
and non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's
Confidential Information. In light of these considerations, this
Article VI sets forth the terms and conditions of Executive's
obligations of non-competition and non-recruitment subsequent to the
termination of this Agreement and/or Executive's employment for any
reason.
6.02 Non-Competition.
(a) Unless the obligation is waived or limited by Ceridian in
accordance with subsection (b) of this Section 6.02, Executive
agrees that for a period of two years following termination of
employment for any reason, Executive will not directly or
indirectly, alone or as a partner, officer, director, shareholder
or employee of any other firm or entity, engage in any commercial
activity in competition with any part of Ceridian's business as
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conducted as of the date of such termination of employment or
with any part of Ceridian's contemplated business with respect to
which Executive has Confidential Information as governed by
Article V of this Agreement. For purposes of this subsection
(a), "shareholder" shall not include beneficial ownership of less
than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange. Also for
purposes of this subsection (a), "Ceridian's business" shall
include business conducted by Ceridian or its affiliates and any
partnership or joint venture in which Ceridian or its affiliates
is a partner or joint venturer; provided that, "affiliate" as
used in this sentence shall not include any corporation in which
Ceridian has ownership of less than fifteen percent (15%) of the
voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written
notice shall describe the proposed employment or consulting
services and the firm to which they will be rendered. Ceridian's
failure to respond or object to such notice shall not in any way
constitute acquiescence or waiver of Ceridian's rights under this
Article VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination.
There shall be credited against Ceridian's obligation to make
such payments any other payments made by Ceridian to Executive
pursuant to Article IV of this Agreement. In the event that
Ceridian elects, pursuant to subsection (b) of this Section 6.02,
to waive all or any portion of the non-competition obligation, no
payment shall be required by Ceridian with respect to the portion
of the non-competition period which has been waived.
6.03 Non-Recruitment. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from
responding to a request (other than by Executive's employer) for a
reference with respect to an individual's employment qualifications.
6.04 Survival. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
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ARTICLE VII
CHANGE OF CONTROL
7.01 Definitions. For purposes of this Article VII, the following
definitions shall be applied:
(a) "Change of Control" shall mean any of the following events:
(1) a merger or consolidation to which Parent Corporation is a
party if the individuals and entities who were stockholders
of Parent Corporation immediately prior to the effective
date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power for election of directors of
the surviving corporation immediately following the
effective date of such merger or consolidation; or
(2) the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in the
aggregate of securities of Parent Corporation representing
twenty-five percent (25%) or more of the total combined
voting power of Parent Corporation's then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert; or
(3) the sale of the properties and assets of Parent Corporation,
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of Parent Corporation.
(4) the stockholders of Parent Corporation approve any plan or
proposal for the liquidation of Parent Corporation; or
(5) a change in the composition of the Board at any time during
any consecutive 24 month period such that the "Continuity
Directors" cease for any reason to constitute at least a
seventy percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those members
of the Board who either:
(A) were directors at the beginning of such consecutive 24
month period; or
were elected by, or on the nomination or recommendation
(B)
of, at least a two-thirds (2/3) majority of the then-
existing Board.
(b) "Change of Control Actions" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation,
to or for the benefit of Executive under any arrangement, which
is considered contingent on a Change of Control for purposes of
Section 280G of the Internal Revenue Code. As used in this
definition, the term "arrangement" includes, without limitation,
any agreement between Executive and Ceridian and any and all of
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Ceridian's salary, bonus, incentive, restricted stock, stock
option, compensation or benefit plans, programs or arrangements,
and shall include this Agreement.
(c) "Change of Control Termination" shall mean, with respect to
Executive, any of the following events occurring within two years
after a Change of Control:
(1) Termination of Executive's employment by Ceridian for any
reason other than (A) fraud, (B) theft or embezzlement of
Ceridian assets, (C) intentional violations of law involving
moral turpitude, or (D) the substantial and continuing
failure by Executive to satisfactorily perform his or her
duties as reasonably assigned to Executive pursuant to
Section 2.02 of Article II of this Agreement for a period of
60 days after a written demand for such satisfactory
performance which specifically identifies the manner in
which it is alleged Executive has not satisfactorily
performed such duties.
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII. A Change of
Control Termination by Executive shall not, however, include
termination by reason of death.
(d) "Good Reason" shall mean a good faith determination by Executive,
in Executive's reasonable judgment, that any one or more of the
following events has occurred, without Executive's express
written consent, after a Change of Control:
(1) A change in Executive's reporting responsibilities, titles
or offices as in effect immediately prior to the Change of
Control, or any removal of Executive from, or any failure to
re-elect Executive to, any of such positions, which has the
effect of materially diminishing Executive's responsibility
or authority;
(2) A reduction by Ceridian in Executive's Base Salary as in
effect immediately prior to the Change of Control or as the
same may be increased from time to time;
(3) Ceridian requiring Executive to be based anywhere other than
within 25 miles of Executive's job location at the time of
the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive at
least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to continue
in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating immediately
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prior to a Change of Control; or (B) the taking of any
action by Ceridian that would materially adversely affect
Executive's participation or materially reduce Executive's
benefits under any of such plans, programs or arrangements;
(5) The failure by Ceridian to provide office space, furniture,
and secretarial support at least comparable to that provided
Executive immediately prior to the Change of Control or the
taking of any similar action by Ceridian that would
materially adversely affect the working conditions in or
under which Executive performs his or her employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or any
other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII in
full force and effect and operative as if a Change of
Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately after
the purchase/transfer becomes effective, and (B) such
purchaser/transferee has a creditworthiness reasonably
equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
(e) "Internal Revenue Code" -- Any reference to a section of the
Internal Revenue Code shall mean that section of the Internal
Revenue Code of 1986, or to the corresponding section of such
Code as from time to time amended.
7.02 Change of Control Termination Right. For a period of two years
following a Change of Control, Executive shall have the right, at any
time and within Executive's sole discretion, to terminate employment
with Ceridian for Good Reason. Such termination shall be accomplished
by, and effective upon, Executive giving written notice to Ceridian of
Executive's decision to terminate. Except as otherwise expressly
provided in this Agreement, upon the exercise of said right, all
obligations and duties of Executive under this Agreement shall be of
no further force and effect.
7.03 Change of Control Termination Payment. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of
Control Compensation" contained in Section 7.04, then, and without
further action by the Board, Compensation Committee or otherwise,
Parent Corporation shall, within five days of such termination, make a
lump sum payment to Executive in an amount equal to one dollar ($1.00)
less than three times the average annualized compensation as defined
by Section 280G of the Internal Revenue Code, received by Executive
from Ceridian and includible in Executive's gross income for federal
income tax purposes, for the five most recent taxable years of the
Executive ending before the date upon which the Change in Control
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occurred (or such portion of such period during which Executive was an
employee of Ceridian).
7.04 Limitation on Change of Control Compensation. Notwithstanding any
other provisions of this Agreement or of any other agreement, contract
or understanding heretofore or hereafter entered into between Ceridian
and Executive, Executive shall not be entitled to receive any Change
of Control Action which would, with respect to Executive, constitute a
"parachute payment" for purposes of Section 280G of the Internal
Revenue Code. In the event any Change of Control Action would, with
respect to Executive, constitute a "parachute payment", Executive
shall have the right to designate those Change of Control Action(s)
which would be reduced or eliminated so that Executive will not
receive a "parachute payment".
7.05 Interest. In the event Parent Corporation does not make timely
payment in full of the Change of Control Termination payment described
in Section 7.03, Executive shall be entitled to receive interest on
any unpaid amount at the lower of: (a) prime rate of interest (or
such comparable index as may be adopted) established from time to time
by the Norwest Bank Minneapolis, N.A., Minneapolis, Minnesota; or (b)
the maximum rate permitted under Section 280G(d)(4) of the Internal
Revenue Code.
7.06 Attorneys' Fees. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall
be entitled to recover from Ceridian any expenses for attorneys' fees
and disbursements incurred.
7.07 Benefits Continuation. In the event of a Change of Control
Termination, Executive (and anyone entitled to claim under or through
Executive) shall, until age 65, be entitled to receive from Ceridian
the same or equivalent health, dental, accidental death and
dismemberment, short and long-term disability, life insurance
coverages, and all other insurance policies and health and welfare
benefits programs, policies or arrangements, at the same levels and
coverages as Executive was receiving on the day immediately prior to
the Change of Control. To the extent that election of continuation of
any of such coverages, programs, policies, or arrangements is made
available to employees terminating at age 55 with 15 or more years of
service, Executive shall be required to pay no more for continuation
than is required of such employees on the day immediately prior to the
Change of Control. If no such continuation program is available,
Executive shall be required to pay no more than he/she paid as an
active employee, or if provided by Ceridian at no cost to employees on
the day immediately prior to the Change of Control, they shall
continue to be made available to Executive on this basis.
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ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any
reason Parent Corporation's ownership interest in any such Subsidiary falls
below the level specified in Section 1.07, (b) Executive's primary
employment duties are with the Subsidiary at the time of the occurrence of
such event, and (c) Executive does not, in conjunction therewith, transfer
employment directly to Parent Corporation or another Subsidiary, then:
(1) If Executive gives his or her written consent to the assignment
of this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment
is accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
(2) If such assignment is not accepted by the Subsidiary or
purchaser, then this Agreement shall be deemed to have been
terminated by Ceridian without cause pursuant to Section 4.03 of
Article IV; and
(3) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 No Adequate Remedy. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense
that such party has an adequate remedy at law.
9.02 Successors and Assigns. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary,
whether by way of merger, consolidation, operation of law, assignment,
purchase or other acquisition of substantially all of the assets or
business of Ceridian, and any such successor or assign shall
absolutely and unconditionally assume all of Ceridian's obligations
hereunder.
9.03 Notices. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address:
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(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed
address. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed dispatched
on the registered date or that stamped on the certified mail
receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is
sooner.
9.04 Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and
any and every legal proceeding arising out of or in connection with
this Agreement shall be brought in the appropriate courts of the State
of Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this
Governing Law provision is corporate headquarters and its principal
executive offices are located within the State of Minnesota, and there
is a critical need for uniformity in the interpretation and
enforcement of the employment agreements between Ceridian and its
senior executives.
9.06 Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
9.07 Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
9.08 Modification. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
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matters herein agreed upon. This Agreement replaces in full all prior
employment agreements or understandings of the parties hereto, and any
and all such prior agreements or understandings are hereby rescinded
by mutual agreement.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
Patrick C. Sommers By:/s/Patrick C. Sommers
Title: President, Employer Services
Address:
8100 34th Avenue South
Bloomington, MN 55425
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EXHIBIT 10.04
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
Ceridian Corporation (a Delaware Corporation)
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
and
STEPHEN B. MORRIS ("Executive")
Date: February 3, 1995
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or
her services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with
Ceridian or engage in recruitment of Ceridian's employees for a
reasonable period of time after termination of employment, and
Executive is willing to refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance
of, and continuance in, Executive's position with Ceridian and
agreement to be bound by the terms of this Agreement represents a
substantial commitment to Ceridian in terms of Executive's personal
and professional career and a foregoing of present and future career
options by Executive, for all of which Ceridian receives substantial
value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position
and responsibilities and substantially frustrate the purpose of
Executive's commitment to Ceridian and forebearance of options.
G. The parties recognize that in light of the above-described commitment
and forebearance of options, it is essential that, for the benefit of
Ceridian and its stockholders, provision be made for a Change of
Control Termination (as defined below) in order to enable Executive to
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accept and effectively continue in Executive's position in the face of
inherently disruptive circumstances arising from the possibility of a
Change of Control of the Parent Corporation (as defined below),
although no such change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and
undertakings with respect to the Executive's employment and Change of
Control occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and
continuance in Executive's employment for the term of this Agreement and
the parties' agreement to be bound by the terms contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Base Salary" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "Board" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "Ceridian" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
(b) any successor in interest by way of consolidation, operation of
law, merger or otherwise.
1.04 "Confidential Information" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting,
or marketing activities;
(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes, formulae,
plans or methods used in the development, manufacture or
marketing of Ceridian's software, products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
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(d) trade secrets;
software in various stages of development, including computer
(e)
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces,
visual displays, technical documentation, user manuals, data
files and databases; and
(f) any similar information of the type described above which
Ceridian obtained from another party and which Ceridian treats as
or designates as being proprietary, private or confidential,
whether or not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Executive outside the scope of employment or contrary
to the requirements of this Agreement will not be considered to have
been properly published, and therefore will not be in the public
domain for purposes of this Agreement.
1.05 "Disability" shall mean the inability of Executive to perform his or
her duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "Parent Corporation" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law,
merger or otherwise. "Parent Corporation" shall not include any
Subsidiary.
1.07 "Subsidiary" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by Parent
Corporation and/or one or more Subsidiaries; and (b) any division or
business unit (or portion thereof) of Parent Corporation or a
corporation described in clause (a) of this Section 1.07.
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 Employment. Upon the terms and conditions set forth in this
Agreement, Ceridian hereby employs Executive, and Executive accepts
such employment. Except as expressly provided herein, termination of
this Agreement by either party shall also terminate Executive's
employment by Ceridian.
2.02 Duties. Executive shall devote his or her full-time and best efforts
to Ceridian and to fulfilling the duties of his or her position which
shall include such duties as may from time to time be assigned him or
her by Ceridian, provided that such duties are reasonably consistent
with Executive's education, experience and background. Executive
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shall comply with Ceridian's policies and procedures to the extent
they are not inconsistent with this Agreement in which case the
provisions of this Agreement prevail.
2.03 Term. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June
30, 1997; and (b) two years after a Change of Control which occurs
prior to June 30, 1997. In any event, the Agreement shall
automatically terminate without notice when Executive reaches 65 years
of age. If employment is continued after the age of 65 by mutual
agreement, it shall be terminable at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 Base Salary. For all services rendered under this Agreement during
the term of Executive's employment, Ceridian shall pay Executive a
minimum Base Salary at the annual rate currently being paid or, if
Executive is not currently in Ceridian's employ, at the annual rate
specified in the written offer of employment. If Executive's salary
is increased from time to time during the term of this Agreement, the
increased amount shall be the Base Salary for the remainder of the
term and any extensions.
3.02 Bonus and Incentive. Bonus or incentive compensation shall be in the
sole discretion of Ceridian. Except as otherwise provided in Article
VII, Ceridian shall have the right in accordance with their terms to
alter, amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 Business Expenses. Ceridian shall, in accordance with, and to the
extent of, its policies in effect from time to time, bear all ordinary
and necessary business expenses incurred by Executive in performing
his or her duties as an employee of Ceridian, provided that Executive
accounts promptly for such expenses to Ceridian in the manner
prescribed from time to time by Ceridian.
ARTICLE IV
EARLY TERMINATION
4.01 Early Termination. Subject to the respective continuing obligations
of the parties pursuant to Articles V, VI, and IX, this Article sets
forth the terms for early termination of this Agreement; provided,
however, that this Article shall not apply to a Change of Control
Termination which is governed solely by the provisions of Article VII.
4.02 Termination for Cause. Ceridian may terminate this Agreement
immediately for cause. For the purpose hereof "cause" means (a)
fraud, (b) misrepresentation, (c) theft or embezzlement of Ceridian
assets, (d) intentional violations of law involving moral turpitude,
(e) the continued failure by Executive to satisfactorily perform his
or her duties as reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of 60 days after a
written demand for such satisfactory performance which specifically
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identifies the manner in which it is alleged Executive has not
satisfactorily performed such duties. In the event of termination for
cause pursuant to this Section 4.02, Executive shall be paid at the
usual rate of Executive's annual Base Salary through the date of
termination specified in any notice of termination.
4.03 Termination Without Cause. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement
and of Executive's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual
Base Salary through the date of termination specified in such
notice (but not to exceed 75 days);
(b) if the notice of termination is given by Ceridian and effective
prior to Executive's 65th birthday, (1) Executive shall be paid
at the usual rate of his or her annual Base Salary through the
date of termination specified in the notice provided, however,
that Ceridian shall have the option of making termination of the
Agreement and Executive's employment effective immediately upon
notice in which case Executive shall be paid through a notice
period of 75 days; and (2) Executive shall receive, within 15
days following termination, a lump sum payment equivalent to two
years' Base Salary.
(c) If the notice of termination is given by Ceridian to be effective
on or after Executive's 65th birthday Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in any notice.
(d) In the event that termination occurs pursuant to Sections 4.03(b)
or 4.03(c), then, in addition to the payments specified in said
Sections, Ceridian shall pay to Executive any amount equal to
(1) the bonus, if any, to which Executive would otherwise have
become entitled under all Ceridian bonus plans in effect at the
time of termination of this Agreement had Executive remained
continuously employed for the full fiscal year in which
termination occurred and continued to perform his or her duties
in the same manner as they were performed immediately prior to
termination, multiplied by (2) a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which termination occurred and the denominator of which
is 12. The amount payable pursuant to this Section 4.03(d) shall
be paid within 15 days after the date such bonus would have been
paid had Executive remained employed for the full fiscal year.
4.04 Termination In The Event of Death or Disability. This Agreement shall
terminate in the event of death or disability of Executive.
(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the
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time of Executive's death plus the amount Executive would have
received in annual incentive plan bonus for the year in which
termination occurs had "target" goals been achieved. Such amount
shall be paid (1) to the beneficiary or beneficiaries designated
in writing to Ceridian by Executive, (2) in the absence of such
designation to the surviving spouse, or (3) if there is no
surviving spouse, or such surviving spouse disclaims all or any
part, then the full amount, or such disclaimed portion, shall be
paid to the executor, administrator or other personal
representative of Executive's estate. The amount shall be paid
as a lump sum as soon as practicable following Ceridian's receipt
of notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month
period of Executive's inability to perform his or her duties
occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to
(1) the amount Executive would have received in annual incentive
plan bonus for the year in which termination occurs had "target"
goals been achieved, multiplied by (2) a fraction, the numerator
of which shall be the number of whole months Executive was
employed in the year in which the death or disability occurred
and the denominator of which is 12. The amount payable pursuant
to this Section 4.04(c) shall be paid within 15 days after the
date such bonus would have been paid had Executive remained
employed for the full fiscal year.
4.05 Entire Termination Payment. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy
for such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive
under any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 Confidentiality. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by Ceridian. If Executive leaves the employ of Ceridian,
Executive will not, without Ceridian's prior written consent, retain
or take away any drawing, writing or other record in any form
containing any Confidential Information.
5.02 Business Conduct and Ethics. During the term of employment with
Ceridian, Executive will engage in no activity or employment which may
conflict with the interest of Ceridian, and will comply with
Ceridian's policies and guidelines pertaining to business conduct and
ethics.
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5.03 Disclosure. Executive will disclose promptly in writing to
Ceridian all inventions, discoveries, software, writings and other
works of authorship which are conceived, made, discovered, or written
jointly or singly on Ceridian time or on Executive's own time,
providing the invention, improvement, discovery, software, writing or
other work of authorship is capable of being used by Ceridian in the
normal course of business, and all such inventions, improvements,
discoveries, software, writings and other works of authorship shall
belong solely to Ceridian.
5.04 Instruments of Assignment. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Ceridian, at the request and the expense of Ceridian,
and Executive will do all acts and sign all instruments of assignment
and other papers Ceridian may reasonably request relating to
applications for patents, patents, copyrights, and the enforcement and
protection thereof. If Executive is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Executive,
Executive agrees to do so, and if Executive leaves the employ of
Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to
Executive and Ceridian, plus reasonable traveling or other expenses.
5.05 Inventions Developed on Executive's Own Time. The two
immediately preceding sections entitled "Disclosure" and "Instruments
of Assignment" do not apply to inventions in which a Ceridian claim
of any rights will create a violation of Chapter 47 Minnesota Revised
Statutes, Section 1-181.78, reproduced below and constituting the
written notification of its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
Any provision in an employment agreement which provides that an
Executive shall assign or offer to assign any of his rights in an
invention to his employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the
employer was used and which was developed entirely on the employee's
own time, and (1) which does not relate (a) directly to the business
of the employer or (b) to the employer's actual or demonstrably
anticipated research or development, or (2) which does not result from
any work performed by the employee for the employer. Any provision
which purports to apply to such an invention is to that extent against
the public policy of this state and is to that extent void and
unenforceable.
Subdivision 2.
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No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS
A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF
HIS RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO,
AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO
THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR
WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF
THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE
EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE
BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.
5.06 Executive's Declaration. Executive has no inventions,
improvements, discoveries, software, writings or other works of
authorship useful to Ceridian in the normal course of business, which
were conceived, made or written prior to the date of this Agreement
and which are excluded from this Agreement.
5.07 Survival. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
6.01 General. The parties hereto recognize and agree that (a) Executive is
a senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is
conducted on a worldwide basis, and (d) provision for non-competition
and non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's
Confidential Information. In light of these considerations, this
Article VI sets forth the terms and conditions of Executive's
obligations of non-competition and non-recruitment subsequent to the
termination of this Agreement and/or Executive's employment for any
reason.
6.02 Non-Competition.
(a) Unless the obligation is waived or limited by Ceridian in
accordance with subsection (b) of this Section 6.02, Executive
agrees that for a period of two years following termination of
employment for any reason, Executive will not directly or
indirectly, alone or as a partner, officer, director, shareholder
or employee of any other firm or entity, engage in any commercial
activity in competition with any part of Ceridian's business as
conducted as of the date of such termination of employment or
with any part of Ceridian's contemplated business with respect to
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which Executive has Confidential Information as governed by
Article V of this Agreement. For purposes of this subsection
(a), "shareholder" shall not include beneficial ownership of less
than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange. Also for
purposes of this subsection (a), "Ceridian's business" shall
include business conducted by Ceridian or its affiliates and any
partnership or joint venture in which Ceridian or its affiliates
is a partner or joint venturer; provided that, "affiliate" as
used in this sentence shall not include any corporation in which
Ceridian has ownership of less than fifteen percent (15%) of the
voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written
notice shall describe the proposed employment or consulting
services and the firm to which they will be rendered. Ceridian's
failure to respond or object to such notice shall not in any way
constitute acquiescence or waiver of Ceridian's rights under this
Article VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination.
There shall be credited against Ceridian's obligation to make
such payments any other payments made by Ceridian to Executive
pursuant to Article IV of this Agreement. In the event that
Ceridian elects, pursuant to subsection (b) of this Section 6.02,
to waive all or any portion of the non-competition obligation, no
payment shall be required by Ceridian with respect to the portion
of the non-competition period which has been waived.
6.03 Non-Recruitment. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from
responding to a request (other than by Executive's employer) for a
reference with respect to an individual's employment qualifications.
6.04 Survival. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
ARTICLE VII
CHANGE OF CONTROL
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7.01 Definitions. For purposes of this Article VII, the following
definitions shall be applied:
(a) "Change of Control" shall mean any of the following events:
(1) a merger or consolidation to which Parent Corporation is a
party if the individuals and entities who were stockholders
of Parent Corporation immediately prior to the effective
date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power for election of directors of
the surviving corporation immediately following the
effective date of such merger or consolidation; or
(2) the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in the
aggregate of securities of Parent Corporation representing
twenty-five percent (25%) or more of the total combined
voting power of Parent Corporation's then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert; or
(3) the sale of the properties and assets of Parent Corporation,
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of Parent Corporation.
(4) the stockholders of Parent Corporation approve any plan or
proposal for the liquidation of Parent Corporation; or
(5) a change in the composition of the Board at any time during
any consecutive 24 month period such that the "Continuity
Directors" cease for any reason to constitute at least a
seventy percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those members
of the Board who either:
(A) were directors at the beginning of such consecutive 24
month period; or
(B) were elected by, or on the nomination or recommendation
of, at least a two-thirds (2/3) majority of the then-
existing Board.
(b) "Change of Control Actions" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation,
to or for the benefit of Executive under any arrangement, which
is considered contingent on a Change of Control for purposes of
Section 280G of the Internal Revenue Code. As used in this
definition, the term "arrangement" includes, without limitation,
any agreement between Executive and Ceridian and any and all of
Ceridian's salary, bonus, incentive, restricted stock, stock
option, compensation or benefit plans, programs or arrangements,
and shall include this Agreement.
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(c) "Change of Control Termination" shall mean, with respect to
Executive, any of the following events occurring within two years
after a Change of Control:
(1) Termination of Executive's employment by Ceridian for any
reason other than (A) fraud, (B) theft or embezzlement of
Ceridian assets, (C) intentional violations of law involving
moral turpitude, or (D) the substantial and continuing
failure by Executive to satisfactorily perform his or her
duties as reasonably assigned to Executive pursuant to
Section 2.02 of Article II of this Agreement for a period of
60 days after a written demand for such satisfactory
performance which specifically identifies the manner in
which it is alleged Executive has not satisfactorily
performed such duties.
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII. A Change of
Control Termination by Executive shall not, however, include
termination by reason of death.
(d) "Good Reason" shall mean a good faith determination by Executive,
in Executive's reasonable judgment, that any one or more of the
following events has occurred, without Executive's express
written consent, after a Change of Control:
(1) A change in Executive's reporting responsibilities, titles
or offices as in effect immediately prior to the Change of
Control, or any removal of Executive from, or any failure to
re-elect Executive to, any of such positions, which has the
effect of materially diminishing Executive's responsibility
or authority;
(2) A reduction by Ceridian in Executive's Base Salary as in
effect immediately prior to the Change of Control or as the
same may be increased from time to time;
(3) Ceridian requiring Executive to be based anywhere other than
within 25 miles of Executive's job location at the time of
the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive at
least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to continue
in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating immediately
prior to a Change of Control; or (B) the taking of any
action by Ceridian that would materially adversely affect
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Executive's participation or materially reduce Executive's
benefits under any of such plans, programs or arrangements;
(5) The failure by Ceridian to provide office space, furniture,
and secretarial support at least comparable to that provided
Executive immediately prior to the Change of Control or the
taking of any similar action by Ceridian that would
materially adversely affect the working conditions in or
under which Executive performs his or her employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or any
other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII in
full force and effect and operative as if a Change of
Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately after
the purchase/transfer becomes effective, and (B) such
purchaser/transferee has a creditworthiness reasonably
equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
"Internal Revenue Code" -- Any reference to a section of the
(e)
Internal Revenue Code shall mean that section of the Internal
Revenue Code of 1986, or to the corresponding section of such
Code as from time to time amended.
7.02 Change of Control Termination Right. For a period of two years
following a Change of Control, Executive shall have the right, at any
time and within Executive's sole discretion, to terminate employment
with Ceridian for Good Reason. Such termination shall be accomplished
by, and effective upon, Executive giving written notice to Ceridian of
Executive's decision to terminate. Except as otherwise expressly
provided in this Agreement, upon the exercise of said right, all
obligations and duties of Executive under this Agreement shall be of
no further force and effect.
7.03 Change of Control Termination Payment. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of
Control Compensation" contained in Section 7.04, then, and without
further action by the Board, Compensation Committee or otherwise,
Parent Corporation shall, within five days of such termination, make a
lump sum payment to Executive in an amount equal to one dollar ($1.00)
less than three times the average annualized compensation as defined
by Section 280G of the Internal Revenue Code, received by Executive
from Ceridian and includible in Executive's gross income for federal
income tax purposes, for the five most recent taxable years of the
Executive ending before the date upon which the Change in Control
occurred (or such portion of such period during which Executive was an
employee of Ceridian).
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7.04 Limitation on Change of Control Compensation. Notwithstanding any
other provisions of this Agreement or of any other agreement, contract
or understanding heretofore or hereafter entered into between Ceridian
and Executive, Executive shall not be entitled to receive any Change
of Control Action which would, with respect to Executive, constitute a
"parachute payment" for purposes of Section 280G of the Internal
Revenue Code. In the event any Change of Control Action would, with
respect to Executive, constitute a "parachute payment", Executive
shall have the right to designate those Change of Control Action(s)
which would be reduced or eliminated so that Executive will not
receive a "parachute payment".
7.05 Interest. In the event Parent Corporation does not make timely
payment in full of the Change of Control Termination payment described
in Section 7.03, Executive shall be entitled to receive interest on
any unpaid amount at the lower of: (a) prime rate of interest (or
such comparable index as may be adopted) established from time to time
by the Norwest Bank Minneapolis, N.A., Minneapolis, Minnesota; or (b)
the maximum rate permitted under Section 280G(d)(4) of the Internal
Revenue Code.
7.06 Attorneys' Fees. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall
be entitled to recover from Ceridian any expenses for attorneys' fees
and disbursements incurred.
7.07 Benefits Continuation. In the event of a Change of Control
Termination, Executive (and anyone entitled to claim under or through
Executive) shall, until age 65, be entitled to receive from Ceridian
the same or equivalent health, dental, accidental death and
dismemberment, short and long-term disability, life insurance
coverages, and all other insurance policies and health and welfare
benefits programs, policies or arrangements, at the same levels and
coverages as Executive was receiving on the day immediately prior to
the Change of Control. To the extent that election of continuation of
any of such coverages, programs, policies, or arrangements is made
available to employees terminating at age 55 with 15 or more years of
service, Executive shall be required to pay no more for continuation
than is required of such employees on the day immediately prior to the
Change of Control. If no such continuation program is available,
Executive shall be required to pay no more than he/she paid as an
active employee, or if provided by Ceridian at no cost to employees on
the day immediately prior to the Change of Control, they shall
continue to be made available to Executive on this basis.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any
reason Parent Corporation's ownership interest in any such Subsidiary falls
below the level specified in Section 1.07, (b) Executive's primary
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employment duties are with the Subsidiary at the time of the occurrence of
such event, and (c) Executive does not, in conjunction therewith, transfer
employment directly to Parent Corporation or another Subsidiary, then:
(1) If Executive gives his or her written consent to the assignment
of this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment
is accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
(2) If such assignment is not accepted by the Subsidiary or
purchaser, then this Agreement shall be deemed to have been
terminated by Ceridian without cause pursuant to Section 4.03 of
Article IV; and
(3) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 No Adequate Remedy. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense
that such party has an adequate remedy at law.
9.02 Successors and Assigns. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary,
whether by way of merger, consolidation, operation of law, assignment,
purchase or other acquisition of substantially all of the assets or
business of Ceridian, and any such successor or assign shall
absolutely and unconditionally assume all of Ceridian's obligations
hereunder.
9.03 Notices. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
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Either party may, by notice hereunder, designate a changed
address. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed dispatched
on the registered date or that stamped on the certified mail
receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is
sooner.
9.04 Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and
any and every legal proceeding arising out of or in connection with
this Agreement shall be brought in the appropriate courts of the State
of Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this
Governing Law provision is essential in light of the fact that Parent
Corporation's corporate headquarters and its principal executive
offices are located within the State of Minnesota, and there is a
critical need for uniformity in the interpretation and enforcement of
the employment agreements between Ceridian and its senior executives.
9.06 Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
9.07 Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
9.08 Modification. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein agreed upon. This Agreement replaces in full all prior
employment agreements or understandings of the parties hereto, and any
and all such prior agreements or understandings are hereby rescinded
by mutual agreement.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
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EXECUTIVE CERIDIAN CORPORATION
Stephen B. Morris By: /s/Stephen B. Morris
Title: President, Arbitron
Company
Address:
142 West 57th Street
New York, NY 10019
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EXHIBIT 10.05
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
Ceridian Corporation (a Delaware Corporation)
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
and
JOHN R. EICKHOFF ("Executive")
Date: February 3, 1995
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or
her services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with
Ceridian or engage in recruitment of Ceridian's employees for a
reasonable period of time after termination of employment, and
Executive is willing to refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance
of, and continuance in, Executive's position with Ceridian and
agreement to be bound by the terms of this Agreement represents a
substantial commitment to Ceridian in terms of Executive's personal
and professional career and a foregoing of present and future career
options by Executive, for all of which Ceridian receives substantial
value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position
and responsibilities and substantially frustrate the purpose of
Executive's commitment to Ceridian and forebearance of options.
G. The parties recognize that in light of the above-described commitment
and forebearance of options, it is essential that, for the benefit of
Ceridian and its stockholders, provision be made for a Change of
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Control Termination (as defined below) in order to enable Executive to
accept and effectively continue in Executive's position in the face of
inherently disruptive circumstances arising from the possibility of a
Change of Control of the Parent Corporation (as defined below),
although no such change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and
undertakings with respect to the Executive's employment and Change of
Control occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and
continuance in Executive's employment for the term of this Agreement and
the parties' agreement to be bound by the terms contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Base Salary" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "Board" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "Ceridian" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
(b) any successor in interest by way of consolidation, operation of
law, merger or otherwise.
1.04 "Confidential Information" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting,
or marketing activities;
(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes, formulae,
plans or methods used in the development, manufacture or
marketing of Ceridian's software, products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
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(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces,
visual displays, technical documentation, user manuals, data
files and databases; and
(f) any similar information of the type described above which
Ceridian obtained from another party and which Ceridian treats as
or designates as being proprietary, private or confidential,
whether or not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Executive outside the scope of employment or contrary
to the requirements of this Agreement will not be considered to have
been properly published, and therefore will not be in the public
domain for purposes of this Agreement.
1.05 "Disability" shall mean the inability of Executive to perform his or
her duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "Parent Corporation" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law,
merger or otherwise. "Parent Corporation" shall not include any
Subsidiary.
1.07 "Subsidiary" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by Parent
Corporation and/or one or more Subsidiaries; and (b) any division or
business unit (or portion thereof) of Parent Corporation or a
corporation described in clause (a) of this Section 1.07.
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 Employment. Upon the terms and conditions set forth in this
Agreement, Ceridian hereby employs Executive, and Executive accepts
such employment. Except as expressly provided herein, termination of
this Agreement by either party shall also terminate Executive's
employment by Ceridian.
2.02 Duties. Executive shall devote his or her full-time and best efforts
to Ceridian and to fulfilling the duties of his or her position which
shall include such duties as may from time to time be assigned him or
her by Ceridian, provided that such duties are reasonably consistent
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with Executive's education, experience and background. Executive
shall comply with Ceridian's policies and procedures to the extent
they are not inconsistent with this Agreement in which case the
provisions of this Agreement prevail.
2.03 Term. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June
30, 1997; and (b) two years after a Change of Control which occurs
prior to June 30, 1997. In any event, the Agreement shall
automatically terminate without notice when Executive reaches 65 years
of age. If employment is continued after the age of 65 by mutual
agreement, it shall be terminable at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 Base Salary. For all services rendered under this Agreement during
the term of Executive's employment, Ceridian shall pay Executive a
minimum Base Salary at the annual rate currently being paid or, if
Executive is not currently in Ceridian's employ, at the annual rate
specified in the written offer of employment. If Executive's salary
is increased from time to time during the term of this Agreement, the
increased amount shall be the Base Salary for the remainder of the
term and any extensions.
3.02 Bonus and Incentive. Bonus or incentive compensation shall be in the
sole discretion of Ceridian. Except as otherwise provided in Article
VII, Ceridian shall have the right in accordance with their terms to
alter, amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 Business Expenses. Ceridian shall, in accordance with, and to the
extent of, its policies in effect from time to time, bear all ordinary
and necessary business expenses incurred by Executive in performing
his or her duties as an employee of Ceridian, provided that Executive
accounts promptly for such expenses to Ceridian in the manner
prescribed from time to time by Ceridian.
ARTICLE IV
EARLY TERMINATION
4.01 Early Termination. Subject to the respective continuing obligations
of the parties pursuant to Articles V, VI, and IX, this Article sets
forth the terms for early termination of this Agreement; provided,
however, that this Article shall not apply to a Change of Control
Termination which is governed solely by the provisions of Article VII.
4.02 Termination for Cause. Ceridian may terminate this Agreement
immediately for cause. For the purpose hereof "cause" means (a)
fraud, (b) misrepresentation, (c) theft or embezzlement of Ceridian
assets, (d) intentional violations of law involving moral turpitude,
(e) the continued failure by Executive to satisfactorily perform his
or her duties as reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of 60 days after a
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written demand for such satisfactory performance which specifically
identifies the manner in which it is alleged Executive has not
satisfactorily performed such duties. In the event of termination for
cause pursuant to this Section 4.02, Executive shall be paid at the
usual rate of Executive's annual Base Salary through the date of
termination specified in any notice of termination.
4.03 Termination Without Cause. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement
and of Executive's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual
Base Salary through the date of termination specified in such
notice (but not to exceed 75 days);
(b) if the notice of termination is given by Ceridian and effective
prior to Executive's 65th birthday, (1) Executive shall be paid
at the usual rate of his or her annual Base Salary through the
date of termination specified in the notice provided, however,
that Ceridian shall have the option of making termination of the
Agreement and Executive's employment effective immediately upon
notice in which case Executive shall be paid through a notice
period of 75 days; and (2) Executive shall receive, within 15
days following termination, a lump sum payment equivalent to two
years' Base Salary.
(c) If the notice of termination is given by Ceridian to be effective
on or after Executive's 65th birthday Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in any notice.
(d) In the event that termination occurs pursuant to Sections 4.03(b)
or 4.03(c), then, in addition to the payments specified in said
Sections, Ceridian shall pay to Executive any amount equal to
(1) the bonus, if any, to which Executive would otherwise have
become entitled under all Ceridian bonus plans in effect at the
time of termination of this Agreement had Executive remained
continuously employed for the full fiscal year in which
termination occurred and continued to perform his or her duties
in the same manner as they were performed immediately prior to
termination, multiplied by (2) a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which termination occurred and the denominator of which
is 12. The amount payable pursuant to this Section 4.03(d) shall
be paid within 15 days after the date such bonus would have been
paid had Executive remained employed for the full fiscal year.
4.04 Termination In The Event of Death or Disability. This Agreement shall
terminate in the event of death or disability of Executive.
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(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the
time of Executive's death plus the amount Executive would have
received in annual incentive plan bonus for the year in which
termination occurs had "target" goals been achieved. Such amount
shall be paid (1) to the beneficiary or beneficiaries designated
in writing to Ceridian by Executive, (2) in the absence of such
designation to the surviving spouse, or (3) if there is no
surviving spouse, or such surviving spouse disclaims all or any
part, then the full amount, or such disclaimed portion, shall be
paid to the executor, administrator or other personal
representative of Executive's estate. The amount shall be paid
as a lump sum as soon as practicable following Ceridian's receipt
of notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month
period of Executive's inability to perform his or her duties
occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to
(1) the amount Executive would have received in annual incentive
plan bonus for the year in which termination occurs had "target"
goals been achieved, multiplied by (2) a fraction, the numerator
of which shall be the number of whole months Executive was
employed in the year in which the death or disability occurred
and the denominator of which is 12. The amount payable pursuant
to this Section 4.04(c) shall be paid within 15 days after the
date such bonus would have been paid had Executive remained
employed for the full fiscal year.
4.05 Pension Supplement. If Ceridian terminates Executive's employment
without cause prior to Executive's 65th birthday, Ceridian shall
provide to Executive, out of its general assets, a monthly
supplemental retirement benefit in an amount equal to the actuarial
equivalent of the difference, if any, between:
(a) the monthly benefit to which Executive would have been entitled
under the defined benefit pension plan or plans in which he or
she participated immediately prior to his or her termination of
employment if the amount of payment to which Executive is
entitled under Section 4.03(b)(2) were taken into account for
purposes of determining his or her "final average pay" or similar
term (as then defined under the terms of such plan or plans) for
either (1) the year in which Executive's termination of
employment occurred; or (2) the prior full year, whichever
provides the highest total final average pay; and
(b) the amount to which Executive is, in fact, entitled under such
plan or plans.
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The benefit calculated under this Section 4.05 shall be paid at the
same time and in the same form as the benefit under the plan with
respect to which such calculation is made.
4.06 Entire Termination Payment. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy
for such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive
under any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 Confidentiality. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by Ceridian. If Executive leaves the employ of Ceridian,
Executive will not, without Ceridian's prior written consent, retain
or take away any drawing, writing or other record in any form
containing any Confidential Information.
5.02 Business Conduct and Ethics. During the term of employment with
Ceridian, Executive will engage in no activity or employment which may
conflict with the interest of Ceridian, and will comply with
Ceridian's policies and guidelines pertaining to business conduct and
ethics.
5.03 Disclosure. Executive will disclose promptly in writing to
Ceridian all inventions, discoveries, software, writings and other
works of authorship which are conceived, made, discovered, or written
jointly or singly on Ceridian time or on Executive's own time,
providing the invention, improvement, discovery, software, writing or
other work of authorship is capable of being used by Ceridian in the
normal course of business, and all such inventions, improvements,
discoveries, software, writings and other works of authorship shall
belong solely to Ceridian.
5.04 Instruments of Assignment. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Ceridian, at the request and the expense of Ceridian,
and Executive will do all acts and sign all instruments of assignment
and other papers Ceridian may reasonably request relating to
applications for patents, patents, copyrights, and the enforcement and
protection thereof. If Executive is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Executive,
Executive agrees to do so, and if Executive leaves the employ of
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Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to
Executive and Ceridian, plus reasonable traveling or other expenses.
5.05 Inventions Developed on Executive's Own Time. The two
immediately preceding sections entitled "Disclosure" and "Instruments
of Assignment" do not apply to inventions in which a Ceridian claim
of any rights will create a violation of Chapter 47 Minnesota Revised
Statutes, Section 1-181.78, reproduced below and constituting the
written notification of its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
Any provision in an employment agreement which provides that an
Executive shall assign or offer to assign any of his rights in an
invention to his employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the
employer was used and which was developed entirely on the employee's
own time, and (1) which does not relate (a) directly to the business
of the employer or (b) to the employer's actual or demonstrably
anticipated research or development, or (2) which does not result from
any work performed by the employee for the employer. Any provision
which purports to apply to such an invention is to that extent against
the public policy of this state and is to that extent void and
unenforceable.
Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS
A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF
HIS RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO,
AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO
THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR
WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF
THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE
EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE
BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.
5.06 Executive's Declaration. Executive has no inventions,
improvements, discoveries, software, writings or other works of
authorship useful to Ceridian in the normal course of business, which
were conceived, made or written prior to the date of this Agreement
and which are excluded from this Agreement.
5.07 Survival. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
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ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
6.01 General. The parties hereto recognize and agree that (a) Executive is
a senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is
conducted on a worldwide basis, and (d) provision for non-competition
and non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's
Confidential Information. In light of these considerations, this
Article VI sets forth the terms and conditions of Executive's
obligations of non-competition and non-recruitment subsequent to the
termination of this Agreement and/or Executive's employment for any
reason.
6.02 Non-Competition.
(a) Unless the obligation is waived or limited by Ceridian in
accordance with subsection (b) of this Section 6.02, Executive
agrees that for a period of two years following termination of
employment for any reason, Executive will not directly or
indirectly, alone or as a partner, officer, director, shareholder
or employee of any other firm or entity, engage in any commercial
activity in competition with any part of Ceridian's business as
conducted as of the date of such termination of employment or
with any part of Ceridian's contemplated business with respect to
which Executive has Confidential Information as governed by
Article V of this Agreement. For purposes of this subsection
(a), "shareholder" shall not include beneficial ownership of less
than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange. Also for
purposes of this subsection (a), "Ceridian's business" shall
include business conducted by Ceridian or its affiliates and any
partnership or joint venture in which Ceridian or its affiliates
is a partner or joint venturer; provided that, "affiliate" as
used in this sentence shall not include any corporation in which
Ceridian has ownership of less than fifteen percent (15%) of the
voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written
notice shall describe the proposed employment or consulting
services and the firm to which they will be rendered. Ceridian's
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failure to respond or object to such notice shall not in any way
constitute acquiescence or waiver of Ceridian's rights under this
Article VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination.
There shall be credited against Ceridian's obligation to make
such payments any other payments made by Ceridian to Executive
pursuant to Article IV of this Agreement. In the event that
Ceridian elects, pursuant to subsection (b) of this Section 6.02,
to waive all or any portion of the non-competition obligation, no
payment shall be required by Ceridian with respect to the portion
of the non-competition period which has been waived.
6.03 Non-Recruitment. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from
responding to a request (other than by Executive's employer) for a
reference with respect to an individual's employment qualifications.
6.04 Survival. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
ARTICLE VII
CHANGE OF CONTROL
7.01 Definitions. For purposes of this Article VII, the following
definitions shall be applied:
(a) "Change of Control" shall mean any of the following events:
(1) a merger or consolidation to which Parent Corporation is a
party if the individuals and entities who were stockholders
of Parent Corporation immediately prior to the effective
date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power for election of directors of
the surviving corporation immediately following the
effective date of such merger or consolidation; or
(2) the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in the
aggregate of securities of Parent Corporation representing
twenty-five percent (25%) or more of the total combined
voting power of Parent Corporation's then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert; or
(3) the sale of the properties and assets of Parent Corporation,
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of Parent Corporation.
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(4) the stockholders of Parent Corporation approve any plan or
proposal for the liquidation of Parent Corporation; or
(5) a change in the composition of the Board at any time during
any consecutive 24 month period such that the "Continuity
Directors" cease for any reason to constitute at least a
seventy percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those members
of the Board who either:
(A) were directors at the beginning of such consecutive 24
month period; or
(B) were elected by, or on the nomination or recommendation
of, at least a two-thirds (2/3) majority of the then-
existing Board.
(b) "Change of Control Actions" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation,
to or for the benefit of Executive under any arrangement, which
is considered contingent on a Change of Control for purposes of
Section 280G of the Internal Revenue Code. As used in this
definition, the term "arrangement" includes, without limitation,
any agreement between Executive and Ceridian and any and all of
Ceridian's salary, bonus, incentive, restricted stock, stock
option, compensation or benefit plans, programs or arrangements,
and shall include this Agreement.
(c) "Change of Control Termination" shall mean, with respect to
Executive, any of the following events occurring within two years
after a Change of Control:
(1) Termination of Executive's employment by Ceridian for any
reason other than (A) fraud, (B) theft or embezzlement of
Ceridian assets, (C) intentional violations of law involving
moral turpitude, or (D) the substantial and continuing
failure by Executive to satisfactorily perform his or her
duties as reasonably assigned to Executive pursuant to
Section 2.02 of Article II of this Agreement for a period of
60 days after a written demand for such satisfactory
performance which specifically identifies the manner in
which it is alleged Executive has not satisfactorily
performed such duties.
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII. A Change of
Control Termination by Executive shall not, however, include
termination by reason of death.
(d) "Good Reason" shall mean a good faith determination by Executive,
in Executive's reasonable judgment, that any one or more of the
following events has occurred, without Executive's express
written consent, after a Change of Control:
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(1) A change in Executive's reporting responsibilities, titles
or offices as in effect immediately prior to the Change of
Control, or any removal of Executive from, or any failure to
re-elect Executive to, any of such positions, which has the
effect of materially diminishing Executive's responsibility
or authority;
(2) A reduction by Ceridian in Executive's Base Salary as in
effect immediately prior to the Change of Control or as the
same may be increased from time to time;
(3) Ceridian requiring Executive to be based anywhere other than
within 25 miles of Executive's job location at the time of
the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive at
least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to continue
in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating immediately
prior to a Change of Control; or (B) the taking of any
action by Ceridian that would materially adversely affect
Executive's participation or materially reduce Executive's
benefits under any of such plans, programs or arrangements;
(5) The failure by Ceridian to provide office space, furniture,
and secretarial support at least comparable to that provided
Executive immediately prior to the Change of Control or the
taking of any similar action by Ceridian that would
materially adversely affect the working conditions in or
under which Executive performs his or her employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or any
other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII in
full force and effect and operative as if a Change of
Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately after
the purchase/transfer becomes effective, and (B) such
purchaser/transferee has a creditworthiness reasonably
equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
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(e) "Internal Revenue Code" -- Any reference to a section of the
Internal Revenue Code shall mean that section of the Internal
Revenue Code of 1986, or to the corresponding section of such
Code as from time to time amended.
7.02 Change of Control Termination Right. For a period of two years
following a Change of Control, Executive shall have the right, at any
time and within Executive's sole discretion, to terminate employment
with Ceridian for Good Reason. Such termination shall be accomplished
by, and effective upon, Executive giving written notice to Ceridian of
Executive's decision to terminate. Except as otherwise expressly
provided in this Agreement, upon the exercise of said right, all
obligations and duties of Executive under this Agreement shall be of
no further force and effect.
7.03 Change of Control Termination Payment. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of
Control Compensation" contained in Section 7.04, then, and without
further action by the Board, Compensation Committee or otherwise,
Parent Corporation shall, within five days of such termination, make a
lump sum payment to Executive in an amount equal to one dollar ($1.00)
less than three times the average annualized compensation as defined
by Section 280G of the Internal Revenue Code, received by Executive
from Ceridian and includible in Executive's gross income for federal
income tax purposes, for the five most recent taxable years of the
Executive ending before the date upon which the Change in Control
occurred (or such portion of such period during which Executive was an
employee of Ceridian).
7.04 Limitation on Change of Control Compensation. Notwithstanding any
other provisions of this Agreement or of any other agreement, contract
or understanding heretofore or hereafter entered into between Ceridian
and Executive, Executive shall not be entitled to receive any Change
of Control Action which would, with respect to Executive, constitute a
"parachute payment" for purposes of Section 280G of the Internal
Revenue Code. In the event any Change of Control Action would, with
respect to Executive, constitute a "parachute payment", Executive
shall have the right to designate those Change of Control Action(s)
which would be reduced or eliminated so that Executive will not
receive a "parachute payment".
7.05 Interest. In the event Parent Corporation does not make timely
payment in full of the Change of Control Termination payment described
in Section 7.03, Executive shall be entitled to receive interest on
any unpaid amount at the lower of: (a) prime rate of interest (or
such comparable index as may be adopted) established from time to time
by the Norwest Bank Minneapolis, N.A., Minneapolis, Minnesota; or (b)
the maximum rate permitted under Section 280G(d)(4) of the Internal
Revenue Code.
7.06 Attorneys' Fees. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall
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be entitled to recover from Ceridian any expenses for attorneys' fees
and disbursements incurred.
7.07 Benefits Continuation. In the event of a Change of Control
Termination, Executive (and anyone entitled to claim under or through
Executive) shall, until age 65, be entitled to receive from Ceridian
the same or equivalent health, dental, accidental death and
dismemberment, short and long-term disability, life insurance
coverages, and all other insurance policies and health and welfare
benefits programs, policies or arrangements, at the same levels and
coverages as Executive was receiving on the day immediately prior to
the Change of Control. To the extent that election of continuation of
any of such coverages, programs, policies, or arrangements is made
available to employees terminating at age 55 with 15 or more years of
service, Executive shall be required to pay no more for continuation
than is required of such employees on the day immediately prior to the
Change of Control. If no such continuation program is available,
Executive shall be required to pay no more than he/she paid as an
active employee, or if provided by Ceridian at no cost to employees on
the day immediately prior to the Change of Control, they shall
continue to be made available to Executive on this basis.
7.08 Pension Supplement. In the event of a Change of Control Termination,
Parent Corporation shall, within five days, make a lump sum payment to
Executive in an amount equal to the actuarial equivalent of the
difference, if any, between:
(a) the monthly benefit to which Executive would have been entitled
under the defined benefit pension plan or plans in which he or
she participated immediately prior to his or her Change of
Control Termination if the amount of payment to which Executive
is entitled under Section 7.03 were taken into account for
purposes of determining his or her "final average pay" or similar
term (as then defined under the terms of such plan or plans) for
either (1) the year in which the Change of Control Termination
occurred; or (2) the prior full year, whichever provides the
highest total final average pay; and
(b) the amount to which Executive is, in fact, entitled under such
plan or plans.
For purposes of determining actuarial equivalencies for this Section
7.08, the actuarial factors specified in the particular plan or plans
with respect to which the determination is being made shall be
applied.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any
reason Parent Corporation's ownership interest in any such Subsidiary falls
below the level specified in Section 1.07, (b) Executive's primary
employment duties are with the Subsidiary at the time of the occurrence of
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such event, and (c) Executive does not, in conjunction therewith, transfer
employment directly to Parent Corporation or another Subsidiary, then:
(1) If Executive gives his or her written consent to the assignment
of this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment
is accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
(2) If such assignment is not accepted by the Subsidiary or
purchaser, then this Agreement shall be deemed to have been
terminated by Ceridian without cause pursuant to Section 4.03 of
Article IV; and
(3) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 No Adequate Remedy. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense
that such party has an adequate remedy at law.
9.02 Successors and Assigns. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary,
whether by way of merger, consolidation, operation of law, assignment,
purchase or other acquisition of substantially all of the assets or
business of Ceridian, and any such successor or assign shall
absolutely and unconditionally assume all of Ceridian's obligations
hereunder.
9.03 Notices. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
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Either party may, by notice hereunder, designate a changed
address. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed dispatched
on the registered date or that stamped on the certified mail
receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is
sooner.
9.04 Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and
any and every legal proceeding arising out of or in connection with
this Agreement shall be brought in the appropriate courts of the State
of Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this
Governing Law provision is essential in light of the fact that Parent
Corporation's corporate headquarters and its principal executive
offices are located within the State of Minnesota, and there is a
critical need for uniformity in the interpretation and enforcement of
the employment agreements between Ceridian and its senior executives.
9.06 Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
9.07 Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
9.08 Modification. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein agreed upon. This Agreement replaces in full all prior
employment agreements or understandings of the parties hereto, and any
and all such prior agreements or understandings are hereby rescinded
by mutual agreement.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
John R. Eickhoff By: /s/John R. Eickhoff
Title: Chief Financial Officer
Address:
8100 34th Avenue South
Bloomington, MN 55425
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EXHIBIT 10.06
CERIDIAN CORPORATION
EMPLOYEE NON-STATUTORY STOCK OPTION
AWARD AGREEMENT
1993 Long-Term Incentive Plan
This Agreement, dated as of January 3, 1994 (the "Date of Grant"), is
between Ceridian Corporation (the "Company") and Pat Sommers (the
"Participant"), pursuant to the 1993 Long-Term Incentive Plan of the
Company (the "Plan") to evidence the grant of a Non-Statutory Stock Option
(the "Option") to the Participant pursuant to the Plan. Any capitalized
term used herein which is defined in the Plan shall have the same meaning
as set forth therein.
1. Effective as of the Date of Grant, and subject to the other terms and
conditions of this Agreement, the Company has granted to the
Participant the option to purchase from the Company, and the Company
has agreed to sell to the Participant, 9,176 shares of Common Stock
(the "Option Shares") at a price of $19.13 per share (the "Exercise
Price").
2. This Option shall become void and expire if the Participant's
employment with the Company and all of its Subsidiaries terminates for
any reason other than death or Disability on or before December 31,
1994, and otherwise at midnight (Minneapolis time) on the tenth
anniversary of the Date of Grant. This Option is a non-statutory stock
option and to the extent it becomes exercisable pursuant to the terms
hereof, it shall be exercisable even though there may be outstanding an
incentive stock option which is granted to the Participant at an
earlier time.
3. Because this Option has been granted as a result of the Participant's
election (the "Election") to receive in the form of a non-statutory
stock option one hundred percent of the difference, if any, between (i)
the cash bonus he or she would otherwise be entitled to receive
pursuant to the Company's 1994 Executive Incentive Plan (the "EIP"),
and (ii) the cash bonus he or she would be entitled to receive under
the EIP if only specified target financial and individual performance
goals were achieved, the Option shall become exercisable only if and to
the extent that financial and individual performance goals justifying a
payout above target level under the EIP have been attained. The
Committee shall, at its February 1995 meeting, certify which, if any,
financial and individual performance goals specified in the EIP have
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been satisfied, the dollar amount of the total bonus payout the
Participant is entitled to receive under the EIP as a result of the
satisfaction of such financial and individual performance goals, and
the dollar amount of such total bonus payout to be received in the form
of a stock option as the result of the Election (the "Election
Amount"). Subject to the provisions of paragraph 4 hereof, a portion
of the Option Shares equal to the quotient obtained by dividing the
Election Amount by one-third of the Exercise Price shall thereupon
become immediately exercisable, and the balance of the Option Shares
shall be forfeited and the portion of the Option relating thereto shall
be cancelled and of no further effect.
4. If the Participant's employment with the Company and all Subsidiaries
should terminate by reason of death or Disability on or before December
31, 1994, the Committee shall determine, as provided in paragraph 3
hereof, whether the Participant would otherwise have been entitled to
the payment of a bonus under the EIP as a result of the Company's
attainment of an applicable financial performance goal. If the
Committee determines that a bonus would have been payable, then a
portion of the Option Shares shall become exercisable upon the
Committee's certification of the Election Amount, such portion to be
equal to the product of (a) the quotient obtained by dividing the
Election Amount by one-third of the Exercise Price, and (b) a fraction,
the numerator of which is the number of whole calendar months during
1994 prior to the date of such employment termination and the
denominator of which is 12.
5. The timing and extent of the exercisability of this Option as specified
in paragraphs 3 and 4 hereof shall not be affected by any intervening
Change of Control, notwithstanding the provisions of Section 12 of the
Plan as in effect on the date of any such Change of Control.
6. Notwithstanding any other provision of this Agreement, the Option shall
not be exercisable prior to the expiration of six months after the Date
of Grant, except in the case of death or Disability.
7. Nothing in the Plan or this Agreement shall confer upon the Participant
any right with respect to continuance of employment by the Company or
any Subsidiary, nor interfere in any way with the right of the Company
or a Subsidiary to terminate the Participant's employment at any time.
8. This Option grant, the Option forming a part thereof, and the
Participant's rights under this Agreement shall be nontransferable
(i.e., may not be sold, pledged, donated or otherwise assigned or
transferred) by the Participant, either voluntarily or involuntarily,
except by will or by applicable law, and any attempt to do so shall
void this Option grant and Agreement. This Option shall be exercisable
during Participant's lifetime only by the Participant or by the
Participant's guardian or other legal representative.
9. Neither the Participant nor any other person shall have any rights as a
stockholder with respect to any Option Shares until the Participant or
other person shall have become a holder of record of such shares and,
except as otherwise provided in Section 4.4 of the Plan, no adjustments
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shall be made for dividends or other distributions or rights as to
which there is a record date preceding the date the Participant becomes
the holder of record of such shares.
10.Except as specifically provided herein, this Agreement is subject to
all of the terms and conditions of the Plan. Where any questions or
issues of interpretation arise, the Committee administering the Plan
shall have sole discretion to decide such matters.
11.Any notice to be given with respect to this Option, including without
limitation a notice of exercise, shall be addressed to the Company,
Attention: Corporate Treasury at its principal executive office in
Minneapolis, Minnesota, and any notice to be given to the Participant
shall be addressed to the Participant at the address given beneath the
Participant's signature hereto, or at such other address as either
party may hereafter designate in writing to the other.
12.Any notice of stock option exercise must specify the number of shares
with respect to which the Option is being exercised and be accompanied
by either (i) payment in full of the purchase price for the shares
exercised or (ii) a Broker Exercise Notice in form and substance
satisfactory to the Company. The exercise of the Option shall be
deemed effective upon receipt by Corporate Treasury of such notice and
payment of the exercise price from the Participant or the broker or
dealer named in the Broker Exercise Notice. Any such notice will not
be deemed given until actual receipt by Corporate Treasury.
IN WITNESS WHEREOF, Ceridian Corporation has executed this Agreement duly
authorized signature, and the Participant has signed this Agreement.
CERIDIAN CORPORATION PARTICIPANT
By: /s/John A. Haveman /s/Patrick C. Sommers
Secretary (Participant's Signature)
PARTICIPANT'S MAILING ADDRESS
8100 34th Avenue South
Bloomington, MN 55425
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EXHIBIT 10.07
CERIDIAN CORPORATION
EMPLOYEE NON-STATUTORY STOCK OPTION
AWARD AGREEMENT
1993 Long-Term Incentive Plan
This Agreement, dated as of January 3, 1994 (the "Date of Grant"), is
between Ceridian Corporation (the "Company") and Jack Eickhoff (the
"Participant"), pursuant to the 1993 Long-Term Incentive Plan of the
Company (the "Plan") to evidence the grant of a Non-Statutory Stock Option
(the "Option") to the Participant pursuant to the Plan. Any capitalized
term used herein which is defined in the Plan shall have the same meaning
as set forth therein.
1. Effective as of the Date of Grant, and subject to the other terms and
conditions of this Agreement, the Company has granted to the
Participant the option to purchase from the Company, and the Company
has agreed to sell to the Participant, 5,822 shares of Common Stock
(the "Option Shares") at a price of $19.13 per share (the "Exercise
Price").
2. This Option shall become void and expire if the Participant's
employment with the Company and all of its Subsidiaries terminates for
any reason other than death or Disability on or before December 31,
1994, and otherwise at midnight (Minneapolis time) on the tenth
anniversary of the Date of Grant. This Option is a non-statutory stock
option and to the extent it becomes exercisable pursuant to the terms
hereof, it shall be exercisable even though there may be outstanding an
incentive stock option which is granted to the Participant at an
earlier time.
3. Because this Option has been granted as a result of the Participant's
election (the "Election") to receive in the form of a non-statutory
stock option sixty percent of the difference, if any, between (i) the
cash bonus he or she would otherwise be entitled to receive pursuant to
the Company's 1994 Executive Incentive Plan (the "EIP"), and (ii) the
cash bonus he or she would be entitled to receive under the EIP if only
specified target financial and individual performance goals were
achieved, the Option shall become exercisable only if and to the extent
that financial and individual performance goals justifying a payout
above target level under the EIP have been attained. The Committee
shall, at its February 1995 meeting, certify which, if any, financial
and individual performance goals specified in the EIP have been
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satisfied, the dollar amount of the total bonus payout the Participant
is entitled to receive under the EIP as a result of the satisfaction of
such financial and individual performance goals, and the dollar amount
of such total bonus payout to be received in the form of a stock option
as the result of the Election (the "Election Amount"). Subject to the
provisions of paragraph 4 hereof, a portion of the Option Shares equal
to the quotient obtained by dividing the Election Amount by one-third
of the Exercise Price shall thereupon become immediately exercisable,
and the balance of the Option Shares shall be forfeited and the portion
of the Option relating thereto shall be cancelled and of no further
effect.
4. If the Participant's employment with the Company and all Subsidiaries
should terminate by reason of death or Disability on or before December
31, 1994, the Committee shall determine, as provided in paragraph 3
hereof, whether the Participant would otherwise have been entitled to
the payment of a bonus under the EIP as a result of the Company's
attainment of an applicable financial performance goal. If the
Committee determines that a bonus would have been payable, then a
portion of the Option Shares shall become exercisable upon the
Committee's certification of the Election Amount, such portion to be
equal to the product of (a) the quotient obtained by dividing the
Election Amount by one-third of the Exercise Price, and (b) a fraction,
the numerator of which is the number of whole calendar months during
1994 prior to the date of such employment termination and the
denominator of which is 12.
5. The timing and extent of the exercisability of this Option as specified
in paragraphs 3 and 4 hereof shall not be affected by any intervening
Change of Control, notwithstanding the provisions of Section 12 of the
Plan as in effect on the date of any such Change of Control.
6. Notwithstanding any other provision of this Agreement, the Option shall
not be exercisable prior to the expiration of six months after the Date
of Grant, except in the case of death or Disability.
7. Nothing in the Plan or this Agreement shall confer upon the Participant
any right with respect to continuance of employment by the Company or
any Subsidiary, nor interfere in any way with the right of the Company
or a Subsidiary to terminate the Participant's employment at any time.
8. This Option grant, the Option forming a part thereof, and the
Participant's rights under this Agreement shall be nontransferable
(i.e., may not be sold, pledged, donated or otherwise assigned or
transferred) by the Participant, either voluntarily or involuntarily,
except by will or by applicable law, and any attempt to do so shall
void this Option grant and Agreement. This Option shall be exercisable
during Participant's lifetime only by the Participant or by the
Participant's guardian or other legal representative.
9. Neither the Participant nor any other person shall have any rights as a
stockholder with respect to any Option Shares until the Participant or
other person shall have become a holder of record of such shares and,
except as otherwise provided in Section 4.3 of the Plan, no adjustments
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shall be made for dividends or other distributions or rights as to
which there is a record date preceding the date the Participant becomes
the holder of record of such shares.
10.Except as specifically provided herein, this Agreement is subject to
all of the terms and conditions of the Plan. Where any questions or
issues of interpretation arise, the Committee administering the Plan
shall have sole discretion to decide such matters.
11.Any notice to be given with respect to this Option, including without
limitation a notice of exercise, shall be addressed to the Company,
Attention: Corporate Treasury at its principal executive office in
Minneapolis, Minnesota, and any notice to be given to the Participant
shall be addressed to the Participant at the address given beneath the
Participant's signature hereto, or at such other address as either
party may hereafter designate in writing to the other.
12.Any notice of stock option exercise must specify the number of shares
with respect to which the Option is being exercised and be accompanied
by either (i) payment in full of the purchase price for the shares
exercised or (ii) a Broker Exercise Notice in form and substance
satisfactory to the Company. The exercise of the Option shall be
deemed effective upon receipt by Corporate Treasury of such notice and
payment of the exercise price from the Participant or the broker or
dealer named in the Broker Exercise Notice. Any such notice will not
be deemed given until actual receipt by Corporate Treasury.
IN WITNESS WHEREOF, Ceridian Corporation has executed this Agreement duly
authorized signature, and the Participant has signed this Agreement.
CERIDIAN CORPORATION PARTICIPANT
By: /s/John A. Haveman /s/John R. Eickhoff
Secretary (Participant's Signature)
PARTICIPANT'S MAILING ADDRESS
8100 34th Avenue South
Bloomington, MN 55425
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EXHIBIT 10.09
CERIDIAN CORPORATION
DIRECTORS' BENEFIT PROTECTION
TRUST AGREEMENT
Table of Contents
Page
PREAMBLE 1
ARTICLE 1 Description and Definitions 2
1.2 Intentions 2
1.3 Irrevocability; Creditor Claims 2
1.4 Additional Definitions 2
1.5 Grantor Trust 3
1.6 Benefits Implemented Through Trust 4
ARTICLE 2 General Administration 5
2.1 Committee Directions 5
2.2 Contributions 5
2.3 Separate Accounting for Each Plan 6
2.4 Interest of Plans in Trust Fund 6
2.5 Excess Accumulations 7
2.6 Substitution 7
2.7 Transfer to Successor Trust 7
2.8 Merger or Split-up of Plans 8
ARTICLE 3 Duties and Powers of Trustee 9
3.1 General Responsibility 9
3.2 General Powers 9
3.3 Distributions 13
3.4 Trustee Responsibility Regarding
Payments on Insolvency 16
3.5 Records 18
3.6 Quarterly Accounting; Final Accounting 18
3.7 Valuation 18
3.8 Delegation of Duties 19
ARTICLE 4 Directed Investments 20
4.1 Appointment of Insurance Company
as Investment Manager 20
4.2 Appointment of Investment Adviser
as Investment Manager 20
4.3 Directions of Committee 22
ARTICLE 5 Compensation, Indemnification 24
5.1 Compensation and Expenses 24
5.2 Indemnification 24
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ARTICLE 6 Resignation or Removal of Trustee 25
6.1 Resignation; Removal 25
6.2 Successor Trustee 25
6.3 Settlement of Accounts 25
SECTION 7 Controversies, Legal Actions
26
7.1 Controversy 26
7.2 Joinder of Parties 26
ARTICLE 8 Insurers 27
8.1 Insurer Not a Party 27
8.2 Authority of Trustee 27
8.3 Contract Ownership 27
8.4 Limitation of Liability 27
8.5 Change of Trustee 27
ARTICLE 9 Amendment and Termination 28
9.1 Amendment 28
9.2 Final Termination 29
ARTICLE 10 Miscellaneous 30
10.1 Taxes 30
10.2 Third Persons 30
10.3 Nonassignability; Nonalienation 30
10.4 The Plans 30
10.5 Applicable Law 30
10.6 Notices and Directions 31
10.7 Successors and Assigns 31
10.8 Gender and Number 31
10.9 Headings 31
10.10 Counterparts 31
10.11 Beneficial Interest 31
10.12 Effective Date 31
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CERIDIAN CORPORATION
DIRECTORS' BENEFIT PROTECTION
TRUST AGREEMENT
This Trust Agreement is made and entered into as of December
1, 1994, between Ceridian Corporation, a Delaware corporation
(the "Company"), and First Trust National Association, a national
banking association with trust powers (the "Trustee").
RECITALS
The Company desires to establish a trust to be used in
conjunction with certain agreements and plans which provide
deferred or supplemental compensation to current or former
directors of the Company or a Subsidiary, including such
agreements or plans entered into or established after the
effective date of this Trust Agreement.
The Company desires to appoint the Trustee to act as trustee of
the Trust and the Trustee desires to accept the appointment.
The Company and the Trustee enter into this Trust Agreement to
establish the Trust and to set forth their respective rights and
obligations in connection with the Trust.
Therefore, in consideration of the mutual undertakings contained
in this Trust Agreement, the Company and Trustee agree as
follows:
ARTICLE 1
Description and Definitions
1.1 Name. The name of the Trust is the "Ceridian Corporation
Directors' Benefit Protection Trust."
1.2 Intentions. It is the intention of the parties that this
Trust constitute an unfunded arrangement and not affect the
status of the Plans as unfunded for purposes of the Code and, to
the extent applicable, Title I of ERISA. In addition, it is the
intention of the Company and the Subsidiaries to make
contributions to the Trust to provide a source of funds to assist
in meeting their liabilities under the Plans, subject to the
claims of the Company's and the Subsidiaries' creditors in the
event of their Insolvency, until paid to Participants and their
Beneficiaries in such manner and at such times as specified in
the Plans.
1.3 Irrevocability; Creditor Claims. The Trust established
pursuant to this Trust Agreement is irrevocable. The principal
of the Trust, and any earnings thereon, will be held separate and
apart from other funds of the Company and the Subsidiaries and
will be used exclusively for the uses and purposes of the
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Participants, Beneficiaries and general creditors of the Company
and the Subsidiaries as herein set forth. The Participants and
their Beneficiaries have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights
created under the Plans and this Trust Agreement are mere
unsecured contractual rights of the Participants and their
Beneficiaries against the Company and the Subsidiaries. Any
assets held by the Trust will be subject to the claims of the
Company's and the Subsidiaries' general creditors under federal
and state law in the event of Insolvency.
1.4 Additional Definitions. In addition to the definitions set
forth above, for purposes hereof, unless otherwise clearly
apparent from the context, the following terms have the following
indicated meanings:
(a) "Account" has the meaning set forth in Section
2.3(a).
(b) "Beneficiary" means one or more persons, trusts,
estates or other entities, designated in accordance with a
Plan, that are entitled to receive benefits under a Plan
upon the death of a Participant.
(c) "Board" means the board of directors of the
Company. When this Trust Agreement provides for an action
to be taken by the Board, the action may be taken by any
committee or individual authorized to take such action
pursuant to a proper delegation of the Company's board of
directors which remains in effect at the time in question.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" means the administrative committee
appointed by the Company's Chief Executive Officer to
administer the Trust.
(f) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(g) "Insolvent" has the meaning set forth in Section
3.4(a).
(h) "Insolvent Entity" has the meaning set forth in
Section 3.4(a).
(i) "IRS" means the Internal Revenue Service.
(j) "Participant" means a current or former director
of the Company or a Subsidiary who is a party to, or a
participant under, one or more of the Plans in accordance
with their terms and conditions.
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(k) "Payment Schedule" has the meaning set forth in
Section 3.3(b).
(l) "Plan" means any plan, program, policy or
agreement pursuant to which the Company or a Subsidiary is
required to provide deferred or supplemental compensation to
a current or former director in his or her capacity as a
director which is listed on Schedule 1, as such schedule may
be amended from time to time by the Board.
(m) "Subaccount" has the meaning set forth in Section
2.3(b).
(n) "Subsidiary" means any corporation that is a
member of a controlled group of corporations within the
meaning of Code section 414(b) that includes the Company.
(o) "Trust" means the trust established pursuant to
this Trust Agreement as amended from time to time.
(p) "Trust Fund" means the assets held by the Trustee
pursuant to the terms of this Trust Agreement and for the
purposes of the Plans.
1.5 Grantor Trust. The Trust is intended to be a "grantor
trust," of which the Company and the Subsidiaries are the
grantors, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Code, and the Trust will be
construed accordingly.
1.6 Benefits Implemented Through Trust. Simultaneously with the
execution of this Trust Agreement, the Company will deliver to
the Trustee true, correct and complete copies of all Plans listed
on Schedule 1. If so specified on Schedule 1, benefits
implemented through the Trust with respect to a Plan may be
limited to any individual Participant or Beneficiary or group of
Participants or Beneficiaries and to less than all of the
benefits payable under the Plan. The Board may, from time to
time, without the consent of the Trustee, add Plans to Schedule
1, expand the scope of Plan benefits implemented through the
Trust or amend or modify any Plan listed on Schedule 1 and no
such action will be deemed to be an amendment subject to Section
9.1; provided, however, that the effect of such action may not
unreasonably increase the Trustee's responsibilities hereunder
without the Trustee's consent. The Company will promptly deliver
to the Trustee a true, correct and complete copy of any new Plan,
or modifications or amendments to such Plan. Any special
provisions of this Trust Agreement applicable to a specific Plan
listed on Schedule 1 will be set forth on an exhibit to this
Trust Agreement and in the event of any inconsistencies between
the provisions of any such exhibit and the other provisions of
this Trust Agreement, the provisions of the exhibit control. A
Plan may be deleted from Schedule 1 by action of the Board and
such action will not be deemed to be an amendment subject to
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Section 9.1 only (a) in the case of a transfer to a successor
trust pursuant to Section 2.7 or (b) if the Committee establishes
to the reasonable satisfaction of the Trustee that the Plan has
been (1) merged with another Plan pursuant to Section 2.8, (2)
assumed by (A) a Subsidiary in connection with a transaction
pursuant to which it ceases to be such or (B) a successor to all
or any portion of the business of the Company or a Subsidiary or
(3) terminated but only if all liabilities to Participants and
Beneficiaries pursuant to the Plan have been fully satisfied.
Any other deletion of a Plan from Schedule 1 is an amendment
subject to Section 9.1.
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ARTICLE 2
General Administration
2.1 Committee Directions.
(a) The Secretary or an Assistant Secretary of the
Company will certify to the Trustee the names of the
Committee members. Persons authorized to give directions to
the Trustee on behalf of the Committee will be identified to
the Trustee by written notice from the Committee, and such
notice will contain specimens of the authorized signatures.
The Trustee may rely on such written notice as evidence of
the identity and authority of the persons appointed until a
written cancellation of the appointment, or the written
appointment of a successor, is received by the Trustee.
(b) Directions by the Committee, or its delegate, to
the Trustee must be in writing and signed by the Committee
or persons authorized by the Committee, or may be made by
such other method as is acceptable to the Trustee.
(c) The Trustee may conclusively rely on written
directions from the Committee in taking any action with
respect to the Trust, including the making of payments from
the Trust Fund and the investment of the Trust Fund pursuant
to this Trust Agreement.
(d) The Trustee may request directions from the
Committee and has no duty to act if such directions are not
provided by the Committee. If requested directions are not
received within a reasonable time, the Trustee may, but is
under no duty to, act on its own discretion to administer
the Trust in accordance with this Trust Agreement and the
Plans.
2.2 Contributions. The Company and the Subsidiaries, in their
sole discretion, may at any time, or from time to time, make
deposits of cash or other property acceptable to the Trustee in
trust with the Trustee to be held, administered and disposed of
by the Trustee as provided in this Trust Agreement. In
connection with any deposit, the Committee will designate in
writing to the Trustee the portion of the deposit attributable to
each Account and, if applicable, Subaccount. Neither the Trustee
nor any Participant or Beneficiary has any right to compel such
additional deposits. The Trustee has no duty to (a) collect or
enforce payment to it of any contributions, (b) require that any
contributions be made, (c) compute any amount to be paid to it or
(d) determine whether amounts paid comply with the terms of the
Plans.
2.3 Separate Accounting for Each Plan.
(a) The Trustee will maintain separate Accounts to
reflect the interest of each Plan in the Trust Fund. Not
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less frequently than monthly, the Account of each Plan will
be debited or credited, as the case may be,
(1) for the entire amount of every contribution
received by the Trustee on behalf of such Plan, every
benefit payment or expense or other charge properly
allocable to such Plan and every transaction relating
solely to such Plan, and
(2) for the Plan's equitable share of every item
of allocated or accrued income, gain or loss of general
expenses and other transactions allocable to the Trust
Fund as a whole.
If contributions are made with respect to a Plan
(b)
by the Company and one or more other Subsidiaries or two or
more Subsidiaries, the Trustee will maintain within the
Account with respect to the Plan separate Subaccounts to
reflect the portion of the total Account balance
attributable to each contributing entity.
(c) Except as provided in Section 2.5,
(1) in no event will a Plan or the Participants
or Beneficiaries covered by that Plan be entitled to
payments from the Trust Fund in excess of the value of
the Account maintained for that Plan, and
(2) if Subaccounts are maintained with respect to
a Plan, in no event will Participants or Beneficiaries
covered by that Plan be entitled to payments pursuant
to the Plan with respect to service as a director of
the Company or a Subsidiary in excess of the value of
the Subaccount maintained for the Company or Subsidiary
with respect to the Plan.
2.4 Interest of Plans in Trust Fund. The Committee may specify
in writing to the Trustee that all or part of a Plan's interest
in the Trust Fund be held in a segregated account for the Plan
and invested separately from the remainder of the Trust Fund. In
such event, assets of such segregated account will be held and
administered solely for that Plan. Except in cases of such
segregation, the contributions received by the Trustee from the
Company and the Subsidiaries with respect to all Plans will be
held and administered pursuant to the terms of this Trust
Agreement as a single fund without distinction between income and
principal and without liability for the payment of interest
thereon except as expressly provided in this Trust Agreement.
During the term of this Trust, except as otherwise expressly
provided in this Trust Agreement, all income received by the
Trust, net of expenses and taxes, will be accumulated and
reinvested.
2.5 Excess Accumulations.
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(a) If the Trustee determines that the fair market
value of an Account or Subaccount exceeds 125 percent of the
benefit obligations accrued through the date of the
determination chargeable to the Account or Subaccount, at
the direction of the Committee, the Trustee will distribute
to the Company or Subsidiary all or any portion of the
excess.
(b) If the Trustee determines that the fair market
value of an Account or Subaccount exceeds 125 percent of the
benefit obligations accrued through the date of the
determination chargeable to the Account or Subaccount, at
the direction of the Committee or pursuant to Section
3.3(d)(2), the Trustee will transfer all or any portion of
the excess to another Account or another Subaccount
maintained for the same entity.
(c) For purposes of this section the value of benefit
obligations as of a given date is,
(1) in the case of a Plan which is a defined
contribution plan, the aggregate balance the accounts
of all Participants and Beneficiaries as of the most
recent Plan valuation date, and
(2) in the case of a Plan which is a defined
benefit plan, the present value (based on actuarial
assumptions determined by the Trustee to be reasonable)
of Plan benefits based on service, compensation and
other appropriate factors as of the determination date
and applying the provisions of the Plan then in
effect.
2.6 Substitution. Notwithstanding any provision of any Plan or
this Trust Agreement to the contrary, the Company or any
Subsidiary that has made contributions to the Trust has the power
to reacquire the Trust Fund by substituting readily marketable
securities (other than a security issued by the Company or any
Subsidiary) acceptable to the Trustee and/or cash of an
equivalent fair market value and such other property will,
following such substitution, constitute the Trust Fund.
2.7 Transfer to Successor Trust. The Company, by written
direction delivered to the Trustee, may direct the withdrawal and
transfer of assets constituting all or a part of the interest of
a Plan in the Trust Fund to a successor trust, which may be the
Trustee acting under a separate trust agreement. The Trustee
will be required to effect the direction only if it determines
that (a) the trustee of the successor trust would qualify to act
as a successor trustee of the Trust pursuant to Section 6.2 and
(b) the transfer could not reasonably be expected to result in
(1) any material decrease in the rights of Participants and
Beneficiaries or (2) Participants and/or Beneficiaries being
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taxed on benefits under a Plan or successor plan in a year other
than the year of actual receipt of benefits. The Trustee will
make the transfer as soon as practicable after making such
determination, either in cash, or at the direction of the
Committee, in other property or partly in cash and partly in
other property.
2.8 Merger or Split-up of Plans. If two or more Plans are
merged into a single Plan, or if a Plan is divided into two or
more Plans, the resulting Plan or Plans will continue to
participate in this Trust unless the Company directs the Trustee
to make a transfer of assets with respect to such Plan or Plans
to a successor trust pursuant to Section 2.7. The Trustee will
make such adjustments of the Accounts or Subaccounts as are
appropriate to reflect any such merger or split-up of Plans.
ARTICLE 3
Duties and Powers of Trustee
3.1 General Responsibility. The general responsibilities of the
Trustee are as follows:
(a) Except as expressly otherwise provided in this
Trust Agreement, the Trustee has exclusive authority and
discretion to manage and control the assets comprising the
Trust Fund.
(b) The Trustee will hold, administer, invest and
reinvest, and disburse the Trust Fund in accordance with the
powers and subject to the restrictions stated in this Trust
Agreement. Investments will be consistent with any funding
policy communicated to the Trustee in writing by the
Committee. The Trustee may rely on the latest such
communication received by it without further inquiry or
verification.
(c) The Trustee will disburse monies and oth
properties from the Trust Fund in accordance with the terms
of this Trust Agreement. The Trustee is not liable for any
distribution made by it pursuant to such directions and has
no duty to make inquiry as to whether any distribution made
by it pursuant to any such direction is made pursuant to the
provisions of the Plans. The receipt by the payee will
constitute a full acquittance to the Trustee.
(d) The Trustee has the responsibilities, if any,
expressly allocated to it by the Plans. Except as
responsibilities may be expressly so allocated, the Trustee,
in its capacity as such, has no responsibility or authority
with respect to the operation and administration of the
Plans, and the rights, powers, and duties of the Trustee are
governed solely by the terms of this Agreement without
reference to the provisions of the Plans.
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(e) The Trustee will reimburse the Company from the
Trust Fund for expenses incurred by the Company or any
employee or agent thereof in connection with the
administration of the Plans upon its receipt of written
statements therefor in form acceptable to the Trustee.
3.2 General Powers. The Trustee has, without exclusion, all
powers conferred on the Trustee by applicable law, unless
otherwise expressly provided in this Trust Agreement, and all
rights associated with the Trust Fund will be exercised by the
Trustee or the person designated by the Trustee, and in no event
by Participants or Beneficiaries. Except as otherwise expressly
provided in this Trust Agreement, the Trustee has exclusive
authority and discretion to invest and reinvest the principal and
income of the Trust Fund in real or personal property of any kind
and will do so with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims. The Trustee will diversify the investments of the
Trust Fund so as to minimize the risk of large losses, unless
under the circumstances it is clearly prudent not to do so. The
Trustee is not limited by the laws of any state proscribing or
limiting the investment of trust funds by corporate or individual
trustees in or to certain kinds, types, or classes of investments
or limiting the value or proportion of the trust assets that may
be invested in any one property or kind, type, or class of
investment. Without limiting the generality of the foregoing,
investments and reinvestments are also subject to the following:
(a) To invest and reinvest the Trust Fund, together
with the income therefrom, in common stock, preferred stock,
convertible preferred stock, mutual funds, bonds,
debentures, convertible debentures and bonds, mortgages,
notes, time certificates of deposit, commercial paper and
other evidences of indebtedness (including those issued by
the Trustee or any of its affiliates), financial futures
contracts, other securities, policies of life insurance,
annuity contracts, options to buy or sell securities or
other assets, and other property of any kind (personal,
real, or mixed, and tangible or intangible); provided,
however, that in no event may the Trustee invest in
securities (including stock or rights to acquire stock) or
obligations issued by the Company or the Subsidiaries, other
than a de minimis amount held in common investment vehicles
in which the Trustee invests.
(b) To hold securities and other properties in bearer
form or in the name of a nominee or nominees without
disclosing any fiduciary relationship; provided, however,
that on the books and records of the Trustee such securities
and properties will constantly be shown to be a part of the
Trust Fund, and no such registration or holding by the
Trustee relieves it from liability for the safe custody and
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proper disposition of such securities and properties in
accordance with the terms and provisions of this Trust
Agreement.
(c) To sell, grant options to buy, transfer, assign,
convey, exchange, mortgage, pledge, lease or otherwise
dispose of any of the properties comprising the Trust Fund
at such prices and on such terms and in such manner as it
may deem proper, and for terms within or extending beyond
the duration of the Trust.
(d) To manage, administer, operate, lease for any
number of years, regardless of any restrictions on leases
made by fiduciaries, develop, improve, repair, alter,
demolish, mortgage, pledge, grant options with respect to,
or otherwise deal with any real property or interest therein
at any time held by it; and to cause to be formed a
corporation or trust to hold title to any such real property
with such powers, all upon such terms and conditions as may
be deemed advisable.
(e) To renew or extend or participate in the renewal
or extension of any note, bond or other evidence of
indebtedness, or any other contract or lease, or to exchange
the same, or to agree to a reduction in the rate of interest
or rent thereon or to any other modification or change in
the terms thereof, or of the security therefor, or any
guaranty thereof, in any manner and to any extent that it
may deem advisable in its absolute discretion; to waive any
default, whether in the performance of any covenant or
condition of any such note, bond or other evidence of
indebtedness, or any other contract or lease, or of the
security therefor, and to carry the same past due or to
enforce any such default as it may in its absolute
discretion deem advisable; to exercise and enforce any and
all rights to foreclose, to bid in property on foreclosure;
to exercise and enforce in any action, suit, or proceeding
at law or in equity any rights or remedies in respect to any
such note, bond or other evidence of indebtedness, or any
other contract or lease, or the security therefor; to pay,
compromise, and discharge with the funds of the Trust Fund
any and all liens, charges, or encumbrances upon the same,
in its absolute discretion, and to make, execute, and
deliver any and all instruments, contracts, or agreements
necessary or proper for the accomplishment of any of the
foregoing powers.
(f) To borrow such sums of money for the benefit of
the Trust Fund from any lender upon such terms, for such
period of time, at such rates of interest, and upon giving
such collateral as it may determine; to secure any loan so
made by pledge or mortgage of the trust property; and to
renew existing loans.
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(g) To use the assets of the Trust Fund, whether
principal or income, for the purpose of improving,
maintaining, or protecting property acquired by the Trust
Fund, and to pay, compromise, and discharge with the assets
of the Trust Fund any and all liens, charges, or
encumbrances at any time upon the same.
(h) To hold uninvested such cash funds as may appear
reasonably necessary to meet the anticipated cash
requirements of the Plans from time to time and to deposit
the same or any part thereof, either separately or together
with other trust funds under the control of the Trustee, in
its own deposit department or to deposit the same in its
name as Trustee in such other depositories as it may select.
(i) To receive, collect, and give receipts for every
item of income or principal of the Trust Fund.
(j) To institute, prosecute, maintain, or defend any
proceeding at law or in equity concerning the Trust Fund
or the assets thereof, at the sole cost and expense of the
Trust Fund, and to compromise, settle, and adjust any claims
and liabilities asserted against or in favor of the Trust
Fund or of the Trustee; but the Trustee is under no duty or
obligation to institute, maintain, or defend any action,
suit, or other legal proceeding unless it has been
indemnified to its satisfaction against any and all loss,
cost, expense, and liability it may sustain or anticipate by
reason thereof.
(k) To vote all stocks and to exercise all rights
incident to the ownership of stocks, bonds, or other
securities or properties held in the Trust Fund and to issue
proxies to vote such stocks; to enter into voting trusts for
such period and upon such terms as it may determine; to give
general or special proxies or powers of attorney, with or
without substitution; to sell or exercise any and all
subscription rights and conversion privileges; to sell or
retain any and all stock dividends; to oppose, consent to,
or join in any plan of reorganization, readjustment, merger,
or consolidation in respect to any corporation whose stocks,
bonds, or other securities are a part of the Trust Fund,
including becoming a member of any stockholders' or
bondholders' committee; to accept and hold any new
securities issued pursuant to any plan of reorganization,
readjustment, merger, consolidation, or liquidation; to pay
any assessments on stocks or securities or to relinquish the
same; and to otherwise exercise any and all rights and
powers to deal in and with the securities and properties
held in the Trust Fund in the same manner and to the same
extent as any individual owner and holder thereof might do.
(l) To make application for any contract issued by an
insurance company to be purchased under a Plan, to accept
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and hold any such contract, and to assign and deliver any
such contract.
(m) To lend any securities or security from time to
time constituting a part of the Trust Fund in exchange for
such consideration and upon such terms and conditions as the
Trustee deems appropriate. In any such transaction the
Trustee may transfer legal title to the securities being
loaned to the obligor, and may permit the obligor to return
to the Trust Fund securities that are identical (but not
necessarily evidenced by the same certificates) to those
transferred to it by the Trustee under this Trust Agreement.
(n) To employ such agents, experts, counsel, and other
persons (any of whom may also be employed by or represent
the Company or a Subsidiary) deemed by the Trustee to be
necessary or proper for the administration of the Trust; to
rely and act on information and advice furnished by such
agents, experts, counsel, and other persons; and to pay
their reasonable expenses and compensation for services to
the Trust from the Trust Fund.
(o)To pay out of the Trust Fund all real and personal
property taxes, income taxes, and other taxes of any and all
kinds levied or, assessed under existing or future laws
against the Trust Fund, without any approval or direction of
the Committee.
(p) To pay any estate, inheritance, income, or other
tax, charge, or assessment attributable to any benefit
which, in the Trustee's opinion, it is or may be required to
pay out of such benefit; and to require, before making any
payment, such release or other document from any taxing
authority and such indemnity from the intended payee as the
Trustee deems necessary for its protection.
(q) To retain any funds or property subject to any
dispute without liability for the payment of interest, and
to decline to make payment or delivery thereof until final
adjudication is made by a court of competent jurisdiction.
(r) To serve not only as Trustee but also in any other
capacity with respect to the Plans pursuant to such
agreements or practices as the Trustee considers necessary
or appropriate under the circumstances.
(s) To participate in and use the Federal Book-entry
Account System (a service provided by the Federal Reserve
Bank for its member banks for deposit of Treasury
securities), or to use the Depository Trust Company, Midwest
Trust Company or other generally accepted central
depositories.
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(t) To make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and all
other instruments that may be necessary or appropriate to
carry out the powers herein granted to the Trustee.
(u) To bring action before any court of competent
jurisdiction for instructions with respect to any matter
pertaining to the interpretation of this Trust Agreement or
the administration of the Trust Fund.
Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee has no
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Code.
3.3 Distributions.
(a) The establishment of the Trust and the payment or
delivery to the Trustee of money or other property does not
vest in any Participant or Beneficiary any right, title or
interest in and to any of the assets comprising the Trust
Fund. To the extent that any Participant or Beneficiary
acquires the right to receive payments under any of the
Plans, such right is no greater than the right of an
unsecured general creditor of the Company or the Subsidiary
that is obligated to make the payments pursuant to the terms
of the Plan in question and such Participant or Beneficiary
will have only the unsecured promise of the Company or
Subsidiary that such payments will be made.
(b) Concurrent with the establishment of this Trust,
the Company will deliver to the Trustee a schedule (the
"Payment Schedule") that specifies (1) the benefit payable
in respect of each Participant (and his or her
Beneficiaries) on a Plan by Plan basis, the formula or
formulas or other instructions acceptable to the Trustee for
determining the amounts so payable, (2) the form in which
such amount is to be paid (as provided for or available
under the applicable Plans), (3) the time of commencement
for payment of such amounts and (4) the Account and, if
applicable, the Subaccount to which the benefit is
chargeable. If the Payment Schedule indicates that benefits
are payable following the occurrence of a contingent event
(e.g., death or termination of service), the Company will
provide the Trustee with notice of the occurrence of such
event within three business days after the Company has
knowledge thereof. The Company will update the Payment
Schedule on at least a monthly basis. The Company will also
update the Payment Schedule at any other time within three
business days after the Trustee submits a written request to
the Company for an update. The Trustee will make payments
to the Participants and their Beneficiaries in accordance
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with such Payment Schedule. If, however, a Participant or
Beneficiary submits to the Trustee a written claim which
establishes to the Trustee's reasonable satisfaction that
the Payment Schedule specifies or is based on incorrect
information or is not consistent with the Plan, the Trustee
may review any information provided to it by the Company,
the Participant or Beneficiary or any other person and
adjust the benefit as appropriate on the basis of such
information. The Trustee has discretionary power and
authority to construe, interpret and apply the terms of the
Plan and to remedy any ambiguities in connection with such
review and adjustment. The Trustee will promptly notify the
Committee of any such written claim.
(c) The Trustee may make any distribution required to
be made by it hereunder by delivering:
(1) Its check payable to the person to whom such
distribution is to be made, to the person; or
(2) Its check payable to an insurer for the
benefit of such person, to the insurer; or
(3) Contracts held on the life of the Participant
to whom or with respect to whom the distribution is
being made, to the Participant or Beneficiary; or
(4) If a distribution is being made, in whole or
in part, of other assets, assignments or other
appropriate documents or certificates necessary to
effect a transfer of title, to the Participant or
Beneficiary.
Payments by the Trustee will be delivered or mailed to
addresses supplied by the Committee and the Trustee may rely
on such addresses unless it has actual knowledge of a
change.
(d) If the Trustee determines that the balance of any
Account or, if applicable, Subaccount is not sufficient or
is not expected to be sufficient to make benefit payments
that are then either due or expected to become due within 90
days after the determination (the "expected short-term
benefit obligations"), the Trustee will promptly provide
written notice to the Committee of the deficiency or
expected deficiency. Only one such notice is required with
respect to any continuous period of deficiency. Upon
receipt of such notice, the Committee will promptly take one
or both of the following steps.
(1) The Committee may cause the Company or a
Subsidiary to make an additional contribution to the
Trust attributable to the Account or Subaccount.
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(2) The Committee may instruct the Trustee in
writing that the Company or Subsidiary intends to make
benefit payments directly pursuant to Section 3.3(e),
in which case the Trustee will make a transfer to the
deficient Account or Subaccount pursuant to Section
2.5(b) if such a transfer may then be made.
During any period in which the balance of the Account or
Subaccount is not sufficient or is not expected to be
sufficient to satisfy the expected short-term benefit
obligations, each benefit payment from the Trust Fund
chargeable to the Account or Subaccount will be reduced on a
pro rata basis to reflect the deficiency. The Company or
Subsidiary, as the case may be, will make the balance of
each such payment as it falls due.
(e) The Company and the Subsidiaries may make payment
of benefits directly to Participants or their Beneficiaries
as they become due under the terms of the Plans. The
Company and the Subsidiaries will notify the Trustee of
their decision to make payment of benefits directly not less
than three business days prior to the time amounts are
payable to Participants or their Beneficiaries.
(f) Notwithstanding anything contained in this Trust
Agreement to the contrary, if at any time the Trust is
finally determined by the IRS not to be a "grantor trust"
with the result that the income of the Trust Fund is not
treated as income of the Company or the Subsidiaries
pursuant to Code sections 671 through 679, or if a tax is
finally determined by the IRS to be payable by one or more
Participants or Beneficiaries with respect to any interest
in the Plans or the Trust Fund prior to payment of such
interest to such Participant or Beneficiary, then (1) the
Trust will immediately terminate, (2) the Trustee will
immediately determine each Participant's share of the Trust
Fund in accordance with the Plans, and (3) the Trustee will
immediately distribute such share in a lump sum to each
Participant or Beneficiary entitled thereto, regardless of
whether such Participant's employment has terminated and
regardless of form and time of payments specified in or
pursuant to the Plans. Any remaining assets (less any
expenses or costs due under Sections 3.2(n) and 5.1 of this
Trust Agreement) will then be paid by the Trustee to the
Company and the Subsidiaries in such amounts, and in the
manner instructed by the Committee.
(g) The Trustee will make provision for the reporting
and withholding of any federal, state or local taxes that
may be required to be withheld with respect to the payment
of benefits pursuant to the terms of the Plans or this Trust
Agreement and will pay amounts withheld to the appropriate
taxing authorities or determine that such amounts have been
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reported, withheld and paid by the Company and the
Subsidiaries.
3.4 Trustee Responsibility Regarding Payments on Insolvency.
(a) The Trustee will cease payment of benefits to
Participants and their Beneficiaries attributable to a
particular entity under the terms of a Plan if the entity is
Insolvent (the "Insolvent Entity"). The Insolvent Entity
will be considered "Insolvent" for purposes of this Trust
Agreement if:
(1) the Insolvent Entity is unable to pay its
debts as they become due, or
(2) the Insolvent Entity is subject to a pending
proceeding as a debtor under the United States
Bankruptcy Code.
For purposes of this Section 3.4, if an entity is determined
to be Insolvent, each Subsidiary in which such entity has an
equity interest will also be deemed to be an Insolvent
Entity. However, the insolvency of a subsidiary will not
cause a parent corporation to be deemed Insolvent.
(b) At all times during the continuance of this Trust,
as provided in Section 1.3 above, the principal and income
of the Trust will be subject to claims of the general
creditors of the Company and its Subsidiaries under federal
and state law as set forth below:
(1) The board of directors of the Company and the
president of the Company have the nondelegable duty to
inform the Trustee in writing of the Company's or any
Subsidiary's Insolvency. If a person claiming to be a
creditor of the Company or any Subsidiary alleges in
writing to the Trustee that the Company or any
Subsidiary has become Insolvent, the Trustee will
determine whether the Company or any Subsidiary is
Insolvent and, pending such determination, the Trustee
will discontinue payment of benefits to the
Participants or their Beneficiaries attributable to the
Insolvent Entity. The Trustee may conclusively rely on
any determination it receives from the board of
directors of the Company or the president of the
Company with respect to the Insolvency of the Company
or any Subsidiary.
(2) Unless the Trustee has actual knowledge of
the Company's or a Subsidiary's Insolvency, or has
received notice from the Company, a Subsidiary, or a
person claiming to be a creditor alleging that the
Company or a Subsidiary is Insolvent, the Trustee has
no duty to inquire whether the Company or any
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Subsidiary is Insolvent. The Trustee may in all events
rely on such evidence concerning the Company's or any
Subsidiary's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable
basis for making a determination concerning the
Company's or any Subsidiary's solvency. In this
regard, the Trustee may rely upon a letter from the
Company's or a Subsidiary's auditors as to the
Company's or any Subsidiary's financial status.
(3) If at any time the Trustee has determined
that the Company or any Subsidiary is Insolvent, the
Trustee will discontinue payments to Participants or
their Beneficiaries attributable to the Insolvent
Entity, and will hold the portion of the assets of the
Trust allocable to the Insolvent Entity for the benefit
of the Insolvent Entity's general creditors. Nothing
in this Trust Agreement in any way diminishes any
rights of Participants or their Beneficiaries to pursue
their rights as general creditors of the Insolvent
Entity with respect to benefits due under the Plans or
otherwise.
(4) The Trustee will resume the payment of
benefits to Participants or their Beneficiaries in
accordance with this Article 3 of this Trust Agreement
only after the Trustee has determined that the alleged
Insolvent Entity is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3.4(b) hereof and subsequently resumes
such payments, the first payment following such
discontinuance will include the aggregate amount of all
payments due to Participants or their Beneficiaries under
the terms of the Plans for the period of such
discontinuance, less the aggregate amount of any payments
made to Participants or their Beneficiaries by the Company
or any Subsidiary in lieu of the payments provided for
hereunder during any such period of discontinuance.
3.5 Records. The Trustee will maintain accurate records and
detailed accounts of all investments, receipts, disbursements and
other transactions hereunder. Such records will be available at
all reasonable times for inspection by the Company and
Subsidiaries or their authorized representative. The Trustee, at
the direction of the Committee, will submit to the Committee and
to any insurer such valuations, reports or other information as
the Committee may reasonably require and, in the absence of fraud
or bad faith, the valuation of the Trust Fund by the Trustee will
be conclusive.
3.6 Quarterly Accounting; Final Accounting.
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(a) Within 45 days following the last day of each
calendar quarter and within 45 days after the removal or
resignation of the Trustee or the termination of the Trust,
the Trustee will file with the Committee a written
accounting setting forth in the aggregate and for each
Account and Subaccount a description of all assets purchased
and sold, all receipts, disbursements and other transactions
effected by it during the three-month period then ending or,
in the case of removal, resignation or termination, since
the previous quarter end, and listing the assets held in the
Trust Fund as of the last day of the period and indicating
the cost and market values of each such asset.
(b) The Committee may approve such accounting either
by written notice of approval delivered to the Trustee or by
its failure to express written objection to such accounting
delivered to the Trustee within 90 days after the date of
which such account was delivered to the Committee.
(c) The approval by the Committee of an accounting is
binding as to all matters covered by the accounting, other
than matters which the Committee could not reasonably
determine to be in error, on all parties to this Trust
Agreement and on all Participants and Beneficiaries, to the
same extent as if such accounting had been settled by a
judgment or decree of a court of competent jurisdiction in
which the Trustee, the Committee, the Company, the
Subsidiaries and all persons having or claiming any interest
in any Plan or Trust Fund were made parties.
(d) Despite the foregoing, nothing contained in this
Trust Agreement deprives the Trustee of the right to have an
accounting judicially settled, if the Trustee, in the
Trustee's sole discretion, desires such a settlement.
3.7 Valuation. The Trustee will determine the fair market value
of assets comprising the Trust Fund based upon such sources of
information as it may deem reliable, including, but not limited
to, stock market quotations, statistical evaluation services,
newspapers of general circulation, financial publications, advice
from investment counselors, brokerage firms or insurance
companies, or any combination of sources. The Trustee may take
whatever action it deems reasonable, including employment of
attorneys, appraisers, life insurance companies or other
professionals, the expense of which will be an expense of
administration of the Trust Fund payable by the Company and the
Subsidiaries. The Trustee may rely upon information from the
Company and the Subsidiaries, the Committee, appraisers or other
sources.
3.8 Delegation of Duties. The Company, a Subsidiary or the
Committee, or any or all of them, may at any time employ the
Trustee as its/their agent to perform any act, keep any records
18
or accounts and make any computations that are required of the
Company, any Subsidiary or the Committee by this Trust Agreement
or the Plans. The Trustee may be compensated for such employment
and such employment will not be deemed to be contrary to the
Trust. Nothing done by the Trustee as such agent changes or
increases its responsibility or liability as Trustee hereunder.
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ARTICLE 4
Directed Investments
4.1 Appointment of Insurance Company as Investment Manager. The
Committee may appoint one or more insurance companies to serve as
an investment manager. The appointment of any such investment
manager and investment of the Trust Fund pursuant to such
appointment are subject to the provisions of this Section 4.1,
notwithstanding any other provisions of this Trust Agreement to
the contrary:
(a) Written notice of each such appointment will be
given to the Trustee a reasonable time in advance of the
effective date of the appointment.
(b) The Committee will determine the terms of each
contract to be entered into between such insurance company
and the Trustee (including any agreement or agreements
supplemental thereto) pursuant to which investment
management services are to be performed by the insurance
company. On written direction of the Committee, the Trustee
will make application for each such contract and will hold
the contract as an asset of the Trust Fund.
(c) The Trustee will pay such premiums to the
insurance company pursuant to such contract as may be
directed in writing by the Committee.
(d) Except as otherwise agreed in writing by the
Trustee and the Retirement Committee, the Trustee will take
only such actions as contractholder of such contract as may
be directed in writing by the Committee.
(e) Any direction by the Committee with respect to
such contract will be complete as to the terms with respect
thereto, it being intended that the Trustee will have no
discretion whatsoever with respect to the provisions of such
contract or actions taken pursuant thereto.
4.2 Appointment of Investment Adviser as Investment Manager.
The Committee may appoint one or more parties that are registered
as investment advisers under the Investment Advisers Act of 1940
to serve as an investment manager. The appointment of any such
investment manager and investment of the Trust Fund pursuant to
such appointment are subject to the provisions of this
Section 4.2, notwithstanding any other provisions of this
Agreement to the contrary:
(a) Written notice of each such appointment will be
given to the Trustee a reasonable time in advance of the
effective date of the appointment. The notice will state
what portion of the Trust Fund is to be invested by the
investment manager and will direct the Trustee to segregate
such portion of the Trust Fund into a separate account for
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the investment manager. Each such separate account is
referred to in this section as an Investment Account.
(b) There will be a written agreement between the
Committee and each investment manager. The Trustee will
receive a copy of each such agreement and all amendments
thereto and will give written acknowledgement of receipt of
same. Alternately, the Committee may direct the Trustee to
enter into such agreement and any ancillary agreements that
the Committee determines to be necessary or appropriate.
Each agreement with an investment manager will provide that:
(1) All directions given by an investment manager
to the Trustee will be in writing, signed by an officer
or partner of the investment manager or by such other
person as may be designated in writing by the
investment manager; provided that the Trustee will
accept oral directions for the purchase or sale of
securities, which will be confirmed by such authorized
personnel of the investment manager in writing;
(2) In all events the Trustee, or an agent
thereof, is to retain physical custody of or title to
all assets included in an Investment Account; and
(3) The Committee, by written notice to the
investment manager and the Trustee, may modify or
terminate the authority of the investment manager.
(c) Payment of the cost of the acquisition, sale, or
exchange of any security or other property for an Investment
Account will be charged to that Investment Account unless
the agreement between the Committee and investment manager
provides otherwise.
(d) So long as the appointment of an investment
manager is in effect, the investment manager has full power
and authority to direct the Trustee as to, and full
responsibility for, investment of its Investment Account and
for the retention and disposition of any assets in its
Investment Account. Subject to any limitations in the
agreement between the Committee and the investment manager,
the investment manager has the same investment discretion as
is accorded the Trustee under Section 3.2. The Trustee may
invest any portion of an Investment Account that would
otherwise be held in cash but has no obligation to do so.
(e) Unless the written agreement between the Committee
and investment manager expressly provides to the contrary,
the Trustee has voting power with respect to all stocks and
other securities in the Investment Account.
(f) The Trustee will make available to an investment
manager copies of or extracts from such portions of its
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accounts, books, or records relating to the Investment
Account of such investment manager as the Trustee may deem
necessary or appropriate in connection with the exercise of
the investment manager's function, or as the Committee may
direct.
(g) All charges (other than those covered in Section
4.2(c) above) against each Investment Account will be made
in such proportions as the Committee may direct from time to
time.
(h) If the authority of an investment manager is
terminated and a successor investment manager is not
appointed, the assets held in its Investment Account may or
may not continue to be segregated as the Trustee may
determine. Until receipt of written notice of the
termination of the authority of an investment manager, the
Trustee will be fully protected in assuming the continuing
authority of such investment manager.
(i) Any direction by an investment manager will be
complete as to the terms with respect thereto, it being
intended that the Trustee has no obligation whatsoever to
invest or otherwise manage any asset of an Investment
Account.
4.3 Directions of Committee. The Committee may direct the
Trustee as to the investment and reinvestment of all or a part of
the Trust Fund, subject to the following provisions of this
Section 4.3, notwithstanding any other provisions of this Trust
Agreement to the contrary:
(a) Written notice of each such appointment will be
given to the Trustee a reasonable time in advance of the
effective date of the appointment. Such notice will state
what portion of the Trust Fund is to be invested by the
Committee and will direct the Trustee to segregate such
portion of the Trust Fund into a separate account for the
Committee. Each such separate account is referred to in
this section as a Committee Account.
(b) All directions given by the Committee to the
Trustee will be in writing, signed by the duly authorized
person or persons; provided that the Trustee will accept
oral directions for the purchase or sale of securities which
must be confirmed by such authorized personnel in writing.
(c) In all events the Trustee or an agent thereof is
to retain physical custody of or title to all assets
comprising a Committee Account.
(d) Payment of the cost of the acquisition, sale, or
exchange of any security for a Committee Account will be
charged to such Account.
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(e) The Committee has full power and authority to
direct the Trustee as to, and full responsibility for,
investment of each Committee Account and for the retention
and disposition of any assets at any time included in each
Committee Account. The Committee has the same investment
discretion as is accorded the Trustee under Section 3.2 of
this Agreement. The Trustee may invest any portion of a
Committee Account that would otherwise be held in cash but
has no obligation to do so.
(f) The Trustee has the voting power with respect to
all stocks and other securities in a Committee Account
except to the extent written directions by the Committee to
the Trustee grant voting power to the Committee.
(g) The Trustee will make available to the Committee
copies of or extracts from such portions of its accounts,
books, or records relating to any Committee Account as the
Committee may direct.
(h) All charges (other than those covered in Section
4.3(d) above) against each Committee Account will be made in
such proportions as the Committee may direct from time to
time.
(I) Any direction by the Committee be complete as to
its terms, it being intended that the Trustee will have no
obligation whatsoever to invest or otherwise manage any
asset of a Committee Account.
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ARTICLE 5
Compensation, Indemnification
5.1 Compensation and Expenses. The Trustee is entitled to
receive such reasonable compensation for its services as Trustee
or in any other capacity in connection with the Plans as agreed
upon by the Trustee and the Company. The Trustee is entitled to
reimbursement for all reasonable and necessary costs, expenses
and disbursements incurred by it in connection with the
performance of such services. Such compensation and
reimbursement will be charged to and paid out of the Trust Fund
as an administrative expense but if not so paid or if the
Committee so specifies, will be paid directly by the Company and
Subsidiaries in such proportions as the Committee determines.
5.2 Indemnification.
(a) The Company and the Subsidiaries will indemnify
and hold the Trustee harmless from and against all
liability, loss, cost or reasonable expense (including
reasonable attorneys' fees) to which it may be subject by
reason of its execution of its duties under this Trust
Agreement, or by reason of any acts taken in good faith in
accordance with any directions, or acts omitted in good
faith due to absence of directions, from the Company, the
Committee or a Participant, unless such liability, loss,
cost or expense is due to the Trustee's negligence or
misconduct. The indemnity described herein is provided
jointly and severally by the Company and the Subsidiaries.
(b) In the event that the Trustee is named as a
defendant in a lawsuit or proceeding involving one or more
of the Plans or the Trust Fund, the Trustee will be entitled
to receive on a current basis the indemnity payments
provided for in this section; provided, however, that, if
the final judgment entered in the lawsuit or proceeding
holds that the Trustee is guilty with respect to the Trust
Fund of negligence or misconduct, the Trustee must refund
the indemnity payments that it has received to the extent
such payments are attributable to liability, loss, cost or
expense due to such negligence or misconduct.
(c) All releases and indemnities provided in this
Trust Agreement survive the termination of this Trust
Agreement.
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ARTICLE 6
Resignation or Removal of Trustee
6.1 Resignation; Removal. The Trustee may resign at any time by
written notice to the Committee. The resignation will be
effective 180 days after the Company's receipt of such notice
unless the Company and the Trustee agree otherwise. The Trustee
may be removed by the Company on 60 days notice or upon shorter
notice accepted by the Trustee.
6.2 Successor Trustee. If the Trustee resigns or is removed, a
successor will be appointed, in accordance with this section, by
the effective date of the resignation or removal under Section
6.1 above. The successor must (a) be a bank (or a trust company
wholly owned by a bank) (b) be among the 100 largest banks in the
United States as measured by deposits and (c) have a rating of
"B/C" or greater based on the most current rating from Keefe,
Bruyett & Woods ("KB&W") or its successor, or if KB&W or its
successor should cease to publish ratings, then a short-term debt
rating from Moody's of "P-1," or greater, or from Standard and
Poor's of "A-1." If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding will be allowed as
administrative expenses of the Trust.
6.3 Settlement of Accounts. Upon resignation or rem
Trustee and appointment of a successor Trustee, all assets
comprising the Trust Fund will subsequently be transferred to the
successor Trustee. The transfer must be completed within 90 days
after receipt of notice of resignation, removal or transfer,
unless the Company extends the time limit. Upon the transfer of
the assets, the successor Trustee will succeed to all of the
powers and duties given to the Trustee in this Trust Agreement.
The resigning or removed Trustee will render to the Committee an
accounting in the form and manner and at the time prescribed in
Section 3.6.
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SECTION 7
Controversies, Legal Actions
7.1 Controversy. If any controversy arises with respect to the
Trust, the Trustee will act as it deems advisable, whether by
legal proceedings, compromise or otherwise. The Trustee may
retain the funds or property involved without liability pending
settlement of the controversy. The Trustee is under no
obligation to take any legal action of whatever nature unless
there is sufficient property in the Trust to indemnify the
Trustee with respect to any expenses or losses to which it may be
subjected.
7.2 Joinder of Parties. In any action or other judicial
proceedings affecting the Trust, it will be necessary to join as
parties the Trustee, the Committee, the Company and the
Subsidiaries. No Participant, Beneficiary or other person is
entitled to any notice or service of process. Any judgment
entered in such a proceeding or action will be binding on all
persons claiming under the Trust. Nothing in this Trust
Agreement is to be construed in a way that deprives a Participant
or Beneficiary of his or her right to seek adjudication of his or
her rights by administrative process or by a court of competent
jurisdiction.
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ARTICLE 8
Insurers
8.1 Insurer Not a Party. No insurer will be deemed to be a
party to the Trust and an insurer's obligations will be measured
and determined solely by the terms of contracts and other
agreements executed by it.
8.2 Authority of Trustee. An insurer must
of the Trustee to any documents or papers executed in connection
with any insurance contracts or agreements ancillary or
supplemental thereto. The signature of the Trustee is conclusive
proof to the insurer that the person on whose life an application
is being made is eligible to have a contract issued on his or her
life and is eligible for a contract of the type and amount
requested.
8.3 Contract Ownership. An insurer will deal with the Trustee
as the sole and absolute owner of any insurance contracts and has
no obligation to inquire whether any action or failure to act on
the part of the Trustee is in accordance with or authorized by
the terms of the Plans or this Trust Agreement.
8.4 Limitation of Liability. An insurer will be fully
discharged from any and all liability for any action taken or any
amount paid in accordance with the direction of the Trustee and
has no obligation to see to the proper application of the amounts
so paid. An insurer has no liability for the operation of the
Trust or the Plans, whether or not in accordance with their terms
and provisions.
8.5 Change of Trustee. An insurer will be fully discharged from
any and all liability for dealing with a party or parties
indicated on its records to be the Trustee until such time as it
receives at its home office written notice of the appointment and
qualification of a successor Trustee.
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ARTICLE 9
Amendment and Termination.
9.1 Amendment. Subject to the limitations set forth in this
section, this Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company. Any
amendment, change or modification is subject to the following
rules:
(a) General Rule. Subject to Sections 9.1(b) and (c)
below, this Trust Agreement may be amended:
(1) By the Company and the Trustee, provided,
however, that if an amendment would in any way
adversely affect the rights created by the Plans or
this Trust Agreement of any Participant or Beneficiary
in the Trust Fund, each and every Participant and
Beneficiary whose rights in the Trust Fund would be
adversely affected must consent to the amendment before
this Trust Agreement may be so amended; and
(2) By the Company and the Trustee as may be
necessary to comply with laws which would otherwise
render the Trust void, voidable or invalid in whole or
in part.
(b) Limitation. Notwithstanding that an amendment may
be permissible under Section 9.1(a) above, this Trust
Agreement may not be amended by an amendment that would:
(1) Cause any of the assets of the Trust to be
used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries as
set forth in the Plans, except as is required to
satisfy the claims of the Company's or a Subsidiary's
general creditors; or
(2) Be inconsistent with the terms of any Plan,
including the terms of any Plan regarding termination,
amendment or modification of the Plan.
(c) Writing and Consent. Any amendment to this Trust
Agreement must be set forth in writing and signed by the
Company and the Trustee and, if consent of any Participant
or Beneficiary is required under Section 9.1(a), the
Participant or Beneficiary whose consent is required. Any
amendment may be current, retroactive or prospective, in
each case as provided therein.
(d) Taxation. This Trust Agreement may not be
amended, altered, changed or modified in a manner that would
cause the Participants and/or Beneficiaries under any Plan
to be taxed on the benefits under any Plan in a year other
than the year of actual receipt of benefits.
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9.2 Final Termination. The Trust will not terminate until the
date on which Participants and their Beneficiaries are no longer
entitled to benefits pursuant to the terms of the Plans. Upon
termination of the Trust, any assets remaining in the Trust will
be returned to the Company and the Subsidiaries. Such remaining
assets will be paid by the Trustee to the Company and the
Subsidiaries in such amounts and in the manner instructed by the
Committee, whereupon the Trustee will be released and discharged
from all obligations hereunder. From and after the date of
termination and until final distribution of the Trust Fund, the
Trustee will continue to have all of the powers provided herein
as are necessary or expedient for the orderly liquidation and
distribution of the Trust Fund.
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ARTICLE 10
Miscellaneous
10.1 Taxes. The Company and the Subsidiaries will from time to
time pay taxes of any and all kinds whatsoever that at any time
are lawfully levied or assessed upon or become payable in respect
of the Trust Fund, the income or any property forming a part
thereof, or any security transaction pertaining thereto. To the
extent that any taxes lawfully levied or assessed upon the Trust
Fund are not paid by the Company and the Subsidiaries, the
Trustee has the power to pay such taxes out of the Trust Fund and
must seek reimbursement from the Company and the Subsidiaries.
Prior to making any payment, the Trustee may require such
releases or other documents from any lawful taxing authority as
it deems necessary. The Trustee will contest the validity of
taxes in any manner deemed appropriate by the Company or its
counsel, but at the Company's and the Subsidiaries' expense, and
only if it has received an indemnity bond or other security
satisfactory to it to pay any such expenses. The Trustee (a)
will not be liable for any nonpayment of tax when it distributes
an interest hereunder on directions from the Committee and (b)
has no obligation to prepare or file any tax return on behalf of
the Trust Fund, any such return being the sole responsibility of
the Company and Subsidiaries. The Trustee will cooperate with
the Committee in connection with the preparation and filing of
any such return.
10.2 Third Persons. All persons dealing with the Trustee are
released from inquiring into the decisions or authority of the
Trustee and from seeing to the application of any moneys,
securities or other property paid or delivered to the Trustee.
10.3 Nonassignability; Nonalienation. Benefits payable to
Participants and their Beneficiaries under this Trust Agreement
may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
10.4 The Plans. The Trust and the Plans are parts of a single,
integrated employee benefit plan system and will be construed
together. In the event of any conflict between the terms of this
Trust Agreement and the agreements that constitute the Plans,
such conflict will be resolved in favor of this Trust Agreement.
10.5 Applicable Law. Except to the extent, if any, preempted by
ERISA, all questions arising in connection with this Trust
Agreement, including, without limitation, those pertaining to
construction, validity, effect, enforcement and remedies, will be
determined in accordance with the internal, substantive laws of
the State of Minnesota without regard to the conflict of law
principles of the State of Minnesota or of any other
jurisdiction. Any provision of this Trust Agreement prohibited
by law are ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
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10.6 Notices and Directions. Whenever a notice or direction is
given by the Committee to the Trustee, it will be in the form
required by Section 2.1. Actions by the Company will be by the
Board or a duly authorized officer, with such actions certified
to the Trustee by an appropriately certified copy of the action
taken. The Trustee will be protected in acting upon any such
notice, resolution, order, certificate or other communication
believed by it to be genuine and to have been signed by the
proper party or parties.
10.7 Successors and Assigns. This Trust Agreement is binding
upon and inures to the benefit of the Company, the Subsidiaries
and the Trustee and their respective successors and assigns.
10.8 Gender and Number. Words used in one gender apply to the
other gender where applicable, and when the context requires, the
plural is to be read as the singular and the singular as the
plural.
10.9 Headings. Headings in this Trust Agreement are inserted for
convenience of reference only and if there is a conflict between
the headings and the text, the text controls.
10.10 Counterparts. This Trust Agreement may be executed in
an original and any number of counterparts, each of which will be
deemed to be an original of one and the same instrument.
10.11 Beneficial Interest. The Company and the Subsidiaries
are the true beneficiaries hereunder in that the payment of
benefits, directly or indirectly to or for a Participant or
Beneficiary by the Trustee, is in satisfaction of the Company's
and the Subsidiaries' liability therefor under the Plans.
Nothing in this Trust Agreement establishes any beneficial
interest in any person other than the Company and the
Subsidiaries.
10.12 Effective Date. The effective date of this Trust
Agreement is December 1, 1994.
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Schedule 1
1. Ceridian Corporation Directors' Deferred Compensation Plan
for benefits payable with respect to Participants who cease to be
directors of the Company after December 1, 1994.
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EXHIBIT 10.11
Amended as of October 21, 1994
CERIDIAN CORPORATION
1993 LONG-TERM INCENTIVE PLAN
1. Purpose of Plan.
The purpose of the Ceridian Corporation 1993 Long-Term Incentive Plan (the
"Plan") is to advance the interests of Ceridian Corporation (the "Company")
and its stockholders by enabling the Company and its Subsidiaries to
attract and retain persons of ability to perform services for the Company
and its Subsidiaries by providing an incentive to such individuals through
equity participation in the Company and by rewarding such individuals who
contribute to the achievement by the Company of its economic objectives.
2. Definitions.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Broker Exercise Notice" means a written notice pursuant to which
a Participant, upon exercise of an Option, irrevocably instructs a broker
or dealer to sell a sufficient number of shares or loan a sufficient amount
of money to pay all or a portion of the exercise price of the Option and/or
any related withholding tax obligations and remit such sums to the Company
and directs the Company to deliver stock certificates to be issued upon
such exercise directly to such broker or dealer.
2.3 "Change of Control" means an event described in Section 12.1 of
the Plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the group of individuals administering the
Plan, as provided in Section 3 of the Plan.
2.6 "Common Stock" means the common stock of the Company, par value
$0.50 per share, or the number and kind of shares of stock or other
securities into which such Common Stock may be changed in accordance with
Section 4.3 of the Plan.
2.7 "Disability" means the disability of the Participant such as
would entitle the Participant to receive disability income benefits
pursuant to the long-term disability plan of the Company or Subsidiary then
covering the Participant or, if no such plan exists or is applicable to the
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Participant, the permanent and total disability of the Participant within
the meaning of Section 22(e)(3) of the Code.
2.8 "Eligible Recipients" means all employees (including, without
limitation, officers and directors who are also employees) of the Company
or any Subsidiary.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.10 "Fair Market Value" means, with respect to the Common Stock, as
of any date (or, if no shares were traded or quoted on such date, as of the
next preceding date on which there was such a trade or quote), the closing
market price per share of the Common Stock as reported on the New York
Stock Exchange Composite Tape on that date.
2.11 "Incentive Award" means an Option, Stock Appreciation Right,
Restricted Stock Award or Performance Unit granted to an Eligible Recipient
pursuant to the Plan.
2.12 "Incentive Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422
of the Code.
**
2.13 "Non-Statutory Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan
that does not qualify as an Incentive Stock Option.
2.14 "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.15 "Participant" means an Eligible Recipient who receives one or
more Incentive Awards under the Plan.
2.16 "Performance Unit" means a right granted to an Eligible Recipient
pursuant to Section 9 of the Plan to receive a payment from the Company, in
the form of stock, cash or a combination of both, upon the achievement of
established performance goals.
2.17 "Previously Acquired Shares" means shares of Common Stock that
are already owned by the Participant.
2.18 "Restricted Stock Award" means an award of Common Stock granted
to an Eligible Recipient pursuant to Section 8 of the Plan that is subject
to the restrictions on transferability and the risk of forfeiture imposed
by the provisions of such Section 8.
2.19 "Retirement" means the termination (other than for "cause"' as
defined in Section 10.3(b) of the Plan) of a Participant's employment or
other service on or after the date on which the Participant has attained
the age of 55 and has completed 10 years of continuous service to the
Company or any Subsidiary (determined in accordance with the
retirement/pension plan or practice of the Company or Subsidiary then
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covering the Participant, provided that if the Participant is not covered
by any such plan or practice, the Participant will be deemed to be covered
by the Company's plan or practice for purposes of this determination).
2.20 "Securities Act" means the Securities Act of 1933, as amended.
2.21 "Stock Appreciation Right" means a right granted to an Eligible
Recipient pursuant to Section 7 of the Plan to receive a payment from the
Company, in the form of stock, cash or a combination of both, equal to the
difference between the Fair Market Value of one or more shares of Common
Stock and the exercise price of such shares under the terms of such Stock
Appreciation Right.
2.22 "Subsidiary" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a
significant equity interest, as determined by the Committee.
2.23 "Tax Date" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive Award.
3.1 Plan Administration.
3.1 The Committee. So long as the Company has a class of its equity
securities registered under Section 12 of the Exchange Act, the Plan will
be administered by a committee (the "Committee") consisting solely of not
less than two members of the Board who are "disinterested persons" within
the meaning of Rule 16b-3 under the Exchange Act. To the extent consistent
with corporate law, the Committee may delegate to any officers of the
Company the duties, power and authority of the Committee under the Plan
pursuant to such conditions or limitations as the Committee may establish;
provided, however, that only the Committee may exercise such duties, power
and authority with respect to Eligible Recipients who are subject to
Section 16 of the Exchange Act. Each determination, interpretation or
other action made or taken by the Committee pursuant to the provisions of
the Plan will be conclusive and binding for all purposes and on all
persons, and no member of the Committee will be liable for any action or
determination made in good faith with respect to the Plan or any Incentive
Award granted under the Plan.
3.2 Authority of the Committee.
(a) In accordance with and subject to the provisions of the
Plan, the Committee will have the authority to determine all provisions of
Incentive Awards as the Committee may deem necessary or desirable and as
consistent with the terms of the Plan, including, without limitation, the
following: (i) the Eligible Recipients to be selected as Participants; (ii)
the nature and extent of the Incentive Awards to be made to each
Participant (including the number of shares of Common Stock to be subject
to each Incentive Award, any exercise price, the manner in which Incentive
Awards will vest or become exercisable and whether Incentive Awards will be
granted in tandem with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award; (iii) the time or times
when Incentive Awards will be granted; (iv) the duration of each Incentive
Award; and (v) the restrictions and other conditions to which the payment
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or vesting of Incentive Awards may be subject. In addition, the Committee
will have the authority under the Plan in its sole discretion to pay the
economic value of any Incentive Award in the form of cash, Common Stock or
any combination of both.
(b) The Committee will have the authority under the Plan to
amend or modify the terms and conditions of any outstanding Incentive Award
in any manner, including, without limitation, the authority to extend the
term of an Incentive Award, accelerate the exercisability or vesting or
otherwise terminate any restrictions relating to an Incentive Award, accept
the surrender of any outstanding Incentive Award or, to the extent not
previously exercised or vested, authorize the grant of new Incentive Awards
in substitution for surrendered Incentive Awards; provided, however that
the amended or modified terms are permitted by the Plan as then in effect
and that any Participant adversely affected by such amended or modified
terms has consented to such amendment or modification. No amendment or
modification to an Incentive Award, however, whether pursuant to this
Section 3.2 or any other provisions of the Plan, will be deemed to be a
regrant of such Incentive Award for purposes of this Plan.
(c) In the event of (i) any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering,
extraordinary dividend or divestiture (including a spin-off) or any other
change in corporate structure or shares, (ii) any purchase, acquisition,
sale or disposition of a significant amount of assets or a significant
business, (iii) any change in accounting principles or practices, or (iv)
any other similar change, in each case with respect to the Company (or any
Subsidiary or division thereof) or any other entity whose performance is
relevant to the grant or vesting of an Incentive Award, the Committee (or,
if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) may, without the
consent of any affected Participant, amend or modify the grant or vesting
criteria of any outstanding Incentive Award that is based in whole or in
part on the financial performance of the Company (or any Subsidiary or
division thereof) or such other entity so as equitably to reflect such
event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the
board of directors of the surviving corporation) following such event as
prior to such event; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect.
4. Shares Available for Issuance.
4.1 Maximum Number of Shares Available. Subject to adjustment as
provided in Section 4.3 of the Plan, the maximum number of shares of Common
Stock that will be available for issuance under the Plan will be 3,000,000
shares. The shares available for issuance under the Plan may, at the
election of the Committee, be either treasury shares or shares authorized
but unissued, and, if treasury shares are used, all references in the Plan
to the issuance of shares will, for corporate law purposes, be deemed to
mean the transfer of shares from treasury.
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4.2 Limitation on Individual Awards in Any Taxable Year. The maximum
number of shares of Common Stock that may be the subject of Incentive
Awards made to any Eligible Recipient in any one taxable year of the
Company shall not exceed 250,000 shares (the "Maximum Annual Grant").
[Amended as of 12/13/93]
4.3 Accounting for Incentive Awards. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Incentive Awards
will be applied to reduce the maximum number of shares of Common Stock
remaining available for issuance under the Plan. Any shares of Common
Stock that are subject to an Incentive Award that lapses, expires, is
forfeited or for any reason is terminated unexercised or unvested and any
shares of Common Stock that are subject to an Incentive Award that is
settled or paid in cash or any form other than shares of Common Stock will
automatically again become available for issuance under the Plan.
4.4 Adjustments to Shares and Incentive Awards. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares,
rights offering, divestiture or extraordinary dividend (including a spin-
off) or any other change in the corporate structure or shares of the
Company, the Committee (or, if the Company is not the surviving corporation
in any such transaction, the board of directors of the surviving
corporation) will make appropriate adjustments (which determination will be
conclusive) as to (i) the number and kind of securities available for
issuance under the Plan, (ii) the Maximum Annual Grant, and (iii) in order
to prevent dilution or enlargement of the rights of Participants, the
number, kind and, where applicable, exercise price of securities subject to
outstanding Incentive Awards. [Amended as of 12/13/93]
5. Participation.
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are
expected to contribute to the achievement of economic objectives of the
Company or its Subsidiaries. Eligible Recipients may be granted from time
to time one or more Incentive Awards, singly or in combination or in tandem
with other Incentive Awards, as may be determined by the Committee in its
sole discretion. Incentive Awards will be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date will be
the date of any related agreement with the Participant.
6. Options.
6.1 Grant. An Eligible Recipient may be granted one or more Options
under the Plan, and such Options will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may
designate whether an Option is to be considered an Incentive Stock Option
or a Non-Statutory Stock Option.
6.2 Exercise Price. The per share price to be paid by a Participant
upon exercise of an Option will be determined by the Committee in its
discretion at the time of the Option grant but will not be less than 100%
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of the Fair Market Value of one share of Common Stock on the date of grant.
Unless otherwise determined by the Committee, the per share purchase price
of Options granted under the Plan will be equal to 100% of the Fair Market
Value of one share of Common Stock on the date of grant.
6.3 Exercisability and Duration. An Option will become exercisable at
such times and in such installments as may be determined by the Committee
in its sole discretion at the time of grant; provided, however, that no
Option may be exercisable prior to six months (other than Options described
in Section 6.6 of the Plan or as provided in Section 10 of the Plan) or
after 10 years from its date of grant. Unless the Committee determines
otherwise, an Option granted under the Plan will be exercisable for 10
years from its date of grant and will become exercisable on a cumulative
basis with respect to one-third of the shares subject to such Option on
each January 1 following its date of grant (or, if later, six months
following its date of grant with respect to the initial one-third
installment).
6.4 Payment of Exercise Price. The total purchase price of the shares
to be purchased upon exercise of an Option will be paid entirely in cash
(including check, bank draft or money order); provided, however, that the
Committee, in its sole discretion and upon terms and conditions established
by the Committee, may allow such payments to be made, in whole or in part,
by tender of a Broker Exercise Notice, Previously Acquired Shares or a
combination of such methods.
6.5 Manner of Exercise. An Option may be exercised by a Participant
in whole or in part from time to time, subject to the conditions contained
in the Plan and in the agreement evidencing such Option, by delivery in
person, by facsimile or electronic transmission or through the mail of
written notice of exercise to the Company, Attention: Corporate Treasury,
at its principal executive office in Minneapolis, Minnesota and by paying
in full the total exercise price for the shares of Common Stock to be
purchased in accordance with Section 6.4 of the Plan.
6.6 Options or Stock in Lieu of Bonus. Without limiting in any way
the authority of the Committee to establish the terms and conditions of
Options or other Incentive Awards, the Committee may allow Eligible
Recipients to elect to receive some or all of their annual cash bonus in
the form of Non-Statutory Stock Options or shares of Common Stock rather
than cash. The Committee will have the sole authority to determine whether
to allow such an election and to establish the terms and conditions to such
an election, which terms and conditions will be set forth in the agreement
evidencing such Options or Incentive Awards.
7. Stock Appreciation Rights.
7.1 Grant. An Eligible Recipient may be granted one or more Stock
Appreciation Rights under the Plan, and such Stock Appreciation Rights will
be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole
discretion.
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7.2 Exercise Price. The exercise price of a Stock Appreciation Right
will be determined by the Committee, in its discretion, at the date of
grant but will not be less than 100% of the Fair Market Value of one share
of Common Stock on the date of grant.
7.3 Exercisability and Duration. A Stock Appreciation Right will
become exercisable at such times and in such installments as may be
determined by the Committee in its sole discretion at the time of grant;
provided, however, that no Stock Appreciation Right may be exercisable
prior to six months (other than as provided in Section 10 of the Plan) or
after 10 years from its date of grant. Unless the Committee determines
otherwise, a Stock Appreciation Right granted under the Plan will be
exercisable for 10 years from its date of grant and will become exercisable
on a cumulative basis with respect to one-third of the shares subject to
such Stock Appreciation Right on each January 1 following its date of grant
(or, if later, six months following its date of grant with respect to the
initial one-third installment). A Stock Appreciation Right will be
exercised by giving notice in the same manner as for Options, as set forth
in Section 6.5 of the Plan.
8. Restricted Stock Awards.
8.1 Grant. An Eligible Recipient may be granted one or more
Restricted Stock Awards under the Plan, and such Restricted Stock Awards
will be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole
discretion. The Committee may impose such restrictions or conditions, not
inconsistent with the provisions of the Plan, to the vesting of such
Restricted Stock Awards as it deems appropriate, including, without
limitation, that the Participant remain in the continuous employ or service
of the Company or a Subsidiary for a certain period, that the Participant
or the Company (or any Subsidiary or division thereof) satisfy certain
performance goals or criteria; provided, however, that other than as
provided in Section 10 of the Plan, no Restricted Stock Award may vest
prior to six months from its date of grant.
8.2 Rights as a Stockholder; Transferability. Except as provided in
Sections 8.1, 8.3 and 13.3 of the Plan, a Participant will have all voting,
dividend, liquidation and other rights with respect to shares of Common
Stock issued to the Participant as a Restricted Stock Award under this
Section 8 upon the Participant becoming the holder of record of such shares
as if such Participant were a holder of record of shares of unrestricted
Common Stock.
8.3 Dividends and Distributions. Unless the Committee determines
otherwise in its sole discretion (either in the agreement evidencing the
Restricted Stock Award at the time of grant or at any time after the grant
of the Restricted Stock Award), any dividends or distributions (including
regular quarterly cash dividends) paid with respect to shares of Common
Stock subject to the unvested portion of a Restricted Stock Award will not
be subject to the same restrictions as the shares to which such dividends
or distributions relate and will be currently paid to the Participant. In
the event the Committee determines not to pay such dividends or
distributions currently, the Committee will determine in its sole
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discretion whether any interest will be paid on such dividends or
distributions. In addition, the Committee, in its sole discretion, may
require such dividends and distributions to be reinvested (and in such case
the Participants consent to such reinvestment) in shares of Common Stock
that will be subject to the same restrictions as the shares to which such
dividends or distributions relate.
8.4 Enforcement of Restrictions. To enforce the restrictions referred
to in this Section 8, the Committee may place a legend on the stock
certificates referring to such restrictions and may require Participants,
until the restrictions have lapsed, to keep the stock certificates,
together with duly endorsed stock powers, in the custody of the Company or
its transfer agent or to maintain evidence of stock ownership, together
with duly endorsed stock powers, in a certificateless book-entry stock
account with the Company's transfer agent for its Common Stock.
9. Performance Units.
An Eligible Recipient may be granted one or more Performance Units under
the Plan, and such Performance Units will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may
impose such restrictions or conditions, not inconsistent with the
provisions of the Plan, to the vesting of such Performance Units as it
deems appropriate, including, without limitation, that the Participant
remain in the continuous employ or service of the Company or any Subsidiary
for a certain period or that the Participant or the Company (or any
Subsidiary or division thereof) satisfy certain performance goals or
criteria. The Committee will have the sole discretion either to determine
the form in which payment of the economic value of vested Performance Units
will be made to the Participant (i.e., cash, Common Stock or any
combination thereof) or to consent to or disapprove the election by the
Participant of the form of such payment.
10. Effect of Termination of Employment or Other Service.
10.1 Termination Due to Death or Disability. In the event a
Participant's employment or other service with the Company and all
Subsidiaries is terminated by reason of death or Disability:
(a) All outstanding Options then held by the Participant will
become immediately exercisable in full and will remain exercisable for the
remainder of their terms;
(b) All Restricted Stock Awards then held by the Participant
that have not vested as of such termination will be terminated and
forfeited; and [Amended as of 10/21/94]
(c) All Performance Units and Stock Appreciation Rights then
held by the Participant will vest and/or continue to vest and, with respect
to Stock Appreciation Rights, will remain exercisable in the manner
determined by the Committee and set forth in the agreement evidencing such
Incentive Awards.
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10.2 Termination Due to Retirement. Except as otherwise provided in
Section 12 of the Plan, in the event a Participant's employment or other
service with the Company and all Subsidiaries is terminated by reason of
Retirement:
(a) All outstanding Options then held by the Participant will
continue to become exercisable in accordance with their terms;
All Restricted Stock Awards then held by the Participant
(b)
that have not vested as of such termination will be terminated and
forfeited; and
(c) All Performance Units and Stock Appreciation Rights then
held by the Participant will vest and/or continue to vest and, with respect
to Stock Appreciation Rights, will remain exercisable in the manner
determined by the Committee and set forth in the agreement evidencing such
Incentive Awards.
10.3 Termination for Reasons Other than Death, Disability or
Retirement.
(a) Except as otherwise provided in Section 12 of the Plan, in
the event a Participant's employment or other service is terminated with
the Company and all Subsidiaries for any reason other than death,
Disability or Retirement, or a Participant is in the employ or service of a
Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company
(unless the Participant continues in the employ or service of the Company
or another Subsidiary), all rights of the Participant under the Plan and
any agreements evidencing an Incentive Award will immediately terminate
without notice of any kind, no Options or Stock Appreciation Rights then
held by the Participant will thereafter be exercisable and all Restricted
Stock Awards then held by the Participant that have not vested will be
terminated and forfeited; provided, however, that if such termination is
due to any reason other than termination by the Company or any Subsidiary
for "cause," all outstanding Options then held by such Participant will
remain exercisable to the extent exercisable as of such termination for a
period of three months after such termination (but in no event after the
expiration date of any such Option) and all Performance Units and Stock
Appreciation Rights will vest and/or continue to vest and, with respect to
Stock Appreciation Rights, will remain exercisable in the manner determined
by the Committee and set forth in the agreement evidencing such Incentive
Awards.
(b) For purposes of this Section 10.3, "cause" will be as
defined in any employment or other agreement or policy applicable to the
Participant or, if no such agreement or policy exists, will mean (i)
dishonesty, fraud, misrepresentation, embezzlement or material and
deliberate injury or attempted injury, in each case related to the Company
or any Subsidiary, (ii) any unlawful or criminal activity of a serious
nature, (iii) any willful breach of duty, habitual neglect of duty or
unreasonable job performance, or (iv) any material breach of any
employment, service, confidentiality or noncompete agreement entered into
with the Company or any Subsidiary.
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10.4 Modification of Rights Upon Termination. Notwithstanding the
other provisions of this Section 10, upon a Participant's termination of
employment or other service with the Company and all Subsidiaries, the
Committee may, in its sole discretion (which may be exercised before or
following such termination), cause Options or Stock Appreciation Rights (or
any part thereof) then held by such Participant to become exercisable
and/or remain exercisable following such termination of employment or
service and Restricted Stock Awards and Performance Units then held by such
Participant to vest and/or continue to vest following such termination of
employment or service, in each case in the manner determined by the
Committee.
10.5 Date of Termination of Employment or Other Service. Unless
the Committee otherwise determines in its sole discretion, a Participant's
employment or other service will, for purposes of the Plan, be deemed to
have terminated on the date recorded on the personnel or other records of
the Company or the Subsidiary for which the Participant provides employment
or other service, as determined by the Committee in its sole discretion
based upon such records.
11. Payment of Withholding Taxes.
11.1 General Rules. The Company is entitled to (a) withhold and deduct
from future wages of the Participant (or from other amounts which may be
due and owing to the Participant from the Company or a Subsidiary), or make
other arrangements for the collection of, all legally required amounts
necessary to satisfy any and all federal, state and local withholding and
employment-related tax requirements attributable to an Incentive Award,
including, without limitation, the grant, exercise or vesting of, or
payment of dividends with respect to, an Incentive Award or a disqualifying
disposition of stock received upon exercise of an Incentive Stock Option,
or (b) require the Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an
Incentive Award.
11.2 Special Rules. The Committee may, in its sole discretion and upon
terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or employment-
related tax obligation described in Section 11.1 of the Plan by electing to
tender Previously Acquired Shares, a Broker Exercise Notice or a
combination of such methods.
12. Change of Control.
12.1 Definitions. For purposes of this Section 12, the following
definitions will be applied:
(a) "Change of Control" will mean any of the following events:
(i) a merger or consolidation to which the Company is a
party if the individuals and entities who were stockholders of the Company
immediately prior to the effective date of such merger or consolidation
have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
of less than 50% of the total combined voting power for election of
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directors of the surviving corporation following the effective date of such
merger or consolidation;
(ii) the direct or indirect beneficial ownership (as defined
in Rule 13d-3 under the Exchange Act) in the aggregate of securities of the
Company representing 25% or more of the total combined voting power of the
Company's then issued and outstanding securities by any person or entity,
or group of associated person or entities acting in concert; [Amended as
of 10/21/94]
(iii) the sale of the properties and assets of the Company
substantially as an entirety, to any person or entity which is not a
wholly-owned subsidiary of the Company;
(iv) the stockholders of the Company approve any plan or
proposal for the liquidation of the Company; or
(v) a change in the composition of the Board at any time
during any consecutive 24 month period such that the "Continuity Directors"
cease for any reason to constitute at least a 70% majority of the Board.
For purposes of this clause, ""Continuity Directors" means those members
of the Board who either (1) were directors at the beginning of such
consecutive 24 month period, or (2) were elected by, or on the nomination
or recommendation of, at least a two-thirds majority of the then-existing
Board of Directors.
(b) "Change of Control Action" will mean any payment
(including any benefit or transfer of property) in the nature of
compensation, to or for the benefit of a Participant under any
arrangement, which is considered to be contingent on a Change of Control
for purposes of Section 280G of the Code. As used in this definition,
the term "arrangement" includes, without limitation, any agreement
between a Participant and the Company and any and all of the Company's
salary, bonus, incentive, restricted stock, stock option, compensation
or benefit plans, programs or arrangements, and will include this Plan.
(c) "Change of Control Termination" will mean, with respect
to a Participant, any of the following events occurring within two years
after a Change of Control:
(i) Termination of the Participant's employment with the
Company and all of its Subsidiaries by the Company or any Subsidiary for
any reason, with or without cause, except for conduct by the Participant
constituting (1) a felony involving moral turpitude under either federal
law or the law of the state of the Company's incorporation or (2) the
Participant's willful failure to fulfill his employment duties with the
Company or any Subsidiary; provided that for purposes of this clause
(2), an act or failure to act by the Participant shall not be "willful"
unless done, or omitted to be done, in bad faith and without reasonable
belief that the Participant's action or omission was in the best
interests of the Company or a Subsidiary; or
(ii) Termination of employment with the Company and all
of its Subsidiaries by the Participant for Good Reason. A Change of
11
<PAGE>
Control Termination shall not include a termination of employment by
reason of death, Disability or Retirement. [Amended as of 10/21/94]
(d) "Good Reason" will mean a good faith determination by the
Participant, in the Participant's sole and absolute judgment, that any
one or more of the following events has occurred, without the
Participant's express written consent, after a Change of Control:
(i) A change in the Participant's reporting
responsibilities, titles or offices as in effect immediately prior to
the Change of Control, or any removal of the Participant from, or any
failure to re-elect the Participant to, any of such positions, which has
the effect of diminishing the Participant's responsibility or authority;
or
(ii) A reduction by the Company or its Subsidiaries in
the Participant's base salary as in effect immediately prior to the
Change of Control or as the same may be increased from time to time
thereafter; or
(iii) The Company or its Subsidiaries requiring the
Participant to be based anywhere other than within twenty-five miles of
the Participant's job location at the time of the Change of Control; or
(iv) Without replacement by a plan, program or
arrangement providing benefits to the Participant equal to or greater
than those discontinued or adversely affected:
(1) the failure by the Company or its Subsidiaries
to continue in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life insurance,
health, accident, disability, or any other employee compensation or
benefit plan, program or arrangement, in which the Participant is
participating immediately prior to a Change of Control; or
(2) the taking of any action by the Company or its
Subsidiaries that would adversely affect the Participant's participation
or materially reduce the Participant's benefits under any of such plans,
programs or arrangements; or
(v) The taking of any action by the Company or its
Subsidiaries that would materially adversely affect the physical
conditions existing at the time of the Change of Control in or under
which the Participant performs his employment duties; or
(vi) If the Participant's primary employment duties are
with a Subsidiary of the Company, the sale, merger, contribution,
transfer or any other transaction as a result of which the Company no
longer directly or indirectly controls or has a significant equity
interest in such Subsidiary; or
(vii) Any material breach by the Company or one of
its Subsidiaries of any employment agreement between the Participant and
the Company or such Subsidiary. [Amended as of 10/21/94]
12
<PAGE>
12.2 Acceleration of Vesting. Subject to the "Limitation on Change
of Control Compensation" contained in Section 12.3 of the Plan, in the
event of a Change of Control Termination with respect to a Participant,
and without further action of the Committee:
(a) Each Option granted to such Participant that has been
outstanding at least six months will become immediately exercisable in
full and will remain exercisable until the expiration date of such
Option.
(b) Each Restricted Stock Award granted to such Participan
that has been outstanding for at least six months will immediately
become fully vested.
(c) All Performance Units and Stock Appreciation Rights then
held by such Participant will vest and/or continue to vest and, with
respect to Stock Appreciation Rights, will remain exercisable in the
manner determined by the Committee and set forth in the agreement
evidencing such Incentive Awards. [Amended as of 10/21/94]
12.3 Limitation on Change of Control Compensation. A Participant
will not be entitled to receive any Change of Control Action which
would, with respect to the Participant, constitute a "parachute payment"
for purposes of Section 280G of the Code. In the event any Change of
Control Action would, with respect to the Participant, constitute a
"parachute payment," the Participant will have the right to designate
those Change of Control Action(s) which would be reduced or eliminated
so that the Participant will not receive a "parachute payment."
12.4 Limitations on Committee's and Board's Actions. Prior to a Change
of Control, the Participant will have no rights under this Section 12, and
the Board will have the power and right, within its sole discretion to
rescind, modify or amend this Section 12 without the consent of any
Participant. In all other cases, and notwithstanding the authority granted
to the Committee or Board to exercise discretion in interpreting,
administering, amending or terminating this Plan, neither the Committee nor
the Board will, following a Change of Control, have the power to exercise
such authority or otherwise take any action that is inconsistent with the
provisions of this Section 12.
13. Rights of Eligible Recipients and Participants; Transferability.
13.1 Employment or Service. Nothing in the Plan will interfere with or
limit in any way the right of the Company or any Subsidiary to terminate
the employment or service of any Eligible Recipient or Participant at any
time, nor confer upon any Eligible Recipient or Participant any right to
continue in the employ or service of the Company or any Subsidiary.
13.2 Rights as a Stockholder. As a holder of Incentive Awards
(other than Restricted Stock Awards), a Participant will have no rights as
a stockholder unless and until such Incentive Awards are exercised for, or
paid in the form of, shares of Common Stock and the Participant becomes the
holder of record of such shares. Except as otherwise provided in the Plan,
13
<PAGE>
no adjustment will be made for dividends or distributions with respect to
such Incentive Awards as to which there is a record date preceding the date
the Participant becomes the holder of record of such shares, except as the
Committee may determine in its discretion.
13.3 Restrictions on Transfer. Except pursuant to testamentary will or
the laws of descent and distribution or as otherwise expressly permitted by
the Plan, no right or interest of any Participant in an Incentive Award
prior to the exercise or vesting of such Incentive Award will be assignable
or transferable, or subjected to any lien, during the lifetime of the
Participant, either voluntarily or involuntarily, directly or indirectly,
by operation of law or otherwise. A Participant will, however, be entitled
to designate a beneficiary to receive an Incentive Award upon such
Participant's death, and in the event of a Participant's death, payment of
any amounts due under the Plan will be made to, and exercise of any Options
and Stock Appreciation Rights (to the extent permitted pursuant to Section
10 of the Plan) may be made by, the Participant's legal representatives,
heirs and legatees.
13.4 Non-Exclusivity of the Plan. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation plans or
programs of the Company or create any limitations on the power or authority
of the Board to adopt such additional or other compensation arrangements as
the Board may deem necessary or desirable.
14. Securities Law and Other Restrictions.
Notwithstanding any other provision of the Plan or any agreements entered
into pursuant to the Plan, the Company will not be required to issue any
shares of Common Stock under this Plan, and a Participant may not sell,
assign, transfer or otherwise dispose of shares of Common Stock issued
pursuant to Incentive Awards granted under the Plan, unless (a) there is in
effect with respect to such shares a registration statement under the
Securities Act and any applicable state securities laws or an exemption
from such registration under the Securities Act and applicable state
securities laws, and (b) there has been obtained any other consent,
approval or permit from any other regulatory body which the Committee, in
its sole discretion, deems necessary or advisable. The Company may
condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement
of any legends on certificates representing shares of Common Stock, as may
be deemed necessary or advisable by the Company in order to comply with
such securities law or other restrictions.
15. Plan Amendment, Modification and Termination.
The Board may suspend or terminate the Plan or any portion thereof at any
time, and may amend the Plan from time to time in such respects as the
Board may deem advisable in order that Incentive Awards under the Plan will
conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company;
provided, however, that no amendments to the Plan will be effective without
approval of the stockholders of the Company if stockholder approval of the
amendment is then required pursuant to Rule 16b-3 under the Exchange Act,
14
<PAGE>
Section 422 of the Code or the rules of the New York Stock Exchange. No
termination, suspension or amendment of the Plan may adversely affect any
outstanding Incentive Award without the consent of the affected
Participant; provided, however, that this sentence will not impair the
right of the Committee to take whatever action it deems appropriate under
Section 4.3 and Section 12.4 of the Plan.
16. Effective Date and Duration of the Plan.
The Plan is effective as of February 3, 1993, the date it was adopted by
the Board. The Plan will terminate at midnight on February 3, 1996, and
may be terminated prior thereto by Board action, and no Incentive Award
will be granted after such termination. Incentive Awards outstanding upon
termination of the Plan may continue to vest, or become free of
restrictions, in accordance with their terms.
17. Miscellaneous.
17.1 Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and
actions relating to the Plan will be governed by and construed exclusively
in accordance with the laws of the State of Minnesota.
17.2 Successors and Assigns. The Plan will be binding upon and inure
to the benefit of the successors and permitted assigns of the Company and
15
<PAGE>
EXHIBIT 10.12
Amended as of October 21, 1994
CERIDIAN CORPORATION
1990 LONG-TERM INCENTIVE PLAN
(1992 RESTATEMENT)
ARTICLE I - INTRODUCTION
1.01 Purpose. The purpose of the 1990 Long-Term Incentive Plan
(the Plan) is to advance the interests of Ceridian
Corporation and its stockholders by affording officers and
other key employees of the Corporation and its Subsidiaries,
upon whose judgment, initiative and efforts the Company is
largely dependent for the successful conduct of its
business, a proprietary interest in the growth and
performance of the Corporation.
ARTICLE II - DEFINITIONS
2.01 "Award" means the grant of any form of Stock Option,
Restricted Stock Award, or any number of Business
Performance Units, whether granted singly, in combination or
in tandem, to a Plan Participant pursuant to the Plan on
such terms, conditions and limitations as the Committee may
establish in order to fulfill the objectives of the Plan.
2.02 "Award Agreement" means the agreement between the Company
and a Participant that sets forth the terms, conditions and
limitations applicable to the Award.
2.03 "Board" means, at any particular time, the then duly elected
and acting directors of the Corporation.
2.04 "Business Performance Unit" means a unit having a cash
equivalent value determined on the basis of achievement by
the Company, a specified Subsidiary, or a specified
operating unit within the Company of economic business
objectives which shall be set forth in the terms of an Award
Agreement and which shall not be related to any equity
security of the Corporation.
2.05 "Committee" means the Compensation and Executive Personnel
Committee of the Board (or any successor to such Committee),
a Committee consisting solely of not less than three
directors who are "disinterested persons" as defined in Rule
16b-3 of the Securities and Exchange Commission, as amended
from time to time.
1
<PAGE>
2.06 "Company" means the Corporation and its Subsidiaries.
2.07 "Corporation" means Ceridian Corporation, a Delaware
corporation, and any successor in interest by way of
consolidation, operation of law, merger or otherwise.
2.08 "Date of Grant" means the date an Award is approved by
resolution of the Committee, or such later date as may be
specified in such resolution.
2.09 "Disability" means a condition of the Participant, resulting
from illness, injury or disease, which, as determined by the
Committee, causes the Participant to be unable to perform
the normal duties of his employment with the Company and is
reasonably expected to be of long and indefinite duration or
result in death.
2.10 "Eligible Employee" means an employee of the Company who
holds a position of responsibility and whose judgment,
initiative and efforts, upon recommendation by the
management of the Company, in the judgment of the Committee,
has contributed or can significantly contribute to the
success of the Company.
2.11 "Employment Termination Date" means the last day of full
time active employment, provided that a Participant shall
not be deemed to have terminated employment for any period
during which he or she is on an approved disability leave of
absence unless during such disability leave of absence the
business unit or subsidiary in which the Participant was
employed at the time the disability leave of absence
commenced is divested, its operations are discontinued or it
otherwise ceases to be covered by the Plan; and provided
further that the Committee may, in its sole discretion,
determine that a Participant has not terminated employment
for purposes of the Plan for any period during which he or
she is on any other type of approved leave.
2.12 "Fair Market Value" means, with respect to shares of Stock
on any particular date, the closing market price per share
of the Stock as reported by the consolidated tape of the New
York Stock Exchange (or such other stock exchange on which
the Stock may subsequently be listed) on that date. If
there are no transactions on such date, the Fair Market
Value shall be determined as of the immediately preceding
date on which there were Stock transactions.
2.13 "Participant" means an Eligible Employee to whom an Award
has been made under the Plan.
2.14 "Performance Goal" means with respect to a Business
Performance Unit Award, a specified initial or cumulative
economic business objective not related to any equity
security of the corporation, the satisfaction of which shall
2
be a condition precedent to the vesting of all or a portion
of that Business Performance Unit Award.
2.15 "Performance Period" means with respect to a Business
Performance Unit Award, the designated period set forth in
an Award Agreement over which the Business Performance Units
may vest.
2.16 "Plan" means the Ceridian Corporation Long-Term Incentive
Plan, as set forth herein, as the same may be from time to
time amended.
2.17 "Restricted Stock Award" means shares of Stock awarded to a
Participant under Article VII of this Plan.
2.18 "Retirement" with respect to a Participant, means the
Participant's termination of employment on or after the date
on which the Participant has attained the age of fifty-five
(55 ).
2.19 "Section 16(b) Participant" means a Participant who is
subject to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "1934 Act").
2.20 "Stock" means the Corporation's Common Stock, par value
$0.50 per share and any Preferred Stock Purchase rights
attached thereto.
2.21 "Stock Option Award" means a non-qualified stock option
awarded to a Participant under Article VI of this Plan.
2.22 "Subsidiary" means any corporation at least a majority of
whose securities having ordinary voting power for the
election of directors (other than securities having such
power only by reason of the occurrence of a contingency) is
at the time owned by the Corporation and/or one or more
Subsidiaries.
2.23 "Year" means a calendar year.
ARTICLE III - ADMINISTRATION
3.01 Administration. Except for those matters expressly reserved
to the Board pursuant to any provisions of the Plan, the
Committee shall have full responsibility for administration
of the Plan, which responsibility shall include, but shall
not be limited to the following:
(a) The Committee shall review and approve any and all
Awards to be made to Eligible Employees recommended by
management of the Company in accordance with and
subject to the provisions of the Plan;
3
(b) The Committee shall, subject to the provisions of the
Plan, establish, adopt and revise such rules and
procedures relating to the Plan as it may deem
necessary or advisable for the administration of the
Plan;
(c) The Committee shall determine the terms of Awards;
provided that management of the Company shall establish
both the Performance Goals and the formula for
valuation of Business Performance Units in connection
with Business Performance Unit Awards.
(d) The Committee shall have the exclusive authority to
interpret the provisions of the Plan, and each such
interpretation or determination shall be conclusive and
binding for all purposes and on all persons, including,
without limitation, the Company, the stockholders of
the Company, the Committee and each of the members
thereof, the directors, officers and employees of the
Company, and the Participants and the respective
successors-in-interest of all of the foregoing.
(e) The Committee shall keep minutes of its meetings
regarding the Plan and shall provide copies to the
Board.
ARTICLE IV - STOCK SUBJECT TO PLAN
4.01 Number. The total number of shares of Stock available for
grants to Participants directly or indirectly under all
forms of Awards under the Plan shall not exceed two million
five hundred thousand (2,500,000), except to the extent
adjustments are made pursuant to Section 4.03 of the Plan.
Shares of Stock to be awarded may be either treasury or
authorized but unissued shares.
4.02 Unused Shares. All or any shares subject to a Restricted
Stock Award or a Stock Option Award which for any reason
expires or otherwise terminates may again be made subject to
a Restricted Stock Award or Stock Option Award under the
Plan.
4.03 Capital Adjustments. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination
of shares, rights offering, or
extraordinary dividend or divestiture (including a
spin-off), or any other change in the corporate
structure or shares of the Corporation, the
Board (or, if the Corporation is not the surviving
corporation in any such transaction, the board
of directors of the surviving corporation) shall
make adjustments, determined by the Board in its
discretion to be appropriate, as to the number
4
and kind of securities subject to and reserved
under the Plan and, in order to prevent dilution
or enlargement of rights of Participants, the
number, kind and, where applicable, the option
exercise price, of securities subject to outstanding
Awards.
Notwithstanding the foregoing, and subject to Section 9.04
of Article IX, the Board, in its discretion, may determine
that in connection with any such reorganization, merger or
consolidation in which the Corporation is not the surviving
corporation, either or any of the following shall occur:
(a) subject to Section 6.03(c), all outstanding Stock
Options shall be exercisable in full during the thirty
calendar days preceding the effective date of such
reorganization, merger or consolidation and shall then
terminate and be cancelled as of such effective date;
(b) Participants, other than Section 16(b) Participants,
holding outstanding unexercised Stock Options shall
receive, with respect to each share of Stock subject to
such options, as of the effective date of any such
reorganization, merger or consolidation, cash in an
amount equal to the excess of the Fair Market Value of
such shares on the day immediately preceding the
effective date of such reorganization, merger or
consolidation over the exercise price per share of such
options.
4.04 Limit on Individual Restricted Stock Awards.
Notwithstanding any other provision of the Plan, the total
number of shares which may be awarded to a Participant under
one or more Restricted Stock Awards pursuant to the Plan
shall not exceed three percent (3%) of the total number of
shares of Stock initially available for award under the
Plan.
ARTICLE V - PARTICIPATION
5.01 Participants. Participants in the Plan shall be those
Eligible Employees who, in the judgment of the Committee,
following recommendation by management of the Company, have
performed, are performing, or during the period of their
Award will perform, vital services in the management,
operation and development of the Company, and have
significantly contributed or are significantly contributing
or are expected to significantly contribute to the
achievement of long-term corporate objectives. Participants
may be granted from time to time one or more Restricted
Stock, Business Performance Unit, or Stock Option Awards;
provided, however, that the grant of each Award shall be
separately approved by the Committee, and receipt of one
such Award shall not result in automatic receipt of any
5
other Award. Upon determination by the Committee that an
Award is to be granted to a Participant, an Award Agreement
shall be given to such person, specifying the terms,
conditions, rights and duties related thereto.
ARTICLE VI - STOCK OPTIONS
6.01 Grant of Stock Options. In accordance with the provisions
of the Plan, the Committee shall approve following
recommendation by the management of the Company, the
Eligible Employees to whom Stock Option Awards shall be
granted, shall determine the number of shares to be subject
to each Award, the time at which the Award is to be granted,
whether the Award shall be granted in exchange for the
cancellation and termination of a previously granted Stock
Option Award under the Plan or otherwise, the Stock Option
exercise price, the Stock Option exercise period and the
manner in which the Stock Option becomes exercisable, and
shall fix such other provisions of the Stock Option Award as
the Committee may deem necessary or desirable, all of which
shall be subject to the provisions of Section 6.03. The
number, terms and conditions of Stock Option Awards granted
to various Participants need not be uniform. The Committee
shall determine the form of Award Agreement to evidence each
Stock Option Award. Each Participant shall enter into an
Award Agreement with the Company with respect to the grant
of each Stock Option Award.
6.02 Option Price. The per share Stock Option exercise price to
be paid by Participants shall be not less than 100 percent
of the Fair Market Value of the optioned Stock on the date
the Stock Option Award is granted.
6.03 Duration and Exercise of Options.
(a) The Stock Option exercise period shall be fixed by the
Committee but in no event shall be more than ten years
from the date the Stock Option Award is granted. Stock
Options shall become exercisable at such times and in
such installments (which may be cumulative) as shall be
determined by the Committee, in its discretion, at the
Date of Grant and shall be set forth in the Award
Agreement, provided that, no Stock Option may be
exercised prior to the date of approval of the Plan by
the stockholders of the Corporation; and provided
further that, unless otherwise determined by the
Committee:
(1) Except as otherwise provided in Section 6.03(c),
upon the date of approval of the Plan by the
stockholders, any Stock Option awarded prior to
such approval date shall become exercisable with
respect to one-sixth of the total shares subject
to the Stock Option Award;
6
(2) Except as otherwise provided in Section 6.03(c),
upon the January 1 following the Date of Grant of
any Stock Option Award, the Stock Option shall
become exercisable with respect to a total of one-
third of the total shares subject to the Stock
Option Award (an additional one-sixth of the total
shares subject to the Award with respect to any
Award granted prior to approval of the Plan by the
stockholders);
(3) Upon each succeeding January 1, the Stock Option
shall become exercisable with respect to an
additional one-third of the total shares subject
to the Stock Option.
(b) Notwithstanding the foregoing, the Committee may
accelerate the time of exercise of any Stock Option in
such cases as the Committee in its discretion may deem
advisable
. (c) Notwithstanding Section 4.03(a), 9.02(a) or any other
provision of this Article VI, in no case shall a Stock
Option awarded to a Section 16(b) Participant be
exercisable prior to the expiration of six months after
the Date of Grant, except in the case of death or
Disability.
(d) If stockholder approval of the Plan is not obtained at
the Corporation's first annual meeting of stockholders
following adoption of the Plan by the Board, any Stock
Option Awards previously granted shall be revoked.
6.04 Manner of Option Exercise. A Stock Option may be exercised
by a Participant in whole or in part from time to time,
subject to the conditions contained herein and in the Award
Agreement, by delivering to the office of the Treasurer of
the Corporation written notice of the number of shares with
respect to which the Stock Option is being exercised and by
paying the purchase price for the shares purchased in full.
The exercise of the Stock Option shall be deemed effective
upon receipt of such notice by the Corporation's Treasurer
or such alternative individual as the Treasurer shall
designate in writing, and payment complying with the terms
of the Plan and the Award Agreement. As soon as practicable
after the effective exercise of the Stock Option, the
Participant shall be recorded on the stock transfer books of
the Corporation as the owner of the shares purchased and the
Corporation shall deliver to the Participant one or more
duly issued stock certificates evidencing such ownership.
6.05 Payment of Option Price. In the case of all Stock Option
exercises, the purchase price shall be paid in cash;
provided that the Committee may, in its discretion and
7
subject to any applicable rule or regulation adopted by the
Committee, allow such payments to be made, in whole or in
part by transfer from the Participant to the Corporation of
previously acquired shares of Stock. The Stock so
transferred shall be valued at the Fair Market Value on the
day immediately preceding the effective date of exercise.
For purposes of this Section 6.05, "previously acquired
shares" shall include shares of Stock that are already owned
by the Participant at the time of exercise and shall not
include shares of Stock that are to be acquired pursuant to
the exercise of the Stock Option concerned. No Stock Option
shall be exercisable except in respect of whole shares.
6.06 Rights as a Stockholder. The Participant shall have no
rights as a stockholder with respect to any shares of Stock
covered by a Stock Option Award until the Participant shall
have become the holder of record of such shares, and except
as provided in Section 4.03, no adjustments shall be made
for dividends or other distributions or other rights as to
which there is a record date preceding the date the
Participant becomes the holder of record of such shares.
ARTICLE VII - RESTRICTED STOCK AWARDS
7.01 Grant of Restricted Stock Awards. In accordance with the
provisions of the Plan, the Committee shall approve
following recommendation by the management of the Company,
the Eligible Employees to whom Restricted Stock Awards shall
be granted, shall determine the number of shares to be
subject to each Restricted Stock Award, the time at which
the Restricted Stock Award is to be granted, the manner in
which restrictions on the transferability of shares of Stock
represented by the Award will lapse, and subject to the
provisions of Section 7.03, shall fix such other provisions
of the Restricted Stock Award as the Committee may deem
necessary or desirable. The number, terms and conditions of
Restricted Stock Awards granted to various Participants need
not be uniform. The Committee shall determine the form of
Award Agreement to evidence each Restricted Stock Award.
Each participant shall enter into an Award Agreement with
the Company with respect to the grant of each Restricted
Stock Award.
7.02 Restrictions on Transfer. The shares of Stock awarded
pursuant to a Restricted Stock Award shall be subject to the
following restrictions:
(a) No such share may be sold, transferred, assigned,
pledged, encumbered or otherwise alienated or
hypothecated unless, and until the Plan shall have been
approved by the stockholders of the Corporation. In
the event stockholder approval of the Plan is not
obtained at the Corporation's first annual meeting of
stockholders following adoption of the Plan by the
8
Board, any Awards previously granted shall be revoked
and the shares of Stock awarded pursuant thereto shall
be forfeited to the Corporation.
(b) No such share may be sold, transferred, assigned,
pledged, encumbered or otherwise alienated or
hypothecated unless, until and then only to the extent
that restrictions shall have lapsed in accordance with
the Plan and the Award Agreement.
(c) No shares awarded under a Restricted Stock Award which
remain subject to the restrictions of Subsections (a)
or (b) of this Section 7.02 shall be evidenced by stock
certificates. Until such time as these restrictions
lapse, ownership of such shares shall be evidenced by
means of a book entry in the name of the applicable
Participant in the stock ledger of the Corporation.
Upon written notification to the Registrar by the
Corporation of the lapsing of restrictions with respect
to all or part of the shares under a Participant's
Restricted Stock Award, a Stock certificate evidencing
such unrestricted shares shall be issued in the name of
the Participant.
7.03 Lapsing of Restrictions. The Committee shall determine,
with respect to each Restricted Stock Award, the times and
extent to which restrictions on the transferability of
shares under a Restricted Stock Award shall lapse, which
schedule shall be set forth in the Award Agreement, provided
that, unless otherwise determined by the Committee,
restrictions will lapse during the period of a Participant's
employment with the Company in accordance with the following
schedule:
(a) except as otherwise provided in Subsection (c) of this
Section 7.03, restrictions on twenty-five percent of
the total number of shares under the Award shall lapse
on the January 1 immediately following the Date of
Grant;
(b) restrictions on twenty-five percent of the total number
of shares under the Award shall lapse on each
succeeding January 1 thereafter.
(c) notwithstanding any other provision of this Article
VII, restrictions on the transferability of shares
awarded to a Section 16(b) Participant shall not lapse
prior to the expiration of six months after the
effective date of the Restricted Stock Award, except in
the case of death or Disability.
7.04 Modification of Lapsing Schedule. Subject to the provisions
of Section 7.03(c), the Committee may, in its sole
discretion, modify the rate at which restrictions on
9
transferability of shares under a Restricted Stock Award
shall lapse. Any such modification shall apply only to
those shares of Stock which are restricted as of the
effective date of the modification, and shall be reflected
in a resolution adopted by the Committee and, if deemed
appropriate by the Committee, in an amendment to any Award
Agreement with respect to which it applies.
ARTICLE VIII - BUSINESS PERFORMANCE UNITS
8.01 Grant of Business Performance Units. In accordance with the
provisions of the Plan, the Committee shall: (i) approve,
following recommendation by the management of the Company,
the Eligible Employees to whom Business Performance Unit
Awards shall be granted, (ii) determine the number of
Business Performance Units to be subject to each Award and
the time at which the Business Performance Unit Award is to
be granted, and (iii) fix such other provisions of the
Business Performance Unit Award as the Committee may deem
necessary or desirable. The number, terms and conditions of
Business Performance Unit Awards granted to various
Participants need not be uniform. The Committee shall
determine the form of Award Agreement to evidence each
Business Performance Unit Award. Each participant shall
enter into an Award Agreement with the Company with respect
to the grant of each Business Performance Unit Award.
8.02 Vesting of Business Performance Units. Each Business
Performance Unit Award Agreement shall set forth:
(a) the Performance Period over which Business Performance
Units may vest;
(b) the initial and cumulative Performance Goals which must
be satisfied prior to vesting of any portion of the
Business Performance Units represented by the Award;
(c) the vesting schedule with respect to the Business
Performance Units, which, unless otherwise determined
by the Committee, shall be as follows:
(i) upon the completion of the first full calendar
year of the Performance Period and the attainment
of the initial threshold Performance Goal, twenty-
five percent (25%) of the total number of Business
Performance Units comprising the Participant's
Award shall vest and become immediately payable to
the Participant in accordance with Sections 8.03
and 8.04. In the event such initial Performance
Goal is not satisfied, said number of Business
Performance Units awarded shall be immediately
forfeited and henceforth no longer eligible for
vesting and payment to the Participant.
10
(ii) upon completion of the second full calendar year
of the Performance Period and attainment of the
cumulative threshold Performance Goal for that two
year period, twenty-five percent (25%) of the
total number of Business Performance Units
comprising the Participant's Award shall vest and
become immediately payable to the Participant in
accordance with Sections 8.03 and 8.04. In the
event such cumulative Performance Goal is not
satisfied, said number of Business Performance
Units awarded shall be immediately forfeited and
henceforth no longer eligible for vesting and
payment to the Participant.
(iii)upon completion of the third full calendar year of
the Performance Period and attainment of the
cumulative threshold Performance Goal for that
three year period, fifty percent (50%) of the
total number of Business Performance Units
comprising the Participant's Award shall vest and
become immediately payable to the Participant in
accordance with Sections 8.03 and 8.04. In the
event such cumulative Performance Goal is not
satisfied, said number of Business Performance
Units awarded shall be immediately forfeited and
henceforth no longer eligible for vesting and
payment to the Participant.
8.03 Valuation of Business Performance Units. The dollar value
of each individual Business Performance Unit which becomes
vested and payable to a Participant shall be determined on
the basis of the graduated valuation scale set forth in the
Award Agreement in accordance with the corresponding
threshold, target, superior and exceptional Performance
Goals.
8.04 Payment of Business Performance Unit Awards. Business
Performance Units which have vested shall be paid to the
Participant in cash, within sixty calendar days after the
determination of the attainment of the applicable
Performance Goal. Any payment to be made to a Participant
hereunder shall be subject to applicable federal and state
wage withholding requirements.
ARTICLE IX - CHANGE OF CONTROL
9.01 Definitions. For purposes of this Article IX, the following
definitions shall be applied:
(a) "Change of Control" shall mean any of the following
events:
(1) a merger or consolidation to which the Corporation
is a party if the individuals and entities who
11
were stockholders of the Corporation immediately
prior to the effective date of such merger or
consolidation have beneficial ownership (as
defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent
(50%) of the total combined voting power for
election of directors of the surviving corporation
following the effective date of such merger or
consolidation; or
(2) the direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities
Exchange Act of 1934) in the aggregate of
securities of the Corporation representing twenty-
five percent (25%) or more of the total combined
voting power of the Corporation's then issued and
outstanding securities by any person or entity, or
group of associated persons or entities acting in
concert; or [Amended as of October 21, 1994]
(3) the sale of the properties and assets of the
Corporation substantially as an entirety, to any
person or entity which is not a wholly-owned
subsidiary of the Corporation; or
(4) the stockholders of the Corporation approve any
plan or proposal for the liquidation of the
Corporation; or
(5) a change in the composition of the Board at any
time during any consecutive twenty-four (24) month
period such that the "Continuity Directors" cease
for any reason to constitute at least a seventy
percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those
members of the Board who either:
(i) were directors at the beginning of such
consecutive twenty-four (24) month period; or
(ii) were elected by, or on the nomination or
recommendation of, at least a two-thirds
(2/3) majority of the then-existing Board of
Directors.
(b) "Change of Control Action" shall mean any payment
(including any benefit or transfer of property) in the
nature of compensation, to or for the benefit of a
Participant under any arrangement, which is considered
to be contingent on a Change of Control for purposes of
Section 280G of the Internal Revenue Code. As used in
this definition, the term "arrangement" includes,
without limitation, any agreement between a Participant
and the Company and any and all of the Company's
12
salary, bonus, incentive, restricted stock, stock
option, compensation or benefit plans, programs or
arrangements, and shall include this Plan.
(c) "Change of Control Termination" shall mean, with
respect to a Participant, any of the following events
occurring within two (2) years after a Change of
Control:
(1) Termination of the Participant's employment by the
Company for any reason, with or without cause,
except for conduct by the Participant constituting
(i) a felony involving moral turpitude under
either federal law or the law of the state of the
Corporation's incorporation or (ii) the
Participant's willful failure to fulfill his
employment duties with the Company; provided that
for purposes of this clause (ii), an act or
failure to act by the Participant shall not be
"willful" unless done, or omitted to be done, in
bad faith and without reasonable belief that the
Participant's action or omission was in the best
interests of the Company; or
(2) Termination of employment with the Company by the
Participant for Good Reason. A Change of Control
Termination shall not include a termination of
employment by reason of death, Disability or
Retirement.
(d) "Good Reason" shall mean a good faith determination by
the Participant, in the Participant's sole and absolute
judgment, that any one or more of the following events
has occurred, without the Participant's express written
consent, after a Change of Control:
(1) A change in the Participant's reporting
responsibilities, titles or offices as in effect
immediately prior to the Change of Control, or any
removal of the Participant from, or any failure to
re-elect the Participant to, any of such
positions, which has the effect of diminishing the
Participant's responsibility or authority; or
(2) A reduction by the Company in the Participant's
base salary as in effect immediately prior to the
Change of Control or as the same may be increased
from time to time thereafter; or
(3) The Company requiring the Participant to be based
anywhere other than within twenty-five (25) miles
of the Participant's job location at the time of
the Change of Control; or
13
(4) Without replacement by a plan, program or
arrangement providing benefits to the Participant
equal to or greater than those discontinued or
adversely affected:
(a) the failure by the Company to continue in
effect, within its maximum stated term, any
pension, bonus, incentive, stock ownership,
purchase, option, life insurance, health,
accident, disability, or any other employee
compensation or benefit plan, program or
arrangement, in which the Participant is
participating immediately prior to a Change
of Control; or
(b) the taking of any action by the Company that
would adversely affect the Participant's
participation or materially reduce the
Participant's benefits under any of such
plans, programs or arrangements; or
(5) The taking of any action by the Company that would
materially adversely affect the physical
conditions existing at the time of the Change of
Control in or under which the Participant performs
his employment duties; or
(6) If the Participant's primary employment duties are
with a Subsidiary of the Corporation, the sale,
merger, contribution, transfer or any other
transaction in conjunction with the Corporation's
ownership interest in such Subsidiary decreases
below the level specified in Section 2.21; or
(7) Any material breach by the Company of any
employment agreement between the Recipient and the
Company or a Subsidiary.
(e) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986 as from time to time amended.
9.02 Acceleration of Vesting/Put Option. Subject to the
"Limitation on Change of Control Compensation" contained in
Section 9.03, in the event of a Change of Control
Termination with respect to a Participant, and without
further action of the Board, Committee or otherwise:
(a) subject to Section 6.03(c), each Stock Option granted
to such Participant pursuant to this Plan shall become
immediately exercisable in full and shall remain exercisable
until expiration of the option according to its terms;
(b) subject to Section 7.03(c), all restrictions with
respect to each Restricted Stock Award granted to such
14
Participant shall immediately lapse and be of no further
force or effect.
(c) within thirty days following the Change of Control
Termination, the Participant may, by written election
delivered to an officer of the Corporation, require the
Corporation to purchase, within five days following delivery
of the election, the shares of the Participant's Stock with
respect to which restrictions have lapsed in accordance with
clause (b) of this Section 9.02, at a price equal to the
Fair Market Value of such shares of Stock on the day prior
to the Change of Control; provided that, the election
described in this clause (c) shall be null and void in the
event that:
(i) the honoring of such election by the Corporation
would constitute a default by the Company under
any material contract (including, but not limited
to, its public debt indenture covenants or bank
debt covenants) as in existence on the day
immediately preceding the Change of Control; and
(ii) the Corporation has exercised all reasonable
efforts to take such actions (including, but not
limited to, the issuance of additional stock) as
are necessary and practicable to avoid having the
honoring of such election constitute a default.
and further provided that, if a Participant is a
Section 16(b) Participant and if the Change of Control
Termination occurs within the six-month period
following the later of the Participant's most recent
purchase of Stock which is subject to Section 16(b) of
the 1934 Act or the grant of the Applicable Restricted
Stock Award, then the Participant shall be entitled to
deliver the written election specified herein within
thirty days following the expiration of such six-month
period, and the thirty-five day period referenced in
clause (d) shall commence upon the expiration of such
six-month period. For purposes of this Section
9.02(c), a "purchase of Stock which is subject to
Section 16(b) of the 1934 Act" shall be deemed to
include the establishment of or increase in a call
equivalent position or the liquidation of or decrease
in a put equivalent position with respect to such
Stock.
(d) To the extent a Participant has not sold shares of
Stock to the Corporation pursuant to Subsection (c)
above, certificates for such shares of Stock, with no
restrictive language, shall be delivered to the
Participant within thirty-five days following the
Change of Control Termination.
15
9.03 Limitation on Change of Control Compensation. A Participant
shall not be entitled to receive any Change of Control
Action which would, with respect to the Participant,
constitute a "parachute payment" for purposes of Section
280G of the Internal Revenue Code. In the event any Change
of Control Action would, with respect to the Participant,
constitute a "parachute payment," the Participant shall have
the right to designate those Change of Control Action(s)
which would be reduced or eliminated so that the Participant
will not receive a "parachute payment."
9.04 Limitations on Committee's and Board's Actions. Prior to a
Change of Control, the Participant shall have no rights
under this Article IX, and the Board shall have the power
and right, within its sole discretion by a resolution
adopted by a two-thirds majority (consisting of at least
five directors) to rescind, modify or amend this Article IX
without any consent of the Participant; provided, however,
that the Board shall not have the right to make any change
in the Plan which would constitute a "modification" within
the meaning of Section 425(h) of the Internal Revenue Code.
In all other cases, and notwithstanding the authority
granted to the Committee or Board to exercise discretion in
interpreting, administering, amending or terminating this
Plan, neither the Committee nor the Board shall, following a
Change of Control, have the power to exercise such authority
or otherwise take any action which is inconsistent with the
provisions of this Article IX.
ARTICLE X - EFFECT OF TERMINATION OF EMPLOYMENT
10.01 Termination of Employment Due to Death. In the event a
Participant's employment by the Company is terminated
by reason of death:
(a) all outstanding Stock Options shall become immediately
exercisable in full and remain exercisable for the life
of the Stock Option;
(b) restrictions on the transferability of shares of Stock
represented by a Restricted Stock Award shall fully
lapse.
(c) A fraction of the Business Performance Units which
would otherwise vest upon attainment of the applicable
Performance Goal on the January 1 following the date of
termination of employment will vest on such January 1
in the event the applicable goal is attained. The
numerator of the fraction of Business Performance Units
that will vest will be the number of full months of
employment completed by the Participant in the year of
death and the denominator will be 12. Any remaining
Business Performance Units under the Award not vested
will be forfeited.
16
10.02 Termination of Employment For Any Other Reason. Except
as otherwise provided in Article IX, in the event that
a Participant's employment by the Company is terminated
for any reason other than the Participant's death:
(a) all rights of the Participant under any Stock Option
Award not yet exercisable as of the Employment
Termination Date shall be forfeited in full; provided
that, the Committee may, in its sole discretion,
provide for exercisability of any rights under the
Stock Option not yet exercisable in full or in part as
it may determine; and the Participant shall have ninety
days following the Employment Termination Date to
exercise the Option to the extent that the Participant
was entitled to exercise it as of the Employment
Termination Date (but in no event after it expires);
(b) the Participant shall forfeit any shares of Stock under
a Restricted Stock Award with respect to which
restrictions on the transferability of the shares have
not lapsed as of the Employment Termination Date;
provided that, the Committee may, in its sole
discretion, grant such additional lapsing of such
restrictions as it may determine; and
(c) A fraction of the Business Performance Units which
would otherwise vest upon attainment of the applicable
Performance Goal on the January 1 following the date of
termination of employment will vest on such January 1
in the event the applicable goal is attained. The
numerator of the fraction of Business Performance Units
that will vest will be the number of full months of
employment completed by the Participant in the year of
termination of employment and the denominator will be
12; provided that, in the event of a voluntary
termination, all Business Performance Units not vested
as of the termination date will be forfeited upon
termination. In all other cases, non-vested Business
Performance Units as of the January 1 following the
termination date will be forfeited.
ARTICLE XI - RIGHTS OF ELIGIBLE EMPLOYEES AND PARTICIPANTS
11.01 Relationship to Employment. Nothing contained in the
Plan, nor in any Award granted pursuant to the Plan,
shall confer upon any Participant any right with
respect to continuance of employment by the Company,
nor interfere in any way with the right of the Company
to terminate the Participant's employment at any time.
11.02 Nontransferability of Award. No Award granted under
the Plan or any shares of Stock or Stock Options
forming a part thereof shall be transferable by the
17
Participant, either voluntarily or involuntarily,
except by will or the laws of descent and distribution,
and any attempt to so do shall void the Award. A Stock
Option shall be exercisable during the Participant's
lifetime only by the Participant or by the
Participant's guardian or other legal representative.
ARTICLE XII - AMENDMENT, MODIFICATION, OR TERMINATION
12.01 Authority to Amend and Procedure. Subject to the
provisions of Article IX, the Board or the Committee
may, at any time and without further action on the part
of the stockholders of the Corporation, terminate this
Plan or make such amendments thereto as it deems
advisable and in the best interests of the Company;
provided that, no such termination or amendment shall,
without the consent of a Participant, materially
adversely affect or impair the right of a Participant
with respect to an Award already granted; and further
provided that, unless the stockholders of the
Corporation shall have approved the same, no amendment
shall, either directly or indirectly:
(a) increase the total number of shares of Stock that may
be awarded under this Plan to all Participants, except
for adjustments described in Section 4.03 of this Plan;
(b) withdraw the administration of the Plan from the
Committee;
(c) permit any person, while a member of the Committee, to
be eligible to participate in this Plan; or
(d) permit any person who has theretofore received a
Restricted Stock Award or Stock Option Award under this
Plan or any person who is not a disinterested person to
become a member of the Committee.
ARTICLE XIII - EFFECTIVE DATE OF PLAN
13.01 Effective Date of Plan. The Plan shall be deemed
effective upon its adoption by the Board; subject,
however, to the approval of the stockholders of the
Corporation at the first annual meeting of the
stockholders of the Corporation following adoption of
the Plan by the Board; and provided further that in the
event the Plan is not approved by the stockholders of
the Corporation, the provisions of Article VIII and any
other applicable provisions (solely to the extent they
relate to Article VIII) shall continue in full force
and effect. Stock Option and Restricted Stock Awards
may be granted under the Plan prior to stockholder
approval if the grant is made subject to stockholder
18
approval of the Plan. Business Performance Unit Awards
may be granted under the Plan immediately upon adoption
of the Plan by the Board.
13.02 Duration of the Plan. The Plan shall terminate at
midnight on December 31, 1994, except as to Awards
previously granted and outstanding under the Plan at
that time and no Awards shall be granted after that
time. The Plan may be abandoned or terminated at any
earlier time by the Board or the Committee, except with
respect to any Awards then outstanding under the Plan.
ARTICLE XIV - GENERAL PROVISIONS
14.01 Construction and Headings. The headings of the
Articles, Sections and their subparts in the Plan are
for the convenience of reading only and are not meant
to be of substantive significance and shall not add to
or detract from the meaning of such Article, Section or
subpart.
14.02 Governing Law. The Plan and all rights and obligations
thereunder shall be construed in accordance with and
governed by the laws of the State of Minnesota, without
regard to the conflict of laws provisions of any
jurisdiction.
14.03 Successor and Assigns. This Plan shall be binding upon
and inure to the benefit of the successors and assigns
of the Company, including, without limitation, whether
by way of merger, consolidation, operation of law,
assignment, purchase or other acquisition of
substantially all of the assets or business of the
Company, and any and all such successors and assigns
shall absolutely and unconditionally assume all of the
Company's obligations hereunder; provided, however,
that this provision shall not apply with respect to the
successors or assigns of a Subsidiary in the event
that, prior to a Change of Control the Subsidiary is
sold, merged, contributed or in any other manner
transferred or for any other reason ceases to be a
Subsidiary of the Corporation.
14.04 Survival of Provisions. The rights, remedies,
agreements, obligations and covenants of the parties
contained in or made pursuant to the Plan, any Award
Agreement and any other notices or agreements in
connection therewith, including, without limitation,
any notice of exercise of a Stock Option, shall survive
the execution and delivery of such notices and
agreements and the exercise of any Stock Option, the
payment of the Stock Option exercise price and the
delivery and receipt of the Stock Option shares, and
shall remain in full force and effect.
19
14.05 Absence of Liability of Directors and Committee
Members. No member of the Board of Directors or of the
Committee shall be liable, with respect to this Plan,
for any act, whether of commission or omission, taken
by any other member or officer, agent, or employee of
the Company nor, except in circumstances involving such
person's own bad faith, for anything done or omitted to
be done by such person in connection with this Plan.
14.06 Withholding Taxes. The Company is entitled to:
(a) withhold and deduct from future wages of the
Participant (or from other amounts which may be due and
owing from the Participant to the Company or any
Subsidiary), or make other arrangements for the
collection of, all legally required amounts necessary
to satisfy any and all federal, state and local
withholding and employment-related tax requirements
attributable to the Participant's exercise of a Stock
Option or the lapse of restrictions on a Restricted
Stock Award or otherwise incurred with respect to any
other provisions of the Plan; or
(b) require the Participant promptly to remit the amount of
such tax requirements to the Company before acting on
the Participant's notice of exercise of a Stock Option
or before taking any further action with respect to the
Stock Option or the issuance of any certificate with
respect to any shares awarded under a Restricted Stock
Award or a Stock Option Award.
20
<PAGE>
Exhibit 10.13
Description of the Ceridian Corporation Annual Executive Incentive Plan
The Company's Annual Executive Incentive Plan provides yearly cash
bonuses to Company executives, although the Board's Compensation and Human
Resources Committee (the "Committee" ) may, in its discretion, permit
individuals to elect to receive part or all of their annual bonus in the
form of stock options rather than cash. The annual determination of an
individual executive's target bonus, expressed as a percentage of base
salary, is based on a subjective assessment by the Committee of the
responsibilities of the position, competitive practice and the Committee's
desire to give greater weight to performance-based compensation at higher
levels of responsibility within the Company.
For 1994, target bonus percentages for executives ranged from 20% to
65% of base salary, with the maximum possible bonus generally one and one-
half times the target amount. Of the total potential bonus, 80% consisted
of a financial component, and 20% was based on a subjective assessment of
the executive's individual performance in the areas of quality improvement
and fostering work force diversity. The financial component consisted of a
requirement that the Company achieve a specified level of earnings per
share ("EPS") during 1994 and, for executives assigned to operating units,
a requirement that the operating unit achieve specified financial goals,
generally a specified level of pre-tax earnings. With respect to the
financial component, bonus payments at, above or below the target
percentages could be made depending on whether the financial performance of
the Company (and, if applicable, the business unit to which the executive
is assigned) met, exceeded or fell short of the applicable targeted
financial goal. The targeted financial component of the bonus would be
payable if budgeted earnings were achieved, but no bonus would be payable
if an earnings threshold amount were not achieved. For 1994, both the
financial and non-financial components of the annual incentive program were
paid at or slightly above the superior level for executives, resulting in
bonus payments for executives ranging between 30% and 97.5% of base salary.
The Committee retains discretion to adjust upward the annual incentive if,
in its judgment, such an action is warranted under the circumstances.
<PAGE>
EXHIBIT 10.14
As Amended Effective Generally as of January 1, 1994
CERIDIAN CORPORATION
BENEFIT EQUALIZATION PLAN
Table of Contents
ARTICLE 1 Description...................................... 1
1.1 Structure and Name............................... 1
1.2 Purpose.......................................... 1
1.3 Type............................................. 1
ARTICLE 2 Benefits......................................... 2
2.1 Amount........................................... 2
2.2 Form and Time of Payment......................... 3
2.3 Entitlement, Reductions.......................... 3
2.4 Payment in the Event of Incapacity............... 4
ARTICLE 3 Source of Payments; Nature of Interest........... 5
3.1 Establishment of Trust........................... 5
3.2 Source of Payments............................... 5
3.3 Status of Plan................................... 5
3.4 Non-assignability of Benefits.................... 5
ARTICLE 4 Adoption, Amendment And Termination.............. 6
4.1 Adoption ........................................ 6
4.2 Amendment........................................ 6
4.3 Termination of Participation..................... 6
4.4 Termination...................................... 7
ARTICLE 5 Definitions...................................... 9
5.1 Administrator.................................... 9
5.2 Affiliated Organization.......................... 9
5.3 Board............................................ 9
5.4 Code............................................. 9
i
<PAGE>
5.5 Company.......................................... 9
5.6 Compensation Equalization Plan................... 9
5.7 Deferred Compensation Plan....................... 9
5.8 ERISA............................................ 9
5.9 Excess Benefit Plan.............................. 9
5.10 Governing Law................................. 9
5.11 Headings......................................... 10
5.12 Number and Gender................................ 10
5.13 Participant...................................... 10
5.14 Participating Employer........................... 10
5.15 Pension Plan..................................... 10
5.16 Plan............................................. 10
ARTICLE 6 Administration................................... 11
6.1 Administrator.................................... 11
6.2 Rules and Regulations............................ 11
6.3 Administrator's Discretion....................... 11
6.4 Specialist's Assistance.......................... 11
6.5 Indemnification.................................. 11
6.6 Benefit Claim Procedure.......................... 11
ARTICLE 7 Miscellaneous.................................... 13
Withholding and Offsets
7.1 .......................... 13
7.2 Other Benefits................................... 13
7.3 No Warranties Regarding Tax Treatment............ 13
7.4 No Employment Rights Created..................... 13
ii
<PAGE>
ARTICLE 1
Description
1.1 Structure and Name. The Plan consists of two separate
component plans which, for administrative convenience, have
been incorporated in one instrument. One such component
plan is the Excess Benefit Plan and the other such component
plan is the Compensation Equalization Plan. Together, the
two component plans are referred to as the "Ceridian
Corporation Benefit Equalization Plan."
1.2 Purpose. The purpose of the Excess Benefit Plan is to
ensure that Pension Plan participants will not be deprived
of benefits that would otherwise be payable under a Pension
Plan but for the operation of the provisions of Code section
415. The purpose of the Compensation Equalization Plan is
to ensure that Pension Plan participants will not be
deprived of benefits that would otherwise be payable under a
Pension Plan but for the operation of the provisions of Code
section 401(a)(17) or certain elections relative to the form
of bonus payments or the deferral of compensation pursuant
to the Deferred Compensation Plan.
1.3 Type. The Excess Benefit Plan is an unfunded "excess
benefit plan" within the meaning of section 3(36) of ERISA
and, as such, is exempt from ERISA by operation of sections
4(b)(5) and 4021(b)(8) thereof. The Compensation
Equalization Plan is an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a
select group of management or highly compensated employees
and, as such, is exempt from Parts 2, 3 and 4 of Subtitle B
of Title I of ERISA by operation of sections 201(2),
302(a)(3) and 401(a)(4) thereof, respectively, and from
Title IV of ERISA by operation of section 4021(a)(6)
thereof. The Excess Benefit Plan and Compensation
Equalization Plan are also intended to be unfunded for tax
purposes. The Plan will be construed and administered in a
manner that is consistent with and gives effect to the
foregoing.
1
<PAGE>
ARTICLE 2
Benefits
2.1 Amount
(A) As of the date on which a Participant's Pension Plan
benefit is scheduled to commence, the Administrator
will determine the amount of the benefit to which the
Participant is entitled pursuant to the Plan in
accordance with Subsection (B).
(B) Subject to Sections 2.2 and 2.3, the amount of a
Participant's benefit will be computed in the following
manner:
(1) The Administrator will determine a monthly benefit
amount equal to the amount by which the monthly
benefit determined pursuant to clause (a) exceeds
the monthly benefit determined pursuant to clause
(b), in each case based on a benefit payable in
the normal form under the Pension Plan in question
commencing at the later of the Participant's
normal retirement date under the Pension Plan or
his or her age on the date on which benefits under
the Pension Plan are scheduled to commence.
(a) The monthly benefit to which the Participant
would be entitled under the Pension Plan
determined
(i) without regard to any limitations
imposed under the Pension Plan to
satisfy the provisions of Code sections
401(a)(17) and 415,
(ii) by including as annual compensation for
a plan year any amount that would have
otherwise been paid to the Participant
as a base salary or a cash bonus during
the plan year but for the Participant's
election pursuant to the Deferred
Compensation Plan (but only to the
extent such amount would have been taken
into account under the Pension Plan for
such plan year but for the election and
is not otherwise taken into account
under the Pension Plan for such plan
year notwithstanding such election), and
(iii)if and only if the Administrator
determines that the Participant is a
member of a select group of management
or highly compensated employees, by
including as annual compensation for a
plan year any amount that would have
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been paid to the Participant as a cash
bonus during the plan year but for the
Participant's election to receive such
amount in the form of common stock of
the Company or an option to purchase
such stock (but only to the extent such
amount is not otherwise taken into
account under the Pension Plan for such
plan year).
(b) The actual amount of the monthly benefit to
which the Participant is entitled under the
Pension Plan.
(2) The amount determined pursuant to clause (1) will
be adjusted in the same manner as the
Participant's benefit under the Pension Plan to
reflect any early or late commencement of the
benefit.
(C) If a Participant dies before his or her "annuity
starting date," within the meaning of Code section
417(f)(2), and the Participant's surviving spouse is
entitled to a "qualified preretirement survivor
annuity," within the meaning of Code section 417(c),
from a Pension Plan or a Pension Plan provides for the
payment of any other death benefit to the surviving
spouse or any other person, the amount of the benefit
to which the surviving spouse or other person is
entitled pursuant to the Plan will be determined in
accordance with Subsection (B) but based, for the
purpose of clause (1), on the difference between the
normal form of the death benefit determined under items
(a) and (b).
2.2 Form and Time of Payment
(A) Payment of a benefit to any Participant determined
pursuant to Section 2.1(B) or surviving spouse or other
person determined pursuant to Section 2.1(C) will be
made or commence, as the case may be, at the same time
and in the same form as his or her benefit under the
Pension Plan.
(B) If a Participant, surviving spouse or other person
entitled to receive a benefit under the Plan elects to
receive his or her benefit under the Pension Plan in a
form other than the normal form, the benefit under the
Plan will be actuarially adjusted to reflect the form
in which it is paid in the same manner as the benefit
under the Pension Plan.
(C) If a Participant dies following the commencement of
monthly benefit payments, any death benefits payable
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<PAGE>
under the form of payment applicable to the
Participant's benefit under the Plan will be paid to
the same beneficiary or joint or contingent annuitant,
as the case may be, as his or her benefit under the
Pension Plan.
2.3 Entitlement, Reductions. Notwithstanding the foregoing
provisions of this Article 2 -
(A) A Participant who has elected to participate in a
Pension Plan on an after-tax basis is not entitled to a
benefit under the Plan attributable to annual
compensation in excess of the limitation in effect
under Code section 401(a)(17) or deferred under the
Deferred Compensation Plan unless, prior to a date
specified by the Administrator, the Participant makes
an irrevocable election, applicable to any period of
future employment with respect to which his or her
Pension Plan after-tax participation election applies,
to forego four percent of that portion of his or her
compensation that is (1) attributable to services
performed after the date of the election and (2) not
taken into account under the Pension Plan solely by
reason of the Code section 401(a)(17) limitation or the
Participant's election pursuant to the Deferred
Compensation Plan.
(B) If, after commencement of monthly benefit payments
under the Plan, the amount of monthly payments to which
the Participant is entitled under the Pension Plan is
increased by reason of an increase in the limitations
under Code section 415, the amount of the monthly
payments to which he or she is entitled under the Plan
will be decreased by the amount of monthly payment
increase under the Pension Plan.
(C) A former Participant is not entitled to a benefit under
the Plan to the extent the liability for such benefit
has been transferred to or assumed by a successor to
all or any portion of the business of the Participating
Employer.
(D) If a Participant who is receiving or entitled to
receive a benefit pursuant to the Plan is reemployed
with a Participating Employer or an affiliate of a
Participating Employer and, in connection with such
reemployment, his or her Pension Plan benefit payment
is suspended, his or her benefit under the Plan will be
suspended for the same period. The Participant's
benefit under the Plan will recommence at the same time
as his or her benefit under the Pension Plan and the
amount of the benefit at recommencement will be
adjusted in accordance with Plan Rules to reflect any
4
<PAGE>
additional benefits earned and benefits previously
paid.
2.4 Payment in the Event of Incapacity. If any person entitled
to receive any payment under the Plan is physically,
mentally, or legally incapable of receiving or acknowledging
receipt thereof, and no legal representative has been
appointed for such person, the Administrator, in his or her
discretion, may (but is not required to) cause any sum
otherwise payable to such person to be paid to any one or
more of the following (as may be chosen by the
Administrator): the person's beneficiary or joint or
contingent annuitant for purposes of his or her benefit
under the Plan, if any, the institution maintaining such
person, a custodian for such person under the Uniform
Transfers to Minors Act of any state, or such person's
spouse, children, parents or other relatives by blood or
marriage. Any payment so made completely discharges all
liability under the Plan to the extent of such payment.
ARTICLE 3
Source of Payments; Nature of Interest
3.3 Establishment of Trust. The Company may establish a Trust
with an independent corporate trustee. The Trust must be a
grantor trust that conforms substantially with the model
trust described in Revenue Procedure 92-64. The
Participating Employers may from time to time transfer to
the Trust cash, marketable securities or other property
acceptable to the Trustee in accordance with the terms of
the Trust.
3.2 Source of Payments
(A) Subject to Subsections (B) and (C), a Participant's
benefit will be paid by the Participating Employer with
whom the Participant was last employed.
(B) If a Participant has participated in a Pension Plan as
an employee of more than one Participating Employer,
the Administrator will determine the portion of the
benefit to which the Participant is entitled under the
Plan allocable to each such Participating Employer.
(C) The Trustee will make distributions to Participants and
Beneficiaries from the Trust in satisfaction of a
Participating Employer's obligations under the Plan in
accordance with the terms of the Trust. The
Participating Employer is responsible for paying any
benefits attributable to a Participant's Account with
respect to that Participating Employer that are not
paid by the Trust.
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<PAGE>
3.3 Status of Plan. Nothing contained in the Plan or Trust is
to be construed as providing for assets to be held for the
benefit of any Participant or any other person or persons to
whom benefits are to be paid pursuant to the terms of this
Plan, the Participant's or other person's only interest
under the Plan being the right to receive the benefits set
forth herein. The Trust is established only for the
convenience of the Participating Employers and the
Participants, and no Participant has any interest in the
assets of the Trust prior to distribution of such assets
pursuant to the Plan. To the extent the Participant or any
other person acquires a right to receive benefits under this
Plan or the Trust, such right is no greater than the right
of any unsecured general creditor of the Participating
Employer.
3.4. Non-assignability of Benefits. The benefits payable under
the Plan and the right to receive future benefits under the
Plan may not be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered, or subjected to any charge or
legal process.
ARTICLE 4
Adoption, Amendment And Termination
Adoption. With the prior approval of the Administrator, an
Affiliated Organization may adopt the Plan and become a
Participating Employer by furnishing to the Administrator a
certified copy of a resolution of its Board adopting the
Plan.
4.2 Amendment
(A) The Company reserves the right to amend the Plan at any
time to any extent that it may deem advisable. To be
effective, an amendment must be stated in a written
instrument approved in advance or ratified by the
Company's Board and executed in the name of the Company
by its President or a Vice President and attested by
the Secretary or an Assistant Secretary.
(B) An amendment adopted in accordance with Subsection (A)
is binding on all interested parties as of the
effective date stated in the amendment; provided,
however, that no amendment will have any retroactive
effect so as to deprive any Participant, or the
beneficiary or joint or contingent annuitant of a
deceased Participant, of any benefit to which he or she
is entitled under the terms of the Plan in effect
immediately prior to the effective date of the
amendment, determined in the case of a Participant who
is employed by an Affiliated Organization, as if he or
she had terminated employment immediately prior to the
effective date of the amendment.
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<PAGE>
(C) The provisions of the Plan in effect at the termination
of a Participant's employment will, except as otherwise
expressly provided by a subsequent amendment, continue
to apply to such Participant.
4.3 Termination of Participation.
(A) Notwithstanding any other provision of the Plan to the
contrary, if determined by the Administrator to be
necessary to ensure that the Plan is exempt from ERISA
to the extent contemplated by Section 1.3 or upon the
Administrator's determination that a Participant's
interest in the Plan has been or is likely to be
includable in the Participant's gross income for
federal income tax purposes prior to the actual payment
of benefits pursuant to the Plan, the Administrator may
take any or all of the following steps:
(1) terminate the Participant's future participation
in the Plan;
(2) cause the Participant's entire interest in the
Plan to be distributed to the Participant in the
form of an immediate lump sum; and/or
(3) transfer the benefits that would otherwise be
payable pursuant to the Plan for all or any of the
Participants to a new plan that is similar in all
material respects (other than those which require
the action in question to be taken.)
(B) For the purpose of Subsection(A)(2), the lump sum value
of a Participant's interest in the Plan will be
determined
(1) in the case of a Participant whose benefit under
the Plan is not then in pay status, in accordance
with Article 2 but assuming that the Participant
had terminated employment and elected to receive
his or her Pension Plan benefit in the form of an
immediate lump sum, or
(2) in the case of a Participant or beneficiary or
joint or contingent annuitant of a beneficiary
whose benefit under the Plan is then in pay
status, by converting the expected future benefit
from the form in which it is being paid to an
actuarially equivalent lump sum benefit using
actuarial assumptions specified in the Pension
Plan to which the benefit relates.
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<PAGE>
4.4 Termination
(A) The Company reserves the right to terminate the Plan in
its entirety at any time. Each Participating Employer
reserves the right to cease its participation in the
Plan or terminate the Plan with respect to any group of
similarly situated current or former employees of the
Participating Employer at any time. The Plan will
terminate in its entirety or with respect to a
particular Participating Employer or group of current
or former employees as of the date specified by the
Company or such Participating Employer in a written
instrument by its authorized officers to the
Administrator, adopted in the manner of an amendment.
(B) Upon the termination of the Plan in its entirety or
with respect to any Participating Employer or group of
current or former employees, the Company or
Participating Employer, as the case may be, will either
(1) cause any benefits to which Participants have
become entitled prior to the effective date of the
termination to continue to be paid in accordance with
the provisions of Article 2 or (2) subject to
Subsection (C), cause the entire interest in the Plan
of any or all Participants, or the beneficiaries or
joint or contingent annuitants of any or all deceased
Participants, to be distributed in the form of an
immediate lump sum payment calculated in accordance
with the provisions of Section 4.3(B).
(C) If the Compensation and Human Resources Committee of
the Company's Board of Directors (or any successor
committee) determines in good faith that there is a
reasonable likelihood that any compensation paid to a
Participant by an Affiliated Organization for a taxable
year of the Affiliated Organization would not be
deductible by the Affiliated Organization solely by
reason of the limitation under Code section 162(m), to
the extent deemed necessary by such Committee to ensure
that the entire amount of any distribution pursuant to
clause (2) of Subsection (B) is deductible, such
Committee may defer all or any portion of the
distribution. The deferred amounts and interest
thereon from the date on which the payment would have
been made but for this subsection and the date on which
the payment is actually made at the rate then used
under the Pension Plan for the purpose of computing
lump sum distributions will be distributed to the
Participant, or to his or her beneficiary in the case
of the Participant's death, at the earliest possible
date, as determined by such Committee in good faith, on
which the deductibility of compensation paid or payable
to the Participant for the taxable year of the
Affiliated Organization during which the distribution
is made will not be limited by Code section 162(m).
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<PAGE>
ARTICLE 5
Definitions, Construction and Interpretation
The definitions and rules of construction and interpretation set
forth in this article apply in construing the Plan unless the
context otherwise indicates.
5.1 Administrator. "Administrator" of the Plan is the Company,
or the person to whom administrative duties are delegated
pursuant to the provisions of Section 6.1, as the context
requires.
5.2 Affiliated Organization. "Affiliated Organization" is the
Company and any corporation that is a member of a controlled
group of corporations within the meaning of Code
section 414(b).
5.3 Board. "Board" is the board of directors of the Affiliated
Organization in question or any individual or committee
authorized to act on behalf of such board of directors
pursuant to a proper delegation.
5.4 Code. "Code" is the Internal Revenue Code of 1986, as
amended from time to time, and any reference to a section of
the Code refers to that section or to the corresponding
section of the Code as amended.
5.5 Company. "Company" is Ceridian Corporation or any successor
thereto.
5.6 Compensation Equalization Plan. "Compensation Equalization
Plan" means the component plan incorporated in this
instrument for the purpose of ensuring that Participants in
the Pension Plans will not be deprived of benefits otherwise
due them under the Pension Plans by operation of the
provisions of Code section 401(a)(17) or certain elections
relative to the form of bonus payments or the deferral of
compensation pursuant to the Deferred Compensation Plan.
5.7 Deferred Compensation Plan. "Deferred Compensation Plan"
means the Ceridian Corporation Deferred Compensation Plan,
as adopted effective January 1, 1995 and as thereafter
amended from time to time.
5.8 ERISA. "ERISA" is the Employee Retirement Income Security
Act of 1974, as amended, and any reference to a section of
ERISA refers to that section or to the corresponding section
of ERISA as amended.
5.9 Excess Benefit Plan. "Excess Benefit Plan" means the
component plan incorporated in this instrument for the
purpose of ensuring that Participants in the Pension Plans
will not be deprived of benefits otherwise due them under
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<PAGE>
such plans by operation of the provisions of Code section
415.
5.10 Governing Law. To the extent state law is not preempted by
the provisions of the ERISA or any other laws of the United
States, this Plan will be administered, construed and
enforced according to the internal laws of the State of
Minnesota without regard to the conflict of law principles
of the State of Minnesota or any other jurisdiction.
5.11 Headings. The headings of articles, sections, subsections
and clauses are included solely for convenience and, if
there is a conflict between such headings and the text of
the Plan, the text will control.
5.12 Number and Gender. Wherever appropriate, the singular
may be read as the plural, the plural may be read as the
singular and one gender may be read as the other gender.
5.13 Participant. "Participant" is an employee of a
Participating Employer who is (a) a participant under any
Pension Plan, (b) entitled to a benefit pursuant to the
provisions of Article 2 and (c) not a party to an agreement
with the Participating Employer pursuant to which he or she
is not eligible to participate in the Plan.
5.14 Participating Employer. "Participating Employer" is the
Company and any other Affiliated Organization that has
adopted the Plan, or all of them collectively, as the
context requires, and their respective successors. A
Participating Employer will cease to be such upon a
termination of the Plan as to its employees and the
satisfaction in full of all of its obligations under the
Plan or upon its ceasing to be an Affiliated Organization.
5.15 Pension Plan. "Pension Plan" is a defined benefit pension
plan which is qualified under the provisions of Code section
401(a) and which is sponsored by a Participating Employer.
5.16 Plan. The "Plan" is the Compensation Equalization Plan or
the Excess Benefit Plan or both of them, as the context
requires.
5.17 Trust. "Trust" means any trust or trustee established by
the Company pursuant to Section 3.1.
5.18 Trustee. "Trustee" means the independent corporate trustee
or trustees that at the relevant time has or have been
appointed to act as Trustee of the Trust.
ARTICLE 6
Administration
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<PAGE>
6.1 Administrator. The general administration of the Plan and
the duty to carry out its provisions is vested in the
Company. The Company's Vice President, Human Resource
Services, or his or her functional equivalent in the event
of a material change in the duties or title of such
position, will perform such duty on behalf of the Company.
Such Vice President may delegate such duty or any portion
thereof to a named person and may from time to time revoke
such authority and delegate it to another person.
6.2 Rules and Regulations. The Administrator has the
discretionary power and authority to make such rules and
regulations as the Administrator determines to be consistent
with the terms, and necessary or advisable in connection
with the administration, of the Plan and to modify or
rescind any such rules or regulations.
6.3 Administrator's Discretion. The Administrator has the
discretionary power and authority to make all determinations
necessary for administration of the Plan, except those
determinations that the Plan requires others to make, and to
construe, interpret, apply and enforce the provisions of the
Plan and Plan rules and regulations whenever necessary to
carry out its intent and purpose and to facilitate its
administration, including, without limitation, the
discretionary power and authority to remedy ambiguities,
inconsistencies, omissions and erroneous benefit
calculations. In the exercise of its discretionary power
and authority, the Administrator will treat all similarly
situated persons uniformly.
6.4 Specialist's Assistance. The Administrator may retain such
actuarial, accounting, legal, clerical and other services as
may reasonably be required in the administration of the
Plan, and may pay reasonable compensation for such services.
All costs of administering the Plan will be paid by the
Participating Employers.
6.5 Indemnification. The Participating Employers jointly and
severally agree to indemnify and hold harmless, to the
extent permitted by law, each director, officer, and
employee of any Affiliated Organization against any and all
liabilities, losses, costs and expenses (including legal
fees) of every kind and nature that may be imposed on,
incurred by, or asserted against such person at any time by
reason of such person's services in connection with the
Plan, but only if such person did not act dishonestly or in
bad faith or in willful violation of the law or regulations
under which such liability, loss, cost or expense arises.
The Participating Employers have the right, but not the
obligation, to select counsel and control the defense and
settlement of any action for which a person may be entitled
to indemnification under this provision.
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<PAGE>
6.6 Benefit Claim Procedure.
(A) If a request for a benefit by a Participant or
beneficiary of a deceased Participant is denied in
whole or in part, he or she may, not later than 30 days
after the denial, file with the Administrator a written
claim objecting to the denial.
(B) The Administrator, not later than 90 days after receipt
of such claim, will render a written decision to the
claimant on the claim. If the claim is denied, in
whole or in part, such decision will include the reason
or reasons for the denial; a reference to the Plan
provisions on which the denial is based; a description
of any additional material or information, if any,
necessary for the claimant to perfect his or her claim;
an explanation as to why such information or material
is necessary; and an explanation of the Plan's claim
procedure.
(C) The claimant may file with the Administrator, not later
than 60 days after receiving the Administrator's
written decision, a written notice of request for
review of the Administrator's decision, and the
claimant or his or her representative may thereafter
review relevant Plan documents which relate to the
claim and may submit written comments to the
Administrator.
(D) Not later than 60 days after receipt of such review
request, the Administrator will render a written
decision on the claim, which decision will include the
specific reasons for the decision, including a
reference to the Plan's specific provisions where
appropriate.
(E) The foregoing 90 and 60-day periods during which the
Administrator must respond to the claimant may be
extended by up to an additional 90 or 60 days,
respectively, if special circumstances beyond the
Administrator's control so require and notice of such
extension is given to the claimant prior to the
expiration of such initial 90 or 60-day period, as the
case may be.
ARTICLE 7
Miscellaneous
7.1 Withholding and Offsets. The Participating Employers and
the Trustee retain the right to withhold from any
compensation or benefit payment pursuant to the Plan any and
all income, employment, excise and other tax as the
Participating Employers or Trustee deem necessary in
connection with any benefits earned or paid pursuant to the
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Plan and the Participating Employers may offset against
amounts payable to any person under the Plan any amounts
then owing to the Participating Employers by such persons.
7.2 Other Benefits. No amounts paid pursuant to the Plan
constitute salary or compensation for the purpose of
computing benefits under any other benefit plan, practice,
policy or procedure of a Participating Employer unless
otherwise expressly provided thereunder.
7.3 No Warranties Regarding Tax Treatment. The Participating
Employers make no warranties regarding the tax treatment to
any person of participation in the Plan or any action or
omission of the Participating Employer or Participant in
connection therewith and each Participant will hold the
Administrator and the Participating Employers and their
officers, directors, employees, agents and advisors harmless
from any liability resulting from any tax position taken in
good faith in connection with the Plan.
7.4 No Employment Rights Created. Neither the establishment of
or participation in the Plan gives any employee a right to
continued employment or limits the right of any Affiliated
Organization to discharge, transfer, demote or modify the
terms and conditions of employment or otherwise deal with
any employee without regard to the effect such action might
have on his or her with respect to the Plan.
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CERIDIAN CORPORATION
BENEFIT EQUALIZATION PLAN
Exhibit A
This exhibit sets for the provisions of Article V of the Plan as
in effect immediately prior to January 1, 1994. These provisions
continue to apply to Participants who terminated employment
before January 1, 1994 with an entitlement to benefits pursuant
to the provision of Article V as set forth in the exhibit. The
provisions of Articles 4, 6 and 7 of the Plan as currently in
effect are applicable to such Participants.
5.01 Each participant shall be entitled to receive, from the
employer, a defined contribution plan equalization
payment or payments, in accordance with the remaining
provisions of this Article V. The aggregate amount of
such payment or payments shall be the amount credited
to a bookkeeping reserve account that the employer
shall establish in the name of the participant, in
accordance with the following provisions:
(a) There shall be credited to each participant's
reserve account, during each plan year, an amount
elected by the participant, but not exceeding the
amount equal to the excess of -
(1) the maximum amount that could have been
contributed by the employer to such
participant's account under the defined
contribution plan for such plan year without
regard to any limitations imposed thereunder
to satisfy the provisions of section 415 of
the Internal Revenue Code, over
(2) the amount actually contributed by the
employer to such participant's account under
the defined contribution plan for such plan
year.
(b) Each participant shall file with the administrator
a written election to have credited to his reserve
account hereunder a percentage of his
"compensation" (as that, or the corresponding,
term is defined in the defined contribution plan).
Subject to the limitation specified at clause (a)
above, the percentage elected may be any whole
percentage from one percent to ten percent, or the
full and fractional percentage by which
participant directed contributions which would
otherwise have been made on his behalf under the
Control Data Corporation Savings and Stock
Ownership Plan are deceased by operation of the
14
<PAGE>
provision thereunder which limits contributions in
order to satisfy the requirements of Section 415
of the Internal Revenue Code. After such election
has been made, the participant's compensation for
each payroll period of the employer shall be
reduced by the percentage so elected. At the end
of each month, there shall be credited to the
participant's reserve account hereunder the amount
by which the participant's compensation for such
month has been so reduced.
(c) A participant may, at any time upon thirty days'
prior written notice to the administrator, suspend
the compensation reductions previously elected. A
participant may, on January 1 or July 1 of any
year, upon thirty days prior written notice to the
administrator and subject to the limitation
specified at clause (a) above, change the
percentage of compensation reductions previously
elected (to any whole percentage from one percent
to ten percent), or reinstate compensation
reductions previously suspended.
(d) The employer shall also credit to the reserve
account of each participant, as of the end of each
month, an imputed investment return. The imputed
investment return shall be the amount which the
balance of the participant's reserve account, as
of the beginning of such month, would have earned
had it been invested in the money market fund
maintained under the Control Data Corporation
Savings and Stock Ownership Plan during such
month.
(e) As of the date of each payment to the participant
or his beneficiary pursuant to the provisions of
Section 5.02, the participant's reserve account
shall be debited with the amount of such
distribution.
5.02 (A) Payment of defined contribution plan equalization
benefits shall be made to the participant or, in
the event of his death, to his beneficiary only
after an event of maturity. Any termination of
the participant's employment with the employer.
including termination by reason of his death,
shall constitute an event of maturity.
(B) Upon the occurrence of an event of maturity with
respect to a participant, the employer shall pay
to him or, in the event of his death, to his
beneficiary, an amount equal to such participant's
bookkeeping reserve account. Pursuant to the
participant's election in the manner hereinafter
15
<PAGE>
provided, such payment shall be made either (1) in
ten substantially equal annual installments;
(provided that, if the administrator, in his sole
discretion determines, that such form of payment
will result in hardship to the participant, he may
cause the payment of one or more such
installments to be accelerated), or (2) in a lump
sum. For purposes of implementing the foregoing,
each participant shall, within sixty days after an
amount is first credited to his reserve account,
file an irrevocable written election with the
administrator, selecting one of the foregoing
methods of payment. If he fails to make such
election within such period or if his election is
for any reason ineffective. he shall be deemed to
have elected to receive benefits hereunder in the
for:n of a lump sum.
5.03 The undistributed portion of a matured reserve account
shall continue to be credited with an imputed
investment return in accordance with clause (d) of
Section 5.01, based on the lowest balance of such
account during the month for which such return is
determined.
5.04 Each participant shall designate, in the manner
prescribed by the administrator, the beneficiary or
beneficiaries to whom undistributed benefits hereunder
shall be paid in the event of his death. Such
designation may be changed from time to time by written
notice to the administrator in such form as he may
prescribe. Any such designation shall be effective
only if it is received by the administrator prior to
the participant's death. If, upon the death of the
participant, no beneficiary designation has been filed
with the administrator or if the designated
beneficiaries have predeceased the participant, the
participant shall be deemed to have designated as his
beneficiary the first of the following categories that
is applicable in his case:
(1) The participant's surviving spouse; or, if none,
(2) The participant's descendants, per stirpes; or, if
none,
(3) The participant's estate.
The administrator's good faith distribution based on
his actual knowledge of the existence of a
participant's beneficiaries shall be conclusive and
binding on all beneficiaries of a participant.
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EXHIBIT 10.15
CERIDIAN CORPORATION
EMPLOYEES' BENEFIT PROTECTION
TRUST AGREEMENT
Table of Contents
Page
PREAMBLE 1
ARTICLE 1 Description and Definitions
1.1 Name
1.2 Intentions
1.3 Irrevocability; Creditor Claims 2
1.4 Additional Definitions 2
1.5 Grantor Trust 3
1.6 Benefits Implemented Through Trust 4
ARTICLE 2 General Administration 5
2.1 Committee Directions 5
2.2 Contributions 5
2.3 Separate Accounting for Each Plan 6
2.4 Interest of Plans in Trust Fund 6
2.5 Excess Accumulations 7
2.6 Substitution 7
2.7 Transfer to Successor Trust 7
2.8 Merger or Split-up of Plans 8
ARTICLE 3 Duties and Powers of Trustee 9
3.1 General Responsibility 9
3.2 General Powers 9
3.3 Distributions 13
3.4 Trustee Responsibility
Regarding Payments on Insolvency 16
3.5 Records 18
3.6 Quarterly Accounting;
Final Accounting 18
3.7 Valuation 18
3.8 Delegation of Duties 19
ARTICLE 4 Directed Investments 20
4.1 Appointment of Insurance Company
as Investment Manager 20
4.2 Appointment of Investment Adviser
as Investment Manager 20
4.3 Directions of Committee 22
i
ARTICLE 5 Compensation, Indemnification 24
5.1 Compensation and Expenses 24
5.2 Indemnification 24
ARTICLE 6 Resignation or Removal of Trustee 25
6.1 Resignation; Removal 25
6.2 Successor Trustee 25
6.3 Settlement of Accounts 25
SECTION 7 Controversies, Legal Actions 26
7.1 Controversy 26
7.2 Joinder of Parties 26
ARTICLE 8 Insurers 27
8.1 Insurer Not a Party 27
8.2 Authority of Trustee 27
8.3 Contract Ownership 27
8.4 Limitation of Liability 27
8.5 Change of Trustee 27
ARTICLE 9 Amendment and Termination 28
9.1 Amendment28
9.2 Final Termination 29
ARTICLE 10 Miscellaneous 30
10.1 Taxes 30
10.2 Third Persons 30
10.3 Nonassignability; Nonalienation 30
10.4 The Plans 30
10.5 Applicable Law 30
10.6 Notices and Directions 31
10.7 Successors and Assigns 31
10.8 Gender and Number 31
10.9 Headings 31
10.10 Counterparts 31
10.11 Beneficial Interest 31
10.12 Effective Date 31
CERIDIAN CORPORATION
EMPLOYEES' BENEFIT PROTECTION
TRUST AGREEMENT
This Trust Agreement is made and entered into as of December
1, 1994, between Ceridian Corporation, a Delaware corporation
(the "Company"), and First Trust National Association, a national
banking association with trust powers (the "Trustee").
RECITALS
The Company desires to establish a trust to be used in
conjunction with certain agreements and plans which provide
deferred or supplemental compensation to current or former
employees of the Company or a Subsidiary, including such
agreements or plans entered into or established after the
effective date of this Trust Agreement.
The Company desires to appoint the Trustee to act as trustee of
the Trust and the Trustee desires to accept the appointment.
The Company and the Trustee enter into this Trust Agreement to
establish the Trust and to set forth their respective rights and
obligations in connection with the Trust.
Therefore, in consideration of the mutual undertakings contained
in this Trust Agreement, the Company and Trustee agree as
follows:
ARTICLE 1
Description and Definition
1.1 Name. The name of the Trust is the "Ceridian Corporation
Employees' Benefit Protection Trust."
1.2 Intentions. It is the intention of the parties that this
Trust constitute an unfunded arrangement and not affect the
status of the Plans as unfunded for purposes of the Code and
Title I of ERISA. In addition, it is the intention of the
Company and the Subsidiaries to make contributions to the Trust
to provide a source of funds to assist in meeting their
liabilities under the Plans, subject to the claims of the
Company's and the Subsidiaries' creditors in the event of their
Insolvency, until paid to Participants and their Beneficiaries in
such manner and at such times as specified in the Plans.
1.3 Irrevocability; Creditor Claims. The Trust established
pursuant to this Trust Agreement is irrevocable. The principal
of the Trust, and any earnings thereon, will be held separate and
apart from other funds of the Company and the Subsidiaries and
will be used exclusively for the uses and purposes of the
Participants, Beneficiaries and general creditors of the Company
and the Subsidiaries as herein set forth. The Participants and
their Beneficiaries have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights
created under the Plans and this Trust Agreement are mere
unsecured contractual rights of the Participants and their
Beneficiaries against the Company and the Subsidiaries. Any
assets held by the Trust will be subject to the claims of the
Company's and the Subsidiaries' general creditors under federal
and state law in the event of Insolvency.
1.4 Additional Definitions. In addition to the definitions set
forth above, for purposes hereof, unless otherwise clearly
apparent from the context, the following terms have the following
indicated meanings:
(a) "Account" has the meaning set forth in Section 2.3(a).
(b) "Beneficiary" means one or more persons, trusts,
estates or other entities, designated in accordance with a Plan,
that are entitled to receive benefits under a Plan upon the death
of a Participant.
(c) "Board" means the board of directors of the Company.
When this Trust Agreement provides for an action to be taken by
the Board, the action may be taken by any committee or individual
authorized to take such action pursuant to a proper delegation of
the Company's board of directors which remains in effect at the
time in question.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" means the administrative committee
appointed by the Company's Chief Executive Officer to administer
the Trust.
(f) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(g) "Insolvent" has the meaning set forth in Section
3.4(a).
(h) "Insolvent Entity" has the meaning set forth in Section
3.4(a).
(i) "IRS" means the Internal Revenue Service.
(j) "Participant" means a current or former employee of the
Company or a Subsidiary who is a party to, or a participant
under, one or more of the Plans in accordance with their terms
and conditions.
(k) "Payment Schedule" has the meaning set forth in Section
3.3(b).
(l) "Plan" means any plan, program, policy or agreement
pursuant to which the Company or a Subsidiary is required to
provide deferred or supplemental compensation to a current or
former employee which is listed on Schedule 1, as such schedule
may be amended from time to time by the Board.
(m) "Subaccount" has the meaning set forth in Section
2.3(b).
(n) "Subsidiary" means any corporation that is a member of
a controlled group of corporations within the meaning of Code
section 414(b) that includes the Company.
(o) "Trust" means the trust established pursuant to this
Trust Agreement as amended from time to time.
(p) "Trust Fund" means the assets held by the Trustee
pursuant to the terms of this Trust Agreement and for the
purposes of the Plans.
1.5 Grantor Trust. The Trust is intended to be a "grantor
trust," of which the Company and the Subsidiaries are the
grantors, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Code, and the Trust will be
construed accordingly.
1.6 Benefits Implemented Through Trust. Simultaneously with the
execution of this Trust Agreement, the Company will deliver to
the Trustee true, correct and complete copies of all Plans listed
on Schedule 1. If so specified on Schedule 1, benefits
implemented through the Trust with respect to a Plan may be
limited to any individual Participant or Beneficiary or group of
Participants or Beneficiaries and to less than all of the
benefits payable under the Plan. The Board may, from time to
time, without the consent of the Trustee, add Plans to Schedule
1, expand the scope of Plan benefits implemented through the
Trust or amend or modify any Plan listed on Schedule 1 and no
such action will be deemed to be an amendment subject to Section
9.1; provided, however, that the effect of such action may not
unreasonably increase the Trustee's responsibilities hereunder
without the Trustee's consent. The Company will promptly deliver
to the Trustee a true, correct and complete copy of any new Plan,
or modifications or amendments to such Plan. Any special
provisions of this Trust Agreement applicable to a specific Plan
listed on Schedule 1 will be set forth on an exhibit to this
Trust Agreement and in the event of any inconsistencies between
the provisions of any such exhibit and the other provisions of
this Trust Agreement, the provisions of the exhibit control. A
Plan may be deleted from Schedule 1 by action of the Board and
such action will not be deemed to be an amendment subject to
Section 9.1 only (a) in the case of a transfer to a successor
trust pursuant to Section 2.7 or (b) if the Committee establishes
to the reasonable satisfaction of the Trustee that the Plan has
been (1) merged with another Plan pursuant to Section 2.8, (2)
assumed by (A) a Subsidiary in connection with a transaction
pursuant to which it ceases to be such or (B) a successor to all
or any portion of the business of the Company or a Subsidiary or
(3) terminated but only if all liabilities to Participants and
Beneficiaries pursuant to the Plan have been fully satisfied.
Any other deletion of a Plan from Schedule 1 is an amendment
subject to Section 9.1.
ARTICLE 2
General Administration
2.1 Committee Directions.
(a) The Secretary or an Assistant Secretary of the Company
will certify to the Trustee the names of the Committee members.
Persons authorized to give directions to the Trustee on behalf of
the Committee will be identified to the Trustee by written notice
from the Committee, and such notice will contain specimens of the
authorized signatures. The Trustee may rely on such written
notice as evidence of the identity and authority of the persons
appointed until a written cancellation of the appointment, or the
written appointment of a successor, is received by the Trustee.
(b) Directions by the Committee, or its delegate, to the
Trustee must be in writing and signed by the Committee or persons
authorized by the Committee, or may be made by such other method
as is acceptable to the Trustee.
(c) The Trustee may conclusively rely on written directions
from the Committee in taking any action with respect to the
Trust, including the making of payments from the Trust Fund and
the investment of the Trust Fund pursuant to this Trust
Agreement.
(d) The Trustee may request directions from the Committee
and has no duty to act if such directions are not provided by the
Committee. If requested directions are not received within a
reasonable time, the Trustee may, but is under no duty to, act on
its own discretion to administer the Trust in accordance with
this Trust Agreement and the Plans.
2.2 Contributions. The Company and the Subsidiaries, in their
sole discretion, may at any time, or from time to time, make
deposits of cash or other property acceptable to the Trustee in
trust with the Trustee to be held, administered and disposed of
by the Trustee as provided in this Trust Agreement. In
connection with any deposit, the Committee will designate in
writing to the Trustee the portion of the deposit attributable to
each Account and, if applicable, Subaccount. Neither the Trustee
nor any Participant or Beneficiary has any right to compel such
additional deposits. The Trustee has no duty to (a) collect or
enforce payment to it of any contributions, (b) require that any
contributions be made, (c) compute any amount to be paid to it or
(d) determine whether amounts paid comply with the terms of the
Plans.
2.3 Separate Accounting for Each Plan.
a) The Trustee will maintain separate Accounts to
reflect the interest of each Plan in the Trust Fund. Not
less frequently than monthly, the Account of each Plan will
be debited or credited, as the case may be,
(1) for the entire amount of every contribution
received by the Trustee on behalf of such Plan, every
benefit payment or expense or other charge properly
allocable to such Plan and every transaction relating
solely to such Plan, and
(2) for the Plan's equitable share of every item
of allocated or accrued income, gain or loss of general
expenses and other transactions allocable to the Trust
Fund as a whole.
(b) If contributions are made with respect to a Plan
by the Company and one or more other Subsidiaries or two or
more Subsidiaries, the Trustee will maintain within the
Account with respect to the Plan separate Subaccounts to
reflect the portion of the total Account balance
attributable to each contributing entity.
(c) Except as provided in Section 2.5,
(1) in no event will a Plan or the Participants
or Beneficiaries covered by that Plan be entitled to
payments from the Trust Fund in excess of the value of
the Account maintained for that Plan, and
(2) if Subaccounts are maintained with respect to
a Plan, in no event will Participants or Beneficiaries
covered by that Plan be entitled to payments pursuant
to the Plan with respect to service with the Company or
a Subsidiary in excess of the value of the Subaccount
maintained for the Company or Subsidiary with respect
to the Plan.
2.4 Interest of Plans in Trust Fund. The Committee may specify
in writing to the Trustee that all or part of a Plan's interest
in the Trust Fund be held in a segregated account for the Plan
and invested separately from the remainder of the Trust Fund. In
such event, assets of such segregated account will be held and
administered solely for that Plan. Except in cases of such
segregation, the contributions received by the Trustee from the
Company and the Subsidiaries with respect to all Plans will be
held and administered pursuant to the terms of this Trust
Agreement as a single fund without distinction between income and
principal and without liability for the payment of interest
thereon except as expressly provided in this Trust Agreement.
During the term of this Trust, except as otherwise expressly
provided in this Trust Agreement, all income received by the
Trust, net of expenses and taxes, will be accumulated and
reinvested.
2.5 Excess Accumulations.
(a) If the Trustee determines that the fair market
value of an Account or Subaccount exceeds 125 percent of the
benefit obligations accrued through the date of the
determination chargeable to the Account or Subaccount, at
the direction of the Committee, the Trustee will distribute
to the Company or Subsidiary all or any portion of the
excess.
(b) If the Trustee determines that the fair market
value of an Account or Subaccount exceeds 125 percent of the
benefit obligations accrued through the date of the
determination chargeable to the Account or Subaccount, at
the direction of the Committee or pursuant to Section
3.3(d)(2), the Trustee will transfer all or any portion of
the excess to another Account or another Subaccount
maintained for the same entity.
(c) For purposes of this section the value of benefit
obligations as of a given date is,
(1) in the case of a Plan which is a defined
contribution plan, the aggregate balance the accounts
of all Participants and Beneficiaries as of the most
recent Plan valuation date, and
(2) in the case of a Plan which is a defined
benefit plan, the present value (based on actuarial
assumptions determined by the Trustee to be reasonable)
of Plan benefits based on service, compensation and
other appropriate factors as of the determination date
and applying the provisions of the Plan then in
effect.
2.6 Substitution. Notwithstanding any provision of any Plan or
this Trust Agreement to the contrary, the Company or any
Subsidiary that has made contributions to the Trust has the power
to reacquire the Trust Fund by substituting readily marketable
securities (other than a security issued by the Company or any
Subsidiary) acceptable to the Trustee and/or cash of an
equivalent fair market value and such other property will,
following such substitution, constitute the Trust Fund.
2.7 Transfer to Successor Trust. The Company, by written
direction delivered to the Trustee, may direct the withdrawal and
transfer of assets constituting all or a part of the interest of
a Plan in the Trust Fund to a successor trust, which may be the
Trustee acting under a separate trust agreement. The Trustee
will be required to effect the direction only if it determines
that (a) the trustee of the successor trust would qualify to act
as a successor trustee of the Trust pursuant to Section 6.2 and
(b) the transfer could not reasonably be expected to result in
(1) any material decrease in the rights of Participants and
Beneficiaries or (2) Participants and/or Beneficiaries being
taxed on benefits under a Plan or successor plan in a year other
than the year of actual receipt of benefits. The Trustee will
make the transfer as soon as practicable after making such
determination, either in cash, or at the direction of the
Committee, in other property or partly in cash and partly in
other property.
2.8 Merger or Split-up of Plans. If two or more Plans are
merged into a single Plan, or if a Plan is divided into two or
more Plans, the resulting Plan or Plans will continue to
participate in this Trust unless the Company directs the Trustee
to make a transfer of assets with respect to such Plan or Plans
to a successor trust pursuant to Section 2.7. The Trustee will
make such adjustments of the Accounts or Subaccounts as are
appropriate to reflect any such merger or split-up of Plans.
ARTICLE 3
Duties and Powers of Trustee
3.1 General Responsibility. The general responsibilities of the
Trustee are as follows:
(a) Except as expressly otherwise provided in this
Trust Agreement, the Trustee has exclusive authority and
discretion to manage and control the assets comprising the
Trust Fund.
(b) The Trustee will hold, administer, invest and
reinvest, and disburse the Trust Fund in accordance with the
powers and subject to the restrictions stated in this Trust
Agreement. Investments will be consistent with any funding
policy communicated to the Trustee in writing by the
Committee. The Trustee may rely on the latest such
communication received by it without further inquiry or
verification.
(c) The Trustee will disburse monies and other
properties from the Trust Fund in accordance with the terms
of this Trust Agreement. The Trustee is not liable for any
distribution made by it pursuant to such directions and has
no duty to make inquiry as to whether any distribution made
by it pursuant to any such direction is made pursuant to the
provisions of the Plans. The receipt by the payee will
constitute a full acquittance to the Trustee.
(d) The Trustee has the responsibilities, if any,
expressly allocated to it by the Plans. Except as
responsibilities may be expressly so allocated, the Trustee,
in its capacity as such, has no responsibility or authority
with respect to the operation and administration of the
Plans, and the rights, powers, and duties of the Trustee are
governed solely by the terms of this Agreement without
reference to the provisions of the Plans.
(e) The Trustee will reimburse the Company from the
Trust Fund for expenses incurred by the Company or any
employee or agent thereof in connection with the
administration of the Plans upon its receipt of written
statements therefor in form acceptable to the Trustee.
3.2 General Powers. The Trustee has, without exclusion, all
powers conferred on the Trustee by applicable law, unless
otherwise expressly provided in this Trust Agreement, and all
rights associated with the Trust Fund will be exercised by the
Trustee or the person designated by the Trustee, and in no event
by Participants or Beneficiaries. Except as otherwise expressly
provided in this Trust Agreement, the Trustee has exclusive
authority and discretion to invest and reinvest the principal and
income of the Trust Fund in real or personal property of any kind
and will do so with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims. The Trustee will diversify the investments of the
Trust Fund so as to minimize the risk of large losses, unless
under the circumstances it is clearly prudent not to do so. The
Trustee is not limited by the laws of any state proscribing or
limiting the investment of trust funds by corporate or individual
trustees in or to certain kinds, types, or classes of investments
or limiting the value or proportion of the trust assets that may
be invested in any one property or kind, type, or class of
investment. Without limiting the generality of the foregoing,
investments and reinvestments are also subject to the following:
(a) To invest and reinvest the Trust Fund, together
with the income therefrom, in common stock, preferred stock,
convertible preferred stock, mutual funds, bonds,
debentures, convertible debentures and bonds, mortgages,
notes, time certificates of deposit, commercial paper and
other evidences of indebtedness (including those issued by
the Trustee or any of its affiliates), financial futures
contracts, other securities, policies of life insurance,
annuity contracts, options to buy or sell securities or
other assets, and other property of any kind (personal,
real, or mixed, and tangible or intangible); provided,
however, that in no event may the Trustee invest in
securities (including stock or rights to acquire stock) or
obligations issued by the Company or the Subsidiaries, other
than a de minimis amount held in common investment vehicles
in which the Trustee invests.
(b) To hold securities and other properties in bearer
form or in the name of a nominee or nominees without
disclosing any fiduciary relationship; provided, however,
that on the books and records of the Trustee such securities
and properties will constantly be shown to be a part of the
Trust Fund, and no such registration or holding by the
Trustee relieves it from liability for the safe custody and
proper disposition of such securities and properties in
accordance with the terms and provisions of this Trust
Agreement.
(c) To sell, grant options to buy, transfer, assign,
convey, exchange, mortgage, pledge, lease or otherwise
dispose of any of the properties comprising the Trust Fund
at such prices and on such terms and in such manner as it
may deem proper, and for terms within or extending beyond
the duration of the Trust.
(d) To manage, administer, operate, lease for any
number of years, regardless of any restrictions on leases
made by fiduciaries, develop, improve, repair, alter,
demolish, mortgage, pledge, grant options with respect to,
or otherwise deal with any real property or interest therein
at any time held by it; and to cause to be formed a
corporation or trust to hold title to any such real property
with such powers, all upon such terms and conditions as may
be deemed advisable.
(e) To renew or extend or participate in the renewal
or extension of any note, bond or other evidence of
indebtedness, or any other contract or lease, or to exchange
the same, or to agree to a reduction in the rate of interest
or rent thereon or to any other modification or change in
the terms thereof, or of the security therefor, or any
guaranty thereof, in any manner and to any extent that it
may deem advisable in its absolute discretion; to waive any
default, whether in the performance of any covenant or
condition of any such note, bond or other evidence of
indebtedness, or any other contract or lease, or of the
security therefor, and to carry the same past due or to
enforce any such default as it may in its absolute
discretion deem advisable; to exercise and enforce any and
all rights to foreclose, to bid in property on foreclosure;
to exercise and enforce in any action, suit, or proceeding
at law or in equity any rights or remedies in respect to any
such note, bond or other evidence of indebtedness, or any
other contract or lease, or the security therefor; to pay,
compromise, and discharge with the funds of the Trust Fund
any and all liens, charges, or encumbrances upon the same,
in its absolute discretion, and to make, execute, and
deliver any and all instruments, contracts, or agreements
necessary or proper for the accomplishment of any of the
foregoing powers.
(f) To borrow such sums of money for the benefit of
the Trust Fund from any lender upon such terms, for
such period of time, at such rates of interest, and upon
giving such collateral as it may determine; to secure any
loan so made by pledge or mortgage of the trust property;
and to renew existing loans.
(g) To use the assets of the Trust Fund, whether
principal or income, for the purpose of improving,
maintaining, or protecting property acquired by the Trust
Fund, and to pay, compromise, and discharge with the assets
of the Trust Fund any and all liens, charges, or
encumbrances at any time upon the same.
(h) To hold uninvested such cash funds as may appear
reasonably necessary to meet the anticipated cash
requirements of the Plans from time to time and to deposit
the same or any part thereof, either separately or together
with other trust funds under the control of the Trustee, in
its own deposit department or to deposit the same in its
name as Trustee in such other depositories as it may select.
(i) To receive, collect, and give receipts for every
item of income or principal of the Trust Fund.
(j) To institute, prosecute, maintain, or defend any
proceeding at law or in equity concerning the Trust Fund or
the assets thereof, at the sole cost and expense of the
Trust Fund, and to compromise, settle, and adjust any claims
and liabilities asserted against or in favor of the Trust
Fund or of the Trustee; but the Trustee is under no duty or
obligation to institute, maintain, or defend any action,
suit, or other legal proceeding unless it has been
indemnified to its satisfaction against any and all loss,
cost, expense, and liability it may sustain or anticipate by
reason thereof.
(k) To vote all stocks and to exercise all rights
incident to the ownership of stocks, bonds, or other
securities or properties held in the Trust Fund and to issue
proxies to vote such stocks; to enter into voting trusts for
such period and upon such terms as it may determine; to give
general or special proxies or powers of attorney, with or
without substitution; to sell or exercise any and all
subscription rights and conversion privileges; to sell or
retain any and all stock dividends; to oppose, consent to,
or join in any plan of reorganization, readjustment, merger,
or consolidation in respect to any corporation whose stocks,
bonds, or other securities are a part of the Trust Fund,
including becoming a member of any stockholders' or
bondholders' committee; to accept and hold any new
securities issued pursuant to any plan of reorganization,
readjustment, merger, consolidation, or liquidation; to pay
any assessments on stocks or securities or to relinquish the
same; and to otherwise exercise any and all rights and
powers to deal in and with the securities and properties
held in the Trust Fund in the same manner and to the same
extent as any individual owner and holder thereof might do.
(l) To make application for any contract issued by an
insurance company to be purchased under a Plan, to accept
and hold any such contract, and to assign and deliver any
such contract.
(m) To lend any securities or security from time to
time constituting a part of the Trust Fund in exchange for
such consideration and upon such terms and conditions as the
Trustee deems appropriate. In any such transaction the
Trustee may transfer legal title to the securities being
loaned to the obligor, and may permit the obligor to return
to the Trust Fund securities that are identical (but not
necessarily evidenced by the same certificates) to those
transferred to it by the Trustee under this Trust Agreement.
(n) To employ such agents, experts, counsel, and other
persons (any of whom may also be employed by or represent
the Company or a Subsidiary) deemed by the Trustee to be
necessary or proper for the administration of the Trust; to
rely and act on information and advice furnished by such
agents, experts, counsel, and other persons; and to pay
their reasonable expenses and compensation for services to
the Trust from the Trust Fund.
(o) To pay out of the Trust Fund all real and personal
property taxes, income taxes, and other taxes of any and all
kinds levied or, assessed under existing or future laws
against the Trust Fund, without any approval or direction of
the Committee.
(p) To pay any estate, inheritance, income, or other
tax, charge, or assessment attributable to any benefit
which, in the Trustee's opinion, it is or may be required to
pay out of such benefit; and to require, before making any
payment, such release or other document from any taxing
authority and such indemnity from the intended payee as the
Trustee deems necessary for its protection.
(q) To retain any funds or property subject to any
dispute without liability for the payment of interest, and
to decline to make payment or delivery thereof until final
adjudication is made by a court of competent jurisdiction.
(r) To serve not only as Trustee but also in any other
capacity with respect to the Plans pursuant to such
agreements or practices as the Trustee considers necessary
or appropriate under the circumstances.
(s) To participate in and use the Federal Book-entry
Account System (a service provided by the Federal Reserve
Bank for its member banks for deposit of Treasury
securities), or to use the Depository Trust Company, Midwest
Trust Company or other generally accepted central
depositories.
(t) To make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and all
other instruments that may be necessary or appropriate to
carry out the powers herein granted to the Trustee.
(u) To bring action before any court of competent
jurisdiction for instructions with respect to any matter
pertaining to the interpretation of this Trust Agreement or
the administration of the Trust Fund.
Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee has no
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Code.
3.3 Distributions.
(a) The establishment of the Trust and the payment or
delivery to the Trustee of money or other property does not
vest in any Participant or Beneficiary any right, title or
interest in and to any of the assets comprising the Trust
Fund. To the extent that any Participant or Beneficiary
acquires the right to receive payments under any of the
Plans, such right is no greater than the right of an
unsecured general creditor of the Company or the Subsidiary
that is obligated to make the payments pursuant to the terms
of the Plan in question and such Participant or Beneficiary
will have only the unsecured promise of the Company or
Subsidiary that such payments will be made.
(b) Concurrent with the establishment of this Trust,
the Company will deliver to the Trustee a schedule (the
"Payment Schedule") that specifies (1) the benefit payable
in respect of each Participant (and his or her
Beneficiaries) on a Plan by Plan basis, the formula or
formulas or other instructions acceptable to the Trustee for
determining the amounts so payable, (2) the form in which
such amount is to be paid (as provided for or available
under the applicable Plans), (3) the time of commencement
for payment of such amounts and (4) the Account and, if
applicable, the Subaccount to which the benefit is
chargeable. If the Payment Schedule indicates that benefits
are payable following the occurrence of a contingent event
(e.g., death or termination of employment), the Company will
provide the Trustee with notice of the occurrence of such
event within three business days after the Company has
knowledge thereof. The Company will update the Payment
Schedule on at least a monthly basis. The Company will also
update the Payment Schedule at any other time within three
business days after the Trustee submits a written request to
the Company for an update. The Trustee will make payments
to the Participants and their Beneficiaries in accordance
with such Payment Schedule. If, however, a Participant or
Beneficiary submits to the Trustee a written claim which
establishes to the Trustee's reasonable satisfaction that
the Payment Schedule specifies or is based on incorrect
information or is not consistent with the Plan, the Trustee
may review any information provided to it by the Company,
the Participant or Beneficiary or any other person and
adjust the benefit as appropriate on the basis of such
information. The Trustee has discretionary power and
authority to construe, interpret and apply the terms of the
Plan and to remedy any ambiguities in connection with such
review and adjustment. The Trustee will promptly notify the
Committee of any such written claim.
(c) The Trustee may make any distribution required to
be made by it hereunder by delivering:
(1) Its check payable to the person to whom such
distribution is to be made, to the person; or
(2) Its check payable to an insurer for the
benefit of such person, to the insurer; or
(3) Contracts held on the life of the Participant
to whom or with respect to whom the distribution is
being made, to the Participant or Beneficiary; or
(4) If a distribution is being made, in whole or
in part, of other assets, assignments or other
appropriate documents or certificates necessary to
effect a transfer of title, to the Participant or
Beneficiary.
Payments by the Trustee will be delivered or mailed to
addresses supplied by the Committee and the Trustee may rely
on such addresses unless it has actual knowledge of a
change.
(d) (If the Trustee determines that the balance of any
Account or, if applicable, Subaccount is not sufficient or
is not expected to be sufficient to make benefit payments
that are then either due or expected to become due within 90
days after the determination (the "expected short-term
benefit obligations"), the Trustee will promptly provide
written notice to the Committee of the deficiency or
expected deficiency. Only one such notice is required with
respect to any continuous period of deficiency. Upon
receipt of such notice, the Committee will promptly take one
or both of the following steps.
(1) The Committee may cause the Company or a
Subsidiary to make an additional contribution to the
Trust attributable to the Account or Subaccount.
(2) The Committee may instruct the Trustee in
writing that the Company or Subsidiary intends to make
benefit payments directly pursuant to Section 3.3(e),
in which case the Trustee will make a transfer to the
deficient Account or Subaccount pursuant to Section
2.5(b) if such a transfer may then be made.
During any period in which the balance of the Account or
Subaccount is not sufficient or is not expected to be
sufficient to satisfy the expected short-term benefit
obligations, each benefit payment from the Trust Fund
chargeable to the Account or Subaccount will be reduced on a
pro rata basis to reflect the deficiency. The Company or
Subsidiary, as the case may be, will make the balance of
each such payment as it falls due.
(e) The Company and the Subsidiaries may make payment
of benefits directly to Participants or their Beneficiaries
as they become due under the terms of the Plans. The
Company and the Subsidiaries will notify the Trustee of
their decision to make payment of benefits directly not less
than three business days prior to the time amounts are
payable to Participants or their Beneficiaries.
(f) Notwithstanding anything contained in this Trust
Agreement to the contrary, if at any time the Trust is
finally determined by the IRS not to be a "grantor trust"
with the result that the income of the Trust Fund is not
treated as income of the Company or the Subsidiaries
pursuant to Code sections 671 through 679, or if a tax is
finally determined by the IRS to be payable by one or more
Participants or Beneficiaries with respect to any interest
in the Plans or the Trust Fund prior to payment of such
interest to such Participant or Beneficiary, then (1) the
Trust will immediately terminate, (2) the Trustee will
immediately determine each Participant's share of the Trust
Fund in accordance with the Plans, and (3) the Trustee will
immediately distribute such share in a lump sum to each
Participant or Beneficiary entitled thereto, regardless of
whether such Participant's employment has terminated and
regardless of form and time of payments specified in or
pursuant to the Plans. Any remaining assets (less any
expenses or costs due under Sections 3.2(n) and 5.1 of this
Trust Agreement) will then be paid by the Trustee to the
Company and the Subsidiaries in such amounts, and in the
manner instructed by the Committee.
(g) The Trustee will make provision for the reporting
and withholding of any federal, state or local taxes that
may be required to be withheld with respect to the payment
of benefits pursuant to the terms of the Plans or this Trust
Agreement and will pay amounts withheld to the appropriate
taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company and the
Subsidiaries.
3.4 Trustee Responsibility Regarding Payments on Insolvency.
(a) The Trustee will cease payment of benefits to
Participants and their Beneficiaries attributable to a
particular entity under the terms of a Plan if the entity is
Insolvent (the "Insolvent Entity"). The Insolvent Entity
will be considered "Insolvent" for purposes of this Trust
Agreement if:
(1) the Insolvent Entity is unable to pay its
debts as they become due, or
(2) the Insolvent Entity is subject to a pending
proceeding as a debtor under the United States
Bankruptcy Code.
For purposes of this Section 3.4, if an entity is determined
to be Insolvent, each Subsidiary in which such entity has an
equity interest will also be deemed to be an Insolvent
Entity. However, the insolvency of a subsidiary will not
cause a parent corporation to be deemed Insolvent.
(b) At all times during the continuance of this Trust,
as provided in Section 1.3 above, the principal and income
of the Trust will be subject to claims of the general
creditors of the Company and its Subsidiaries under federal
and state law as set forth below:
(1) The board of directors of the Company and the
president of the Company have the nondelegable duty to
inform the Trustee in writing of the Company's or any
Subsidiary's Insolvency. If a person claiming to be a
creditor of the Company or any Subsidiary alleges in
writing to the Trustee that the Company or any
Subsidiary has become Insolvent, the Trustee will
determine whether the Company or any Subsidiary is
Insolvent and, pending such determination, the Trustee
will discontinue payment of benefits to the
Participants or their Beneficiaries attributable to the
Insolvent Entity. The Trustee may conclusively rely on
any determination it receives from the board of
directors of the Company or the president of the
Company with respect to the Insolvency of the Company
or any Subsidiary.
(2) Unless the Trustee has actual knowledge of
the Company's or a Subsidiary's Insolvency, or has
received notice from the Company, a Subsidiary, or a
person claiming to be a creditor alleging that the
Company or a Subsidiary is Insolvent, the Trustee has
no duty to inquire whether the Company or any
Subsidiary is Insolvent. The Trustee may in all events
rely on such evidence concerning the Company's or any
Subsidiary's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable
basis for making a determination concerning the
Company's or any Subsidiary's solvency. In this
regard, the Trustee may rely upon a letter from the
Company's or a Subsidiary's auditors as to the
Company's or any Subsidiary's financial status.
(3) If at any time the Trustee has determined
that the Company or any Subsidiary is Insolvent, the
Trustee will discontinue payments to Participants or
their Beneficiaries attributable to the Insolvent
Entity, and will hold the portion of the assets of the
Trust allocable to the Insolvent Entity for the benefit
of the Insolvent Entity's general creditors. Nothing
in this Trust Agreement in any way diminishes any
rights of Participants or their Beneficiaries to pursue
their rights as general creditors of the Insolvent
Entity with respect to benefits due under the Plans or
otherwise.
(4) The Trustee will resume the payment of
benefits to Participants or their Beneficiaries in
accordance with this Article 3 of this Trust Agreement
only after the Trustee has determined that the alleged
Insolvent Entity is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3.4(b) hereof and subsequently resumes
such payments, the first payment following such
discontinuance will include the aggregate amount of all
payments due to Participants or their Beneficiaries under
the terms of the Plans for the period of such
discontinuance, less the aggregate amount of any payments
made to Participants or their Beneficiaries by the Company
or any Subsidiary in lieu of the payments provided for
hereunder during any such period of discontinuance.
3.5 Records. The Trustee will maintain accurate records and
detailed accounts of all investments, receipts, disbursements and
other transactions hereunder. Such records will be available at
all reasonable times for inspection by the Company and
Subsidiaries or their authorized representative. The Trustee, at
the direction of the Committee, will submit to the Committee and
to any insurer such valuations, reports or other information as
the Committee may reasonably require and, in the absence of fraud
or bad faith, the valuation of the Trust Fund by the Trustee will
be conclusive.
3.6 Quarterly Accounting; Final Accounting.
(a) Within 45 days following the last day of each
calendar quarter and within 45 days after the removal or
resignation of the Trustee or the termination of the Trust,
the Trustee will file with the Committee a written
accounting setting forth in the aggregate and for each
Account and Subaccount a description of all assets purchased
and sold, all receipts, disbursements and other transactions
effected by it during the three-month period then ending or,
in the case of removal, resignation or termination, since
the previous quarter end, and listing the assets held in the
Trust Fund as of the last day of the period and indicating
the cost and market values of each such asset.
(b) The Committee may approve such accounting either
by written notice of approval delivered to the Trustee or by
its failure to express written objection to such accounting
delivered to the Trustee within 90 days after the date of
which such account was delivered to the Committee.
(c) The approval by the Committee of an accounting is
binding as to all matters covered by the accounting, other
than matters which the Committee could not reasonably
determine to be in error, on all parties to this Trust
Agreement and on all Participants and Beneficiaries, to the
same extent as if such accounting had been settled by a
judgment or decree of a court of competent jurisdiction in
which the Trustee, the Committee, the Company, the
Subsidiaries and all persons having or claiming any interest
in any Plan or Trust Fund were made parties.
(d) Despite the foregoing, nothing contained in this
Trust Agreement deprives the Trustee of the right to have an
accounting judicially settled, if the Trustee, in the
Trustee's sole discretion, desires such a settlement.
3.7 Valuation. The Trustee will determine the fair market value
of assets comprising the Trust Fund based upon such sources of
information as it may deem reliable, including, but not limited
to, stock market quotations, statistical evaluation services,
newspapers of general circulation, financial publications, advice
from investment counselors, brokerage firms or insurance
companies, or any combination of sources. The Trustee may take
whatever action it deems reasonable, including employment of
attorneys, appraisers, life insurance companies or other
professionals, the expense of which will be an expense of
administration of the Trust Fund payable by the Company and the
Subsidiaries. The Trustee may rely upon information from the
Company and the Subsidiaries, the Committee, appraisers or other
sources.
3.7 Delegation of Duties. The Company, a Subsidiary or the
Committee, or any or all of them, may at any time employ the
Trustee as its/their agent to perform any act, keep any records
or accounts and make any computations that are required of the
Company, any Subsidiary or the Committee by this Trust Agreement
or the Plans. The Trustee may be compensated for such employment
and such employment will not be deemed to be contrary to the
Trust. Nothing done by the Trustee as such agent changes or
increases its responsibility or liability as Trustee hereunder.
ARTICLE 4
Directed Investments
4.1 Appointment of Insurance Company as Investment Manager. The
Committee may appoint one or more insurance companies to serve as
an investment manager. The appointment of any such investment
manager and investment of the Trust Fund pursuant to such
appointment are subject to the provisions of this Section 4.1,
notwithstanding any other provisions of this Trust Agreement to
the contrary:
(a) Written notice of each such appointment will be
given to the Trustee a reasonable time in advance of the
effective date of the appointment.
(b) The Committee will determine the terms of each
contract to be entered into between such insurance company
and the Trustee (including any agreement or agreements
supplemental thereto) pursuant to which investment
management services are to be performed by the insurance
company. On written direction of the Committee, the Trustee
will make application for each such contract and will hold
the contract as an asset of the Trust Fund.
(c) The Trustee will pay such premiums to the
insurance company pursuant to such contract as may be
directed in writing by the Committee.
(d) Except as otherwise agreed in writing by the
Trustee and the Retirement Committee, the Trustee will take
only such actions as contractholder of such contract as may
be directed in writing by the Committee.
(e) Any direction by the Committee with respect to
such contract will be complete as to the terms with respect
thereto, it being intended that the Trustee will have no
discretion whatsoever with respect to the provisions of such
contract or actions taken pursuant thereto.
4.2 Appointment of Investment Adviser as Investment Manager.
The Committee may appoint one or more parties that are registered
as investment advisers under the Investment Advisers Act of 1940
to serve as an investment manager. The appointment of any such
investment manager and investment of the Trust Fund pursuant to
such appointment are subject to the provisions of this
Section 4.2, notwithstanding any other provisions of this
Agreement to the contrary:
(a) Written notice of each such appointment will be
given to the Trustee a reasonable time in advance of the
effective date of the appointment. The notice will state
what portion of the Trust Fund is to be invested by the
investment manager and will direct the Trustee to segregate
such portion of the Trust Fund into a separate account for
the investment manager. Each such separate account is
referred to in this section as an Investment Account.
(b) There will be a written agreement between the
Committee and each investment manager. The Trustee will
receive a copy of each such agreement and all amendments
thereto and will give written acknowledgement of receipt of
same. Alternately, the Committee may direct the Trustee to
enter into such agreement and any ancillary agreements that
the Committee determines to be necessary or appropriate.
Each agreement with an investment manager will provide that:
(1) All directions given by an investment manager
to the Trustee will be in writing, signed by an officer
or partner of the investment manager or by such other
person as may be designated in writing by the
investment manager; provided that the Trustee will
accept oral directions for the purchase or sale of
securities, which will be confirmed by such authorized
personnel of the investment manager in writing;
(2) In all events the Trustee, or an agent
thereof, is to retain physical custody of or title to
all assets included in an Investment Account; and
(3) The Committee, by written notice to the
investment manager and the Trustee, may modify or
terminate the authority of the investment manager.
(c) Payment of the cost of the acquisition, sale, or
exchange of any security or other property for an Investment
Account will be charged to that Investment Account unless
the agreement between the Committee and investment manager
provides otherwise.
(d) So long as the appointment of an investment
manager is in effect, the investment manager has full power
and authority to direct the Trustee as to, and full
responsibility for, investment of its Investment Account and
for the retention and disposition of any assets in its
Investment Account. Subject to any limitations in the
agreement between the Committee and the investment manager,
the investment manager has the same investment discretion as
is accorded the Trustee under Section 3.2. The Trustee may
invest any portion of an Investment Account that would
otherwise be held in cash but has no obligation to do so.
(e) Unless the written agreement between the Committee
and investment manager expressly provides to the contrary,
the Trustee has voting power with respect to all stocks and
other securities in the Investment Account.
(f) The Trustee will make available to an investment
manager copies of or extracts from such portions of its
accounts, books, or records relating to the Investment
Account of such investment manager as the Trustee may deem
necessary or appropriate in connection with the exercise of
the investment manager's function, or as the Committee may
direct.
(g) All charges (other than those covered in Section
4.2(c) above) against each Investment Account will be made
in such proportions as the Committee may direct from time to
time.
(h) If the authority of an investment manager is
terminated and a successor investment manager is not
appointed, the assets held in its Investment Account may or
may not continue to be segregated as the Trustee may
determine. Until receipt of written notice of the
termination of the authority of an investment manager, the
Trustee will be fully protected in assuming the continuing
authority of such investment manager.
(i) Any direction by an investment manager will be
complete as to the terms with respect thereto, it being
intended that the Trustee has no obligation whatsoever to
invest or otherwise manage any asset of an Investment
Account.
4.3 Directions of Committee. The Committee may direct the
Trustee as to the investment and reinvestment of all or a part of
the Trust Fund, subject to the following provisions of this
Section 4.3, notwithstanding any other provisions of this Trust
Agreement to the contrary:
(a) Written notice of each such appointment will be
given to the Trustee a reasonable time in advance of the
effective date of the appointment. Such notice will state
what portion of the Trust Fund is to be invested by the
Committee and will direct the Trustee to segregate such
portion of the Trust Fund into a separate account for the
Committee. Each such separate account is referred to in
this section as a Committee Account.
(b) All directions given by the Committee to the
Trustee will be in writing, signed by the duly authorized
person or persons; provided that the Trustee will accept
oral directions for the purchase or sale of securities which
must be confirmed by such authorized personnel in writing.
(c) In all events the Trustee or an agent thereof is
to retain physical custody of or title to all assets
comprising a Committee Account.
(d) Payment of the cost of the acquisition, sale, or
exchange of any security for a Committee Account will be
charged to such Account.
(e) The Committee has full power and authority to
direct the Trustee as to, and full responsibility for,
investment of each Committee Account and for the retention
and disposition of any assets at any time included in each
Committee Account. The Committee has the same investment
discretion as is accorded the Trustee under Section 3.2 of
this Agreement. The Trustee may invest any portion of a
Committee Account that would otherwise be held in cash but
has no obligation to do so.
(f) The Trustee has the voting power with respect to
all stocks and other securities in a Committee Account
except to the extent written directions by the Committee to
the Trustee grant voting power to the Committee.
(g) The Trustee will make available to the Committee
copies of or extracts from such portions of its accounts,
books, or records relating to any Committee Account as the
Committee may direct.
(h) All charges (other than those covered in Section
4.3(d) above) against each Committee Account will be made in
such proportions as the Committee may direct from time to
time.
(i) Any direction by the Committee be complete as to
its terms, it being intended that the Trustee will have no
obligation whatsoever to invest or otherwise manage any
asset of a Committee Account.
ARTICLE 5
Compensation, Indemnification
5.1 Compensation and Expenses. The Trustee is entitled to
receive such reasonable compensation for its services as Trustee
or in any other capacity in connection with the Plans as agreed
upon by the Trustee and the Company. The Trustee is entitled to
reimbursement for all reasonable and necessary costs, expenses
and disbursements incurred by it in connection with the
performance of such services. Such compensation and
reimbursement will be charged to and paid out of the Trust Fund
as an administrative expense but if not so paid or if the
Committee so specifies, will be paid directly by the Company and
Subsidiaries in such proportions as the Committee determines.
5.2 Indemnification.
(a) The Company and the Subsidiaries will indemnify
and hold the Trustee harmless from and against all
liability, loss, cost or reasonable expense (including
reasonable attorneys' fees) to which it may be subject by
reason of its execution of its duties under this Trust
Agreement, or by reason of any acts taken in good faith in
accordance with any directions, or acts omitted in good
faith due to absence of directions, from the Company, the
Committee or a Participant, unless such liability, loss,
cost or expense is due to the Trustee's negligence or
misconduct. The indemnity described herein is provided
jointly and severally by the Company and the Subsidiaries.
(b) In the event that the Trustee is named as a
defendant in a lawsuit or proceeding involving one or more
of the Plans or the Trust Fund, the Trustee will be entitled
to receive on a current basis the indemnity payments
provided for in this section; provided, however, that, if
the final judgment entered in the lawsuit or proceeding
holds that the Trustee is guilty with respect to the Trust
Fund of negligence or misconduct, the Trustee must refund
the indemnity payments that it has received to the extent
such payments are attributable to liability, loss, cost or
expense due to such negligence or misconduct.
(c) All releases and indemnities provided in this
Trust Agreement survive the termination of this Trust
Agreement.
ARTICLE 6
Resignation or Removal of Trustee
6.1 Resignation; Removal. The Trustee may resign at any time by
written notice to the Committee. The resignation will be
effective 180 days after the Company's receipt of such notice
unless the Company and the Trustee agree otherwise. The Trustee
may be removed by the Company on 60 days notice or upon shorter
notice accepted by the Trustee.
6.2 Successor Trustee. If the Trustee resigns or is removed, a
successor will be appointed, in accordance with this section, by
the effective date of the resignation or removal under Section
6.1 above. The successor must (a) be a bank (or a trust company
wholly owned by a bank) (b) be among the 100 largest banks in the
United States as measured by deposits and (c) have a rating of
"B/C" or greater based on the most current rating from Keefe,
Bruyett & Woods ("KB&W") or its successor, or if KB&W or its
successor should cease to publish ratings, then a short-term debt
rating from Moody's of "P-1," or greater, or from Standard and
Poor's of "A-1." If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding will be allowed as
administrative expenses of the Trust.
6.3 Settlement of Accounts. Upon resignation or removal of the
Trustee and appointment of a successor Trustee, all assets
comprising the Trust Fund will subsequently be transferred to the
successor Trustee. The transfer must be completed within 90 days
after receipt of notice of resignation, removal or transfer,
unless the Company extends the time limit. Upon the transfer of
the assets, the successor Trustee will succeed to all of the
powers and duties given to the Trustee in this Trust Agreement.
The resigning or removed Trustee will render to the Committee an
accounting in the form and manner and at the time prescribed in
Section 3.6.
SECTION 7
Controversies, Legal Actions
7.1 Controversy. If any controversy arises with respect to the
Trust, the Trustee will act as it deems advisable, whether by
legal proceedings, compromise or otherwise. The Trustee may
retain the funds or property involved without liability pending
settlement of the controversy. The Trustee is under no
obligation to take any legal action of whatever nature unless
there is sufficient property in the Trust to indemnify the
Trustee with respect to any expenses or losses to which it may be
subjected.
7.2 Joinder of Parties. In any action or other judicial
proceedings affecting the Trust, it will be necessary to join as
parties the Trustee, the Committee, the Company and the
Subsidiaries. No Participant, Beneficiary or other person is
entitled to any notice or service of process. Any judgment
entered in such a proceeding or action will be binding on all
persons claiming under the Trust. Nothing in this Trust
Agreement is to be construed in a way that deprives a Participant
or Beneficiary of his or her right to seek adjudication of his or
her rights by administrative process or by a court of competent
jurisdiction.
ARTICLE 8
Insurers
8.1 Insurer Not a Party. No insurer will be deemed to be a
party to the Trust and an insurer's obligations will be measured
and determined solely by the terms of contracts and other
agreements executed by it.
8.2 Authority of Trustee. An insurer must accept the signature
of the Trustee to any documents or papers executed in connection
with any insurance contracts or agreements ancillary or
supplemental thereto. The signature of the Trustee is conclusive
proof to the insurer that the person on whose life an application
is being made is eligible to have a contract issued on his or her
life and is eligible for a contract of the type and amount
requested.
8.3 Contract Ownership. An insurer will deal with the Trustee
as the sole and absolute owner of any insurance contracts and has
no obligation to inquire whether any action or failure to act on
the part of the Trustee is in accordance with or authorized by
the terms of the Plans or this Trust Agreement.
8.4 Limitation of Liability. An insurer will be fully
discharged from any and all liability for any action taken or any
amount paid in accordance with the direction of the Trustee and
has no obligation to see to the proper application of the amounts
so paid. An insurer has no liability for the operation of the
Trust or the Plans, whether or not in accordance with their terms
and provisions.
8.5 Change of Trustee. An insurer will be fully discharged from
any and all liability for dealing with a party or parties
indicated on its records to be the Trustee until such time as it
receives at its home office written notice of the appointment and
qualification of a successor Trustee.
ARTICLE 9
Amendment and Termination.
9.1 Amendment. Subject to the limitations set forth in this
section, this Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company. Any
amendment, change or modification is subject to the following
rules:
(a) General Rule. Subject to Sections 9.1(b) and (c)
below, this Trust Agreement may be amended:
(1) By the Company and the Trustee, provided,
however, that if an amendment would in any way
adversely affect the rights created by the Plans or
this Trust Agreement of any Participant or Beneficiary
in the Trust Fund, each and every Participant and
Beneficiary whose rights in the Trust Fund would be
adversely affected must consent to the amendment before
this Trust Agreement may be so amended; and
(2) By the Company and the Trustee as may be
necessary to comply with laws which would otherwise
render the Trust void, voidable or invalid in whole or
in part.
(b) Limitation. Notwithstanding that an amendment may
be permissible under Section 9.1(a) above, this Trust
Agreement may not be amended by an amendment that would:
(1) Cause any of the assets of the Trust to be
used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries as
set forth in the Plans, except as is required to
satisfy the claims of the Company's or a Subsidiary's
general creditors; or
(2) Be inconsistent with the terms of any Plan,
including the terms of any Plan regarding termination,
amendment or modification of the Plan.
(c) Writing and Consent. Any amendment to this Trust
Agreement must be set forth in writing and signed by the
Company and the Trustee and, if consent of any Participant
or Beneficiary is required under Section 9.1(a), the
Participant or Beneficiary whose consent is required. Any
amendment may be current, retroactive or prospective, in
each case as provided therein.
(d) Taxation. This Trust Agreement may not be
amended, altered, changed or modified in a manner that would
cause the Participants and/or Beneficiaries under any Plan
to be taxed on the benefits under any Plan in a year other
than the year of actual receipt of benefits.
9.2 Final Termination. The Trust will not terminate until the
date on which Participants and their Beneficiaries are no longer
entitled to benefits pursuant to the terms of the Plans. Upon
termination of the Trust, any assets remaining in the Trust will
be returned to the Company and the Subsidiaries. Such remaining
assets will be paid by the Trustee to the Company and the
Subsidiaries in such amounts and in the manner instructed by the
Committee, whereupon the Trustee will be released and discharged
from all obligations hereunder. From and after the date of
termination and until final distribution of the Trust Fund, the
Trustee will continue to have all of the powers provided herein
as are necessary or expedient for the orderly liquidation and
distribution of the Trust Fund.
ARTICLE 10
Miscellaneous
10.1 Taxes. The Company and the Subsidiaries will from time to
time pay taxes of any and all kinds whatsoever that at any time
are lawfully levied or assessed upon or become payable in respect
of the Trust Fund, the income or any property forming a part
thereof, or any security transaction pertaining thereto. To the
extent that any taxes lawfully levied or assessed upon the Trust
Fund are not paid by the Company and the Subsidiaries, the
Trustee has the power to pay such taxes out of the Trust Fund and
must seek reimbursement from the Company and the Subsidiaries.
Prior to making any payment, the Trustee may require such
releases or other documents from any lawful taxing authority as
it deems necessary. The Trustee will contest the validity of
taxes in any manner deemed appropriate by the Company or its
counsel, but at the Company's and the Subsidiaries' expense, and
only if it has received an indemnity bond or other security
satisfactory to it to pay any such expenses. The Trustee (a)
will not be liable for any nonpayment of tax when it distributes
an interest hereunder on directions from the Committee and (b)
has no obligation to prepare or file any tax return on behalf of
the Trust Fund, any such return being the sole responsibility of
the Company and Subsidiaries. The Trustee will cooperate with
the Committee in connection with the preparation and filing of
any such return.
10.2 Third Persons. All persons dealing with the Trustee are
released from inquiring into the decisions or authority of the
Trustee and from seeing to the application of any moneys,
securities or other property paid or delivered to the Trustee.
10.3 Nonassignability; Nonalienation. Benefits payable to
Participants and their Beneficiaries under this Trust Agreement
may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
10.4 The Plans. The Trust and the Plans are parts of a single,
integrated employee benefit plan system and will be construed
together. In the event of any conflict between the terms of this
Trust Agreement and the agreements that constitute the Plans,
such conflict will be resolved in favor of this Trust Agreement.
10.5 Applicable Law. Except to the extent, if any, preempted by
ERISA, all questions arising in connection with this Trust
Agreement, including, without limitation, those pertaining to
construction, validity, effect, enforcement and remedies, will be
determined in accordance with the internal, substantive laws of
the State of Minnesota without regard to the conflict of law
principles of the State of Minnesota or of any other
jurisdiction. Any provision of this Trust Agreement prohibited
by law are ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
10.6 Notices and Directions. Whenever a notice or direction is
given by the Committee to the Trustee, it will be in the form
required by Section 2.1. Actions by the Company will be by the
Board or a duly authorized officer, with such actions certified
to the Trustee by an appropriately certified copy of the action
taken. The Trustee will be protected in acting upon any such
notice, resolution, order, certificate or other communication
believed by it to be genuine and to have been signed by the
proper party or parties.
10.7 Successors and Assigns. This Trust Agreement is binding
upon and inures to the benefit of the Company, the Subsidiaries
and the Trustee and their respective successors and assigns.
10.8 Gender and Number. Words used in one gender apply to the
other gender where applicable, and when the context requires, the
plural is to be read as the singular and the singular as the
plural.
10.9 Headings. Headings in this Trust Agreement are inserted for
convenience of reference only and if there is a conflict between
the headings and the text, the text controls.
10.10 Counterparts. This Trust Agreement may be executed in
an original and any number of counterparts, each of which will be
deemed to be an original of one and the same instrument.
10.11 Beneficial Interest. The Company and the Subsidiaries
are the true beneficiaries hereunder in that the payment of
benefits, directly or indirectly to or for a Participant or
Beneficiary by the Trustee, is in satisfaction of the Company's
and the Subsidiaries' liability therefor under the Plans.
Nothing in this Trust Agreement establishes any beneficial
interest in any person other than the Company and the
Subsidiaries.
10.12 Effective Date effective date of this Trust Agreement
is December 1, 1994.
Schedule 1
1. Ceridian Corporation Benefit Equalization Plan for benefits
payable with respect to Participants who terminate employment or
die after December 1, 1994
2. Ceridian Corporation Deferred Compensation Plan
<PAGE>
EXHIBIT 10.16
CERIDIAN CORPORATION
DEFERRED COMPENSATION PLAN
Table of Contents
ARTICLE 1 Description 1
1.1 Plan Name 1
1.2 Plan Purpose 1
1.3 Plan Type 1
ARTICLE 2 Participation 2
2.1 Eligibility 2
2.2 Transfer Among Participating Employers 2
2.3 Multiple Employment 2
2.4 Termination or Ceasing to be a Qualified Employee 2
2.5 Condition of Participation 2
2.6 Termination of Participation 3
ARTICLE 3 Benefits 4
3.1 Participant Accounts 4
3.2 Deferral Credits 4
3.3 Earnings Credits 5
3.4 Vesting 5
ARTICLE 4 Distribution 6
4.1 Distribution to Participant 6
4.2 Distribution to Beneficiary 8
4.3 Beneficiary Designation 8
4.4 Payment in Event of Incapacity 9
ARTICLE 5 Source of Payments; Nature of Interest 10
5.1 Establishment of Trust 10
5.2 Source of Payments 10
5.4 Non-assignability of Benefits 10
ARTICLE 6 Adoption, Amendment, Termination 11
6.1 Adoption 11
6.2 Amendment 11
6.3 Termination of Participation 11
6.4 Termination 12
ARTICLE 7 Definitions, Construction and Interpretation 13
i
7.17.1 Account 13
7.2 Active Participant 13
7.3 Administrator. 13
7.4 Affiliated Organization 13
7.5 Annual Bonus. 13
7.6 Base Salary 13
7.7 Board 14
7.8 Beneficiary 14
7.9 Code 14
7.10 Committee 14
7.11 Company 14
7.12 Cross Reference 14
7.13 Effective Date 14
7.14 Employee 14
7.15 ERISA 14
7.16 Governing Law 14
7.17 Headings 14
7.19 Participant 14
7.20 Participating Employer 15
7.21 Plan 15
7.22 Plan Year 15
7.23 Plan Rule 15
7.24 Qualified Employee 15
7.25 Trust 15
7.26 Trustee 15
ARTICLE 8 Administration 16
8.1 Administrator 16
8.2 Plan Rules and Regulations 16
8.3 Administrator's Discretion 16
8.4 Specialist's Assistance 16
8.5 Indemnification 16
8.6 Benefit Claim Procedure 16
ARTICLE 9 Miscellaneous 18
9.1 Withholding and Offsets 18
9.2 Other Benefits 18
9.3 No Warranties Regarding Tax Treatment 18
9.4 No Employment Rights Created 18
ARTICLE 1
Description
1.1 Plan Name. The name of the Plan is the "Ceridian
Corporation Deferred Compensation Plan."
1.2 Plan Purpose. The purpose of the Plan is to provide Active
Participants with the opportunity to defer a portion of the Base
Salary or Annual Bonus or both that would otherwise be payable to
them.
1.3 Plan Type. The Plan is an unfunded plan maintained
primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees and,
as such, is intended to be exempt from the provisions of Parts 2,
3 and 4 of Subtitle B of Title I of ERISA by operation of
sections 201(2), 301(a)(3) and 401(a)(4) thereof, respectively,
and from the provisions of Title IV of ERISA, to the extent
otherwise applicable, by operation of section 4021(b)(6) thereof.
The Plan is also intended to be unfunded for tax purposes. The
Plan will be construed and administered in a manner that is
consistent with and gives effect to the foregoing.
ARTICLE 2
Participation
2.1 Eligibility.
(A) Prior to the beginning of each Plan Year, the
Administrator will determine which Qualified Employees, if any,
are eligible to make deferral elections pursuant to Section 3.2
with respect to the Plan Year.
(B) At any time during a Plan Year, the Administrator may
determine that a Qualified Employee who became such after the
beginning of the Plan Year is eligible to make a deferral
election pursuant to Section 3.2 with respect to the remainder of
the Plan Year.
(C) The fact that an Employee has been eligible to make
deferral elections with respect to any particular Plan Year does
not give the Employee any right to make deferral elections in any
other Plan Year.
(D) In conjunction with each deferral election, a
Participant must elect the form and timing of distribution of
amounts deferred pursuant to the election and earnings thereon in
accordance with Section 4.1. The election is applicable to all
amounts credited to a Participant's Account pursuant to Section
3.2 for a given Plan Year. To be effective, a deferral election
must specify a benefit payment or commencement date that is
neither (1) before the earlier of (a) the last day of the third
Plan Year after the Plan Year to which the election relates or
(b) the Participant's termination of employment nor (2) after the
later of (a) the Participant's sixty-fifth birthday or (b) the
Participant's termination of employment.
2.2 Transfer Among Participating Employers. An Active
Participant who transfers employment from one Participating
Employer to another Participating Employer and who continues to
be a Qualified Employee after the transfer will, for the duration
of the Plan Year during which the transfer occurs, continue to
participate in the Plan, in accordance with the election in
effect for the portion of the Plan Year before the transfer, as a
Qualified Employee of such other Participating Employer.
2.3 Multiple Employment. An Active Participant who is
simultaneously employed as a Qualified Employee with more than
one Participating Employer will participate in the Plan as a
Qualified Employee of all such Participating Employers on the
basis of a single deferral election pursuant to Section 3.2
applied separately to his or her Base Salary and Annual Bonus
from each such Participating Employer.
2.4 Termination or Ceasing to be a Qualified Employee. An
Active Participant who, during a Plan Year, terminates his or her
employment with all Participating Employers or is determined by
the Administrator to have otherwise ceased to be a Qualified
Employee is not eligible for further deferral credits for the
Plan Year pursuant to Section 3.2 other than such credits
relating to the period prior to such termination or cessation.
2.5 Condition of Participation. Each Qualified Employee, as a
condition of participation, is bound by all of the terms and
conditions of the Plan and the Plan Rules, including but not
limited to the reserved right of the Company to amend or
terminate the Plan, and must furnish to the Administrator such
pertinent information, and must execute such election forms and
other instruments, as the Administrator or Plan Rules may require
by such dates as the Administrator or Plan Rules may establish.
2.6 Termination of Participation. A Participant or Beneficiary
will cease to be such as of the date on which his or her entire
Account balance has been distributed.
ARTICLE 3
Benefits
3.1 Participant Accounts.
(A) The Administrator will establish and maintain an
Account for each Participant to evidence amounts credited with
respect to the Participant pursuant to Sections 3.2 and 3.3. If
a Participant makes deferrals with respect to Base Salary, Annual
Bonus or both from more than one Participating Employer, the
Administrator will establish a separate Account for the
Participant with respect to each such Participating Employer.
(B) Within each Account, the Administrator will maintain
two or more separate subaccounts, each of which will evidence
amounts credited to the Account pursuant to Section 3.2 with
respect to which the Participant has elected an identical form
and timing of distribution.
3.2 Deferral Credits.
(A) For any Plan Year with respect to which the Company
chooses to permit deferrals of Base Salary, an Active Participant
may elect to defer a portion of his or her Base Salary for the
Plan Year from a minimum percentage or dollar amount specified in
Plan Rules to a maximum percentage or dollar amount specified in
Plan Rules and any percentage so elected will automatically apply
to the Participant's Base Salary as adjusted from time to time.
An election made pursuant to this subsection will not be
effective unless it is made on a properly completed election form
received by the Administrator by a date specified by the
Administrator which is prior to the first day of the Plan Year to
which the election relates or, in the case of an Active
Participant who is determined by the Administrator to be eligible
to participate for a Plan Year pursuant to Section 2.1(B), within
30 days after the Administrator's determination. An Active
Participant may revoke a deferral election made pursuant to this
subsection at any time. The revocation will be effective as soon
as administratively practicable after the Administrator receives
a properly completed revocation form. Any election or revocation
pursuant to this subsection applies only to Base Salary relating
to services performed after the effective date of the election or
revocation.
(B) For any Plan Year with respect to which the Company
chooses to permit deferrals of Annual Bonuses, (1) an Active
Participant who is determined by the Administrator to be eligible
to participate for a Plan Year pursuant to Section 2.1(A) may
elect to defer all or a portion of his or her Annual Bonus for
the Plan Year as specified in Plan Rules and (2) an Active
Participant who is determined by the Administrator to be eligible
to participate for a Plan Year pursuant to Section 2.1(B) may, if
and to the extent specified by the Administrator in conjunction
with such determination, elect to defer a portion of his or her
Annual Bonus for the Plan Year as specified in Plan Rules. An
election made pursuant to this subsection will not be effective
unless it is made on a properly completed election form received
by the Administrator by a date specified by the Administrator
which is prior to the first day of the Plan Year to which the
election relates or, in the case of an Active Participant who is
determined by the Administrator to be eligible to participate for
a Plan Year pursuant to Section 2.1(B), within 30 days after the
Administrator's determination. An election pursuant to this
subsection is irrevocable after the latest date by which it must
be received by the Administrator to be effective; provided, that
if a Participant terminates employment with all Affiliated
Organizations before the date as of which an Annual Bonus
deferral is credited to his or her Account, other than in
connection with a divestiture contemplated by Section 4.1(D)(2)
in which the Participant is covered in a successor plan, the
deferral election with respect to such Annual Bonus will be
automatically revoked as of the date of the Participant's
termination of employment.
(C) Notwithstanding Subsections (A) and (B), Plan Rules may
impose conditions and limitations on participation by any
Qualified Employee or any group of similarly situated Qualified
Employees.
(D) Reductions to an Active Participant's Base Salary and
Annual Bonus pursuant to this section will be credited to his or
her Account as of the day on which the Participant would have
otherwise received the Base Salary or Annual Bonus with respect
to which such credit relates.
3.3 Earnings Credits. As of the last day of each month, the
Administrator will, in accordance with Plan Rules, credit a
Participant's Account, including the undistributed portion of an
Account being distributed in the form of installment payments,
with earnings in an amount equal to the "applicable percentage"
of the average daily balance of the Account for the month. The
applicable percentage for a given month is the monthly equivalent
of the annual prime rate of interest in effect on the first
banking day of the month as reported in The Wall Street Journal
or other national financial publication selected by the
Administrator.
3.4 Vesting. Each Participant always has a fully vested
nonforfeitable interest in his or her Account.
ARTICLE 4
Distribution
4.1 Distribution to Participant.
(A) Form.
(1) Disability. Notwithstanding any election by a
Participant to the contrary, if a Participant is determined by
the Administrator to have terminated employment because of
illness, injury or disease that is likely to be of long or
indefinite duration or result in death, distribution to the
Participant will be made in the form of a lump sum payment.
(2) Other. Except as provided in clause (1),
distribution to a Participant will be made in the form of a lump
sum payment or annual installment payments for either five or ten
years, as elected by the Participant.
(B) Time.
(1) Disability. Distribution to a Participant
described in Subsection (A)(1) will be made as soon as
administratively practicable after the date on which the
Participant is determined to have terminated employment.
(2) Other. Except as provided in clause (1),
distribution to a Participant will be made or will begin, as the
case may be, on or as soon as administratively practicable after
the date or the occurrence of the event specified by the
Participant.
(C) Amount.
(1) Lump Sum. If distribution is made in the form of
a lump sum payment, the amount of the payment will be equal to
the sum of (a) the balance of the Participant's Account as of the
last day of the month immediately preceding the date of the
distribution plus (b) deferrals credited to the Account pursuant
to Section 3.2 since the last day of the month immediately
preceding the date of the distribution plus (c) earnings on the
average daily balance of the Account for the period beginning on
the first day of the month during which the distribution occurs
and ending on the day before the distribution at the rate in
effect for the month pursuant to Section 3.3.
(2) Installments. If distribution is made in the form
of annual installment payments, the amount of the payment each
year will be determined by dividing the Participant's Account
balance as of the last day of the month immediately preceding the
payment date by the total number of remaining payments (including
the payment in question); provided, that the amount of the final
installment payment will be determined in accordance with clause
(1).
(D) Special Rules. The provisions of this subsection apply
notwithstanding Subsection (A) or (B) or any election by a
Participant to the contrary.
(1) Nondeductibility. If the Committee determines in
good faith that there is a reasonable likelihood that any
compensation paid to a Participant by an Affiliated Organization
for a taxable year of the Affiliated Organization would not be
deductible by the Affiliated Organization solely by reason of the
limitation under Code section 162(m), to the extent deemed
necessary by the Committee to ensure that the entire amount of
any distribution to the Participant is deductible, the Committee
may defer all or any portion of the distribution. Any amounts
deferred pursuant to this subsection will continue to be credited
with earnings in accordance with Section 3.3. The deferred
amounts and earnings thereon will be distributed to the
Participant, or to his or her Beneficiary in the case of the
Participant's death, at the earliest possible date, as determined
by the Committee in good faith, on which the deductibility of
compensation paid or payable to the Participant for the taxable
year of the Affiliated Organization during which the distribution
is made will not be limited by Code section 162(m).
(2) Divestitures.
(a) If some or all of the assets of a
Participating Employer are sold or otherwise disposed of to an
unrelated third party, the Committee may but is not required to
cause to be distributed the Account of any Participant whose
employment with all Affiliated Organizations is terminated in
connection with the sale or disposition unless the acquiror
adopts a successor plan which is substantially similar to the
Plan in all material respects and expressly assumes the
Participating Employer's obligation to provide benefits to the
Participant, in which case the Participating Employer will cease
to have any obligation to provide benefits to the Participant
pursuant to the Plan as of the effective date of the assumption.
Any such distribution will be made in the form of a lump sum
payment as soon as administratively practicable after the date of
the sale or disposition. The amount of the payment will be
determined in accordance with Section 4.1(C)(1).
(b) If a Participating Employer ceases to be an
Affiliated Organization, unless otherwise provided in an
agreement between an Affiliated Organization and the
Participating Employer or an Affiliated Organization and an
unrelated third party acquiror:
(i) a Participant who is employed with the
Participating Employer or
(ii) a Participant who is not employed with
the Participating Employer but has an Account balance
attributable to the Participating Employer
will not become entitled to his or her
Account balance attributable to the Participating Employer solely
as a result of the cessation and the Participating Employer will,
after the date on which it ceases to be an Affiliated
Organization, continue to be solely responsible to provide
benefits to the Participant at least equal to the balance of the
Account as of the effective date of the cessation and as
thereafter increased by deferral credits relating to the period
before the effective date and earnings credits pursuant to
Section 3.3.
(E) Reduction of Account Balance. The balance of the
Account from which a distribution is made will be reduced by the
amount of the distribution as of the date of the distribution.
4.2 Distribution to Beneficiary.
(A) Form. In the event of a Participant's death, the
balance of the Participant's Account will be distributed to the
Participant's Beneficiary in a lump sum payment whether or not
payments had commenced to the Participant in the form of
installments prior to his or her death.
(B) Time. Distribution to a Beneficiary will be made as
soon as administratively practicable after the date on which the
Administrator receives notice of the Participant's death.
(C) Amount. The amount of the payment will be determined
in accordance with Section 4.1(C)(1).
(D) Reduction of Account Balance. The balance of the
Account from which a distribution is made will be reduced by the
amount of the distribution as of the date of the distribution.
(E) Beneficiary Designation.
(1) Each Participant may designate, on a form
furnished by the Administrator, one or more primary Beneficiaries
or alternative Beneficiaries to receive all or a specified part
of his or her Account after his or her death, and the Participant
may change or revoke any such designation from time to time. No
such designation, change or revocation is effective unless
executed by the Participant and received by the Administrator
during the Participant's lifetime. No designation of a
Beneficiary other than the Participant's spouse is effective
unless the spouse consents to the designation or the
Administrator determines that spousal consent cannot be obtained
because the spouse cannot reasonably be located or is legally
incapable of consenting. The consent must be in writing, must
acknowledge the effect of the election and must be witnessed by a
notary public. The consent is effective only with respect to the
Beneficiary or class of Beneficiaries so designated and only with
respect to the spouse who so consented.
(2) If a Participant -
(a) fails to designate a Beneficiary, or
(b) revokes a Beneficiary designation without
naming another Beneficiary, or
(c) designates one or more Beneficiaries none of
whom survives the Participant or exists at the time in question,
for all or any portion of his or her Account, such
Account or portion will be paid to the Participant's surviving
spouse or, if the Participant is not survived by a spouse, to the
representative of the Participant's estate.
(3) The automatic Beneficiaries specified above and,
unless the designation otherwise specifies, the Beneficiaries
designated by the Participant, become fixed as of the
Participant's death so that, if a Beneficiary survives the
Participant but dies before the receipt of the payment due such
Beneficiary, the payment will be made to the representative of
such Beneficiary's estate. Any designation of a Beneficiary by
name that is accompanied by a description of relationship or only
by statement of relationship to the Participant is effective only
to designate the person or persons standing in such relationship
to the Participant at the Participant's death.
4.3 Payment in Event of Incapacity. If any individual entitled
to receive any payment under the Plan is, in the judgment of the
Administrator, physically, mentally or legally incapable of
receiving or acknowledging receipt of the payment, and no legal
representative has been appointed for the individual, the
Administrator may (but is not required to) cause the payment to
be made to any one or more of the following as may be chosen by
the Administrator: the Beneficiary (in the case of the
incapacity of a Participant); the institution maintaining the
individual; a custodian for the individual under the Uniform
Transfers to Minors Act of any state; or the individual's spouse,
children, parents, or other relatives by blood or marriage. The
Administrator is not required to see to the proper application of
any such payment and the payment completely discharges all claims
under the Plan against the Participating Employer, the Plan and
Trust to the extent of the payment.
ARTICLE 5
Source of Trust
5.1 Establishment of Trust. The Company may establish a Trust
with an independent corporate trustee. The Trust must be a
grantor trust that conforms substantially with the model trust
described in Revenue Procedure 92-64. The Participating
Employers may from time to time transfer to the Trust cash,
marketable securities or other property acceptable to the Trustee
in accordance with the terms of the Trust.
5.2 Source of Payments.
(A) Each Participating Employer will pay, from its general
assets, the portion of any benefit pursuant to Article 4 or
Section 6.3 or 6.4 attributable to a Participant's Account with
respect to that Participating Employer, and all costs, charges
and expenses relating thereto.
(B) The Trustee will make distributions to Participants and
Beneficiaries from the Trust in satisfaction of a Participating
Employer's obligations under the Plan in accordance with the
terms of the Trust. The Participating Employer is responsible
for paying any benefits attributable to a Participant's Account
with respect to that Participating Employer that are not paid by
the Trust.
5.3 Status of Plan. Nothing contained in the Plan or Trust is
to be construed as providing for assets to be held for the
benefit of any Participant or any other person or persons to whom
benefits are to be paid pursuant to the terms of this Plan, the
Participant's or other person's only interest under the Plan
being the right to receive the benefits set forth herein. The
Trust is established only for the convenience of the
Participating Employers and the Participants, and no Participant
has any interest in the assets of the Trust prior to distribution
of such assets pursuant to the Plan. To the extent the
Participant or any other person acquires a right to receive
benefits under this Plan or the Trust, such right is no greater
than the right of any unsecured general creditor of the
Participating Employer.
5.4 Non-assignability of Benefits. The benefits payable under
the Plan and the right to receive future benefits under the Plan
may not be anticipated, alienated, sold, transferred, assigned,
pledged, encumbered, or subjected to any charge or legal process.
ARTICLE 6
Adoption, Amendment, Termination
6.1 Adoption. With the prior approval of the Administrator, an
Affiliated Organization may adopt the Plan and become a
Participating Employer by furnishing to the Administrator a
certified copy of a resolution of its Board adopting the Plan.
6.2 Amendment.
(A) The Company reserves the right to amend the Plan at any
time to any extent that it may deem advisable. To be effective,
an amendment must be stated in a written instrument approved in
advance or ratified by the Company's Board and executed in the
name of the Company by its President or a Vice President and
attested by the Secretary or an Assistant Secretary.
(B) An amendment adopted in accordance with Subsection (A)
is binding on all interested parties as of the effective date
stated in the amendment; provided, however, that no amendment
will have any retroactive effect so as to deprive any
Participant, or the Beneficiary of a deceased Participant, of any
benefit to which he or she is entitled under the terms of the
Plan in effect immediately prior to the effective date of the
amendment, determined in the case of a Participant who is
employed by an Affiliated Organization, as if he or she had
terminated employment immediately prior to the effective date of
the amendment.
(C) Any amendment that changes the method of determining
the earnings credited to Participants' Accounts pursuant to
Section 3.3 is effective with respect to the portion of the
Accounts attributable to credits made before the date on which
the amendment is adopted only if the Company's Board determines
in good faith that on that date, it is reasonably likely that, in
the long run, the new method will not result in materially lower
earnings credits than the old method.
(D) The provisions of the Plan in effect at the termination
of a Participant's employment will, except as otherwise expressly
provided by a subsequent amendment, continue to apply to such
Participant.
6.3 Termination of Participation. Notwithstanding any other
provision of the Plan to the contrary, if determined by the
Administrator to be necessary to ensure that the Plan is exempt
from ERISA to the extent contemplated by Section 1.3 or upon the
Administrator's determination that a Participant's interest in
the Plan has been or is likely to be includable in the
Participant's gross income for federal income tax purposes prior
to the actual payment of benefits pursuant to the Plan, the
Administrator may take any or all of the following steps:
(a) terminate the Participant's future participation in the
Plan;
(b) cause the Participant's entire interest in the Plan to
be distributed to the Participant in the form of an immediate
lump sum; and/or
(c) transfer the benefits that would otherwise be payable
pursuant to the Plan for all or any of the Participants to a new
plan that is similar in all material respects (other than those
which require the action in question to be taken.)
6.3 Termination. The Company reserves the right to terminate
the Plan in its entirety at any time. Each Participating
Employer reserves the right to cease its participation in the
Plan at any time. The Plan will terminate in its entirety or
with respect to a particular Participating Employer as of the
date specified by the Company or such Participating Employer in a
written instrument by its authorized officers to the
Administrator, adopted in the manner of an amendment. Upon the
termination of the Plan in its entirety or with respect to any
Participating Employer, the Company or Participating Employer, as
the case may be, will either cause (a) any benefits to which
Participants have become entitled prior to the effective date of
the termination to continue to be paid in accordance with the
provisions of Article 4 or (b) the entire interest in the Plan of
any or all Participants, or the Beneficiaries of any or all
deceased Participants, to be distributed in the form of an
immediate lump sum payment.
ARTICLE 7
Definitions, Construction and Interpretation
The definitions and rules of construction and interpretation set
forth in this article apply in construing the Plan unless the
context otherwise indicates.
7.1 Account. "Account" means the bookkeeping account
maintained with respect to a Participant pursuant to Section
3.1(A) or the subaccount maintained pursuant to Section 3.1(B),
as the context requires.
7.2 Active Participant. "Active Participant" with respect
to a Plan Year is a Qualified Employee who the Administrator has
determined pursuant to Section 2.1 is eligible to make deferrals
pursuant to the Plan during the Plan Year, for the portion of the
Plan Year during which he or she remains eligible.
7.3 Administrator. The "Administrator" of the Plan is the
Company or person to whom administrative duties are delegated
pursuant to the provisions of Section 8.1, as the context
requires.
7.4 Affiliated Organization. An "Affiliated Organization"
is the Company and any corporation that is a member of a
controlled group of corporations within the meaning of Code
section 414(b) that includes the Company.
7.5 Annual Bonus. "Annual Bonus" with respect to a
Participant for a Plan Year means the discretionary annual cash
bonus paid to the Participant by a Participating Employer during
the calendar quarter first following the Plan Year or that would
have been so paid but for an election made pursuant to the Plan.
7.6 Base Salary. "Base Salary" with respect to a
Participant for a Plan Year means the regular cash remuneration
for services rendered as a Qualified Employee paid to the
Participant by a Participating Employer during the Plan Year or
that would have been so paid but for an election made pursuant to
the Plan, excluding the following:
(a) any bonus;
(b) the value of life insurance coverage included in
the Participant's wages under Code section 79;
(c) any car allowance, moving expense or mileage
reimbursement;
(d) any educational assistance payment;
(e) any severance pay;
(f) any payments under any qualified or nonqualified
plan of deferred compensation;
(g) any benefit under any qualified or nonqualified
stock option or stock purchase plan; or
(h) any other element of compensation specified in
Plan Rules.
7.7 Board. "Board" means the board of directors of the
Affiliated Organization in question. When the Plan provides for
an action to be taken by the Board, the action may be taken by
any committee or individual authorized to take such action
pursuant to a proper delegation by the board of directors in
question.
7.8 Beneficiary. "Beneficiary" with respect to a Participant is
the person designated or otherwise determined under the
provisions of Section 4.2(E) as the distributee of benefits
payable after the Participant's death who has not ceased to be a
Beneficiary pursuant to Section 2.6.
7.9 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
7.10 Committee. "Committee" means the Compensation and Human
Resources Committee of the Company's Board of Directors (or any
successor Committee).
7.11 Company. "Company" means Ceridian Corporation or any
successor thereto.
7.12 Cross Reference. References within a section of the Plan to
a particular subsection refer to that subsection within the same
section and references within a section or subsection to a
particular clause refer to that clause within the same section or
subsection, as the case may be.
7.13 Effective Date. "Effective Date" means January 1, 1995.
7.14 Employee. "Employee" is an individual who performs services
as a common law employee of a Participating Employer.
7.15 ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
7.16 Governing Law. To the extent that state law is not
preempted by the provisions of ERISA, or any other laws of the
United States, all questions pertaining to the construction,
validity, effect and enforcement of the Plan will be determined
in accordance with the internal, substantive laws of the State of
Minnesota without regard to its conflict of laws rules of the
State of Minnesota or any other jurisdiction.
7.17 Headings. The headings of articles and sections are
included solely for convenience of reference; if there exists any
conflict between such headings and the text of the Plan, the text
will control.
7.18 Number and Gender. Wherever appropriate, the singular may
be read as the plural, the plural may be read as the singular and
one gender may be read as the other gender.
7.19 Participant. "Participant" is a current or former Active
Participant to whose Account amounts have been credited pursuant
to Article 3 and who has not ceased to be a Participant pursuant
to Section 2.6.
7.20 Participating Employer. "Participating Employer" is the
Company and any other Affiliated Organization that has adopted
the Plan, or all of them collectively, as the context requires.
An Affiliated Organization will cease to be a Participating
Employer upon a termination of the Plan as to its Employees and
the satisfaction in full of all of its obligations under the Plan
or upon its ceasing to be an Affiliated Organization.
7.21 Plan. "Plan" means the Ceridian Corporation Deferred
Compensation Plan, as from time to time amended or restated.
7.22 Plan Year. "Plan Year" means the calendar year.
7.23 Plan Rule. "Plan Rule" is a rule, policy, practice or
procedure adopted by the Administrator pursuant to Section 8.2.
7.24 Qualified Employee. "Qualified Employee" means an Employee
who is considered to be a management or highly compensated
employee under Plan Rules.
7.25 Trust. "Trust" means any trust or trusts established by the
Company pursuant to Section 5.1.
7.26 Trustee. "Trustee" means the independent corporate trustee
or trustees that at the relevant time has or have been appointed
to act as Trustee of the Trust.
ARTICLE 8
Administration
8.1 Administrator. The general administration of the Plan and
the duty to carry out its provisions is vested in the Company.
The Company's Vice President, Human Resource Services, or his or
her functional equivalent in the event of a material change in
the duties or title of such position, will perform such duty on
behalf of the Company. Such Vice President may delegate such
duty or any portion thereof to a named person and may from time
to time revoke such authority and delegate it to another person.
8.2 Plan Rules and Regulations. The Administrator has the
discretionary power and authority to make such Plan Rules as the
Administrator determines to be consistent with the terms, and
necessary or advisable in connection with the administration, of
the Plan and to modify or rescind any such Plan Rules.
8.3 Administrator's Discretion. The Administrator has the
discretionary power and authority to make all determinations
necessary for administration of the Plan, except those
determinations that the Plan requires others to make, and to
construe, interpret, apply and enforce the provisions of the Plan
and Plan Rules whenever necessary to carry out its intent and
purpose and to facilitate its administration, including, without
limitation, the discretionary power and authority to remedy
ambiguities, inconsistencies, omissions and erroneous benefit
calculations. In the exercise of its discretionary power and
authority, the Administrator will treat all similarly situated
persons uniformly.
8.4 Specialist's Assistance. The Administrator may retain such
actuarial, accounting, legal, clerical and other services as may
reasonably be required in the administration of the Plan, and may
pay reasonable compensation for such services. All costs of
administering the Plan will be paid by the Participating
Employers.
8.5 Indemnification. The Participating Employers jointly and
severally agree to indemnify and hold harmless, to the extent
permitted by law, each director, officer, and employee of any
Affiliated Organization against any and all liabilities, losses,
costs and expenses (including legal fees) of every kind and
nature that may be imposed on, incurred by, or asserted against
such person at any time by reason of such person's services in
connection with the Plan, but only if such person did not act
dishonestly or in bad faith or in willful violation of the law or
regulations under which such liability, loss, cost or expense
arises. The Participating Employers have the right, but not the
obligation, to select counsel and control the defense and
settlement of any action for which a person may be entitled to
indemnification under this provision.
8.6 Benefit Claim Procedure.
(A) If a request for a benefit by a Participant or
Beneficiary of a deceased Participant is denied in whole or in
part, he or she may, not later than 30 days after the denial,
file with the Administrator a written claim objecting to the
denial.
(B) The Administrator, not later than 90 days after receipt
of such claim, will render a written decision to the claimant on
the claim. If the claim is denied, in whole or in part, such
decision will include the reason or reasons for the denial; a
reference to the Plan provisions on which the denial is based; a
description of any additional material or information, if any,
necessary for the claimant to perfect his or her claim; an
explanation as to why such information or material is necessary;
and an explanation of the Plan's claim procedure.
(C) The claimant may file with the Administrator, not later
than 60 days after receiving the Administrator's written
decision, a written notice of request for review of the
Administrator's decision, and the claimant or his or her
representative may thereafter review relevant Plan documents
which relate to the claim and may submit written comments to the
Administrator.
(D) Not later than 60 days after receipt of such review
request, the Administrator will render a written decision on the
claim, which decision will include the specific reasons for the
decision, including a reference to the Plan's specific provisions
where appropriate.
(E) The foregoing 90 and 60-day periods during which the
Administrator must respond to the claimant may be extended by up
to an additional 90 or 60 days, respectively, if special
circumstances beyond the Administrator's control so require and
notice of such extension is given to the claimant prior to the
expiration of such initial 90 or 60-day period, as the case may
be.
ARTICLE 9
Miscellaneous
9.1 Withholding and Offsets. The Participating Employers and
the Trustee retain the right to withhold from any compensation,
deferral and/or benefit payment pursuant to the Plan, any and all
income, employment, excise and other tax as the Participating
Employers or Trustee deems necessary and the Participating
Employers may offset against amounts payable to a Participant or
Beneficiary under the Plan any amounts then owing to the
Participating Employers by such Participant or Beneficiary.
9.2 Other Benefits. Neither amounts deferred nor amounts paid
pursuant to the Plan constitute salary or compensation for the
purpose of computing benefits under any other benefit plan,
practice, policy or procedure of a Participating Employer unless
otherwise expressly provided thereunder.
9.3 No Warranties Regarding Tax Treatment. The Participating
Employers make no warranties regarding the tax treatment to any
person of any deferrals or payments made pursuant to the Plan and
each Participant will hold the Administrator and the
Participating Employers and their officers, directors, employees,
agents and advisors harmless from any liability resulting from
any tax position taken in good faith in connection with the Plan.
9.4 No Employment Rights Created. Neither the establishment of
or participation in the Plan gives any Employee the right to
continued employment or limits the right of the Participating
Employer to discharge, transfer, demote, modify terms and
conditions of employment or otherwise deal with any Employee
without regard to the effect which such action might have on him
or her with respect to the Plan.
<PAGE>
ISSC/Ceridian Corporation
Agreement for Information Technology Services
CONFIDENTIAL INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND IS BEING
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
OMISSIONS IN THIS AGREEMENT ARE INDICATED BY THE WORDS "CONFIDENTIAL
INFORMATION OMITTED" OR THE REFERENCE ["CIO"].
This Agreement for Information Technology Services ("Agreement"), dated
as of January 10, 1995, is by and between Ceridian Corporation acting
through its Ceridian Employer Services Division having a place of business
at 300 Embassy Row, Atlanta, Georgia 30328, ("CES"), and Integrated
Systems Solutions Corporation, a wholly owned subsidiary of International
Business Machines Corporation, having its headquarters at 44 South
Broadway, White Plains, New York 10601 ("ISSC"). CES and ISSC agree that
the following terms and conditions will apply to services provided by ISSC
under this Agreement. CES and ISSC may be referred to individually as a
"Party" and collectively as the "Parties."
TABLE OF CONTENTS
Section Title Page
1.0 Background and Objectives 6
2.0 Definitions, Documents and Term 6
2.1 General Definitions 6
2.2 Associated Contract Documents 11
2.3 Term 12
2.4 Renewal and Expiration 12
3.0 Overview 12
3.1 Implementation Plan 12
3.2 Ceridian-Owned Software 13
3.3 Third Party Software 13
3.4 Software Currency 13
3.5 Required Consents 13
3.6 Joint Verification 14
3.7 On-going Relationship 14
4.0 Services 14
4.1 ISSC Project Executive 15
4.2 Personnel Replacement 16
4.3 Non-Competition 17
4.4 Use of Subcontractors 17
4.5 Alternate Source for Work 18
4.6 CES Project Executive 18
4.7 Performance 19
4.8 Efficient Use of Resources 19
4.9 Management and Control 20
4.10 Annual Technology Plan 22
4.11 CES Approvals and Notification 22
5.0 Operations 23
5.1 ISSC Machines 23
1
5.2 Software Services 23
5.3 Operations, Support and Maintenance 23
5.4 Consolidation and Relocation Services 24
5.5 Systems Management 24
5.6 Production Services 24
5.7 Software 25
5.8 CES-Retained Machines 25
5.9 Connectivity 26
5.10 Viruses 26
5.11 Software Licenses 26
6.0 Additional Services 27
6.1 Help Desk 27
6.2 Security 27
6.3 Back-up and Disaster Recovery 27
6.4 Facilities and Support Services 27
6.5 Audits 28
7.0 Charges and Expenses 29
7.1 Annual Services Charge 29
7.2 Additional Resource Charges 29
7.3 [CIO] Adjustments 29
7.4 Cost of Living Adjustment 29
7.5 New Entities 29
7.6 New Services 30
7.7 Taxes 30
7.8 Reduction of CES Requirements for the Base System 31
7.9 Services Transfer Assistance 32
8.0 Invoicing and Payment 33
8.1 Annual Services Charge Invoices 33
8.2 ARC and COLA Invoicing 34
8.3 Capacity Invoicing 34
8.4 Other Charges 34
8.5 Invoice Payment 34
8.6 Proration 34
8.7 Disputed Charges/Credits 34
8.8 Other Credits 35
9.0 Intellectual Property Rights 35
9.1 Intellectual Property Definitions 35
9.2 ISSC Developed Code 36
9.3 CES Developed Code 37
9.4 General Rights 37
10.0 Confidentiality/Data Security 38
10.1 Confidential Information 38
10.2 Obligations 38
10.3 Exclusions 39
10.4 Protection of CES Information 40
2
10.5 Loss of Confidential Information 40
10.6 Limitation 40
11.0 Termination 40
11.1 Termination for Convenience 40
11.2 Termination for Change of Control 41
11.3 [CIO] 41
11.4 Termination Proration 41
11.5 Termination [CIO] 42
11.6 [CIO] 42
11.7 Extension of Service 43
11.8 Other Rights Upon Termination 43
12.0 Liability 44
12.1 General Intent 44
12.2 Damages 44
13.0 Remedies 46
13.1 Warranty 46
13.2 Work Standards 46
13.3 Ownership of CES-Retained Machines 46
13.4 Noninfringement 46
13.5 Compliance with Obligations 47
13.6 Disclaimer 47
13.7 Disabling Code 47
13.8 Authorization and Enforceability 47
13.9 Regulatory and Corporate Proceedings 48
14.0 Indemnities 48
14.1 Indemnity by ISSC 48
14.2 Indemnity by CES 49
14.3 Employment Actions 50
14.4 Cross Indemnity and Contribution 50
14.6 Indemnification Procedures 51
15.0 Insurance and Risk of Loss 52
15.1 ISSC Insurance 52
15.2 CES Insurance 53
15.3 Risk of Property Loss 54
15.4 Mutual Waiver of Subrogation 55
16.0 Publicity 55
17.0 Review Committee and Dispute Resolution 55
17.1 Joint Advisory Committee 55
17.2 Dispute Resolution 56
17.3 Continued Performance 57
3
18.0 General 57
18.1 Control of Services 57
18.2 Right to Perform Services for Others 57
18.3 Scope of Services 57
18.4 Amendments and Revisions 57
18.5 Force Majeure 57
18.6 Nonperformance 58
18.7 Remarketing 58
18.8 Waiver 59
18.9 Severability 59
18.10 Limitations Period upon Termination 59
18.11 Counterparts 59
18.12 Governing Law 59
18.13 Binding Nature and Assignment 60
18.14 Notices 60
18.15 No Third Party Beneficiaries 61
18.16 Other Documents 62
18.17 Consents and Approvals 62
18.18 Headings 62
SUPPLEMENT
Annual Services Charge
Capacity Rates
Additional Resource Charge Rates
Termination Charge
Capacity Plan
Baselines
Disaster Recovery Options
4
TABLE OF SCHEDULES
Schedule Title
Schedule A Applications Software
Schedule B Systems Software
Schedule C CES-Retained Machines
Schedule D ISSC Machines
Schedule E Support Services, Performance Standards and Operational
Responsibilities
Schedule F Procedures Manual Table of Contents
Schedule G Disaster Recovery Services
Schedule H Implementation Plan
Schedule I Operations Help Desk
Schedule J ISSC Charges, Measures of Utilization and Financial
Responsibilities
Schedule K Application Installation Standards
Schedule L Security Procedures
Schedule M Confidential Information Categories
5
1.0 Background and Objectives
a) CES desires that:
1) ISSC and CES mutually work to define and develop a fully
operational data processing environment to support the CES
Business; and
2) ISSC provide, operate, maintain and support a
professional, cost effective and flexible operational data
processing environment (including, without limitation, the ISSC
facility housing such environment) for the support of the CES
Business.
b) ISSC, a large and well-known provider of a broad range of
information management and related services (including without
limitation, the services described in Section 1.0(a)(1) and (2)
above), desires to perform and provide the services described in
Section 1.0(a)(1) and (2) above as described in this Agreement.
The Parties intend that ISSC, and any of its subcontractors
performing Services under this Agreement, will constantly strive to
improve the efficiency, quality and effectiveness of the Services
to be provided to CES in accordance with this Agreement.
c) This Agreement documents the terms and conditions under which
CES agrees to purchase and ISSC agrees to perform and provide the
Services.
d) In entering into this Agreement, the Parties have identified
specific objectives and goals intended to be satisfied throughout
performance of this Agreement. In determining these goals and
objectives CES has made certain assumptions, which ISSC has
reviewed, but not validated, regarding the volume of transactions
that could be processed as part of the Services. These objectives
and goals include the following:
1) a level and quality of Services to facilitate retention
and expansion of CES's customer base.
2) ability to transition services to CES or its designee
with minimal disruption to the CES Business; and
3) flexibility regarding evolving technologies and CES
Business' needs;
e) The provisions of this Section are intended to be a general
introduction to this Agreement and are not intended to expand the
scope of the Parties' obligations hereunder or to alter the plain
meaning of the terms and conditions of this Agreement. However, to
the extent the terms and conditions of this Agreement are unclear
or ambiguous, such terms and conditions are to be interpreted and
construed consistent with the objectives set forth in the preceding
paragraphs of this Section 1.0.
2.1 General Definitions
As used in this Agreement:
a) (CIO} has the meaning given in Section V.B of Schedule J.
6
b) "Additional Resource Charge Rate" ("ARC Rate") means the
charge rate for each Resource Unit in excess of its Baseline, as
set forth in the Supplement and Schedule J.
c) "Additional Resource Charges" ("ARCs") means the charges for
utilization of Resource Units in excess of the Baseline quantity
set forth in the Supplement and described in Schedule J.
d) "Affiliate" means, with respect to a Party, any entity
(including joint ventures) at any time Controlling, Controlled by
or under common Control with, such Party.
e) "Applications Development" ("AD/M") means the programming of
(1) any new applications software, (2) regulatory/statutory
mandated changes, (3) version upgrades to applications software and
(4) changes or enhancements to existing applications programs.
Programming effort shall include, without limitation, the pre and
post development analysis, planning, design, coding, testing,
installation, provision of program and training documentation and
training necessary to complete the task.
f) "Annual Services Charge" means the fixed charge to CES for
ISSC's provision of the Services and includes the CPU and DASD
capacity and the quantity of tape Resource Units set forth under
Capacity Plan and Baselines in the Supplement.
g) "Applications Software" means those programs and programming
resident on ISSC Machines, including all supporting documentation
and media, that perform specific user related information
processing and communication tasks. Applications Software as of the
Commencement Date is listed in Schedule A, which will be updated
pursuant to Section 2.2 to reflect the then current Applications
Software.
h) "Available Resources" has the meaning given in Section 18.7.
i) "Baseline" means the specified quantity of resources for a
resource category included within the Annual Services Charge, as
set forth under the category entitled "Baselines" in the
Supplement.
j) "Cable" or "Cabling" means the wires or cables that
interconnect Machines and/or connect a Machine to a facility
connection point.
k) "Capacity Plan" has the meaning given in Section IV.A of
Schedule J.
l) "Ceridian-Owned Software" has the meaning given in Section
3.2.
m) "CES Business" means the services that CES provides to its
customers.
n) "CES Facilities" means any CES facilities used or required by
ISSC in connection with ISSC's provision of the Services.
o) "CES-Retained Machines" means Machines physically located at
the ISSC Data Center and Recovery Centers that are owned, leased or
rented and retained by CES after the Commencement Date and for
which CES has retained responsibility except as described in this
Agreement. CES-Retained Machines are listed in Schedule C which
will be updated pursuant to Section 2.2 to reflect the then current
CES-Retained Machines.
7
p) "CES Service Employees" has the meaning given in Section
11.8(e).
q) "Change of Control" has the meaning given in Section 18.13.
r) "Change Management Procedures" has the meaning given in
Section 4.9(b).
s) "Claim" has the meaning given in Section 14.6.
t) "Code" has the meaning given in Section 9.0.
u) "Commencement Date" means January 1, 1995.
v) "Confidential Information" has the meaning given in Section
10.1.
w) "Contract Year" means the first 12 months following the
Commencement Date and each 12 month period thereafter beginning on
the anniversary of the Commencement Date.
x) "Control," "Controlling" or "Controlled" means the legal,
beneficial or equitable ownership, directly or indirectly, of more
than 50% of the aggregate of all voting equity interests in such
entity.
y) "Data Center" means the ISSC Machines, CES-Retained Machines
and Software to be located at 1505 Windward Concourse, Alpharetta,
Georgia 30202, ("Site 1") as of the Commencement Date and at the
second location to be provided hereunder if applicable ("Site 2")
and at such other locations as ISSC may establish thereafter.
z) "DEC Machines" means the Machines listed in Schedule C under
the heading "DEC Machines" or the then current replacement or
equivalent thereof.
aa) "Deferral Credit" has the meaning given in Section V.A of
Schedule J
ab) "Derivative Work" has the meaning given in Section 9.1(a).
ac) "Develop" has the meaning given in Section 9.0.
ad) "Direct Damages Cap" has the meaning given in Section 12.2(a).
ae) "Disaster Recovery" has the meaning given in Schedule G.
af) "Equipment Plan" has the meaning given in Section V.A of
Schedule J.
ag) "Execution Date" means the date this Agreement is signed by
both Parties.
ah) "Force Majeure Event" has the meaning given in Section
18.5(a).
ai) "IBM Systems Software" means the Systems Software licensed by
IBM or its Affiliates operating on the ISSC Machines in the Data
Center.
aj) "Implementation Plan" has the meaning given in Section 3.1 and
Schedule H.
8
ak) "Indemnified Party" has the meaning given in Section 14.6(a).
al) "Indemnifying Party" has the meaning given in Section 14.6(a).
am) "ISSC Machines" means Machines which are provided by ISSC on
or after the Commencement Date in order to meet its obligations
under this Agreement. ISSC Machines as of the Commencement Date
are listed in Schedule D, which will be updated pursuant to Section
2.2 to reflect the then current ISSC Machines.
an) "Joint Advisory Committee" has the meaning given in Section
17.1.
ao) "Level One Support" means, with respect to hardware and
software, receiving the initial call, problem recording, isolation
to a failing subsystem, (e.g., workstation, network, host
application, etc.), call routing and problem tracking.
ap) "Level Two Support" means, with respect to hardware and
software, performing the maintenance diagnostic routines to isolate
a problem to a failing component of the subsystem and includes
replacing the failing component.
aq) "Level Three Support" means, with respect to hardware and
software, diagnosing or repairing the failure within the component.
ar) "Losses" means all losses, liabilities, damages and claims
(including taxes), and all related costs and expenses (including
any and all reasonable attorneys' fees and reasonable costs of
investigation, litigation, settlement, judgment, interest and
penalties).
as) "Machines" means the equipment used to provide the Services
including the following:
(1) computer equipment, including all computers and
associated features, peripheral devices, and other equipment; and
(2) communications equipment, including all cabling,
communications controllers, multiplexors, modems/DSUs and all other
communications equipment.
at) "Maintenance Release" means those Software fixes and updates
provided by the Software vendor as part of normal maintenance
service for which there is no additional cost to ISSC.
au) "Materials" has the meaning given in Section 9.1(b).
av) [CIO] has the meaning given in Schedule E.
aw) [CIO] has the meaning given in Section 4.0(d).
ax) [CIO] has the meaning given in Section 4.0(d).
ay) "New Services" has the meaning given in Section 7.6.
az) "Operational Support" means the provision of data backups,
monitoring of consoles, mounting of tapes, reloading and any other
standard procedures documented in the
9
Procedures Manual and/or
other requested activities consistent with the normal and customary
operation of the machine environment.
ba) "Out-of-Pocket Expenses" means all actual direct payments made
by ISSC for equipment, materials, supplies and other services
purchased by ISSC that ISSC would not otherwise have expended in
connection with the provision of the Services hereunder and will
include, but not be limited to, ISSC's reasonable indirect expenses
such as ISSC's personnel and overhead costs or allocations thereof,
administrative expenses or other partially or fully burdened charge
factors consistent with industry practice in connection with
providing the services; provided, however, that such costs shall
have been approved in writing by CES in advance and in no event
will any profit be included in the concept of Out-of-Pocket
Expenses, and ISSC shall not be obligated to perform any functions
for which Out-of-Pocket Expenses are applicable and have not been
approved.
bb) [CIO] means the [CIO] and [CIO] responsibilities under which
the Services will be provided. The [CIO] are described in Section
4.7 and listed in Schedule E.
bc) [CIO] has the meaning given in Section V.G of Schedule J.
bd) "Procedures Manual" has the meaning given in Section 4.9(a).
be) [CIO] has the meaning given in Section V.G of Schedule J.
bf) "Recovery Center" has the meaning given in Section II.E of
Schedule G.
bg) "Replacement Services" has the meaning given in Section
7.6(c).
bh) "Required Consents" means any consents or approvals required
to be obtained to grant ISSC the same rights of access and use of
the Software and CES-Retained Machines that CES has with respect to
the Software and CES-Retained Machines.
bi) [CIO] has the meaning given in Section 3.5.
bj) "Required Consents Charges" has the meaning given in Section
3.5.
bk) "Resource Unit" ("RU") means a particular unit of resource
utilization, as described in Schedule J and set forth under
Baseline quantities in the Supplement.
bl) [CIO] has the meaning given in Section V.G. of Schedule J.
bm) [CIO] has the meaning set forth in Schedule E.
bn) "Services," ("Information Technology Services") means those
services and functions which ISSC agrees to provide to CES pursuant
to this Agreement.
bo) "Services Transfer Assistance" has the meaning given in
Section 7.9.
bp) "Similarly Situated Customers" means ISSC customers, during
the term of such customer's contracts with ISSC, with substantially
the same mix of on-line and batch processing
10
applications and
systems resources utilization at similar or lesser volumes and for
whom ISSC is providing services substantially similar to the
Services ISSC is providing CES, using a substantially similar
charging methodology.
bq) "Software" means both Applications Software and Systems
Software.
br) "Software Maintenance" means problem analysis, defect
identification, fixes and installation of Maintenance Releases and
Versions.
bs) "Systems Software" means those programs and programming
resident on the Machines, including all IBM Systems Software and
Third Party Systems Software and all supporting documentation and
media, that perform tasks basic to the functioning of the Machines
that are necessary to operate the Applications Software or
otherwise support the provision of Services by ISSC. Systems
Software includes, but is not limited to, operating systems,
software utilities, data security software and data base managers.
Systems Software as of the Commencement Date is listed in Schedule
B, which shall be updated pursuant to Section 2.2 to reflect the
then current Systems Software.
bt) "Technology Plan" has the meaning given in Section 4.10.
bu) "Term" has the meaning given in Section 2.3 and any extension
and renewal term described in this Agreement.
bv) [CIO] has the meaning given in Section 11.1.
bw) "Third Party Systems Software" means Systems Software other
than IBM Systems Software.
bx) "Type I Materials," "Type II Materials," Type III Materials,"
"Type IV Materials," Type V Materials," "Type VI Materials" and
Type VII Materials" have the meanings given in Sections 9.1(c),
9.1(d), 9.1(e), 9.1(f), 9.1(g), 9.1(h) and 9.1(i), respectively.
by) "Version" means those Software updates that generally add
function to the existing Software and are provided by the Software
vendor at a fee over and above the standard software maintenance
costs.
bz) "Virus" or "Viruses" has the meaning given in Section 5.10.
ca) "Wind-Down Expenses" has the meaning given in Section 11.3.
cb) "Wire" or "Wiring" means those cables or wires that are
internal to the building structure that interconnect machines
within the same building or between buildings.
2.2 Associated Contract Documents
This Agreement also includes:
a) Supplement ("Supplement") containing the charges and certain
other necessary information; and
11
b) Schedules A through M which will be updated by the Parties as
necessary or appropriate during the Term.
2.3 Term
The term of this Agreement will begin as of 12:01 a.m. on the
Commencement Date and will end as of 12:00 midnight on December 31,
2004, (the "Term"), unless earlier terminated or extended in
accordance with this Agreement.
2.4 Renewal and Expiration
ISSC agrees to notify CES, in writing, whether it desires to renew
this Agreement not less than [CIO] months prior to the expiration
of the Term and, if so, of the proposed prices and terms to govern
such renewal not less than [CIO] months prior to the expiration of
the Term. If ISSC notifies CES that it desires to renew this
Agreement, CES agrees to inform ISSC in writing whether it desires
to renew not less than [CIO] months prior to the expiration of the
Term.
If CES notifies ISSC that it desires to renew the Agreement, but
the Parties are unable to agree upon renewal prices, terms and
conditions as of [CIO] prior to the expiration of the Term, this
Agreement will be extended for[CIO] at the then current prices,
terms and conditions. If the Parties are unable to reach agreement
on renewal during such extension period, this Agreement will expire
at the end of such extension period.
3. 0 Overview
3.1 Implementation Plan
On the Commencement Date, the Parties completed a transition period
pursuant to that certain letter agreement between ISSC and CES
executed November 9, 1994, which is hereby replaced and superseded
by this Agreement. Any amounts paid by CES (a) attributable to the
overlapping time period covered by both the letter agreement and
this Agreement, and (b) attributable to the rate differential
between the letter agreement and this Agreement for the period of
January 8, 1995, through February 7, 1995, will be credited to the
amounts owed by CES under this Agreement which credit both Parties
agree equals[CIO]. During such transition period, the Parties
mutually developed a detailed written plan for the operating
environments being provided under this Agreement ("Implementation
Plan") which is set forth in Schedule H and which will be updated
by the Parties throughout the Term as necessary.
The Implementation Plan is divided into four specific phases as
follows:
a) Phase I addresses the requirements for implementing an MVS
operating environment at the Data Center.
b) Phase II addresses the requirements for implementing the CES
application development and testing environments in the Data
Center.
c) Phase III addresses the implementation of the CES customer
processing in the operating environment.
d) Phase IV addresses the implementation of Site 2, if
applicable.
12
e) CES and ISSC will cooperate with one another in accomplishing
all aspects of the Implementation Plan, including the fulfillment
of their respective obligations to complete the Implementation
Plan.
3.2 Ceridian-Owned Software
As of the Commencement Date, Ceridian Corporation and its
Affiliates grant to ISSC a license to use such Software owned by
Ceridian or its Affiliates ("Ceridian-Owned Software") as is
necessary and appropriate for ISSC to perform the Services. Such
Ceridian-Owned Software is identified as such in Schedules A and B.
Ceridian-Owned Software remains the property of Ceridian
Corporation or its Affiliates, as applicable.
3.3 Third Party Software
CES will make the Software available to ISSC for the purpose of
providing the Services. ISSC will comply with all license
obligations of CES, including those of nondisclosure, under any
such Software licenses to the extent such obligations were
disclosed. The Parties acknowledge and agree that ISSC has had
access to such CES books, records, documents and personnel as ISSC
deemed necessary or appropriate and has had the opportunity to
perform due diligence as it deemed applicable to verify and
validate such obligations. ISSC's due diligence does not include a
review of CES's compliance with any such lease, license or other
agreement prior to the Commencement Date.
3.4 Software Currency
The Parties agree to maintain reasonable currency for Maintenance
Releases and Versions of Software, unless CES determines otherwise.
For purposes of this Section, "reasonable currency" shall mean that
the next Maintenance Release or Version is installed not later than
the longer of (a) [CIO] after the date the licensor makes such
Maintenance Release or Version commercially available or (b) within
[CIO] after the date the licensor makes a subsequent Maintenance
Release or Version commercially available which causes CES to be
more than one Maintenance Release or Version behind.
In the event CES requests ISSC to expedite installation of a
Maintenance Release or Version or to delay upgrading of specific
Software beyond such period or requires operation and maintenance
of multiple versions of Software, ISSC shall do so, provided, that
if ISSC reasonably determines that it will incur any Out-of-Pocket
Expenses as a result of such requests (e.g., Software support costs
due to withdrawal of maintenance by the licensor, multiple version
charges, etc.); then ISSC will notify CES of the amount of such
Out-of-Pocket Expenses in writing and CES, at its option, will
either delay installation of such Maintenance Release or Version or
update the Software to the current level (as applicable) or
reimburse ISSC for any demonstrable Out-of-Pocket Expenses.
In addition, CES shall relieve ISSC from any failure to meet a
Minimum Service Level directly related to delaying, or impacted by
the operation of, the next Maintenance Release or Version until
such time as the affected Software is deemed current.
3.5 Required Consents
CES shall be responsible for obtaining all Required Consents
necessary to enable ISSC to use the Software and CES-Retained
Machines until such time as the third party vendor refuses to
provide such Required Consents.
13
ISSC will provide CES with advice and counsel regarding ISSC's
experience with vendors and ISSC's agreements with vendors. CES
will be responsible for all vendor charges and fees related
specifically to obtaining the Required Consents (the "Required
Consents Charges"). [CIO] shall reimburse [CIO] of the Required
Consents Charges. Thereafter, ISSC shall reimburse CES for [CIO]
of any and all Required Consents Charges up to the Required
Consents Cap. The [CIO] is the [CIO] for Required Consents Charges
and is initially set at [CIO], which amount may [CIO] described in
[CIO] and [CIO] of [CIO]. ISSC shall bear the costs, if any,
associated with the cancellation and relicensing of IBM brand
software.
In the event that any Required Consent is not obtained with respect
to the Software licenses, leases or contracts related to the
Services, then, unless and until such Required Consents are
obtained, the Parties shall cooperate with each other in achieving
a reasonable alternative arrangement for CES to continue to process
its work with minimum interference to the CES Business, and [CIO]
shall bear [CIO] of the expenses related to achieving such
alternative arrangement, which amount shall be applied towards the
[CIO].
3.6 Joint Verification
Following the Commencement Date, ISSC and CES reserve the right to
inventory, validate and update, any information that is reflected
in or omitted from the attached Supplement or Schedules. If any
administrative or clerical discrepancies are detected, the
Supplement and Schedules shall be changed, modified and adjusted to
correct such discrepancies so that the Supplement and Schedules
will be correct and accurately reflect the scope of Services
provided CES. If either Party disputes the discrepancy then the
Parties will submit the matter to the Joint Advisory Committee for
dispute resolution as specified in Section 17 of this Agreement.
3.7 On-going Relationship
Both CES and ISSC agree that the Services provided may require
adjustments to reflect the evolving business and operations of CES
and ISSC. Therefore, CES and ISSC will establish a Joint Advisory
Committee as described in Section 17.1, which will periodically
evaluate the business operating strategies of each Party and
recommend modifications to, and evolution of, the Services to
optimize such strategies.
The Parties acknowledge that the relationship memorialized by this
Agreement is dynamic in nature and that such relationship will
change as the operating and business environment of CES changes and
evolves, and that it is impossible to define with specificity the
scope of the Services that will be provided by ISSC during the Term
of this Agreement. While the Parties will endeavor to modify the
Schedules and amend the Agreement as necessary or appropriate from
time to time to reflect the parameters and changing nature of the
Services, the Parties acknowledge that such activities may not
always be documented with specificity. Therefore, the Parties
agree to deal with each other in good faith and endeavor to resolve
in good faith, through the dispute resolution processes contained
in this Agreement, any disputes that may arise.
4. 0 Services
During the Term, ISSC shall provide the Services, consisting of the
following, as they may evolve during the Term and be supplemented
and enhanced as provided in this Agreement:
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a) The services, functions and responsibilities described in this
Agreement and its Schedules, including without limitation, the
services, functions and responsibilities described in Sections 3.0
through 6.0 and the Schedules.
b) If any services, functions or responsibilities not
specifically described in this Agreement are required for the
proper performance and provision of the Services and are an
inherent part of, or a necessary sub-task included within, the
Services described above in this Section, including, without
limitation, those described in Schedule E, such services, functions
and responsibilities shall be deemed to be implied by and included
within the scope of the Services to the same extent and in the same
manner as if specifically described in this Agreement.
c) Except as otherwise expressly provided in this Agreement and
the Schedules, ISSC shall be responsible for providing all
facilities, personnel and other resources set forth in this
Agreement, the Schedules and the Supplement. The Parties agree
that additional or replacement Data Center machines and other
equipment, including upgrades not set forth in the Equipment Plan
listed in Section H-2 of Schedule H, or provided pursuant to the
charging methodologies described in the Supplement and Schedule J,
are the responsibility of CES and will be provided by ISSC as New
Services in accordance with Section 7.6 of the Agreement.
d) ISSC agrees to take commercially reasonable actions, without
an increase in charges to CES, to provide the ISSC Machines and IBM
Systems Software at a technological level that will enable CES to
take advantage of technological advancement in its industry;
provided, however, that ISSC will maintain the ISSC Machines and
IBM Systems Software as a whole [CIO] unless otherwise mutually
agreed; provided, further, ISSC will maintain new installations for
critical components, such as the processors and DASD supporting the
production environment at a level [CIO]
4.1 ISSC Project Executive
a) Prior to the Commencement Date, ISSC will designate an ISSC
Project Executive, who will be located at the CES Facility on and
after the Execution Date, to whom all CES's communications may be
addressed and who has the authority to act for ISSC and its
subcontractors in connection with all aspects of this Agreement.
b) ISSC shall cause the person assigned to the position of
Project Executive to devote substantially his or her full working
time and effort in the employ of ISSC to the provision of the
Services under this Agreement. Before assigning an individual to
the position of Project Executive, whether the individual is
initially assigned or is subsequently assigned, ISSC shall:
1) notify CES of the proposed assignment;
2) introduce the individual to appropriate CES
representatives; and
3) consistent with ISSC's personnel practices, provide CES
with a resume and any other information about the individual
reasonably requested by CES.
15
ISSC agrees to discuss with CES any objections CES may have to
such assignment and will resolve such concerns on a mutually agreed
basis.
c) ISSC will give CES at least [CIO] advance notice of a change
of the person appointed to the position of Project Executive and
will discuss with CES any objections CES may have to such change.
Appointment of any such candidate will be in accordance with
Section 4.1(b) above. CES shall have the right to request a
replacement of the ISSC Project Executive in accordance with
Section 4.2.
d) ISSC shall not reassign or replace any person assigned to the
position of Project Executive during the [CIO] of his or her
assignment to the CES service team nor shall ISSC assign more than
[CIO] different individuals to the position during the Term unless:
1) CES consents to such reassignment or replacement; or
2) any such ISSC employee:
(a) voluntarily resigns from ISSC; or
(b) is dismissed by ISSC for misconduct or materially
failing to perform his or her duties and responsibilities pursuant
to this Agreement in ISSC's reasonable judgment; or
(c) is unable to work due to his or her death or
disability.
e) If ISSC reassigns or replaces the Project Executive, ISSC will
provide a reasonable period for overlap training as the
circumstances allow.
4.2 Personnel Replacement
a) In the event that CES reasonably and in good faith determines
that it is not in the best interests of CES for any individual ISSC
employee or subcontractor employee to be appointed to perform or to
continue performing any of the Services, then CES shall give the
ISSC Project Executive written notice requesting that the employee
or subcontractor employee not be appointed, not be replaced or be
replaced. Promptly after its receipt of such a notice, ISSC shall
investigate the matters stated in such notice. If it determines
that CES's position is valid, ISSC shall not appoint, shall not
remove, or shall cause to be removed, such ISSC employee, including
the ISSC Project Executive, or subcontractor employee from the CES
service team providing the Services under this Agreement.
b) If ISSC [CIO] to meet the [CIO] or [CIO] and if CES reasonably
determines such [CIO] is attributable in whole or in part to [CIO]
assigned to the CES service team, CES will notify ISSC of such
determination. ISSC will provide data concerning its [CIO] for
providing the Services and will meet with CES to discuss the
reasons for the [CIO]. If reasonably requested by CES, ISSC shall
submit to CES its proposals for reducing the turnover rate and the
Parties shall mutually agree on a plan to bring the turnover rate
down to a reasonably acceptable level. Notwithstanding transfer or
turnover of personnel, ISSC remains obligated to perform the
Services in accordance with the [CIO] and
16
the other terms and
conditions of this Agreement. Any exercise or non-exercise of this
provision by CES shall not impact any other right or remedy of CES
under this Agreement.
4.3 Non-Competition
a) Except as approved by CES, ISSC will not:
1) assign to the account of a CES competitor an ISSC
employee who has held a position hereunder as [CIO] for [CIO] after
the date such individual ceased to hold a position of [CIO]
hereunder; provided, however, that such reassignment limitation
shall not be applicable after the termination of this Agreement, if
such termination was by CES for convenience or by ISSC for cause
pursuant to Sections 11.1 or 11.5, respectively. For the purposes
of this Section 4.3a(1), CES's competitors will be the list of
[CIO] businesses provided by CES to the ISSC Project Executive in
writing. CES may update such list not more than once annually and
the updated listing cannot exceed [CIO] businesses; or
2) [CIO] for [CIO] for [CIO] or [CIO] development for [CIO].
For purposes of this provision, [CIO] includes any present or
future Affiliate of [CIO] that provides [CIO], relating to [CIO],
as well as any successor in interest to [CIO] (in whatever
corporate form) that provides such services.
b) CES will not reduce the volume of Services obtained from ISSC
below the Capacity Plan set forth in the Supplement in order to
transfer data processing for CES's payroll customers to a
competitor of ISSC or in-house to a CES facility during the Term;
provided, however, that nothing contained herein shall prevent CES
from retaining the CES data processing facilities operated by CES
as of the Commencement Date in connection with its then current
data processing for payroll customers, or prevent CES from
utilizing in-house or any third party facilities and services for
(1) data processing for CES payroll customers in an amount in
excess of such Capacity Plan, or (2) data processing for CES
Business' activities other than payroll processing for its payroll
customers or (3) data processing on a hardware and/or software
platform other than the integrated hardware and software platforms
set forth on Schedules A, B, C and D.
4.4 Use of Subcontractors
a) ISSC may delegate or subcontract its obligations under this
Agreement but ISSC shall remain primarily liable to CES for the
timely and proper performance of all such obligations and the
performance and actions of any person or entity to which it
delegates or subcontracts any such obligation. ISSC shall notify
CES of a decision to delegate or subcontract its basic Data Center
operations (i.e., systems programming) and obtain CES's approval of
such delegation or subcontract.
b) ISSC shall remain responsible for:
1) obligations performed by the subcontractors that it
engages or permits to be engaged to provide and/or perform the
Services; and
17
2) for the performance and actions of all such persons and
entities, to the same extent as if such obligations were performed
by ISSC and its employees.
4.5 Alternate Source for Work
a) Except as limited in Section 4.3(b), CES shall have the right
during the Term to retain third parties to perform any part of the
Services, any services, functions or responsibilities that would be
deemed New Services pursuant to Section 7.6, or to do either such
work internally. ISSC shall cooperate with any such third party
and CES. Such cooperation shall include, without limitation:
1) providing reasonable electronic access to the Data Center
and Software (other than Third Party Systems Software, if any,
where the underlying license agreement does not authorize such
access and a Required Consent permitting such access has not been
obtained), and other resources used by ISSC to perform the
Services; and
2) providing such information regarding the operating
environments, system constraints, and other operating parameters as
is reasonably necessary for the work product of the third party or
CES to be compatible with the Services.
b) ISSC's obligations hereunder shall be subject to the third
party's:
1) compliance with ISSC's reasonable security and other
applicable standards and procedures;
2) execution of appropriate confidentiality agreements; and
3) scheduling of computer time and scheduling access to
other resources to be furnished by ISSC pursuant to this Agreement.
c) The Parties agree that if ISSC's cooperation with CES or any
third party performing such work for CES causes ISSC to expend
additional resources that ISSC would not otherwise have expended,
ISSC's Out-of-Pocket Expenses for such additional requested
Resources will be paid by CES.
d) The Parties further agree that if a third party's activities
affect ISSC's ability to meet the Performance Standards or
otherwise provide the Services in ISSC's reasonable determination,
ISSC will provide written notice to CES of such determination and
the Parties will cooperate to determine whether such affect is
caused by the third party and how to ameliorate any such affect.
ISSC shall be excused for any inability to meet the Performance
Standards, [CIO] or provide Services due to the third party's
access and use of the resources ISSC otherwise uses to provide the
Services and meet the Performance Standards to the extent such
inability is demonstrated by ISSC to be caused by such third
party's access.
4.6 CES Project Executive
Prior to the Commencement Date, CES agrees to designate a Project
Executive to whom all ISSC communications may be addressed and who
has the authority to act for CES and its subcontractors in
connection with all aspects of this Agreement.
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4.7 Performance
a) ISSC agrees that it will perform the [CIO] and [CIO] such
Services. ISSC further agrees that its performance of the Services
will [CIO] and [CIO].
b) Within[CIO] after the Commencement Date, CES and ISSC will
review and modify, as agreed by the Parties, each of the [CIO] but
the [CIO] and [CIO] shall not be [CIO] or [CIO] agreed to by the
Parties at any time without the prior written agreement of CES,
except [CIO] that ISSC [CIO] is [CIO] on [CIO] beyond the Capacity
Plan set forth on the Supplement without the corresponding
adjustment to increase such Capacity Plan in accordance with the
Supplement and Schedule J. The Parties expect and understand that
the [CIO] and[CIO] will be [CIO] over time. As part of this review
process, the Parties shall jointly determine and, if appropriate,
agree on additional or alternate [CIO] which may be added to
Schedule E as applicable.
c) ISSC shall install and implement the measurement and
monitoring tools set forth on Schedule B and shall implement
procedures approved by CES as required to measure and report ISSC's
performance of the Services against the applicable [CIO] and [CIO].
Such measurement and monitoring shall permit reporting at a
reasonable level of detail sufficient to verify compliance with the
[CIO] and [CIO], if any, and shall be subject to reasonable audit
by CES. ISSC shall provide CES with the information for, data for
and access to such tools for CES's use and analysis to the extent
permitted under the Software license subject to Section 5.11(b),
upon request, for purposes of verification and for CES's own
analysis.
4.8 Efficient Use of Resources
ISSC shall take commercially reasonable actions to efficiently use
resources that will be chargeable to CES under this Agreement for
providing and performing the Services including, but not limited to
the following:
a) ISSC will make schedule adjustments (consistent with CES's
priorities and schedules for the Services and ISSC's obligation to
meet the Performance Standards) including, without limitation,
delaying the performance of noncritical functions within
established limits;
b) ISSC will tune or optimize the ISSC Machines and Systems
Software running on the ISSC Machines used to perform the Services;
c) ISSC will assign personnel with the required skills, training
and experience to perform the duties, responsibilities and
functions assigned to such personnel;
d) ISSC will utilize project management tools, including
productivity aids and project management systems, as reasonably
necessary to perform the Services; and
19
e) ISSC will be responsible for providing and implementing
quality assurance processes and procedures that are reasonably
necessary to assure that the Services are performed accurately and
in a timely manner.
CES will cooperate with ISSC, and as reasonably requested by ISSC,
promptly make management decisions and provide approvals,
information and otherwise facilitate ISSC's provision of the
Services.
4.9 Management and Control
a) On the Execution Date, ISSC shall provide a manual describing
the operating processes and procedures relating to ISSC's
performance of the Services then being provided (the "Procedures
Manual"). The Procedures Manual shall generally conform to the
format and content set forth in Schedule F. Until such procedures
are completed and accepted by the Parties, ISSC shall provide the
Services using generally accepted industry processes and
procedures.
1) The Procedures Manual shall be provided to CES for
review, comment and approval. Any reasonable proposals, comments
or suggestions of CES will be incorporated therein.
2) ISSC shall periodically update the Procedures Manual to
reflect any changes in the operations or procedures described
therein and provide such changes to CES for review, comment and
approval.
3) ISSC shall perform all Services in accordance with the
Procedures Manual.
ISSC shall develop the Procedures Manual according to the
priorities and schedule mutually established by the Parties.
b) On the Execution Date, ISSC shall provide the "Change
Management Procedures" then being provided, which shall include, at
a minimum, that:
1) ISSC will make no change which may adversely affect the
business operations of CES without first obtaining approval from
CES.
2) ISSC will assure that all programs are moved from the
applications development and test environments to the production
environment in a controlled and documented manner that is
adequately noticed in advance in a writing delivered by ISSC to CES
in hard copy or through CES's electronic mail system.
3) ISSC will schedule all change(s) to CES's operating
environment in consultation with CES so as not to unreasonably
interrupt the CES Business.
4) ISSC will prepare monthly, a rolling quarterly "look
ahead" schedule for ongoing and planned change(s) to CES's
operating environment. The status of such change(s) will be
monitored and tracked against the applicable schedule.
5) ISSC will document and provide to CES, via the change
control notice referenced in Section 4.9(b)(2) above, notification
of all change(s) performed for emergency
20
purposes or as otherwise
not precluded in Section 4.9(b)(1) above. In addition, ISSC shall
provide verbal notification within 12 hours after such change to
the contact specified in the Procedures Manual.
The Change Management Procedures will be included in the
Procedures Manual and shall be provided to CES for review, comment
and approval. Any reasonable comments or suggestions of CES will
be incorporated therein.
c) Beginning on February 1, 1995, ISSC will provide to CES
preliminary reports regarding ISSC's performance of the Services.
Beginning March 1, 1995, ISSC will provide to CES a mutually agreed
upon set of periodic reports and cooperate with CES to establish a
final report structure by a mutually agreed upon date. At a
minimum, the reports to be provided beginning March 1, 1995 will
include the following:
1) a monthly performance report documenting ISSC's
performance with respect to the Performance Standards, [CIO] and
applicable Service Credits;
2) a monthly project schedule report containing the
information described in Section 4.9(b)(4);
3) a monthly change report setting forth a record of all
change(s) to CES's operating environment performed during the
previous month; and
4) a monthly report describing CES's utilization of each
particular type of RU during such month, and comparing such
utilization to the then applicable Baseline for each RU.
ISSC will provide CES with such documentation and other
information as may be reasonably requested by CES from time to time
in order to verify the accuracy of the reports specified above.
d) By the Execution Date, the Parties will mutually determine an
appropriate set of periodic meetings to be held between
representatives of CES and ISSC. At a minimum, these meetings will
include the following:
1) a weekly meeting, unless otherwise agreed upon by the
Parties, among operational personnel to discuss ongoing issues
relating generally to daily performance and planned or anticipated
activities and change(s) to CES's operating environment;
2) a monthly management meeting to review the performance
report, the project schedule report, the changes report, and such
other matters as appropriate; and
3) a quarterly senior management meeting to review relevant
contract and performance issues.
All meetings will have a published agenda agreed to by CES and
ISSC, which agenda shall be issued by ISSC sufficiently in advance
of the meeting to allow meeting participants a reasonable
opportunity to prepare for the meeting. ISSC shall prepare minutes
of all such meetings and shall circulate the minutes for review.
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4.10 Annual Technology Plan
The Parties shall jointly prepare a "Technology Plan" in accordance
with the following procedures:
a) The First Technology Plan under this Agreement will be
completed by [CIO]. The Technology Plan for subsequent years of
this Agreement will be completed by [CIO] of each year, commencing
[CIO].
b) The Technology Plan will be composed of short-term and long-
range plans, which tie into CES Business' goals and objectives.
The long-range plan will include strategic and flexible use of the
Data Center in light of CES Business' priorities and strategies.
The short-term plan will include an identification of proposed
software and hardware, as appropriate, and a projected time
schedule for developing and implementing the proposed changes.
c) CES will draft the Technology Plan with ISSC's active
participation, advice and consent. ISSC will provide CES with its
written comments regarding the draft Technology Plan within [CIO]
after receipt thereof by ISSC. ISSC's response will include,
without limitation, information regarding industry trends in
production capabilities and pricing and the implementation of
proposed hardware and software changes. The final Technology Plan
will be subject to mutual agreement by the Parties. If the Parties
are unable to agree with respect to a particular element of the
Technology Plan, then the Parties' rights and obligations with
respect to such element shall be as otherwise required under this
Agreement without reference to the Technology Plan. Implementation
of any portion of the Technology Plan that is inconsistent with the
Parties' obligations hereunder will require an amendment to this
Agreement pursuant to Section 18.4.
4.11 CES Approvals and Notification
For those areas of the Services where CES:
a) has reserved right-of-approval or consent or agreement;
b) is required to provide notification; and/or
c) is required to perform a responsibility set forth in this
Agreement;
and such approval, consent, notification or performance is delayed
or withheld by CES without authorization or right beyond the period
provided in this Agreement or the Schedules and such delay or
withholding is not caused by ISSC and affects ISSC's ability to
provide the Services under this Agreement, then CES will relieve
ISSC of the responsibility for that portion of the Services
affected by the delay or withholding during the period such
approval, consent, notification or performance is delayed or
withheld beyond the period provided in this Agreement or the
Schedules provided that ISSC provides reasonable written notice to
CES of such delay by CES and of the responsibility affected. CES
will reimburse ISSC for its Out-of-Pocket Expenses, if any,
incurred during such period as a result thereof.
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5. 0 Operations
5.1 ISSC Machines
ISSC will provide the Services using the ISSC Machines. Additional
or replacement ISSC Machines, including upgrades, will be added by
ISSC to the Data Center, as necessary to perform the Services in
accordance with the Performance Standards, subject to capacity
charges beyond the specified Capacity Plan or ARCs for growth
beyond the Baselines set forth in the Supplement, as applicable.
ISSC retains all right, title and interest in and to all ISSC
Machines, subject to Section 11.8 with respect to CES's rights upon
termination or expiration of this Agreement.
5.2 Software Services
ISSC will:
a) operate, maintain and enhance all IBM Systems Software in the
Data Center, as necessary to perform the Services in accordance
with the Performance Standards;
b) operate the Third Party Systems Software in the Data Center;
c) provide Operational Support for the CES-Retained Machines in
the Data Center;
d) apply problem analysis, preventive maintenance and program
temporary fixes to correct defects in the Systems Software
operating on the ISSC Machines running in the Data Center;
e) provide or obtain new Versions and Maintenance Releases,
upgrades, replacements or additional IBM Systems Software as ISSC
deems appropriate, subject to Section 3.4, in order to perform the
Services in accordance with the Performance Standards;
f) operate all Applications Software in the Data Center;
g) provide Operational Support for the interfaces to the
Applications Software and Systems Software developed by CES; and
h) cooperate with CES in connection with CES's development of
Applications Software and Systems Software, upon request.
CES will develop interfaces to the Applications Software and
Systems Software.
5.3 Operations, Support and Maintenance
ISSC will:
a) operate the Data Center;
b) provide maintenance services for ISSC Machines in the Data
Center seven days a week, twenty-four hours a day;
c) provide files to the queue in accordance with Schedule E;
23
d) monitor file transmissions originating from the ISSC Machines
using monitoring tools provided by CES and approved by ISSC, which
approval will not be unreasonably withheld, and take appropriate
action in accordance with the Procedures Manual;
e) store, maintain and provide security for storage media (tapes,
disk packs, etc.) provided to ISSC; and
f) provide reasonable system capacity to support CES application
development and testing, in accordance with Schedule E, the
resources utilized for which will be included in the Capacity Plan
and when calculating RUs.
5.4 Consolidation and Relocation Services
ISSC will install, rearrange and relocate equipment in the Data
Center as ISSC deems necessary in order to perform the Services in
accordance with the Performance Standards and in such a manner so
as to minimize service level impact to CES users. ISSC will also
be responsible for the de-installation and relocation of the ISSC
Machines in the Data Center, including without limitation,
appropriate packaging, certification and shipping. Installation,
relocation or rearrangement of CES-Retained Machines if made
pursuant to CES's request will be invoiced to CES as Out-of-Pocket
Expenses or if made pursuant to ISSC's request will be deemed to be
included in the Annual Services Charge. De-installation and
relocation of the CES-Retained Machines, including without
limitation, appropriate packaging, certification and shipping, if
made pursuant to CES's request will be invoiced to CES as Out-of-
Pocket Expenses or if made pursuant to ISSC's request will be
deemed to be included in the Annual Services Charge.
5.5 Systems Management
ISSC will:
a) perform capacity planning, performance analysis and tuning for
the ISSC Machines and Systems Software operating on the ISSC
Machines running in the Data Center;
b) implement controls to effectively manage the environment of
the Data Center according to the Procedures Manual;
c) provide backup and restore capability for data and programs
maintained in the Data Center;
d) invoke the disaster recovery plan when appropriate in
accordance with Schedule G; and
e) provide for systems access security for the ISSC Machines
through the use of appropriate security products. Any other
security products specified by CES will be considered Third Party
Systems Software.
5.6 Production Services
ISSC will:
a) take direction from CES and cooperate with the scheduling,
controlling, monitoring and running of production jobs on the ISSC
Machines using scheduling and quality control procedures, as
specified in Schedule E and in the Procedures Manual; and
24
b) follow procedures for scheduling and directing output of all
production work (including workload and performance balancing), as
specified in the Procedures Manual.
5.7 Software
ISSC agrees to use any Third Party Systems Software selected by
CES. CES may add Applications Software to, or delete Applications
Software, from Schedule A. ISSC agrees to use any Applications
Software selected by CES, subject to the provisions of Schedule K
and Section 7.6. CES will retain responsibility for maintenance,
support and all license and related charges for all Applications
Software and Third Party Systems Software, subject to the
provisions of Section 3.5.
If CES requests a [CIO] of any IBM Systems Software, CES shall pay
[CIO] the [CIO] and [CIO] attributable to the [CIO] IBM System
Software [CIO] attributable to the IBM Systems Software being
[CIO]. If CES [CIO] any IBM Systems Software [CIO] Schedule B and
does not at the same time [CIO] any other IBM Systems Software
therefor, CES may [CIO] an amount equal to [CIO] and[CIO] to such
[CIO] IBM System Software [CIO] attributable to any [CIO] to the
IBM System Software [CIO] by CES.
CES shall audit, control and approve all new Applications Software
and Third Party Systems Software prior to its promotion into
production.
5.8 CES-Retained Machines
ISSC shall provide approximately [CIO] of space within each Data
Center location (Site 1 and Site 2, if applicable) and the Recovery
Center for the DEC Machines. Upon request by CES, ISSC shall
increase such square footage of floor space at a rate not to exceed
[CIO] each year for the remainder of the Term at [CIO]. In
addition, ISSC shall provide space within each Data Center location
and the Recovery Center for the CES-Retained Machines other than
the DEC Machines. ISSC shall provide heat, light, power, air
conditioning, UPS, and such other similar utilities as may
reasonably be necessary for the CES-Retained Machines. ISSC shall
provide reasonable physical and electronic access to the CES-
Retained Machines by CES and CES's maintenance providers upon
reasonable advance notice. In addition, ISSC will:
a) provide Operational Support for the Systems Software resident
on the CES-Retained Machines;
b) to the extent the CES-Retained Machines trigger notification
to ISSC of the need for reasonable local operational action, ISSC
will perform such action;
c) to the extent that CES's personnel notify ISSC of the need for
reasonable local operational action, ISSC shall perform such
action; and
d) follow standard local operational procedures for such CES-
Retained Machines provided to ISSC by CES (such as disk back-up
procedures).
CES shall otherwise be financially and operationally responsible
for the CES-Retained Machines and the Software resident thereon,
including the operation, other than that specified above or in
Schedule E, maintenance, upgrade, enhancement and replacement
thereof.
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5.9 Connectivity
CES will be responsible for providing and managing connectivity up
to the output side of the 3745 and/or the 3172 controller and
interconnect equipment or their equivalent located in the Data
Center from end users and ISSC will be responsible for managing
connectivity from the mainframe to the output side of the 3745
and/or the 3172 controller. ISSC will monitor network messages
regarding connectivity, utilizing mutually agreed upon monitoring
tools and notify CES in accordance with the Procedures Manual.
5.10 Viruses
Each Party agrees to use diligent efforts to ensure that no viruses
or similar items ("Viruses") are coded or introduced into the
systems by their respective employees, contractors or other third
parties that have access to or utilize the Services. ISSC will
engage in and comply with IBM established virus prevention programs
and processes for Software used or being promoted into the
production environment. ISSC agrees that, in the event a Virus is
found to have been introduced into the operating environment used
to provide the Services, ISSC shall, at CES's written request, use
commercially reasonable efforts to assist CES in reducing the
effects of the Virus and, if the Virus causes a loss of operational
efficiency or loss of data, to assist CES to the same extent to
mitigate and restore such losses; provided, however, that the Party
that introduced a Virus shall bear the cost associated with such
efforts. If a Virus was introduced by CES, CES shall relieve ISSC
of the Minimum Service Level effect of such Virus, if any, to the
extent caused by or resulting from such Virus(es). ISSC shall not
be deemed to have introduced a Virus if ISSC promotes Applications
Software to production to which it applies its applicable virus
protection programs and processes prior to promotion to production.
5.11 Software Licenses
a) All Software provided by ISSC in connection with the Services,
with the exception of IBM Systems Software, shall be licensed in
CES's name as licensee with ISSC having the right to use such
Systems Software in performing the Services unless ISSC can provide
the Software specified by CES on a more cost effective basis in its
own name. ISSC shall consider and take into account in its
dealings with the Software vendors CES's reasonable concerns
regarding the terms and conditions of such Software licenses
including CES's use upon termination.
b) Prior to the initial use of any new or additional Systems
Software operating on the ISSC Machines, which is not listed in
Schedule B, and prior to any upgrade, enhancement or modification
of existing Systems Software listed in Schedule B operating on the
ISSC Machines, or the addition of or migration to different Systems
Software operating on the ISSC machines licensed to anyone other
than CES, ISSC shall [CIO] for any such actions. In addition,
prior to taking any such action, ISSC will provide CES with
information regarding the amount of any fees and other requirements
CES would have to undertake in order to obtain a license to and
maintenance for such Systems Software, and shall obtain, where
possible using commercially reasonable efforts, a firm commitment
from the third party vendor of such software to license the
software to CES and provide maintenance for the Software upon the
payment of such fees. To the extent possible, using commercially
reasonable efforts, each Systems Software license entered into
hereunder in either CES's or ISSC's name shall include use and
access rights for CES's consultants and
26
subcontractors. ISSC will
not utilize Systems Software to which CES [CIO] unless CES
otherwise agrees in advance in writing.
6. 0 Additional Services
6.1 Help Desk
As part of the Services, ISSC will provide a Data Center operations
help desk and problem management in accordance with Schedule I.
6.2 Security
CES shall approve and ISSC shall administer system level access,
granting group access and control to CES for their administration
and control of CES's applications and end users. CES shall notify
ISSC of what entities and personnel are to be granted access to the
Software and the level of security access required by each. The
Parties shall cooperate in administering security procedures
regarding such access, all as set forth in Schedule L.
6.3 Back-up and Disaster Recovery
ISSC shall perform the back-up, recovery and storage procedures
specified in Schedule E and provide Disaster Recovery services as
specified in Schedule G.
6.4 Facilities and Support Services
To enable ISSC to provide the Services, CES agrees:
a) to provide, at no charge to ISSC, the use of CES Facilities as
may be reasonably necessary to house the ISSC Project Executive and
his or her office business equipment for the performance of the
Services. This includes reasonable office space, storage space,
telephone capability (but excluding long distance telephone
charges, and all long distance telephone charges for facsimile
transmissions for which CES will be reimbursed by ISSC), office
support services (e.g., janitorial and physical security) and
furniture;
b) to provide for the CES Facilities during the Term, all heat,
light, power, air conditioning, UPS, and such other similar
utilities as may reasonably be necessary for ISSC to perform the
Services as described in this Agreement;
c) to provide access to CES parking (if available, but excluding
CES's paying for such parking) and break room facilities for ISSC
employees;
d) if CES decides to relocate its current CES Facility that
houses the ISSC Project Executive and his or her office business
equipment, CES will provide comparable space, facilities and
resources in the new location, as well as relocation of such
equipment to the new location, under the same terms and conditions
of this Agreement;
e) following the expiration or termination of this Agreement, CES
will allow ISSC the use, at [CIO], of those CES Facilities then
being used to perform the Services for up to [CIO] following the
effective date of such expiration or termination (or from the last
day of any
27
Services Transfer Assistance period) to enable ISSC to
affect an orderly transition of ISSC resources;
f) it is understood that ISSC's use of the CES Facilities does
not constitute or create a lease hold interest. When the CES
Facilities are no longer being utilized by ISSC to perform the
Services, CES's obligations set forth in this Section with respect
to the CES Facilities will cease; and
g) it is understood that ISSC's usage of any of the foregoing CES
facilities and services will not be deemed to be a part of any
Baseline Charge related thereto payable by CES to ISSC hereunder.
6.5 Audits
ISSC will assist CES in meeting its audit and regulatory
requirements, including providing access to the Data Center to
enable CES and its auditors and examiners to conduct appropriate
audits and examinations of the operations of ISSC relating to the
performance of the Services to verify:
a) the accuracy of ISSC's charges to CES; and
b) that the Services are being provided in accordance with this
Agreement and the Performance Standards.
Such access will require not less than two business days prior
written notice to ISSC and will be provided during normal business
hours, provided that any audit does not interfere with ISSC's
ability to perform the Services in accordance with the Performance
Standards. ISSC will provide access to information reasonably
necessary to perform the audit. ISSC shall not allow CES, its
examiners or auditors access to ISSC's proprietary data. ISSC will
also assist CES's employees or auditors in testing CES's data files
and programs, including, without limitation, installing and running
audit software, subject to CES's reimbursing ISSC for its Out-of-
Pocket Expenses.
ISSC agrees to make any changes and take other actions which are
necessary in order to maintain compliance with applicable laws or
regulations in effect on the Commencement Date at no charge to CES,
except with respect to any such changes or actions arising out of
CES's failure to comply with such laws or regulations prior to the
Commencement Date. In addition, ISSC agrees to make any changes
and take other actions which are necessary in order to maintain
compliance with laws or regulations applicable to CES Business
effective after the Commencement Date and CES shall reimburse ISSC
for such changes and actions as a New Service in accordance with
Section 7.6. CES may submit additional findings or recommendations
to ISSC for its consideration and ISSC shall consider such
findings.
If any audit or examination reveals that ISSC's invoices for the
audited period are not correct for such period, ISSC shall promptly
reimburse CES for the amount of any overcharges, or CES shall
promptly pay ISSC for the amount of any undercharges.
CES may audit the Services annually and may provide reports on the
audit results to CES's customers; provided, however, CES may not
provide pricing and financial information provided to CES by ISSC
to CES's customers.
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7. 0 Charges and Expenses
7.1 Annual Services Charge
CES agrees to pay the Annual Services Charge specified in the
Supplement for each year of the Term together with the other
amounts as described in this Section 7 and Schedule J, as set forth
in the Supplement.
7.2 Additional Resource Charges
Beginning for the initial month following the Commencement Date and
monthly thereafter, ISSC will review the quantity of Resource Units
utilized by CES during the preceding month, and calculate Addi-
tional Resource Charges (ARCs) in accordance with the Supplement
and Schedule J. CES agrees to pay Additional Resource Charges in
accordance with Section 8.2.
7.3 [CIO] Adjustments
CES may [CIO] or [CIO] of the [CIO] of [CIO] in accordance with the
Supplement and Schedule J. If CES elects to [CIO] of an[CIO] of
[CIO], ISSC shall provide CES a [CIO], as described in Schedule J,
until the [CIO] of [CIO] is [CIO]. If CES elects to [CIO] of an
[CIO] of [CIO], ISSC will use commercially reasonable efforts to
meet CES's [CIO]. CES shall pay ISSC an [CIO], as described in
Schedule J, for the period from when the [CIO] is [CIO] until the
time [CIO] was [CIO] to [CIO] as shown on the Supplement.
7.4 Cost of Living Adjustment
CES agrees to pay ISSC, or ISSC will credit CES with, a Cost of
Living Adjustment ("COLA"), in accordance with Section III of
Schedule J, as applicable, beginning in the first January following
the Commencement Date.
In the event that the rate of change of CPI-U for any year is
greater than [CIO] and the Parties agree that the CPI-U does not
accurately reflect the rate of inflation actually experienced by
the elements of cost that make up the Services for such year, the
Parties shall determine by agreement either an alternative index or
the actual rate of inflation that shall be used for computing the
COLA for such year.
7.5 New Entities
If CES acquires any additional Affiliates during the Term for which
CES desires ISSC to provide Services and ISSC's acceptance of such
responsibilities would require ISSC to (a) utilize capacity or
resources for which there is not an existing charging methodology
and/or Baseline and (b) expend additional resources that ISSC would
not otherwise have expended, then ISSC will provide the Services to
such Affiliate in accordance with this Agreement, subject to
Section 7.6.
29
7.6 New Services
In the event that CES requests ISSC to perform functions different
from, and in addition to, the Services ("New Services"), the charge
to CES for ISSC performing such functions will be determined as
follows:
a) if the additional function requires only those resources which
have a current charging methodology or Baseline, the additional
function will not be considered a New Service and the charges for
the incremental resources, if any, will be recovered through the
applicable charging methodology set forth in the Supplement and
Schedule J;
b) if the additional function requires resources not covered by a
current charging methodology, an existing Baseline and/or requires
additional start-up expenses, then to the extent that ISSC should
not otherwise have provided such function as part of the Services,
such additional resources and/or start-up expenses will be
considered New Services, and prior to performing such New Services:
1) ISSC will quote to CES the increase in the Annual
Services Charge or other payment method that will be attributable
to such New Services, which will be based upon the required
proportional increase in system and other applicable resources
relative to the Annual Services Charge; and
2) CES, upon receipt of such quote, may then elect through
written notice by the CES Project Executive to have ISSC perform
the New Services, and the Annual Services Charge, charging
methodology and/or Baselines will be adjusted, if necessary, to
reflect such New Services; and
c) if CES's request for different or additional services results
in ISSC having to reduce or eliminate Services being provided
hereunder, and such reduced or eliminated Services are not a result
of CES or a third party services provider performing such Services,
such different or additional services will be deemed "Replacement
Services." In such event, the Parties shall determine the resources
and expenses related to the Services being replaced, the resources
and expenses related to the services being added and the net
increase or decrease in resources and expenses will be the basis on
which ISSC will quote a price to CES for Replacement Services.
Notwithstanding the foregoing, nothing herein may be interpreted as
obligating CES to obtain New Services from ISSC.
During the Term, if the Services evolve or are supplemented and
enhanced over time by ISSC at its sole discretion, such as by
changes made which keep pace with technological advancements or
improvements, the Parties acknowledge that such changes will not be
deemed to result in functions materially different from and in
addition to the Services and will not be considered New or
Replacement Services.
7.7 Taxes
a) The Annual Services Charges, ARCs (if any) and any other
charges paid by CES to ISSC are inclusive of any applicable sales,
use, personal property or other taxes based upon or measured by
ISSC's cost of acquiring or providing materials, supplies or
services furnished
30
by ISSC in performing the Services. CES will be
responsible for paying any tax on the Services (if any) and any
other taxes for which it is legally responsible.
b) Each Party shall bear sole responsibility for all taxes,
assessments and other real property-related levies on its owned or
leased real property.
c) The Parties agree to reasonably cooperate with each other to
more accurately determine each Party's tax liability and to
minimize such liability to the extent legally permissible.
d) Each Party shall provide and make available to the other any
resale certificates, information regarding out-of-state sales or
use of equipment, materials or services, and other exemption
certificates or information reasonably requested by either Party.
The Parties will also work together to segregate the Annual
Services Charge, ARCs and other charges into separate payment
streams:
1) that for taxable Services, if any;
2) that for nontaxable Services;
3) that for which a sales, use or similar tax has already
been paid by ISSC; and
4) that for which ISSC functions merely as a paying agent
for CES in receiving goods, supplies or services (including leasing
and licensing arrangements) that otherwise are nontaxable or have
previously been subject to tax.
Consistent with this Agreement, no portion of the payment
stream will be described as the lease or rental of tangible
property.
7.8 Reduction of CES Requirements for the Base
a) If, during the Term, CES experiences significant changes in
the scope or nature of its business, exclusive of any Services set
forth in this Agreement, which have or are reasonably expected to
have the effect of causing sustained substantial decreases ([CIO]
or more) in the amount of the "Base System" (as defined in Schedule
J) used in providing the Services, such changes shall be governed
by this Section. Examples of the kinds of events that might cause
such substantial decreases are:
1) changes to locations where CES operates;
2) changes in CES's products or markets;
3) mergers, acquisitions or divestitures;
4) changes in the method of service delivery (other than use
of another vendor or an in-house solution); or
5) changes in market priorities.
b) CES will notify ISSC of any event or discrete set of events
which CES believes qualifies under this Section and ISSC will
identify the changes that need to be made to accommodate
31
the extraordinary decrease of resource requirements in a cost-effective
manner without disruption to CES Business, and the cost savings
that will result therefrom in a plan that will be submitted to CES
for review and acceptance.
c) Upon acceptance by CES, ISSC will make the applicable
adjustments to the Annual Services Charge and the Baselines to
reflect the foregoing and distribute an amended Supplement to the
Parties.
d) CES may, at its option and expense, employ an accredited and
mutually agreed upon independent auditor to verify that ISSC's
methodology for calculating the savings referenced in Section
7.8(b) above conforms to accepted accounting practices.
7.9 Services Transfer Assistance
It is the intent of the Parties that ISSC will cooperate with CES
to assist with the orderly transfer of the services, functions and
operations provided by ISSC hereunder to CES itself or another
services provider in connection with the expiration or earlier
termination of this Agreement. Commencing [CIO] prior to
expiration or commencing upon any notice of termination or of non-
renewal of this Agreement, CES may request ISSC to provide and, if
so requested, ISSC shall provide to CES or CES's designee (except
in the event of a termination due to a failure by CES to pay any
amounts due and payable under this Agreement when due; provided,
however, that [CIO] shall not be considered a failure by CES to pay
amounts due and payable) services in connection with migrating the
work of CES to CES itself or another services provider ("Services
Transfer Assistance"), subject to Section 11.8. Services Transfer
Assistance shall be provided until the effective date of expiration
or termination with respect to the Services, and, for expiration or
termination related services other than those relating to the
Services, upon request by CES, for up to [CIO] after the effective
date of expiration or termination. Subject to Section 7.9(d)
below, Services Transfer Assistance shall include, but not be
limited to, providing CES and its Affiliates and their agents,
contractors and consultants, as necessary, with services such as
the following:
a) Premigration Services
1) continue to install, load and operate Software as
necessary to meet project schedules until it is necessary to freeze
all noncritical Software changes to perform the Migration Services,
2) notifying all outside vendors of procedures to be
followed during the turnover phase,
3) reviewing all Software libraries (tests and production)
with CES and/or the new service provider,
4) assisting in establishing naming conventions for the new
production site,
5) providing copies of configuration diagrams, manuals,
inventories, operational records, and other documentation generally
used to provide the Services,
6) analyzing space required for the data bases and Software
libraries, and
32
7) generating a tape and computer listing of the source code
on the ISSC Machines in a form reasonably requested by CES.
b) Migration Services
1) unloading the production data bases,
2) delivering tapes of production data bases (with content
listings) to the new operations staff,
3) assisting with the loading of the data bases,
4) assisting with the Data Center connectivity to the
communications network turnover, if applicable, and
5) assisting in the execution of a parallel operation until
the effective date of expiration or termination of this Agreement.
c) Post Migration Services
1) answering questions regarding the Services on an "as
needed" basis, and
2) turning over of any remaining CES owned reports and
documentation still in ISSC's possession.
d) If any Services Transfer Assistance provided by ISSC requires
the utilization of additional resources for which there is a
current Baseline that ISSC would not otherwise use in the
performance of this Agreement, CES will pay ISSC for such usage at
the then current Agreement charges. If the Services Transfer
Assistance requires ISSC to incur expenses in addition to the
expenses that ISSC would otherwise incur in the performance of this
Agreement, then:
1) ISSC shall notify CES of any Out-of-Pocket Expenses
associated with the performance of any additional services pursuant
to this Section prior to performing such services, and
2) upon CES's authorization, ISSC shall perform the
additional services and invoice CES for such Out-of-Pocket
Expenses; and
3) CES shall pay ISSC for such Out-of-Pocket Expenses within
thirty business days of the date of the invoice.
8. 0 Invoicing and Payment
8.1 Annual Services Charge Invoices
ISSC will invoice CES on a monthly basis the proportional amount of
the Annual Services Charge for that month in advance. The invoice
will state separately applicable taxes owed by CES, if any, by tax
jurisdiction. No such invoice shall be delivered prior to the
month for which such invoice is applicable.
33
8.2 ARC and COLA Invoicing
Beginning in the fifth month following the Commencement Date and
quarterly thereafter, ISSC will invoice CES for the net amounts due
for ARCs, if any, for the preceding quarter. ISSC will invoice CES
for COLA monies starting in January following the Commencement Date
for such month and monthly thereafter in accordance with Section
7.4. No COLA invoice shall be delivered to CES prior to the month
for which such invoice is applicable.
8.3 Capacity Invoicing
ISSC will bill or credit CES on a monthly basis in advance for the
CPU and/or DASD capacity that is either installed early or deferred
in accordance with the procedures set forth in Schedule J.
8.4 Other Charges
Any amount due under this Agreement including amounts described in
Sections 8.1, 8.2 and 8.3 shall be payable as described in Section
8.5. No invoice for any such amount, exclusive of amounts under
Sections 8.1, 8.3 and 11.7, shall be delivered to CES until after
the Service, which is the subject of such invoice, has been
provided to CES.
8.5 Invoice Payment
CES will pay each invoice either by wire funds transfer or other
electronic means acceptable to ISSC to an account specified by ISSC
or, at CES's option, by bank check within [CIO] after the date of
receipt of such invoice. In the event that any payments are not
received by ISSC within [CIO] following the due date, a late fee
equal to [CIO] will be payable to ISSC on unpaid balances;
provided, however, that such late fee will not apply to disputed
amounts placed in escrow, which amounts shall not accrue a late
fee, but may accrue interest in accordance with Section 8.7 and
provided, further, that with respect to disputed amounts below the
escrow account minimum amount, such disputed amounts shall not
accrue a late fee until the [CIO] day after the original due date.
8.6 Proration
All periodic charges under this Agreement are to be computed on a
calendar month basis, and will be prorated for any partial month,
unless specifically stated otherwise in this Agreement.
8.7 Disputed Charges/Credits
In the event either Party disputes the accuracy or applicability of
any charge or credit, then that Party shall notify the other Party
of the disputed matter and support for such dispute in writing
within [CIO] after becoming aware of, and performing an
investigation of, dispute. The Party contesting its obligation to
pay a charge or to grant a credit of [CIO] such or greater will
deposit the disputed amount in an escrow account in a mutually
agreed upon United States commercial bank or, if the Parties do not
reach agreement, NationsBank of Georgia, N.A. in Atlanta shall be
the depository. The amounts so escrowed shall be deposited in an
interest bearing account and the interest accruing on such escrowed
amount will be allocated among the Parties based on the percentage
of the principal amount of the escrow paid to each Party upon
resolution of the dispute. Neither Party shall set off or fail to
pay a disputed amount without prior notification to the other Party
of such dispute and escrow of the disputed amount. A disputed
amount on an invoice does not
34
relieve the Party of the obligation
for payment of the other undisputed amounts contained on such
invoice and the Party will pay such undisputed amounts pursuant to
the applicable terms and conditions of this Agreement.
If requested by the non-escrowing Party, the non-escrowing Party
will be added as a second Party of the escrow account and the
disputed amounts and accrued interests in escrow may only be
released by the escrow agent upon receipt of written instructions
signed by both Parties, or by the escrowing Party if the non-
escrowing Party does not request addition as a second Party on the
escrow account.
No failure by either Party to identify a contested charge or credit
prior to payment of the invoiced amount will limit or waive any of
such Party's rights or remedies with respect to such charges or
credits, including such Party's right to withhold such disputed
amounts from subsequent payments or credits due to the other Party
hereunder and pay such sums that are [CIO] into an escrow account
as described in this Section 8.7. If the Parties do not
investigate and resolve any disputed amounts pursuant to Section
17.2, within [CIO] after receipt of written notification of the
request for the initiation of such dispute resolution procedures by
the noncontesting Party, the Parties shall notify the escrow agent
to release the applicable disputed funds, at the contesting Party's
sole discretion, (a) to the contesting Party or (b) to the
noncontesting Party. Upon settlement of the dispute by the Parties
or final resolution of the dispute by a court of competent
jurisdiction, if the holder of the disputed amounts shall be
determined not to be entitled to such amounts, the holder shall pay
the amounts to which it is found not to be entitled to the other
Party together with interest thereon payable at a rate of [CIO]
from the date such amounts were due or the date released from
escrow, whichever is later, through the date of payment thereof.
Unpaid charges and credits that are in dispute and placed in escrow
pursuant to this Section 8.7 or held by the noncontesting Party
pursuant to this Section 8.7 pending final resolution of the
dispute will not be considered a basis for monetary or other
default under this Agreement.
8.8 Other Credits
Except as otherwise set forth in this Agreement, with respect to
any amount to be paid or reimbursed to CES by ISSC pursuant to this
Agreement, ISSC may, at its option, pay that amount to CES by
giving CES a credit against the charges otherwise payable to ISSC
hereunder at the time any such amount is due and payable to CES.
Notwithstanding the foregoing, if the amount to be paid or reim-
bursed by ISSC in any specific month, together with the credits due
CES for such month, exceed the pro rata portion of the Annual
Services Charge for such month, ISSC shall [CIO] during such month.
9. 0 Intellectual Property Rights
Pursuant to this Agreement, ISSC, its subcontractors and CES
personnel may develop, create, modify or personalize (collectively,
"Develop") certain computer programming code, including source and
object code ("Code") and documentation to perform the Services.
9.1 Intellectual Property Definitions
a) "Derivative Work" means a work based on one or more
preexisting works, including, without limitation, a condensation,
transformation, expansion or adaptation, which, if prepared without
authorization of the owner of the copyright of such preexisting
work, would constitute a copyright infringement.
35
b) "Materials" means Type I, Type II, Type III, Type IV, Type V,
Type VI and VII Materials collectively.
c) "Type I Material" means Developed Code which constitutes a
Derivative Work of software for which the copyright is owned by
CES.
d) "Type II Material" means Developed Code created at ISSC's
expense, by ISSC personnel performing the Services hereunder and
used to provide the Services, which does not constitute a
Derivative Work of any software owned by CES, ISSC, IBM or their
Affiliates or any third party.
e) "Type III Material" means Code Developed under this Agreement
which constitutes Derivative Works of software for which the
copyright is owned by ISSC, IBM, their Affiliates or their
subcontractors.
f) "Type IV Material" means literary works of authorship
Developed under this Agreement, such as user manuals, charts,
graphs and other written documentation and machine-readable text
and files created at ISSC's expense, by ISSC personnel performing
the Services hereunder and used to provide the Services, and
excludes Code.
g) "Type V Material" means Code Developed under this Agreement by
ISSC and/or its subcontractors independently or jointly with CES,
at CES's expense or as part of the Services or specifically related
to the core business of CES.
h) "Type VI Material" means literary works of authorship
Developed under this Agreement, such as user manuals, charts,
graphs and other written documentation, and machine-readable text
and files, by ISSC and/or it subcontractors independently or
jointly with CES, at CES's expense or as part of the Services or
specifically related to the core business of CES, but excludes
Code.
i) "Type VII Material" means Code and/or literary works of
authorship such as user manuals, charts, graphs and other written
documentation, and machine-readable text and files created at
ISSC's expense and used to interface between Applications Software
and/or Systems Software which does not constitute a Derivative Work
of any software owned by CES, ISSC, IBM or their Affiliates or any
third party.
9.2 ISSC Developed Code
With respect to any Materials whether Developed solely by ISSC or
its subcontractors, or jointly by CES personnel and ISSC or its
subcontractors, ownership will be as follows:
a) Type I, Type V and VI Materials shall be owned by CES, and
ISSC shall have the following license rights:
1) a perpetual, nonexclusive, worldwide, paid-up license to
use, execute, reproduce, display, perform, operate, distribute,
modify, develop, personalize and create Derivative Works from such
Materials internally for the sole benefit of and exclusive use by
CES during the Term; and
2) the right to sublicense third parties to do any of the
foregoing.
36
b) Type II, III, IV and VII Materials, shall be owned by ISSC,
and CES shall have the following license rights:
1) a perpetual, nonexclusive, worldwide, perpetual, paid-up
license to use, execute, operate, reproduce, display, perform,
distribute, modify, Develop, personalize and create Derivative
Works from such Materials internally within CES and its Affiliates;
and
2) the right to sublicense third parties to do any of the
foregoing.
9.3 CES Developed Code
With respect to any Materials whether or not Developed under this
Agreement, which are or have been Developed solely by CES
personnel, such Materials shall be owned by CES, and ISSC, at CES's
sole option, shall have the following license rights:
a) an irrevocable, nonexclusive, worldwide, paid-up license to
use, execute, operate, reproduce, display, perform, distribute,
modify, Develop, personalize and create Derivative Works from such
Materials for the purpose of performing the Services for the sole
benefit of and exclusive use by CES during the Term; and
b) the right to sublicense third parties to do any of the
foregoing.
9.4 General Rights
a) At the expiration or earlier termination of this Agreement, so
long as CES is not in arrears of its payment of monies due ISSC
(other than amounts disputed by CES in accordance with Section
8.7), ISSC will grant to CES the following license rights in the
Types II, III, IV and VII Materials:
1) an irrevocable, nonexclusive, worldwide, perpetual, paid
up license to use, execute, operate, reproduce, display, perform,
distribute, modify, Develop, personalize and create Derivative
Works from the Materials internally for the sole benefit of and
exclusive use by CES and its Affiliates in the operation of their
businesses; and
2) the right to sublicense third parties to do any of the
foregoing.
b) Any ownership or license rights herein granted to either Party
are limited by and subject to any patents and copyrights held by,
and terms and conditions of any license agreements with, applicable
third party software providers.
c) To the extent any of the Materials may not, by operation of
law, be owned by the Party to which ownership has been granted (as
described in this Section 9), each Party agrees to assign (and take
such actions and execute and deliver such documents as shall be
necessary or appropriate to effect such assignment) and hereby
assigns, without further consideration, the ownership of all right,
title and interest in all U.S. and foreign copyrights and mask work
rights (if any) and patents in such Materials to the other Party as
set forth in this Section 9, and such assignee Party shall have the
right to obtain and hold in its own name copyrights, registrations,
renewals and all other rights relating or pertinent thereto.
37
d) The Parties agree to reproduce copyright legends which appear
on any portion of the Materials which may be owned by third
parties.
e) This Agreement shall not preclude either Party from developing
materials or providing services which are competitive to the
Materials or Services which might be delivered pursuant to this
Agreement subject to the limitations set forth in Section 4.3,
except to the extent any of same may infringe any of the other
Party's patent rights or copyrights or mask work rights.
f) Except as set forth in Sections 4.3 and 10, nothing contained
in this Agreement shall restrict either Party from the use of any
ideas, concepts, know-how, or techniques relating to data
processing or network management which either Party, individually
or jointly, develops or discloses under this Agreement, except to
the extent such use infringes any of either Party's patent rights
or copyrights or mask work rights. However, except for the
licenses expressly granted under this Section 9, neither this
Agreement nor any disclosure made hereunder grants any license to
either Party under any patents or copyrights or mask work rights of
the other Party.
10. 0 Confidentiality/Data Security
10.1 Confidential Information
ISSC and CES each acknowledge that the other possesses and will
continue to possess information that has been created, discovered,
developed by or acquired by such party, which information has
commercial value in its business and is not in the public domain.
"Confidential Information" means: information related to either
Party and/or its Affiliates (i) which derives economic value,
actual or potential, from not being generally known to or readily
ascertainable by other persons who can obtain economic value from
its disclosure or use; (ii) which is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy and
(iii) all tangible reproductions of such information including, but
not limited to, technical and nontechnical data related to the
formulas, patterns, designs, compilations, programs, inventions,
methods, techniques, drawings, processes, finances, actual or
potential employees, customers and suppliers and existing and
future products; provided, however, that all of either Party's
information which falls within one of the categories of information
set forth on Schedule M shall be deemed Confidential Information
whether or not so marked. Schedule M may be modified by either
party if the Party seeking modification obtains prior written
consent from the other Party, which consent shall not be
unreasonably withheld. All information that does not fall within a
category set forth on Schedule M must be marked confidential,
restricted or proprietary by either Party or its Affiliates to be
deemed Confidential Information.
10.2 Obligations
a) CES and ISSC will each use the same care to prevent disclosing
to third parties the Confidential Information of the other as it
employs to avoid disclosure, publication or dissemination of its
own information of a similar nature but in no event less than a
reasonable standard of care. Notwithstanding the foregoing, the
Parties may disclose such information to subcontractors involved in
providing Services under this Agreement where:
1) such disclosure is necessary to permit the subcontractor
to perform its duties hereunder;
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2) the subcontractor agrees in writing, under which the
nondisclosing Party is a third party beneficiary for all purposes,
to observe the confidentiality and restricted use and disclosure
covenants and standards of care set forth in this Section 10 at the
security levels as applicable to CES and ISSC respectively; and
3) the disclosing Party assumes full responsibility for the
acts or omissions of its subcontractor, no less than if the acts or
omissions were those of the disclosing Party.
a) Without limiting the generality of the foregoing, neither
Party will publicly disclose the terms of this Agreement, except to
the extent permitted by Sections 10.3 and 16, without the prior
written consent of the other. Furthermore, neither ISSC nor CES
will:
1) make any use of the Confidential Information of the other
except as contemplated by this Agreement;
2) acquire any right in or assert any lien against the
Confidential Information of the other except as contemplated by
this Agreement; or
3) refuse to promptly return, provide a copy of or destroy
such Confidential Information upon the request of the other Party;
provided, however, that except for those restrictions set
forth in Section 4.3 and this Section 10, neither Party will be
restricted in using any data processing or network management
ideas, concepts, know-how and techniques, (including without
limitation, in the development, manufacturing and marketing of its
products and services and in its operations) which are retained in
the minds of employees who have had access to the Confidential
Information of such Party without reference to any physical or
electronic embodiment of such information, unless such use shall
infringe any of such Party's patent rights, copyrights or mask work
rights.
10.3 Exclusions
Notwithstanding the foregoing, this Section will not apply to any
information which ISSC or CES can demonstrate was:
a) at the time of disclosure to it, in the public domain;
b) after disclosure to it, published or otherwise becomes part of
the public domain through no fault of the receiving Party;
c) without a breach of duty owed to the disclosing Party, is in
the possession of the receiving Party at the time of disclosure to
it;
d) received after disclosure to it from a third party who had a
lawful right to, and without a breach of duty owed to the
disclosing Party, did disclose such information to it; or
e) independently developed by the receiving Party without
reference to Confidential Information of the furnishing Party.
39
Further, either Party may disclose Confidential Information of the
other to the extent required by law or order of a court or
governmental agency; provided, however, that the recipient of such
Confidential Information must give the discloser prompt notice and
make a reasonable effort to obtain a protective order or otherwise
protect the confidentiality of such information, all at the
discloser's cost and expense. It is understood that the receipt of
Confidential Information under this Agreement will not limit or
restrict assignment or reassignment of employees of ISSC and CES
within or between the respective Parties and their Affiliates.
10.4 Protection of CES Information
Any additional responsibilities of ISSC and CES with respect to
protection of Confidential Information are set forth in Schedule L.
10.5 Loss of Confidential Information
In the event of any disclosure or loss of, or use in violation of
this Agreement of Confidential Information of a disclosing Party
known to the receiving Party, the receiving Party will notify the
disclosing Party immediately, orally or in writing.
10.6 Limitation
a) That portion, if any, of the Confidential Information that
constitutes trade secrets shall be subject to this Section 10 for
such period as it shall qualify as trade secrets under applicable
law. The remainder of the Confidential Information shall be subject
to this Section 10 for a period of two years after the expiration
or earlier termination of this Agreement.
b) ISSC will not be responsible for the security of data during
transmission via public communications facilities if the breach of
security occurred through access to the public communications
facilities, except to the extent that such breach of security is
caused by the failure of ISSC to perform its security obligations
under this Agreement, or the negligent acts or omissions of ISSC.
11. 0 Termination
11.1 Termination for Convenience
Subject to the other provisions of this Agreement, CES may
terminate this Agreement for CES's convenience beginning on the
[CIO] upon at least [CIO] prior written notice to ISSC; provided,
however, CES may terminate this Agreement for CES's convenience
prior to such [CIO] if the [CIO]. If CES terminates this Agreement
prior to the expiration of the Term for CES's convenience, CES
agrees to pay ISSC on the effective date of termination either:
a) the charge, as specified in the Supplement, ([CIO]) under
[CIO]
b) the [CIO] specified in the Supplement under [CIO] and [CIO].
40
11.2 Termination for Change of Control
In the event of a sale of stock of either Party resulting in the
ability of the purchaser(s) of such stock to elect a majority of
the board of directors of such Party, the merger of either Party
with another entity, or the sale of all or substantially all of the
assets of either Party to another entity, not effected solely for
the purpose of permitting termination under this Section 11.2
("Termination for Change of Control"), CES or its successor
corporation in the case of a merger or the entity purchasing the
assets of CES, may terminate this Agreement with [CIO] prior
written notice to ISSC given not later than [CIO] after such Change
of Control, upon payment of either:
a) the [CIO] specified in the Supplement under [CIO]
b) the [CIO] specified in the Supplement under [CIO].
11.3 [CIO]
a) No [CIO], however described, payable by CES to ISSC hereunder
shall include any element of anticipated profit or revenue, lost
opportunity or similar amounts.
b) For purposes of this Agreement, "Wind-Down Expenses" shall
mean ISSC's reasonable expenses related to the displacement of
assets and personnel, and discontinuance of leases, licenses and
contracts due to CES's early termination.
c) Within [CIO] of the receipt of CES's notification of
termination under the provisions of this Section 11, ISSC will
provide CES an estimate of the amounts associated with the Wind-
Down Expenses and will provide the actual Wind-Down Expenses not
less than [CIO] prior to the effective date of termination.
Further, ISSC will use commercially reasonable efforts to mitigate
its Wind-Down Expenses, such efforts to include, without
limitation, appropriate redeployment of assets and personnel.
Wind-Down Expenses shall be reduced by all such mitigation
anticipated, planned or realized by ISSC prior to termination.
d) Upon CES's prior written notification, ISSC will include full
payout of the ISSC Machines in the Data Center that are being used
solely to provide the Services to CES in the Wind-Down Expenses for
[CIO] for either termination for convenience or termination for
Change of Control, and upon receipt of the [CIO] and Wind-Down
Expenses, transfer title for such ISSC Machines to CES.
e) The Parties agree that the charge(s) paid ISSC under either
Sections 11.1 or 11.2 above are CES's sole and exclusive liability
for termination under such provisions.
11.4 Termination Proration
Any [CIO] will be prorated according to the following formula:
[{(A-B),12 months} x C] + B = Prorated [CIO]
where:
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A = the [CIO] specified in the Supplement for the year in
which termination is effective;
B = the [CIO] specified in the Supplement for the year after
the year in which termination is effective; and
C = the number of months remaining during the year in which
termination is effective.
11.5 Termination [CIO]
Upon written notice, either Party may terminate this Agreement,
without charge to the terminating Party, in the event of a [CIO] by
the other; provided, however, any action or inaction by [CIO] for
which [CIO] has made payments under Section 14.1(f) and/or [CIO]
has received [CIO] in the form of [CIO], that are related to the
grounds for termination under this Section, shall be specifically
excluded from this provision unless [CIO] returned such [CIO] in
accordance with Section 13 and/or such other payments made under
Section 14.1(f). However, the Party seeking termination will
provide the other Party with sufficient, reasonable written prior
notice of such material breach, persistent or continuous breach(es)
and the opportunity to cure same, as follows:
a) in the event of a failure to pay any amount due and payable
under this Agreement when due, at least [CIO], and
b) in the event of any other material breach, or persistent or
continuous breach(es) at least [CIO].
If the nature of any nonmonetary breach is such that it would be
unreasonable to expect a cure within a [CIO] period, the breaching
Party shall be given an additional [CIO] to cure such breach. In
the event the material breach or persistent or continuous
breach(es) are not cured within the periods specified above after
delivery of the notice, the nonbreaching Party may terminate this
Agreement, which termination shall be in writing, as of a date
specified in such notice of termination. The terminating Party
shall have all rights and remedies afforded by law or equity,
subject to the limitations expressed in this Agreement.
11.6 [CIO]
The Parties acknowledge that the [CIO] of [CIO] may have [CIO] on
the [CIO] even if such [CIO] does not [CIO] that gives CES the
[CIO] under [CIO] above; provided, however, any [CIO] or [CIO] by
ISSC for which ISSC has provided [CIO] or CES has received [CIO] in
the form of [CIO] that are related to the grounds for [CIO] under
this Section shall be specifically excluded from this provision
unless CES returned such [CIO]. In the event of such a [CIO], CES
may, at its option, [CIO] as provided under [CIO], [CIO] to CES,
which termination shall then become CES's [CIO]. If CES does not
elect to [CIO] as provided under [CIO], then nothing in this
Section 11.6 shall be deemed to limit or restrict the ability of
CES to claim that a [CIO] constitutes a [CIO] and elect [CIO] CES
[CIO] or otherwise pursuant to the provisions of this Agreement.
42
11.7 Extension of Service
Except in the case of a termination of this Agreement due to a
material breach by CES, CES may once request and ISSC will extend
the provision of services for a period not to exceed [CIO] beyond
the effective date of termination or expiration. Such request must
be a written notice received not less than [CIO] prior to the
effective date of termination or expiration of this Agreement;
provided, however, CES may so request and ISSC will extend the
provisions of Services beyond the effective date of termination or
expiration [CIO] for the portion of the [CIO] period CES desires
such extension of Services.
11.8 Other Rights Upon Termination
So long as CES has complied with Section 8.7 and is not otherwise
in default of monies due ISSC at the expiration or earlier
termination of this Agreement:
a) ISSC agrees to sell to CES or its designee, upon CES's
request, the ISSC Machines at the Data Center then currently being
used by ISSC on a dedicated basis to perform the Services at ISSC's
accounting book value with such book value based on a [CIO]
straight-line depreciation from initial entry on ISSC's books or,
in the case of ISSC Machines that ISSC is leasing, at the lease
buy-out charge based on a [CIO] lease period or, for ISSC Machines
that have either been fully depreciated or the leases have expired
and ISSC is the owner of such ISSC Machines, for the [CIO]. CES
shall be responsible for any sales, use or similar taxes associated
with the purchase of such equipment.
b) For Software proprietary to ISSC and not otherwise owned by or
licensed to CES in accordance with Section 9 and not generally
commercially available, ISSC will provide a source code license,
with the right to modify and own such modifications, to CES, for
use only by CES and its Affiliates in the CES Business upon terms
and prices (which prices shall not be greater than those offered to
other Similarly Situated Customers or, in the case where no
Similarly Situated Customers exist, other third parties generally)
to be mutually agreed upon by the Parties or, at CES's option, ISSC
will recommend a mutually agreeable commercially available
substitute, if any, to perform the same function.
c) With respect to generally commercially available Software, if
ISSC has licensed or purchased and is using any such Software
solely for providing the Services to CES at the date of expiration
or termination, CES will reimburse ISSC for initial license or
purchase charges, except to the extent that CES has already
compensated ISSC for such investment, for such Software in an
amount equal to the remaining unamortized cost of such Software, if
any, depreciated over a [CIO] year life, and pay any transfer fee
or charge imposed by any applicable vendor; provided, however, that
ISSC shall bear the costs, if any, associated with the transfer of
[CIO] upon termination.
d) With respect to generally commercially available Software, if
ISSC has licensed or purchased and is using any such Software for
providing the Services to CES and other ISSC customers in a shared
environment at the date of expiration or termination, ISSC will
assist CES in obtaining licenses for such Software subject to CES's
payment of any license fee or charge imposed by any applicable
vendor.
43
e) Upon the date of expiration or termination of this Agreement,
CES shall have the right to make offers of employment to any or all
ISSC employees performing Services for CES or its Affiliates
hereunder ("CES Service Employees"). Promptly after either Party
sends the other written notice of termination or expiration, ISSC
agrees to supply CES, at no charge, with the names and resumes
requested by CES for the purpose of exercising its rights under
this Section. CES's rights under this Section will take precedence
over any ISSC/employee employment contract or covenant that may
otherwise limit an employee's right to accept employment with CES.
f) ISSC will transfer or assign to CES or its designee, upon
CES's request, on mutually acceptable terms and conditions, subject
to the payment by CES of any transfer fee or charge imposed by the
applicable vendors, any contracts applicable solely to services
being provided to CES for maintenance, Disaster Recovery services
and other necessary third party services (other than subcontractor
services) then being used by ISSC to perform the Services.
g) ISSC will provide Services Transfer Assistance pursuant to
Section 7.9.
h) ISSC will use commercially reasonable efforts to negotiate
license arrangements with third parties that will minimize the
amount of license transfer fees to be paid by CES.
12. 0 Liability
12.1 General Intent
Each Party's and each of its subcontractor's entire monetary
liability to the other Party and its exclusive remedies for
monetary damages are set forth in this Section, in Schedule E
(Service Credits) and in Section 14 (Indemnities). Subject to the
specific provisions of this Section, it is the intent of the
Parties that each Party will be liable to the other Party for any
damages incurred by the nonbreaching Party as a result of the
breaching Party's failure to perform its obligations in the manner
required by this Agreement.
12.2 Damages
a) Each Party's and each of its subcontractor's liability for
actual, direct monetary liability arising out of or resulting from
the other Party's and each of its subcontractor's performance or
non-performance under this Agreement regardless of the form of the
action (whether in contract, tort, warranty or other legal or
equitable grounds), will be limited [CIO] breach by such Party and
its subcontractors, to [CIO](the [CIO]). Actual, direct damages
shall include, by way of example but without limitation, the costs
of cover incurred by CES to obtain services which are the same as
or substantially similar to the Services, the costs incurred by CES
to transition to another provider of information technology
services and/or taking some or all of such functions and
responsibilities in-house, the difference in the amounts to be paid
to ISSC hereunder and the charges to be paid to such other provider
and/or the costs of providing such functions and responsibilities
in-house, and similar damages.
The [CIO] shall be [CIO] in any or all of the following three
ways:
1) reduced by the amount of [CIO] actually paid by [CIO]
pursuant to [CIO] hereof;
44
2) as described in [CIO] if the [CIO] set forth in [CIO] is
not [CIO] or is [CIO]; and
3) if the ASC is adjusted pursuant to [CIO].
b) In the event ISSC [CIO] to provide the Services in accordance
with [CIO], ISSC [CIO] according to the schedule set forth in [CIO]
(each, a [CIO]); collectively, the [CIO] ) against the amounts owed
to ISSC in respect of the [CIO] following the [CIO] in which the
[CIO] was (were) incurred.
c) The [CIO] shall not apply to any of the following:
1) any failure by CES to pay any amounts due and payable but
remaining unpaid to ISSC pursuant to the terms of this Agreement;
2) Losses covered by either Party's obligation to indemnify
the other Party under Sections 14.1(a), 14.1(c), 14.1(d), 14.1(e),
14.2(a), 14.2(c), 14.2(d) and 14.2(e), respectively;
3) Losses incurred by either Party caused by or arising out
of the inaccuracy or untruthfulness of the representations and
warranties of the other Party contained in this Agreement;
4) amounts to be [CIO] to [CIO] by [CIO] pursuant to [CIO]
in the form [CIO]; and
5) Losses arising from a violation of Section 10.0
Confidentiality/Data Security of this Agreement.
d) In no event will either Party have any liability whether based
on contract, tort (including, without limitation, negligence),
warranty or any other legal or equitable grounds, for any damages
other than the actual, direct damages described in Section 12.2(a),
(b) and (c) including without limitation, any other damages
constituting:
1) loss of interest, profit or revenue of the other Party;
or
2) any consequential, indirect, incidental, special,
punitive or exemplary damages suffered by the other Party, arising
from or related to this Agreement, even if such Party has been
advised of the possibility of such losses or damages; provided,
however, that this clause will not prevent either Party from
recovering accrued but unpaid credits and amounts due under this
Agreement.
e) In no event will ISSC or its subcontractors be liable for any
damages if and to the extent caused by CES's failure to perform its
responsibilities, nor shall CES or its subcontractors be liable for
any damages if and to the extent caused by any failure to perform
by ISSC or its subcontractors.
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13. 0 Remedies
If ISSC's provision of the Services is such that ISSC would
otherwise owe CES a [CIO], CES may, at its option:
a) seek [CIO] subject to the limitations specified in Section
12.2; or
b) recover as [CIO] the [CIO]; provided, however, CES may [CIO],
which are related to [CIO] under Sections 11.5 and 11.6, received
from ISSC hereunder within [CIO] after CES's receipt thereof and
seek in lieu thereof [CIO].
If [CIO] does not return a [CIO] prior to the end of such [CIO]
period, [CIO] recovery of the [CIO] shall constitute
acknowledgement of [CIO] of full satisfaction of any claim by [CIO]
that [CIO] has [CIO] its obligations under this Agreement with
respect to such event or said events giving rise to the applicable
[CIO].
13.1 Warranty
13.2 Work Standards
ISSC represents and warrants that:
a) it has [CIO], rights and [CIO] to provide and perform the
Services; and
b) it has [CIO] and [CIO] the Services or [CIO] that are [CIO] to
the Services for other customers.
CES represents that:
a) CES is authorized to permit ISSC access to and use of the CES
Facilities and ISSC is performing a portion of the Services for CES
at the CES Facilities at CES's request; and
b) if the CES Facilities are found not to be in compliance with
all material applicable federal, state and local environmental laws
regarding hazardous substances by an applicable governmental
regulatory authority, ISSC may remove the ISSC Project Executive
from the CES Facility until such noncompliance is remedied.
13.3 Ownership of CES-Retained Machines
CES represents that CES is either the owner of each CES-Retained
Machine or is authorized by its owner to include it under this
Agreement.
13.4 Noninfringement
The Parties represent and warrant that they will perform their
responsibilities under this Agreement in a manner that does not
infringe, or constitute an infringement or misappropriation of, any
patent, trade secret, copyright or other proprietary right of any
third party. Notwithstanding this provision
46
or any other provision
in this Agreement, CES makes no warranty or representation with
respect to any claims for such infringement or misappropriation by
virtue of its compliance with obligations herein to provide ISSC
access to, use of or benefits of the software licenses, leases and
related contracts prior to receiving the necessary Required
Consents.
13.5 Compliance with Obligations
Each Party represents and warrants that its entry into this
Agreement does not violate or constitute a breach of any of its
contractual obligations with third parties. Notwithstanding this
provision or any other provision in this Agreement, CES makes no
warranty or representation with respect to any claims for violation
or breach of any of its contractual obligations by virtue of its
compliance with obligations herein to provide ISSC use of the
objects of such arrangements prior to receiving the necessary
Required Consents.
13.6 Disclaimer
a) ISSC does not warrant the accuracy of any advice, report, data
or other product delivered to CES to the extent any inaccuracies
are caused by data and/or Software provided by CES, and such
products are delivered AS IS, and ISSC shall not be liable for any
inaccuracy thereof. ISSC will promptly notify CES of any such
inaccuracies of which ISSC becomes aware and the cause therefore
and will provide reasonable assistance to CES to remedy the
problem.
b) Subject to the obligations of ISSC contained in this Agreement
and the Supplement and Schedules referenced herein, ISSC does not
assure uninterrupted or error-free operation of the ISSC Machines.
c) EXCEPT AS PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
EXPRESS WARRANTIES AND THERE ARE NO IMPLIED WARRANTIES, INCLUDING,
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
13.7 Disabling Code
Each Party represents and warrants that, without the prior written
consent of the other Party, it will not insert into the Software
any code which would have the effect of disabling or otherwise
shutting down all or any portion of the Services. Each Party
further represents and warrants that, with respect to any disabling
code that may be part of the Software, it will not invoke such
disabling code at any time, including upon expiration or
termination of this Agreement for any reason, without the other
Party's prior written consent.
13.8 Authorization and Enforceability
Each Party hereby represents that:
a) it has all requisite corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated
hereby;
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b) the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of
each Party; and
c) this Agreement has been duly executed and delivered by such
Party and (assuming the due authorization, execution and delivery
hereof by the other Party) is a valid and binding obligation of
such Party, enforceable against it in accordance with its terms.
13.9 Regulatory and Corporate Proceedings
Each Party agrees to obtain all necessary regulatory approvals
applicable to its business, obtain any necessary permits, and
comply with any regulatory requirement applicable to the
performance of the Services.
14.0 Indemnities
14.1 Indemnity by ISSC
ISSC agrees to indemnify, defend and hold CES, its Affiliates and
their respective officers, directors, employees, agents, successors
and assigns harmless, in accordance with the procedures described
in Section 14.6 from and against any and all Losses incurred by
CES, caused by, arising from or in connection with:
a) any Claims of infringement made against CES of any United
States letters patent, or any copyright, trademark, service mark,
trade name, trade secret or similar proprietary rights conferred by
contract or by common law or by any law of the United States or any
state, alleged to have occurred because of equipment, systems,
products or other resources or items provided to CES by ISSC;
provided, however, that ISSC will have no obligation with respect
to any Losses to the extent the same are caused by, arise out of or
arise in connection with CES's modification of a program or a
machine or CES's combination, operation or use with devices, data
or programs not furnished by ISSC or its subcontractors;
b) the inaccuracy or untruthfulness of any representation or
warranty made by ISSC under this Agreement;
c) any amounts, including but not limited to taxes, interest and
penalties assessed against CES which are obligations of ISSC
pursuant to Section 7.7;
d) personal injuries, death or damage to tangible personal or
real property of third parties, including employees of ISSC, its
contractors or subcontractors; provided, however, that ISSC will
have no obligation with respect to any Losses, under this part, to
the extent the same are caused by, arise out of or arise in
connection with the negligence of CES;
e) any Claims by third parties arising out of or resulting from
the failure to obtain any [CIO] as of the Commencement Date and
applicable to [CIO], where CES has used commercially reasonable
efforts to obtain such [CIO] and
48
f) notwithstanding anything to the contrary contained in [CIO]
hereof, any amounts that are [CIO]; provided, however, that ISSC
shall not be required to indemnify CES for charges incurred under
this Section 14.1(f) if:
1) CES does not cooperate with ISSC to mitigate the charges
incurred under this Section 14.1(f) to the same degree CES sought
to mitigate such charges prior to the Commencement Date;
2) After notifying ISSC of the [CIO], CES does not allow
ISSC to participate in CES's efforts to mitigate any charges
incurred under Section 14.1(f), after being notified in writing of
ISSC's desire to so participate;
3) The charges are incurred under a process and/or during a
window of time that is substantially different from those processes
and time windows utilized as of the Commencement Date (which the
Parties agree to document by a mutually agreed upon date) to the
extent that the change in the process or window of time, without
ISSC's consent, which will not be unreasonably withheld, causes the
charges to be incurred;
4) The charges are incurred as a result of an [CIO] of this
Agreement that occurred more than [CIO] previously for which CES
has received a [CIO] and has not elected to return such [CIO] in
accordance with Section 13 hereof.
In the event and to the extent that a Claim is made by an employee
of ISSC or its contractors or subcontractors providing Services
hereunder against CES, its Affiliates and their respective
directors, officers, employees or agents, the intent of this
Agreement is that ISSC shall indemnify CES, its directors,
officers, employees and agents, to the same extent as if the Claim
was made by a non-employee of ISSC or its contractors or
subcontractors. Accordingly, in addition to other provisions
herein, and in order to render the Parties' intent and this
indemnification agreement fully enforceable, ISSC, in an
indemnification Claim hereunder, expressly and without reservation
waives any defense or immunity it may have under any applicable
Workers' Compensation Law(s) or any other statute or judicial
decision disallowing or limiting such indemnification and consents
to a cause of action for indemnity. Said waiver and consent to
indemnification is made irrespective of and specifically waiving,
only between the Parties, any defense or immunity under any statute
or judicial decision.
14.2 Indemnity by CES
CES agrees to indemnify, defend and hold ISSC, its Affiliates and
their respective officers, directors, employees, agents, successors
and assigns harmless, in accordance with the procedures described
in Section 14.6, from and against any and all Losses incurred by
ISSC, caused by, arising from or in connection with:
a) any Claims of infringement made against ISSC of any United
States letters patent, or any copyright, trademark, service mark,
trade name, trade secret or similar proprietary rights conferred by
contract or by common law or by any law of the United States or any
state, alleged to have occurred because of equipment, systems,
products or other resources or items
49
provided to ISSC by CES
hereunder; provided, however, that CES will have no obligation with
respect to any Losses to the extent the same are caused by, arise
out of, or arise in connection with ISSC's modification of a
program or machine or ISSC's combination, operation or use with
devices, data or programs not furnished by CES;
b) the inaccuracy or untruthfulness of any representation or
warranty made by CES under this Agreement;
c) any amounts, including but not limited to taxes, interest and
penalties, assessed against ISSC which are obligations of CES
pursuant to Section 7.7;
d) personal injuries, death or damage to tangible personal or
real property of third parties, including employees of CES, its
contractors and subcontractors; provided however, that CES will
have no obligation with respect to any Losses, under this part, to
the extent the same are caused by, arise out of or arise in
connection with the negligence of ISSC or its contractors or
subcontractors; and
e) any Claim by third parties arising out of or in connection
with CES's disposition of the [CIO] pursuant to Section [CIO].
In the event and to the extent that a Claim is made by an employee
of CES against ISSC or its contractors or subcontractors, its
Affiliates and their respective directors, officers, employees and
agents, the intent of this Agreement is that CES shall indemnify
ISSC, its directors, officers, employees and agents, to the same
extent as if the Claim was made by a non-employee of CES or its
contractors or subcontractors.. Accordingly, in addition to other
provisions herein, and in order to render the Parties' intent and
this indemnification agreement fully enforceable, CES, in an
indemnification Claim hereunder, expressly and without reservation
waives any defense or immunity it may have under any applicable
Workers' Compensation Law(s) or any other statute or judicial
decision disallowing or limiting such indemnification and consents
to a cause of action for indemnity. Said waiver and consent to
indemnification is made irrespective of and specifically waiving,
only between the Parties, any defense or immunity under any statute
or judicial decision.
14.3 Employment Actions
It is understood and agreed that ISSC shall be solely and
exclusively responsible for personnel decisions (including hiring,
promotions, training, compensation, evaluation, discipline, and
discharge) affecting ISSC's employees, contractors and agents
except as specified in Section 4.1. CES shall be solely and
exclusively responsible for personnel decisions (including hiring,
promotion, training, compensation, evaluation, discipline and
discharge) affecting CES's employees, contractors, and agents.
14.4 Cross Indemnity and Contribution
Each Party agrees to contribute to the amount paid or payable by
the other Party for any and all Losses for which such Party is
legally liable and in proportion to such Party's comparative fault
in causing such Losses, arising in favor of any person, corporation
or other entity, including the Parties hereto and their employees,
contractors and agents, on account of personal injuries, death or
damage to tangible personal or real property in any way incident
to, or in connection with or arising out of:
a) this Agreement;
50
b) the Services provided by ISSC hereunder;
c) the presence of such Party, its employees, contractors or
agents on the premises of the other Party; or
d) the act or omission of such Party, its employees, contractors
or agents.
14.5 Exclusive Remedy
The indemnification rights of each Indemnified Party for third
party Claims pursuant to Sections 14.1, 14.2, 14.3 or 14.4,
together with the Indemnified Party's right to recover any and all
Losses under this Agreement or otherwise caused by, arising out of
or arising in connection with the event or facts that give rise to
such indemnification right, shall be the exclusive remedy of such
Indemnified Party with respect to each such third party Claim to
which such indemnification relates.
14.6 Indemnification Procedures
a) If any civil, criminal, administrative or investigative action
or proceeding is commenced or threatened (any of the above being a
"Claim") against any Party entitled to indemnification under
Sections 14.1, 14.2 or 14.3 (an "Indemnified Party") written notice
thereof shall be given to the Party that is obligated to provide
indemnification under such Sections (the "Indemnifying Party") as
promptly as practicable but in all events, within a period that
will not prejudice the rights of the Indemnifying Party under this
Agreement or to defend the Claim. After such notice, if the
Indemnifying Party shall acknowledge in writing to such Indemnified
Party that this Agreement applies with respect to such Claim, then
the Indemnifying Party shall be entitled, if it so elects, in a
written notice delivered to the Indemnified Party not fewer than
[CIO] prior to the date on which a response to such Claim is due or
such lesser period as is reasonable given the nature of the Claim
and the notice and response time permitted by law or the facts and
circumstances, to take control of the defense and investigation of
such Claim and to employ and engage attorneys of its sole choice to
handle and defend the same, at the Indemnifying Party's sole cost
and expense. The Indemnified Party shall cooperate in all
reasonable respects with the Indemnifying Party and its attorneys
in the investigation, trial and defense of such Claim and any
appeal arising therefrom; provided, however, that the Indemnified
Party may, at its own cost and expense, participate, through its
attorneys or otherwise, in such investigation, trial and defense of
such Claim and any appeal arising therefrom. No settlement of a
Claim that involves a remedy other than the payment of money by the
Indemnifying Party shall be entered into without the consent of the
Indemnified Party, which consent will not be unreasonably withheld.
b) After notice by the Indemnifying Party to the Indemnified
Party of its election to assume full control of the defense of any
such Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal expenses incurred thereafter by
such Indemnified Party in connection with the defense of that
Claim. If the Indemnifying Party does not promptly assume full
control over and diligently pursue the defense of a Claim subject
to such defense as provided in this Section 14.6, the Indemnifying
Party may participate in such defense, at its sole cost and
expense, and the Indemnified Party shall have the right to defend,
settle or otherwise resolve the Claim in such manner as it may deem
appropriate, at the cost and expense of the Indemnifying Party,
provided, however, any settlement of the Claim shall require the
consent of the Indemnifying Party which consent shall not be
unreasonably withheld.
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15. 0 Insurance and Risk of Loss
15.1 ISSC Insurance
During the Term of this Agreement, ISSC and any ISSC contractor and
subcontractor shall maintain and keep in force, at its own expense,
the following minimum insurance coverages and minimum limits:
a) Workers' Compensation Insurance, the statutory limits as
required by the various laws and regulations applicable to the
employees of ISSC or any ISSC contractor or subcontractor.
b) Employer's Liability Insurance, for employee bodily injuries
and deaths, with a limit of [CIO] each accident.
c) Comprehensive or Commercial General Liability Insurance,
covering claims for bodily injury, death and property damage,
including Premises and Operations, Independent Contractors,
Products and Completed Operations, Personal Injury, Contractual,
and Broad-form Property Damage liability coverages, with limits as
follows:
1) Occurrence/Aggregate Limit of [CIO] for bodily injury,
death and property damage each occurrence of [CIO] general
aggregate; or
2) Split liability limits of:
(a) [CIO] for bodily injury per person;
(b) [CIO] for bodily injury per occurrence;
(c) [CIO] for property damage.
d) Comprehensive Automobile Liability Insurance, covering owned,
non-owned and hired vehicles, with limits as follows:
1) Combined Single Limit of [CIO] for bodily injury, death
and property damage per occurrence; or
2) Split liability limits of:
(a) [CIO] for bodily injury per person;
(b) [CIO] for bodily injury per occurrence;
(c) [CIO] for property damage.
e) All-Risk Property Insurance, on a replacement cost basis,
covering the real property of ISSC which ISSC is obligated to
insure by this Agreement. Such real property may include
buildings, equipment, furniture, fixtures and supply inventory.
All such policies of insurance of ISSC and its contractors and
subcontractors shall provide that the same shall not be canceled
nor the coverage modified nor the limits changed without first
[CIO]
52
prior written notice thereof to CES. No such cancellation,
modification or change shall affect ISSC's obligation to maintain
the insurance coverages required by this Agreement.
ISSC shall be responsible for payment of any and all deductibles
from insured claims under its policies of insurance. The coverage
afforded under any insurance policy obtained by ISSC pursuant to
this Agreement shall be primary coverage regardless of whether or
not CES has similar coverage.
ISSC or its contractors and subcontractors shall not perform under
this Agreement unless and until certificates of such insurance,
including renewals thereof, have been delivered to and approved by
CES.
ISSC shall have the right to self-insure any of the insurance
coverages required by this Agreement upon prior written
notification to CES. Unless previously agreed to in writing by
CES, ISSC's contractors and subcontractors shall comply with the
insurance requirements herein. The minimum limits of coverage
required by this Agreement may be satisfied by a combination of
primary and excess or umbrella insurance policies.
If ISSC or its contractors or subcontractors shall fail to comply
with any of the insurance requirements herein, upon written notice
to ISSC by CES, CES may, without any obligation to do so, procure
such insurance and ISSC shall pay CES the cost thereof plus a
reasonable administrative fee as designated by CES.
The maintenance of the insurance coverages required under this
Agreement shall in no way operate to limit the liability of ISSC to
CES under the provisions of this Agreement.
15.2 CES Insurance
During the Term of this Agreement, CES shall maintain and keep in
force, at its own expense, the following minimum insurance
coverages and minimum limits:
a) Workers' Compensation Insurance, with statutory limits as
required by the various laws and regulations applicable to the
employees of CES.
b) Employer's Liability Insurance, for employee bodily injuries
and deaths, with a limit of [CIO] each accident.
c) Comprehensive or Commercial General Liability Insurance,
covering claims for bodily injury, death and property damage,
including Premises and Operations, Independent Contractors,
Products and Completed Operations, Personal Injury, Contractual,
and Broad-form Property Damage liability coverages, with limits as
follows:
1) Occurrence/Aggregate Limit of [CIO] for bodily injury,
death and property damage each occurrence and [CIO] general
aggregate; or
2) Split liability limits of:
(a) [CIO] for bodily injury per person;
(b) [CIO] for bodily injury per occurrence;
53
(c) [CIO] for property damage.
d) Comprehensive Automobile Liability Insurance, covering owned,
non-owned and hired vehicles, with limits as follows:
1) Combined Single Limit of [CIO] for bodily injury, death
and property damage per occurrence; or
2) Split liability limits of:
(a) [CIO] for bodily injury per person;
(b) [CIO] for bodily injury per occurrence;
(c) [CIO] for property damage.
e) All-Risk Property Insurance, on a replacement cost basis,
covering the real property of CES which CES is obligated to insure
by this Agreement. Such real property may include buildings,
equipment, furniture, fixtures and supply inventory.
All such policies of insurance of CES shall provide that the same
shall not be canceled nor the coverage modified nor the limits
changed without first giving [CIO] prior written notice thereof to
ISSC. No such cancellation, modification or change shall affect
CES's obligation to maintain the insurance coverages required by
this Agreement.
CES shall be responsible for payment of any and all deductibles
from insured claims under its policies of insurance. The coverage
afforded under any insurance policy obtained by CES pursuant to
this Agreement shall be primary coverage regardless of whether or
not ISSC has similar coverage.
CES shall not perform under this Agreement unless and until
certificates of such insurance, including renewals thereof, have
been delivered to and approved by ISSC.
CES shall have the right to self-insure any of the insurance
coverages required by this Agreement upon prior written
notification to ISSC. The minimum limits of coverage required by
this Agreement may be satisfied by a combination of primary and
excess or umbrella insurance policies.
If CES shall fail to comply with any of the insurance requirements
herein, upon written notice to CES by ISSC, ISSC may, without any
obligation to do so, procure such insurance and CES shall pay ISSC
the cost thereof plus a reasonable administrative fee as designated
by ISSC.
The maintenance of the insurance coverages required under this
Agreement shall in no way operate to limit the liability of CES to
ISSC under the provision of this Agreement.
15.3 Risk of Property Loss
CES is responsible for risk of loss of, or damage to, the CES-
Retained Machines and other CES property regardless of where
located, and loss or damage to software on the CES-Retained
Machines or any Software in CES's possession at the time of such
loss or damage. ISSC is responsible for risk of loss of, or damage
to, the ISSC Machines and other ISSC property regardless of where
located, and loss or damage to Software in ISSC's possession at the
time of such loss or damage.
54
15.4 Mutual Waiver of Subrogation
a) To the extent permitted by law, ISSC and its contractors and
subcontractors hereby waive their rights of subrogation against
CES, its directors, officers, employees and agents for any loss or
damage to the Machines and other tangible real property of ISSC,
its contractors and subcontractors resulting from operations in
connection with this Agreement. Each property insurance policy of
ISSC and its contractors and subcontractors shall be endorsed to
provide a waiver of any and all rights of subrogation against CES,
its directors, officers, employees and agents for loss resulting
from operations in connection with this Agreement.
b) To the extent permitted by law, CES, its directors, officers,
employees and agents hereby waive their rights of subrogation
against ISSC and its contractors and subcontractors for any loss or
damage to the Machines and other tangible real property of CES, its
directors, officers, employees and agents resulting from operations
in connection with this Agreement.
16. 0 Publicity
Each Party will submit to the other all advertising, written sales
promotion, press releases and other publicity materials relating to
this Agreement in which the other Party's name or mark is mentioned
or language from which the connection of said name or mark may be
inferred or implied, and will not publish or use such advertising,
sales promotion, press releases, or publicity materials without
prior written approval of the other Party. However, either Party
may include the other Party's name and a factual description of the
work performed under this Agreement on employee bulletin boards, in
its list of references and in the experience section of proposals
to third parties, in internal business planning documents and in
its annual report to stockholders, and whenever required by reason
of legal, accounting or regulatory requirements.
17. 0 Review Committee and Dispute Resolution
17.1 Joint Advisory Committee
ISSC and CES agree to create a Joint Advisory Committee consisting
of two people of the following titles from each Party:
ISSC
1) Director, Cross-Industry Applications and Business
Services
2) ISSC Project Executive
CES
1) Vice-President, Technology
2) CES Project Executive
The Joint Advisory Committee will:
a) conduct quarterly reviews of the progress of the Services;
55
b) annually review the operating and strategic plans prepared by
the Project Executives;
c) review, on an annual basis, performance objectives and
measurements;
d) provide advice and direction on technology changes; and
e) resolve disputes between the Parties.
17.2 Dispute Resolution
a) Any dispute between the Parties either with respect to the
interpretation of any provision of this Agreement or with respect
to the performance by ISSC or by CES hereunder shall be resolved as
specified in this Section 17.2, as follows:
1) Upon the written request of either Party, each of the
Parties will appoint a designated representative who does not
devote substantially all of his or her time to performance under
this Agreement, whose task it will be to meet for the purpose of
endeavoring to resolve such dispute.
2) The designated representatives shall meet as often as
necessary to gather and furnish to the other all information with
respect to the matter in issue which is appropriate and germane in
connection with its resolution.
3) Such representatives shall discuss the problem and
negotiate in good faith in an effort to resolve the dispute without
the necessity of any formal proceeding relating thereto.
4) During the course of such negotiation, all reasonable
requests made by one Party to the other for nonprivileged
information reasonably related to this Agreement, will be honored
in order that each of the Parties may be fully advised of the
other's position.
5) The specific format for such discussions will be left to
the discretion of the designated representatives but may include
the preparation of agreed upon statements of fact or written
statements of position furnished to the other Party.
b) If the designated representatives cannot resolve the dispute,
then the dispute shall be escalated to the President of CES and the
President of ISSC, for their review and resolution. If the dispute
cannot be resolved by such officers, then the Parties may initiate
formal proceedings; however, formal proceedings for the judicial
resolution of any such dispute may not be commenced until the
earlier of:
1) the designated representatives, concluding in good faith
that amicable resolution through continued negotiation of the
matter in issue does not appear likely; or
2) [CIO] after the initial request to negotiate such
dispute; or
3) [CIO] before the statute of limitations governing any
cause of action relating to such dispute would expire;
provided, however, that the pendency of this dispute resolution
procedure shall not prevent either Party from seeking equitable
relief with respect to a dispute prior to such period.
56
17.3 Continued Performance
Both Parties agree to continue performing their respective
obligations under this Agreement while any dispute is being
resolved unless and until such obligations are terminated or expire
in accordance with the provisions hereof.
18. 0 General
18.1 Control of Services
a) This Agreement shall not be construed as constituting either
Party as partner of the other or to create any other form of legal
association that would impose liability upon one Party for the act
or failure to act of the other or as providing either Party with
the right, power or authority (express or implied) to create any
duty or obligation of the other Party.
b) Each Party shall be responsible for the management, direction
and control of its employees and such employees shall not be
employees of the other Party.
18.2 Right to Perform Services for Others
Each Party recognizes that ISSC personnel providing Services to CES
under this Agreement may perform similar services for others and
this Agreement shall not prevent ISSC from using the personnel and
equipment provided to CES under this Agreement for such purposes
subject only to the restrictions set forth in Sections 4.1, 4.3 and
10. ISSC may perform its obligations through its subsidiaries,
Affiliates or through the use of ISSC-selected independent
contractors; provided, however, that ISSC shall not be relieved of
its obligations under this Agreement by use of such subsidiaries,
Affiliates, or subcontractors.
18.3 Scope of Services
The Services provided under this Agreement are for ISSC Machines
and facilities located within the United States, Puerto Rico or
Guam.
18.4 Amendments and Revisions
No changes or modifications to this Agreement, its Supplement and
Schedules may be made orally, but only by a written amendment or
revision signed by both Parties.
18.5 Force Majeure
a) Neither Party shall be liable for any default or delay in the
performance of its obligations hereunder if and to the extent such
default or delay is caused, directly or indirectly, by fire, flood,
earthquake, elements of nature or acts of God, acts of war,
terrorism, riots, civil disorders, rebellions or revolutions in the
United States, strikes, lockouts, or labor difficulties (other than
in the case of ISSC, strikes, lockouts or labor difficulties
initiated by ISSC's employees or, in the case of CES, strikes,
lockouts, or labor difficulties initiated by CES's or its
subcontractor's employees), or any other similar cause beyond the
reasonable control of such Party (individually, each being a "Force
Majeure Event"); provided such Force Majeure Event could not have
been prevented by reasonable precautions and cannot
57
reasonably be
circumvented by the nonperforming Party through the use of
alternate sources, work-around plans or other means.
b) In such event, the nonperforming Party will be excused from
any further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such Party
continues to use commercially reasonable efforts to recommence
performance or observance whenever and to whatever extent possible
without delay. Any Party so delayed in its performance will
immediately notify the other by telephone (to be confirmed in
writing within [CIO] of the inception of such delay) and describe
at a reasonable level of detail the circumstances causing such
delay.
c) This Section 18.5 does not limit or otherwise affect ISSC's
obligation to provide Disaster Recovery services in accordance with
Schedule G in the event that Site 1 and Site 2 simultaneously
experience conditions that cause such Disaster Recovery services to
be invoked, or if (1) prior to the scheduled inception of the
provision of Services from Site 2 or, (2) if CES does not elect to
implement Site 2, in the event that Site 1 experiences such
conditions.
d) If ISSC materially breaches its obligations to provide
Disaster Recovery Services in accordance with Schedule G, CES may
terminate this Agreement pursuant to Section 11.5 without regard to
the cure periods, provided that CES gives ISSC written notice of
termination within [CIO] of the alleged breach. Nothing in this
subsection shall be deemed to otherwise limit CES's right to
terminate pursuant to Section 11.5 subject to the cure periods
stated therein.
18.6 Nonperformance
Except as otherwise provided in this Agreement, to the extent any
nonperformance by either Party of its nonmonetary obligations under
this Agreement results from or is caused by the other Party's
failure to perform its nonmonetary obligations under this
Agreement, such nonperformance shall be excused.
18.7 Remarketing
CES may not remarket all or any portion of the Services provided
under this Agreement, or make all or any portion of the Services
available to any party, without the prior written consent of ISSC;
provided, however, CES may [CIO] subject to the following
limitations:
a) CES shall independently [CIO];
b) CES does not utilize ISSC's [CIO];
c) CES discloses to its [CIO];
58
d) CES will seek ISSC's approval of a potential [CIO] prior to
CES's initiating [CIO] for such [CIO], which approval shall only be
withheld pursuant to ISSC's contractual obligations to its [CIO]
and which approval ISSC shall use commercially reasonable efforts
to timely obtain for CES;
e) if CES's activities for an [CIO] cause ISSC to fail to meet a
Minimum Service Level, ISSC shall be excused from such failure to
the extent ISSC demonstrates that the failure was caused by such
[CIO] activities; and
f) if ISSC incurs incremental costs in connection with any such
[CIO] of the [CIO], such costs will be treated as a New Service in
accordance with Section 7.6 hereof.
Nothing herein may be construed to limit or hinder CES from (i)
marketing, selling or performing its employee services to and for
its customers and/or (ii) from providing any portion of the
Services to its Affiliates.
18.8 Waiver
No waiver of any breach of any provision of this Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach
of the same or any other provisions hereof.
18.9 Severability
If any provision of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or
impaired thereby, and such provision shall be deemed to be restated
to reflect the original intentions of the Parties as nearly as
possible in accordance with applicable law(s).
18.10 Limitations Period upon Termination
Neither Party may bring an action, regardless of form, arising out
of this Agreement more than [CIO] after the cause of action has
arisen or the date such cause of action was or should have been
discovered.
18.11 Counterparts
This Agreement shall be executed in duplicate counterparts. Each
such counterpart shall be an original.
18.12 Governing Law
This Agreement shall be governed by the laws of the State of
Georgia as such laws are applied to contracts which are entered
into and performed entirely within the State of Georgia.
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18.13 Binding Nature and Assignment
This Agreement will be binding on the Parties and their respective
successors and permitted assigns. For purposes of this Agreement, a
"Change of Control" of a Party or a merger of a Party or a sale of
all or substantially all of the assets of a Party shall not be
deemed a prohibited assignment of this Agreement; provided,
however, in the case of a purchase of all or substantially all of
the assets of a Party, the purchasing entity must be at least as
credit worthy as the Party was as of the Commencement Date.
Further, the Party must assign this Agreement in writing to the
entity purchasing the assets, and the Party shall be released from
all obligations and liability hereunder upon the execution by the
entity purchasing the assets of a full and unconditional assumption
of all obligations of the Party under this Agreement without
further modification or amendment to this Agreement.
Except as provided in the first paragraph of this Section 18.13,
neither Party may, or will have the power to, assign this Agreement
without the prior written consent of the other, except that either
Party may assign its rights and obligations under this Agreement,
without the approval of the other, to an Affiliate which expressly
assumes such Party's obligations and responsibilities hereunder,
provided that the assigning Party remains fully liable for and
shall not be relieved from the full performance of all obligations
under this Agreement.
Any attempted assignment that does not comply with the terms of
this Section 18.13 shall be null and void. Any Party assigning its
rights or obligations to an Affiliate in accordance with this
Agreement shall, within three business days of such assignment,
provide written notice thereof to the other Party together with a
copy of the assignment document.
18.14 Notices
a) Under this Agreement whenever one Party is required or
permitted to give notice to the other, such notice will be in
writing unless otherwise specifically provided herein and will be
deemed given when delivered in hand, [CIO] after being given to an
express courier with a reliable system for tracking delivery, or
[CIO] after the day of mailing, when mailed by United States mail,
registered or certified mail, return receipt requested, postage
prepaid, or when sent by facsimile and thereafter delivered by one
of the foregoing methods of delivery.
b) Notifications will be addressed as follows:
1) For termination, breach or default, notify:
In the case of ISSC:
ISSC Project Executive
300 Embassy Row
Atlanta, Georgia 30328
Facsimile: 404-353-2099
60
with a courtesy, but not legally required, copy to:
ISSC General Counsel
44 South Broadway
White Plains, New York 10601
Facsimile: 914-288-1167
In the case of CES:
CES Director of Data Services
300 Embassy Row
Atlanta, Georgia 30328
Facsimile: 404-353-2099
with a courtesy, but not legally required, copy to:
CES General Counsel
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Facsimile: 612-853-4555
2) For all other notices:
In the case of ISSC:
ISSC Project Executive
300 Embassy Row
Atlanta, Georgia 30328
Facsimile: 404-353-2099
In the case of CES:
CES Director of Data Services
300 Embassy Row
Atlanta, Georgia 30328
Facsimile: 404-353-2099
Either Party hereto may from time to time change its address for
notification purposes by giving the other prior written notice of
the new address and the date upon which it will become effective.
18.15 No Third Party Beneficiaries
Except as specified in Sections 10 and 15 with respect to either
Party's contractors or subcontractors, the Parties do not intend,
nor will any clause be interpreted, to create for any third party
any obligations to or benefit from either ISSC or CES.
61
18.16 Other Documents
On or after the Commencement Date and the date(s) of any amendments
or revisions hereto and at the request of the other Party, each
Party shall furnish to the other such certificate of its Secretary,
certified copy of resolutions of its Board of Directors, or opinion
of its counsel as shall evidence that this Agreement or any
amendment or revision hereto has been duly executed and delivered
on behalf of such Party.
18.17 Consents and Approvals
The Parties agree that in any instance where consent, approval or
agreement is required of a Party in order for the other Party to
perform under or comply with the terms and conditions of this
Agreement, then such Party will not unreasonably withhold or delay
such consent, approval or agreement and where consent, approval or
agreement cannot be provided, the Party shall notify the other
Party in a timely manner.
18.18 Headings
All headings herein and the table of contents are not to be
considered in the construction or interpretation of any provision
of this Agreement. This Agreement was drafted with the joint
participation of both Parties and shall be construed neither
against nor in favor of either, but rather in accordance with the
fair meaning thereof. In the event of any apparent conflicts or
inconsistencies between this Agreement or any Supplements,
Schedules, Exhibits or other Attachments to this Agreement, to the
extent possible such provisions shall be interpreted so as to make
them consistent, and if such is not possible, the provisions of
this Agreement shall prevail.
62
THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS AGREEMENT,
UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
FURTHER, THE PARTIES AGREE THAT THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES RELATING TO THIS
SUBJECT SHALL CONSIST OF 1) THIS AGREEMENT, 2) THE SUPPLEMENT, AND
3) THE SCHEDULES, INCLUDING THOSE MADE EFFECTIVE BY THE PARTIES IN
THE FUTURE. THIS STATEMENT OF THE AGREEMENT SUPERSEDES ALL
PROPOSALS OR OTHER PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER
COMMUNICATIONS BETWEEN THE PARTIES, RELATING TO THE SUBJECT MATTERS
DESCRIBED IN THIS AGREEMENT.
Accepted by: Accepted by:
Integrated Systems Solutions Ceridian Corporation
Corporation
By: /s/K. R. Johnson By: /s/Kenneth Weber
Authorized Signature Authorized Signature
Date January 10, 1995 Date January 10, 1995
63
<TABLE>
<CAPTION>
ISSC / Ceridian Corporation
Agreement for Information Technology Services
-----------------------------------------------------------------------------
Supplement to
Agreement for Information Technology Services
Name and Address of Customer: Customer No.: 8098415
Ceridian Corporation
300 Embassy Row
Atlanta, Georgia 30328
ISSC Project Office Address: ISSC Project Office No.:
ISSC Project Executive
44 South Broadway
White Plains, New York 10601
Commencement Date: January 1, 1995
Term End Date: December 31, 2004
Contract Year
_____________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1/1- 1/1- 1/1- 1/1- 1/1- 1/1- 1/1- 1/1- 1/1- 1/1-
12/31 12/31 12/31 12/31 12/31 12/31 12/31 12/31 12/31 12/31
_____ ______ ______ ______ ______ ______ ______ ______ ______ ______
ANNUAL SERVICES CHARGE Confidential treatment has been requested.
(K$)
CAPACITY RATES
CPU Confidential treatment has been requested.
($ per MIPS)
DASD Confidential treatment has been requested.
($ per gigabyte)
SITE 2 CREDITS Confidential treatment has been requested.
($ per Month)
ADDITIONAL RESOURCE CHARGE RATES
Tape Utilization Confidential treatment has been requested.
($ per tape mount)
Tape Library Confidential treatment has been requested.
($ per tape stored)
Tape Transfer Confidential treatment has been requested.
($ per tape transfer)
Tape Vaulting Confidential treatment has been requested.
($ per tape stored in vault)
TERMINATION CHARGE
($ in Millions)
Convenience
Option 1 Confidential treatment has been requested.
Option 2 Confidential treatment has been requested.
Change of Control
Option 1 Confidential treatment has been requested.
Option 2 Confidential treatment has been requested.
NOTE Credits for cancellation of Site 2 will begin in (Confidential treatment has been requested)
January 10, 1995
ISSC/CES Confidential Supplement Page 1 of 3
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Supplement to
Agreement for Information Technology Services
Monthly Baselines
_________________
Months
______
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
YEAR Tape Utilization (# of Mounts)
1995 Confidential treatment has been requested.
1996 Confidential treatment has been requested.
1997 Confidential treatment has been requested.
1998 Confidential treatment has been requested.
1999 Confidential treatment has been requested.
2000 Confidential treatment has been requested.
2001 Confidential treatment has been requested.
2002 Confidential treatment has been requested.
2003 Confidential treatment has been requested.
2004 Confidential treatment has been requested.
YEAR Tape Library (# of Tapes Stored)
1995 Confidential treatment has been requested.
1996 Confidential treatment has been requested.
1997 Confidential treatment has been requested.
1998 Confidential treatment has been requested.
1999 Confidential treatment has been requested.
2000 Confidential treatment has been requested.
2001 Confidential treatment has been requested.
2002 Confidential treatment has been requested.
2003 Confidential treatment has been requested.
2004 Confidential treatment has been requested.
YEAR Tape Transfer (Aggregate # of Tapes Logged In and Out)
1995 Confidential treatment has been requested.
1996 Confidential treatment has been requested.
1997 Confidential treatment has been requested.
1998 Confidential treatment has been requested.
1999 Confidential treatment has been requested.
2000 Confidential treatment has been requested.
2001 Confidential treatment has been requested.
2002 Confidential treatment has been requested.
2003 Confidential treatment has been requested.
2004 Confidential treatment has been requested.
YEAR Tape Vaulting (Aggregate # of Tapes Sent to/Received from Vault Storage)
1995 Confidential treatment has been requested.
1996 Confidential treatment has been requested.
1997 Confidential treatment has been requested.
1998 Confidential treatment has been requested.
1999 Confidential treatment has been requested.
2000 Confidential treatment has been requested.
2001 Confidential treatment has been requested.
2002 Confidential treatment has been requested.
2003 Confidential treatment has been requested.
2004 Confidential treatment has been requested.
January 10, 1995
ISSC/CES Confidential Supplement Page 2 of 3
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Supplement to
Agreement for Information Technology Services
Capacity Plan
_____________
Months
______
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
YEAR Host CPU (Installed MIPS)
1995 Confidential treatment has been requested.
1996 Confidential treatment has been requested.
1997 Confidential treatment has been requested.
1998 Confidential treatment has been requested.
1999 Confidential treatment has been requested.
2000 Confidential treatment has been requested.
2001 Confidential treatment has been requested.
2002 Confidential treatment has been requested.
2003 Confidential treatment has been requested.
2004 Confidential treatment has been requested.
YEAR DASD (Installed Gigabytes)
1995 Confidential treatment has been requested.
1996 Confidential treatment has been requested.
1997 Confidential treatment has been requested.
1998 Confidential treatment has been requested.
1999 Confidential treatment has been requested.
2000 Confidential treatment has been requested.
2001 Confidential treatment has been requested.
2002 Confidential treatment has been requested.
2003 Confidential treatment has been requested.
2004 Confidential treatment has been requested.
Disaster Recovery Options
_________________________
Confidential treatment has been requested. (Effective July 1, 1997 through end of Term)
($ per month)
ADDITIONAL TEST PERIOD
($ per test)
Confidential treatment has been requested.
Confidential treatment has been requested.
</TABLE>
<TABLE>
<CAPTION>
January 10, 1995
ISSC/CES Confidential Supplement Page 3 of 3
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ISSC / Ceridian Corporation
Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedules to
Agreement for Information Technology Services
<S> <C>
SCHEDULE A - Applications Software
SCHEDULE B - Systems Software
SCHEDULE C - CES-Retained Machines
SCHEDULE D - ISSC Machines
SCHEDULE E - Support Services, Performance Standards and
Operational Responsibilities
SCHEDULE F - Procedures Manual Table of Contents
SCHEDULE G - Disaster Recovery Services
SCHEDULE H - Implementation Plan
SCHEDULE I - Operations Help Desk
SCHEDULE J - ISSC Charges, Measures of Utilization and
Financial Responsibilities
SCHEDULE K - Application Installation Standards
SCHEDULE L - Security Procedures
SCHEDULE M - Confidential Information Categories
</TABLE>
<TABLE>
<CAPTION>
January 10, 1995
ISSC/CES Confidential Table of Schedules Page 1 of 1
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ISSC / Ceridian Corporation
Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedule A
Applications Software
<S> <C> <C> <C> <C> <C> <C> <C>
ITEM APPLICATION RESPONSIBILITY
NO. VENDOR NAME/DESCRIPTION OPER FIN MAINT DEV LIC
1. CES Signature 2000 ISSC CES CES CES CES
2. CES Tesseract V.941 ISSC CES CES CES CES
LEGEND: "OPER" = OPERATE "FIN" = FINANCIAL "MAINT" = MAINTENANCE "DEV" =
DEVELOPMENT "LIC" = LICENSEE
January 10, 1995
ISSC/CES Confidential Schedule A Page 1 of 1
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<CAPTION>
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Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedule B
Systems Software
Section B-1
IBM Systems Software (MVS)
<S> <C> <C> <C> <C> <C> <C> <C>
ITEM PROGRAM SOFTWARE RESPONSIBILITY
NO. VENDOR NO. NAME/DESCRIPTION OPER FIN MAINT LIC
1. IBM 5621-425 3172 INTERCONNECT CONTROLLER ISSC ISSC ISSC ISSC
2. IBM 5648-063 ACF/NCP V7.01 ISSC ISSC ISSC ISSC
3. IBM 5655-257 ICKDSF V1 ISSC ISSC ISSC ISSC
4. IBM 5655-041 ACF/SSP ISSC ISSC ISSC ISSC
5. IBM 5655-042 ISPF/PDF ISSC ISSC ISSC ISSC
6. IBM 5658-260 EREP V3 ISSC ISSC ISSC ISSC
7. IBM 5665-279 BTAM V1 ISSC ISSC ISSC ISSC
8. IBM 5665-311 3270 PC FILE TRANSFER ISSC ISSC ISSC ISSC
9. IBM 5665-488 SDSF ISSC ISSC ISSC ISSC
10. IBM 5668-949 SMP/E ISSC ISSC ISSC ISSC
11. IBM 5685-083 CICS/ESA V3 ISSC ISSC ISSC ISSC
12. IBM 5685-025 TSO/E ISSC ISSC ISSC ISSC
13. IBM 5685-111 NETVIEW V2 ISSC ISSC ISSC ISSC
14. IBM 5685-151 AOC/MVS ISSC ISSC ISSC ISSC
15. IBM 5688-008 ESCON MGR ISSC ISSC ISSC ISSC
16. IBM 5688-139 TSCF ISSC ISSC ISSC ISSC
17. IBM 5695-DF1 DFSMS/MVS/RMM ISSC ISSC ISSC ISSC
18. IBM 5695-039 RACF V2 ISSC ISSC ISSC ISSC
19. IBM 5695-046 BOOKMGR READ/MVS ISSC ISSC ISSC ISSC
20. IBM 5695-100 DITTO ISSC ISSC ISSC ISSC
21. IBM 5695-117 VTAM V4 ISSC ISSC ISSC ISSC
22. IBM 5695-167 GDDM V3 ISSC ISSC ISSC ISSC
23. IBM 5706-254 QMF V3 ISSC ISSC ISSC ISSC
24. IBM 5735-HAL TCP/IP V2 ISSC ISSC ISSC ISSC
25. IBM 5669-962 ASSEMBLER H ISSC ISSC ISSC ISSC
26. IBM 5695-064 CICS AO ISSC ISSC ISSC ISSC
27. IBM 5685-DB2 DB2 ISSC ISSC ISSC ISSC
28. IBM 5688-015 BOOKMASTER ISSC ISSC ISSC ISSC
29. IBM 5668-958 COBOL II ISSC ISSC ISSC ISSC
30. IBM 5740-SM1 DFSORT ISSC ISSC ISSC ISSC
31. IBM 5771-ABA FONT-SONORAN SERIF ISSC ISSC ISSC ISSC
32. IBM 5771-ABC FONT-P1 & SPECIAL ISSC ISSC ISSC ISSC
33. IBM 5685-060 INFO/MGMNT ISSC ISSC ISSC ISSC
34. IBM 5695-MVS MVS/ESA ISSC ISSC ISSC ISSC
35. IBM 5756-265 NETVIEW ANO ISSC ISSC ISSC ISSC
36. IBM 5695-040 PSF ISSC ISSC ISSC ISSC
37. IBM 5695-057 SYSTEMVIEW ISSC ISSC ISSC ISSC
38. IBM 5798-BQH CICS 3270PC FILE TRANSFER ISSC ISSC ISSC ISSC
39. IBM 5771-ABB FONT-SONORAN SANS SERIF ISSC ISSC ISSC ISSC
40. IBM 5771-ADB FONT-APL2 ISSC ISSC ISSC ISSC
41. IBM 5798-DXQ ICFRU ISSC ISSC ISSC ISSC
42. IBM 5685-059 INFO/SYS ISSC ISSC ISSC ISSC
43. IBM 5695-169 NETVIEW AUTOBRIDGE ISSC ISSC ISSC ISSC
44. IBM 5668-909 PL/1 ISSC ISSC ISSC ISSC
January 10, 1995
ISSC/CES Confidential Schedule B Page 1 of 4
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Schedule B
Systems Software
Section B-1
IBM Systems Software (MVS)
ITEM PROGRAM SOFTWARE RESPONSIBILITY
NO. VENDOR NO. NAME/DESCRIPTION OPER FIN MAINT LIC
45. IBM 5685-029 RMF ISSC ISSC ISSC ISSC
46. IBM 5688-187 C/370 COMPILER ISSC ISSC ISSC ISSC
47. IBM 5688-188 C/370 LIBRARY ISSC ISSC ISSC ISSC
48. IBM 5798-DQD CACHE RMF REPORTER ISSC ISSC ISSC ISSC
49. IBM 5775-DNH CONCAID ISSC ISSC ISSC ISSC
50. IBM 5798-DZW DSF/TSO ISSC ISSC ISSC ISSC
51. IBM 5771-ADT FONT-MATH & SCIENC ISSC ISSC ISSC ISSC
52. IBM 5732-071 PASCAL-RUNTIME LIB ISSC ISSC ISSC ISSC
53. IBM 5688-190 PPFA ISSC ISSC ISSC ISSC
54. IBM 5686-191 OGL ISSC ISSC ISSC ISSC
55. IBM 5665-307 PMF ISSC ISSC ISSC ISSC
56. IBM 5695-047 JES2-MVS/ESA ISSC ISSC ISSC ISSC
LEGEND: "OPER" = OPERATE "FIN" = FINANCIAL "MAINT" = MAINTENANCE "LIC" = LICENSEE
January 10, 1995
ISSC/CES Confidential Schedule B Page 2 of 4
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Schedule B
Systems Software
Section B-2
Third Party Systems Software (MVS)
ITEM VERSION SOFTWARE RESPONSIBILITY
NO. VENDOR NO. NAME/DESCRIPTION OPER FIN MAINT LIC
1. ALTAI CURRENT ZEKE/ZEBB/GWS JOB SCHEDULER/RERUN RESTART ISSC CES CES CES
2. B&B STOP-X37 DASD SPACE MANAGER ISSC CES CES CES
3. CANDLE OMEGAMON II FOR CICS ISSC ISSC ISSC ISSC
4. CANDLE OMEGAMON II FOR DB2 ISSC ISSC ISSC ISSC
5. CANDLE OMEGAMON II FOR MVS ISSC ISSC ISSC ISSC
6. CANDLE OMEGAMON II FOR SMS ISSC ISSC ISSC ISSC
7. CANDLE OMEGAMON II FOR VTAM ISSC ISSC ISSC ISSC
8. CANDLE OMEGAVIEW ISSC ISSC ISSC ISSC
9. CHICAGO SOFTWARE CURRENT MVS/QUICKREF ON-LINE REFERENCE MANUALS ISSC CES CES CES
10. CHICAGO SOFTWARE CURRENT MVS/SOP ON-LINE STANDARDS & PROCEDURES ISSC CES CES CES
11. COMPUWARE CURRENT ABEND-AID XLF/DB2 ABEND DEBUG TOOL-BATCH ISSC CES CES CES
12. COMPUWARE CURRENT CICS ABEND-AID/RADAR/DB2 ABEND DEBUG TOOL-CICS ISSC CES CES CES
13. COMPUWARE CURRENT FILE AID MVS/DB2 OPT EXTEND ISPF UTILITIES ISSC CES CES CES
14. COMPUWARE CURRENT PLAYBACK/DB2 OPT TEST DATA CREATOR & GENERATOR ISSC CES CES CES
15. COMPUWARE CURRENT XPEDITER CICS ON-LINE DEBUG TRACE TOOL-CICS ISSC CES CES CES
16. COMPUWARE CURRENT XPEDITER TSO ON-LINE DEBUG TRACE TOOL-BATCH ISSC CES CES CES
17. LEGENT CURRENT ENDEVOR/ACM (AUTOMATED CONFIGURATION MANAGER) ISSC CES CES CES
18. LEGENT CURRENT ENDEVOR/EP EXTERNAL PROCESSORS ISSC CES CES CES
19. LEGENT CURRENT ENDEVOR/ESI EXTERNAL SECURITY INTERFACE ISSC CES CES CES
20. LEGENT CURRENT ENDEVOR/MVS AUTOMATED SOFTWARE MGT-MVS ENVIRMNT ISSC CES CES CES
21. LEGENT CURRENT ENDEVOR/PDM (PARALLEL DEVLMT MGR) ISSC CES CES CES
22. LEGENT CURRENT MICS SYSTEM DATA COLLECT, ANALYSIS & REPORT TOOLS ISSC ISSC ISSC ISSC
23. LEGENT 02.03.00 XCOM FILE TRANSFER ISSC CES CES CES
24. LEVI, RAY & SHOUP CURRENT VPS VTAM PRINTER SUPPORT SYSTEM ISSC CES CES CES
25. LEVI, RAY & SHOUP CURRENT VPS/PC & WINDOWS ISSC CES CES CES
26. LEVI, RAY & SHOUP CURRENT VPS FOR TCPIP ISSC CES CES CES
27. LEVI, RAY & SHOUP CURRENT VPS ADAPT SNA/DYNACOM ISSC CES CES CES
28. LEVI, RAY & SHOUP CURRENT VPS VMCF FOR VTAM & CICS ISSC CES CES CES
29. MERRILLE CURRENT MXG SAS COPY BOOKS FOR SMF ISSC ISSC ISSC ISSC
30. MERRILLE CURRENT MXG SAS COPY BOOKS FOR SMF ISSC CES CES CES
31. SAS INSTITUTE CURRENT SAS BASE REPORT WRITER, SMF ANALLSYS TOOL ISSC CES CES CES
32. SAS INSTITUTE CURRENT REPORT WRITER & GRAPHICS TOOLS FOR SAS ISSC CES CES CES
33. STERLING SOFTWARE CURRENT SUPERTRACS FILE TRANSFER (SNA RJE) ISSC CES CES CES
34. ? TBD AUTOMATED BALANCING PRODUCT ISSC CES CES CES
35. ? TBD DB2/DBA DEVELOPMENT TOOLS ISSC CES CES CES
36. ? TBD REPORT & OUTPUT DISTRIBUTION ISSC CES CES CES
37. ? TBD REPORT WRITERS ISSC CES CES CES
38. ? TBD SESSION MANAGER ISSC CES CES CES
LEGEND: "OPER" = OPERATE "FIN" = FINANCIAL "MAINT" = MAINTENANCE "LIC" = LICENSEE
NOTE ISSC has not performed due diligence on these products and reserves the
right to perform due diligence and make appropriate adjustments to the
Agreement after CES provides the applicable documentation to ISSC.
NOTE The actual Software program for this item will be chosen from the CES
list (SOFTGRP1.XLS) dated 12/12/94.
January 10, 1995
ISSC/CES Confidential Schedule B Page 3 of 4
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Schedule B
Systems Software
Section B-3
Systems Software for CES-Retained Machines
ITEM VER REV SOFTWARE RESPONSIBILITY
NO. VENDONO. LEV PRODUCT NO. NAME/DESCRIPTI OPER FIN MAINT LIC
1. DEC 0.0 2 ALS-WM-92361-2084 BASE-VMS-25013 ISSC CES CES CES
2. DEC 0.0 1 ASP-MS-91312-2 BOOKBROWSER ISSC CES CES CES
3. DEC 0.0 4 AL2-WM-92339-2272 C ISSC CES CES CES
4. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3800 C ISSC CES CES CES
5. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3817 CDDS-3817 ISSC CES CES CES
6. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3818 CDD-PLUS8 ISSC CES CES CES
7. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3819 CDD-PLUS-USER ISSC CES CES CES
8. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3820 CDDADMIN0 ISSC CES CES CES
9. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3821 CDDADMIN-RTO ISSC CES CES CES
10. DEC 0.0 1 BIX-PK-93266-1-CLO-CLOEIS-3822 CDDADMIN-USER ISSC CES CES CES
11. DEC 0.0 1 AL2-WM-92339-2270 COMMSERVER-BSC ISSC CES CES CES
12. DEC 0.0 1 ALS-WM-92339-2269 COMMSERVER-V ISSC CES CES CES
13. DEC 0.0 1 ALS-WM-93081-832 DECPS-DC ISSC CES CES CES
14. DEC 0.0 1 ALS-WM-93081-833 DECPS-PA ISSC CES CES CES
15. DEC 0.0 1 BIX-PK-93266-1-CLO-CLEIS-4017 DECTRACE7 ISSC CES CES CES
16. DEC 0.0 1 ALJ-WM-92357-764 DMQ-RTO-V ISSC CES CES CES
17. DEC 0.0 1 ALS-WM-92339-2274 DVNETEND ISSC CES CES CES
18. DEC 0.0 1 BIX-PK-93266-1-CLO-CLEIS-4126 DVNETRTG6 ISSC CES CES CES
19. DEC 0.0 1 BIR-PK-91259-1-CLO-CLEIS-11645 DW-MOTIF45 ISSC CES CES CES
20. DEC 0.0 1 ALJ-WM-92339-2271 P.S.I.-ACCESS ISSC CES CES CES
21. DEC 0.0 1 BIX-MS-92041-1-CLO-CLEIS-7236 RDBS-7236 ISSC CES CES CES
22. DEC 0.0 1 BIX-MS-92041-1-CLO-CLEIS-7240 RDB-INTERACTIV ISSC CES CES CES
23. DEC 0.0 1 BIX-MS-92041-1-CLO-CLEIS-7246 RDB-RT246 ISSC CES CES CES
24. DEC 0.0 1 ALJ-WM-93005-883 SNA-API ISSC CES CES CES
25. DEC 0.0 1 ALS-WM-93005-882 SNA-VMS ISSC CES CES CES
26. DEC 0.0 1 BIX-PK-93266-1-CLO-CLEIS-5029 VAXSET029 ISSC CES CES CES
27. DEC 0.0 2 ALS-WM-92361-2082 VMS-USER ISSC CES CES CES
28. DEC 0.0 2 ALS-WM-92361-2083 VMS-USER ISSC CES CES CES
29. Novel0.0 NETWARE FOR SA ISSC CES CES CES
LEGEND: "OPER" = OPERATE "FIN" = FINANCIAL "MAINT" = MAINTENANCE "LIC" = LICENSEE
NOTE:ISSC will be responsible for operating the software specified in Section
B-3 when the Machines listed in Schedule C are installed in the Data
Center.
NOTE ISSC has not performed due diligence on these products and reserves the
right to perform due diligence and make appropriate adjustments to the
Agreement after CES provides the applicable documentation to ISSC.
January 10, 1995
ISSC/CES Confidential Schedule B Page 4 of 4
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ISSC / Ceridian Corporation
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Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedule C
CES-Retained Machines
<S>
ITEM MACHINE MACHINE DEC RESPONSIBILITY
NO. QTY DESCRIPTION TYPE S/N MACHINE OPER FIN MAINT
1. 1 PC-ZENITH 386 YES ISSC CES CES
2. 1 PC-MONITOR ZENITH YES ISSC CES CES
3. 1 CPU 4700A DEC YES ISSC CES CES
4. 1 DISK CABINET W/ 8 DISKS DEC-ARRAY YES ISSC CES CES
5. 1 DISK CABINET W/ 8 DISKS DEC-ARRAY YES ISSC CES CES
6. 2 TF85 TAPEDRIVES DEC YES ISSC CES CES
7. 1 SNA SWITCH RAD YES ISSC CES CES
8. 1 COMSERVER DEC YES ISSC CES CES
9. 1 COMSERVER DEC YES ISSC CES CES
10. 1 COMSERVER DEC YES ISSC CES CES
11. 1 COMSERVER DEC YES ISSC CES CES
12. 1 COMSERVER DEC YES ISSC CES CES
13. 1 GATEWAY DEC YES ISSC CES CES
14. 1 GATEWAY DEC YES ISSC CES CES
15. 1 GATEWAY DEC YES ISSC CES CES
16. 1 GATEWAY DEC YES ISSC CES CES
17. 1 DELNI DEC YES ISSC CES CES
18. 1 DELNI DEC YES ISSC CES CES
19. 1 BRIDGE VITALNK YES ISSC CES CES
20. 1 CSU/DSU DOWTY YES ISSC CES CES
21. 1 DEC WORKSTATION 2000 YES ISSC CES CES
22. 1 DEC MONITOR DEC YES ISSC CES CES
23. 1 DEC KEYBOARD DEC YES ISSC CES CES
24. 1 DEC MOUSE DEC YES ISSC CES CES
25. 120 DEC TAPES TK85 YES ISSC CES CES
26. 1 PC PS/2 MOD 60 IBM YES ISSC CES CES
27. 1 EPSON PRINTER LQ1000 YES ISSC CES CES
28. 1 DEC CD READER DEC YES ISSC CES CES
29. 1 DEC TAPE DRIVE DEC YES ISSC CES CES
30. 1 DEC VAXSTATION SYS BOX YES ISSC CES CES
31. 1 DEC STORAGE EXP BOX YES ISSC CES CES
32. 1 DEC KEYBOARD DEC YES ISSC CES CES
33. 1 DEC MOUSE DEC YES ISSC CES CES
34. 1 DEC MONITOR DEC YES ISSC CES CES
35. 1 PC ZENITH 386 YES ISSC CES CES
36. 2 PC ZENITH 8088 YES ISSC CES CES
37. 1 MODEM ZOOM NO ISSC CES CES
38. 1 CSU RACAL NO ISSC CES CES
39. 1 ROUTER WELLFLEET NO ISSC CES CES
40. 1 HUB 3COM NO ISSC CES CES
41. 2 19" RACK RACAL NO ISSC CES CES
42. 2 SAA GATEWAY J&L NO ISSC CES CES
LEGEND: "OPER" = OPERATE "FIN" = FINANCIAL "MAINT" = MAINTENANCE
NOTE:ISSC will be responsible for operating these Machines when they are
installed in the Data Center.
January 10, 1995
ISSC/CES Confidential Schedule C Page 1 of 2
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Schedule C
CES-Retained Machines
NOTE:The items listed above are representative of the actual CES-Retained
Machines to be installed in the Data Center. This Schedule C will be
updated to reflect the actual CES-Retained Machines as they are
installed.
NOTE ISSC has not performed due diligence on these products and reserves the
right to perform due diligence and make appropriate adjustments to the
Agreement after CES provides the applicable documentation to ISSC.
<S> <C>
January 10, 1995
ISSC/CES Confidential Schedule C Page 2 of 2
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Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedule D
ISSC Machines
<S> <C> <C> <C> <C> <C> <C>
ITEM MACHINE MACHINE RESPONSIBILITY
NO. TYPE/MODEL DESCRIPTION S/N OPER FIN MAINT
1. 9121-480 IBM Processor 00125 ISSC ISSC ISSC
2. 3990-6 IBM DASD Controller 91778 ISSC ISSC ISSC
3. 3390-3 IBM A38 DASD * A7585 ISSC ISSC ISSC
4. 3390-3 IBM B3C DASD * BH150 ISSC ISSC ISSC
5. 3390-3 IBM B3C DASD * B9784 ISSC ISSC ISSC
6. 3745-210 IBM Communications Controller 02975 ISSC ISSC ISSC
7. 3172-003 IBM Interconnect Controller 62918 ISSC ISSC ISSC
8. 9391-A10 RAMAC ISSC ISSC ISSC
9. 9392-B13 RAMAC ISSC ISSC ISSC
10. 9392-B13 RAMAC ISSC ISSC ISSC
11. 9392-B13 RAMAC ISSC ISSC ISSC
12. 9392-B13 RAMAC ISSC ISSC ISSC
13. 9392-B13 RAMAC ISSC ISSC ISSC
14. 9392-B13 RAMAC ISSC ISSC ISSC
15. 9392-B13 RAMAC ISSC ISSC ISSC
16. 9392-B13 RAMAC ISSC ISSC ISSC
17. 9392-B13 RAMAC ISSC ISSC ISSC
18. 9392-B13 RAMAC ISSC ISSC ISSC
19. 9392-B13 RAMAC ISSC ISSC ISSC
20. 9392-B13 RAMAC ISSC ISSC ISSC
21. 9392-B13 RAMAC ISSC ISSC ISSC
22. 9392-B13 RAMAC ISSC ISSC ISSC
23. 9392-B13 RAMAC ISSC ISSC ISSC
24. 9392-B13 RAMAC ISSC ISSC ISSC
LEGEND: "OPER" = OPERATE "FIN" = FINANCIAL "MAINT" = MAINTENANCE
NOTE CES's preferred solution is the acquisition of the RAMAC equipment
described above. In the interim period until such RAMAC equipment can
be obtained and installed, ISSC will provide CES with the asterisk (*)
DASD.
January 10, 1995
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Schedule E
SUPPORT SERVICES, PERFORMANCE STANDARDS AND
OPERATIONAL RESPONSIBILITIES
Confidential treatment has been requested for this schedule in its entirety.
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Schedule F
Procedures Manual Table of Contents
The following is a sample of the Table of Contents for the Procedures Manual
to be developed in accordance with Section 4.9(a) of the Agreement. The
actual content and Table of Contents for the Procedures Manual developed for
CES's production and applications test environments will be of a form and
content necessary to provide support for the actual CES environment. The
sample Table of Contents is shown below:
[S]
I. INTRODUCTION X. CONFIGURATION MANAGEMENT
A. Purpose A. Scope
B. Audience B. Objectives
C. Layouts
II. ENFORCEMENT OF STANDARDS
XI. STORAGE AND DATA MANAGEMENT
III. REQUIREMENTS PROCESS PROCESSES
A. Introduction A. Tape Backup
B. When are Requirements required? B. Data Security System (RACF)
C. Requirements/Services
Request Documentation XII. SYSTEMS MANAGEMENT CONTROLS
D. How does the Requirements
process work? A. Service Level Management
B. Security
IV. SECURITY C. Problem Management
D. Change Management
A. Data Center Security E. Recovery Management
Requirements F. Batch Processing Management
B. Physical Security G. Online Processing Management
H. Performance Management
V. DISASTER RECOVERY I. Capacity Management
A. Overview
B. Critical Applications
C. Disaster Recovery Plan Outline
D. Operations XIII. LEGEND OF ASSIGNEES
VI. PRODUCTION XIV. HARDWARE LISTING
A. Production Support A. Hardware in the ISSC Data
Center and Configuration
VII. ISSC SYSTEM HARDWARE SERVICE
CALL PROCEDURES XV. CUSTOMER SOFTWARE REQUIREMENTS
BY APPLICATION VERSUS SYSTEM
A. ISSC System Hardware
B. CES System Hardware (at ISSC A. Application Requirements
Locations) B. System Software
VIII. OPERATIONS HELP DESK XVI. CUSTOMER APPLICATIONS
A. Scope A. List of Customer Applica-
B. Help Desk Procedures Doc- tions
umentation
C. Escalation/Alert Process XVII. APPLICATION AVAILABILITY
D. Executive Alert Process
A. On-line and Batch Time
IX. NETWORK CONFIGURATIONS Frames
A. Data Center to Customer Con-
nection
January 10, 1995
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Schedule G
Disaster Recovery Services
Confidential treatment has been requested for this schedule in its entirety.
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Agreement for Systems Operations Services
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Schedule H
Implementation Plan
Confidential treatment has been requested for this schedule in its entirety.
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<CAPTION>
ISSC / Ceridian Corporation
Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedule I
Operations Help Desk
<S> <C>
I. INTRODUCTION
ISSC will provide an operations help desk to provide Data Center informa-
tion and status and provide and/or coordinate Levels I, II and III Data
Center Operations and Systems Software support for the Data Center.
Calls to the ISSC operations help desk will be initiated by the CES help
desk for CES.
II. ISSC DATA CENTER HELP DESK RESPONSIBILITIES
The ISSC Data Center help desk will perform the following typical func-
tions for both the production and test environments:
A. receive calls from the CES help desk;
B. initiate a problem management record ("PMR") for all Services
outages;
C. perform Level I problem determination;
D. route call to applicable services provider, e.g., maintenance vendor
in the case of a data center ISSC Machine malfunction and/or ISSC
Systems Software support for systems programming problems;
E. monitor Data Center problems to resolution and report progress to CES
help desk;
F. close the PMR at problem resolution;
G. confirm problem resolution with CES help desk;
H. provide a monthly summary of all problems opened and closed during
the reporting period in accordance with the Procedures Manual;
I. provide assistance for problems pertaining to the procedures for the
new environment;
J. report on the status of batch jobs upon request;
K. notify designated CES personnel of systems or equipment failures, or
of an emergency, according to the Procedures Manual; and
L. maintain and distribute an updated Help Desk telephone number
listing.
Hours of Operation
The ISSC Operations Help Desk hours will be 24 hours a day, 7 days a
week.
III. CES RESPONSIBILITIES
CES will:
A. provide single-point-of-contact for CES users;
B. contact the ISSC Data Center help desk for Data Center information
and problems;
C. provide feedback to CES users concerning information requests and
problem status for problems referred to the ISSC Data Center help
desk;
D. route call to applicable services provider, e.g., maintenance vendor
in the case of a data center CES-Retained Machine malfunction, appli-
cations support for systems programming problems, CES help desk for
LAN or WAN problems, CES AD/M personnel for Applications Software or
applications problems, etc.;
E. recycle, start and stop devices at CES end user or CES AD/M request;
F. reset passwords;
January 10, 1995
ISSC/CES Confidential Schedule I Page 1 of 3
cesskdi
G. report on the status of batch jobs upon request;
H. perform end user and applications support, operations and training;
and
I. maintain an updated listing for use by the ISSC Data Center help desk
for contacting appropriate CES personnel for assistance/notification
as specified above.
IV. ISSC DATA CENTER HELP DESK FLOW
+------------+
| USERS |
| |
+------|-----+
|
+------|-----+
+--------------------->| CES |<------------------------------------+
| +-----------+ | Help Desk | |
|---->| CES ---+ +------|-----+ +------------+ |
| | AD/M | | | +-------------| CES |<---|
| +-----------+ | | | | |COMMO SPT | |
| | | | | +------------+ |
| | | | | |
| +----|--------|-----------|--+ | +------------+ |
| | ISSC Data Center Help Desk | +-----| CES |<---|
| +-------------|--------------+ |TECH SVCS | |
| | +------------+ |
| | |
| | |
| | |
| +----|----+ +---------+ |
| Info/Status | Info or | Problem | ISSC | No |
+------------------------| Problem |----------------->| Problem |-------->|
+---------+ +----|----+ |
Yes| |
+----|----+ |
| Open | |
| PMR | |
+----|----+ |
| |
+---------------------------+ +-----|-----+ |
+----|----+ +----|----+ | Dispatch | |
|Escalate | No | Problem |<----------------| Svc Vendor| |
| as |<----------------| Resolved| | &/or Route| |
|Required | +----|----+ | to Tech. | |
+---------+ Yes| +-----------+ |
+----|----+ |
| Close | Notify CES |
| PMR |--------------------------------------+
+----|----+
|
+----|----+
| Update |
| Monthly |
| Records |
+---------+
V. SERVICES RESPONSIBILITIES MATRICES
The Services Responsibilities Matrices attached as Exhibit I-1 to this
Schedule summarizes the roles and responsibilities of the ISSC and CES
help desks.
January 10, 1995
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Schedule I
Operations Help Desk
Exhibit I-1
Services Responsibilities Matrices
+---------------------------------------------+-----------------------------+
] ] RESPONSIBILITY ]
] HELP DESK - ISSC (DATA CENTER OPERATIONS ONL+--------------+--------------+
] ] ISSC ] CES ]
+---------------------------------------------+--------------+--------------+
] ANSWER CALLS FROM CES HELP DESK ] X ] ]
+---------------------------------------------+--------------+--------------+
] PROBLEM MANAGEMENT ] ] ]
+---------------------------------------------+--------------+--------------+
] -- RECORD PROBLEMS ] X ] ]
+---------------------------------------------+--------------+--------------+
] -- TRACK PROBLEMS THROUGH RESOLUTION ] X ] ]
+---------------------------------------------+--------------+--------------+
] -- PROVIDE FEEDBACK TO CES HELP DESK ] X ] ]
+---------------------------------------------+--------------+--------------+
] PROBLEM SUPPORT (ISSC MACHINES) ] X ] ]
+---------------------------------------------+--------------+--------------+
] INVOKE PROPER PROBLEM RESOLUTION RESOURCES ] X ] ]
+---------------------------------------------+--------------+--------------+
] DISPATCH SERVICE PROVIDER (ISSC MACHINES) ] X ] ]
+---------------------------------------------+--------------+--------------+
] FOLLOW-UP FOR RESOLUTION STATUS (ISSC ] X ] ]
] MACHINES) ] ] ]
+---------------------------------------------+--------------+--------------+
] ESCALATE TO NEXT LEVEL OF SUPPORT (ISSC ] X ] ]
] MACHINES) ] ] ]
+---------------------------------------------+--------------+--------------+
] NOTIFY CES HELP DESK OF SYSTEMS ] X ] ]
] AVAILABILITY (EXCEPTION PROCESS ONLY) ] ] ]
+---------------------------------------------+--------------+--------------+
+---------------------------------------------+-----------------------------+
] ] RESPONSIBILITY ]
] HELP DESK - CES +--------------+--------------+
] ] ISSC ] CES ]
+---------------------------------------------+--------------+--------------+
] ANSWER CALLS FROM USERS ] ] X ]
+---------------------------------------------+--------------+--------------+
] PROBLEM MANAGEMENT ] ] ]
+---------------------------------------------+--------------+--------------+
] -- RECORD PROBLEMS ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- TRACK PROBLEMS THROUGH RESOLUTION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- PROVIDE FEEDBACK TO USERS ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- INTERFACE WITH ISSC HELP DESK ] ] X ]
+---------------------------------------------+--------------+--------------+
] INVOKE PROPER PROBLEM RESOLUTION RESOURCES ] ] X ]
+---------------------------------------------+--------------+--------------+
] DISPATCH SERVICE PROVIDER (CES-RETAINED ] ] X ]
] MACHINES) ] ] ]
+---------------------------------------------+--------------+--------------+
] COORDINATE SERVICE/MAINTENANCE CALLS ] ] X ]
] (CES-RETAINED MACHINES) ] ] ]
+---------------------------------------------+--------------+--------------+
] FOLLOW-UP FOR RESOLUTION STATUS ] ] X ]
+---------------------------------------------+--------------+--------------+
] ESCALATE TO NEXT LEVEL OF SUPPORT ] ] X ]
+---------------------------------------------+--------------+--------------+
] NOTIFY USERS OF SYSTEMS AVAILABILITY ] ] X ]
+---------------------------------------------+--------------+--------------+
] LEVEL ONE AND LEVEL TWO SUPPORT OF CES ] ] X ]
] SYSTEMS & APPLICATIONS ] ] ]
+---------------------------------------------+--------------+--------------+
] LEVEL ONE AND LEVEL TWO SUPPORT OF ] ] X ]
] CES-RETAINED MACHINES ] ] ]
+---------------------------------------------+--------------+--------------+
January 10, 1995
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</TABLE>
Agreement for Information Technology Services
-----------------------------------------------------------------------------
Schedule J
ISSC Charges, Measures of Utilization and
Financial Responsibilities
Confidential treatment has been requested for this schedule in its entirety.
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Schedule K
Application Installation Standards
CES agrees that Applications Software provided to ISSC for execution will
conform to the following standards:
1. Programs will be fully tested for compatibility and conformity to ISSC's
specifications prior to transfer to ISSC for promotion into the pro-
duction system;
2. Back out and recovery procedures will be documented; and
3. Programs will conform to the mutually agreed
a. File allocation and naming conventions
b. Sysout class
c. Job execution class
d. Forms standards
e. Accounting fields
f. Job Name Standards.
As mutually agreed by ISSC and CES, programs will execute in the following
target software environments.
MVS
___
Operating System MVS/ESA
Job Entry System JES2
Security RACF
Transaction Processing CICS
Storage Management DFRMM, DFSMS, DFHSM, DFDSS
Problem/Change Management INFO
Performance Management OMEGAMON
Analysis/Reporting MICS
Remote Operations NETVIEW
On-line Viewing TBD
Scheduling ZEKE
Restart/Rerun ZEBB
Output Processing TBD
Network Software ACF/VTAM, ACF/NCP, EP, BTAM
Compiler COBOL, COBOL2, ASSEMBLER H
Interactive Development DFSORT, ENDEVOR,TSO/ISPF,DB2
Automation AOC
All changes to the operating environment will be in accordance with the
ISSC/CES Change Management Procedures.
January 10, 1995
ISSC/CES Confidential Schedule K Page 1 of 1
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Schedule L
Security Procedures and Responsibilities
I. ISSC WILL:
A. provide physical security for the Data Center and other ISSC facili-
ties, if any, required to provide the Services;
B. restrict access to the Data Center to authorized personnel only;
C. conduct periodic reviews of the Data Center access logs for unusual
occurrences and perform follow-up activities;
D. identify the protection requirements for operating system resources
and implement this protection via the access control software;
E. install, maintain and upgrade new or existing data access control
software;
F. implement the functions and features of the access control software
which will satisfy CES's security standards and practices as defined
in the Procedures Manual;
G. grant system access to ISSC employees only to the extent necessary to
perform activities required by this Agreement;
H. provide storage and security for portable storage media including,
but not limited to, tapes and disk packs under ISSC's control;
I. keep abreast of the latest concepts and techniques associated with
system and data security;
J. review security policies and procedures for effectiveness and recom-
mend improvements; and
K. provide sufficient access to the Data Center to allow CES's security
administrator to fulfill CES's responsibilities.
II. CES WILL:
A. provide ISSC with CES's most recent data security standards and prac-
tices and updates as they occur;
B. identify the protection requirements for application resources and
protect them via the access control software;
C. identify the protection requirements for end user data and protect it
via the access control software;
D. establish, change, deactivate and remove logon IDs and associated
access authorities;
E. reset logon ID passwords and disclose passwords to authorized per-
sonnel;
F. periodically review logon IDs and remove those for which management
authorization no longer exists;
G. review, approve and grant requests for group privileged user authori-
ties;
H. periodically review group privileged user authorities and remove
those for which management approval no longer exists;
I. implement and maintain security controls for those subsystems which
do not use the access control software for their security (all sub-
systems will use RACF);
J. keep abreast of the latest concepts and techniques associated with
system and data security; and
K. review security policies and procedures for effectiveness and recom-
mend improvements.
III. SERVICES RESPONSIBILITIES MATRIX
The Services Responsibilities Matrix attached as Exhibit L-1 to this
Schedule summarizes the roles and responsibilities of ISSC and CES.
January 10, 1995
ISSC/CES Confidential Schedule L Page 1 of 2
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Schedule L
Security Procedures and Responsibilities
Exhibit L-1
Services Responsibilities Matrix
+---------------------------------------------+-----------------------------+
] ] RESPONSIBILITY ]
] SECURITY +--------------+--------------+
] ] ISSC ] CES ]
+---------------------------------------------+--------------+--------------+
] PHYSICAL SECURITY - CES FACILITIES ] ] ]
+---------------------------------------------+--------------+--------------+
] -- ADMINISTRATIVE AND TECHNICAL SUPPORT ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- BADGE DISTRIBUTION, ALARM MONITORING ] ] X ]
] AND RESPONSE ] ] ]
+---------------------------------------------+--------------+--------------+
] -- EMERGENCY RESPONSE (FIRE, MEDICAL, ] ] X ]
] FIRST AID) ] ] ]
+---------------------------------------------+--------------+--------------+
] PHYSICAL SECURITY - ISSC FACILITIES ] ] ]
+---------------------------------------------+--------------+--------------+
] -- ADMINISTRATIVE AND TECHNICAL SUPPORT ] X ] ]
+---------------------------------------------+--------------+--------------+
] -- BADGE DISTRIBUTION, ALARM MONITORING ] X ] ]
] AND RESPONSE ] ] ]
+---------------------------------------------+--------------+--------------+
] -- EMERGENCY RESPONSE (FIRE, MEDICAL, ] X ] ]
] FIRST AID) ] ] ]
+---------------------------------------------+--------------+--------------+
] DATA SECURITY - ISSC MACHINES ] ] ]
+---------------------------------------------+--------------+--------------+
] -- ACCESS CONTROL SYSTEM ] ] ]
+---------------------------------------------+--------------+--------------+
] -- RACF INSTALLATION & MAINTENANCE ] X ] ]
+---------------------------------------------+--------------+--------------+
] -- RACF UPGRADES ] X ] ]
+---------------------------------------------+--------------+--------------+
] -- ADMINISTRATIVE SUPPORT ] ] ]
+---------------------------------------------+--------------+--------------+
] * SYSTEM ] X ] ]
+---------------------------------------------+--------------+--------------+
] * GROUP ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SYSTEMS PROFILE IDENTIFICATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- LOGON ID ADMINISTRATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- PASSWORD RESETS (HELP DESK) ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SUBSYSTEMS PASSWORD AUTHORIZATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SUBSYSTEMS PASSWORD ADMINISTRATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] DATA SECURITY - CES-RETAINED MACHINES ] ] ]
+---------------------------------------------+--------------+--------------+
] -- ACCESS CONTROL SYSTEM ] ] ]
+---------------------------------------------+-----------------------------+
] -- SYSTEM INSTALLATION & MAINTENANCE ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SYSTEM UPGRADES ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- ADMINISTRATIVE SUPPORT ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SYSTEMS PROFILE IDENTIFICATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- LOGON ID ADMINISTRATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- PASSWORD RESETS (HELP DESK) ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SUBSYSTEMS PASSWORD AUTHORIZATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- SUBSYSTEMS PASSWORD ADMINISTRATION ] ] X ]
+---------------------------------------------+--------------+--------------+
] LAN SYSTEMS ] ] X ]
+---------------------------------------------+--------------+--------------+
] DATA NETWORK ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- DIAL NETWORKS ] ] X ]
+---------------------------------------------+--------------+--------------+
] -- LEASED LINES ] ] X ]
+---------------------------------------------+--------------+--------------+
] VOICE NETWORK ] ] X ]
+---------------------------------------------+--------------+--------------+
January 10, 1995
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Schedule M
Confidential Information Categories
I. Customer Lists
II. Customer Information
III.Account Information
IV. Business Planning Documentation
January 10, 1995
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<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
CERIDIAN CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands, except per
share data) Year Ended December 31
<S> <C> <C> <C>
1994 1993 1992
Net earnings (loss) applicable to
common stockholders - primary $ 65,626 $ (30,676) $ (392,800)
Discontinued operations (321,600)
Extraordinary loss (8,400)
Change in accounting (FAS 106) (41,800)
Earnings (Loss) from continuing
operations 65,626 (22,276) (29,400)
Restore dividends on convertible
preferred stock (a) 12,980 325
Restore interest expense on
convertible debentures (a) (b) 13,900
Net earnings (loss) for fully
diluted earnings per share $ 78,606 $ (21,951) $ (15,500)
Weighted average common shares
outstanding 44,504 43,131 42,617
Common share equivalents from stock
options (c) 1,361
Weighted average common shares and
equivalents outstanding - primary 45,865 43,131 42,617
Shares issuable assuming conversion
of preferred stock (a) 10,384 260
Shares issuable assuming
conversion of debentures (a) 6,794
Weighted average common shares and
equivalents outstanding - adjusted
for full dilution 56,249 43,391 49,411
Primary earnings (loss) per share
Continuing operations $ 1.43 $ (0.52) $ (0.69)
Discontinued operations (7.55)
Extraordinary loss (0.19)
Change in accounting (FAS 106) (0.98)
Total $ 1.43 $ (0.71) $ (9.22)
Fully diluted earnings (loss) per
share (c) $ 1.40 $ (0.51) $ (0.31)
(a) Convertible preferred stock issued and convertible debentures
redeemed in December 1993.
(b) Net of income tax effect which is nil.
(c) Common stock equivalents and shares issuable assuming
conversion of convertible debentures not reported in 1993 and 1992
because the result is anti-dilutive or additional dilution is less
than 3% as prescribed by APBO No. 15. This calculation is submitted
in accordance with Regulation S-X item 601(b)(11).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
CERIDIAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1994 1993 1992 1991 1990
Earnings (Loss) before
income taxes and other
items(1) . . . . . . . $ 85.2 $ (18.2)$(186.3) $ 1.9 $ 15.9
Less undistributed earnings
and non-guaranteed losses
from less than 50% owned
affiliates included above -- -- (0.6) (2.6) 1.3
Total earnings (loss)
before income taxes
and other items. . . $ 85.2 $ (18.2) (185.7) 4.5 14.6
Add:
Interest . . . . . . . 1.6 16.4 17.7 25.4 43.8
Interest portion
of rentals (2) . . . 11.9 12.4 17.2 31.8 31.6
Adjusted earnings (loss)
before income taxes
and other items. . . . $ 98.7 $ 10.6 $(150.8) $ 61.7 $ 90.0
Preferred stock dividends $ 13.0 $ 0.3 $ 0.3 $ 0.5 $ 0.5
Pre-tax to net
income ratio (3) . . . 100% 100% 100% 100% 100%
Preferred dividend factor
on a pre-tax basis . . 13.0 0.3 0.3 0.5 0.5
Interest . . . . . . . . 1.6 16.4 17.7 25.4 43.8
Interest portion
of rentals (2) . . . . 11.9 12.4 17.2 31.8 31.6
Total fixed charges and
preferred dividends $ 26.5 $ 29.1 $ 35.2 $ 57.7 $ 75.9
Ratio of earnings to
fixed charges and
preferred dividends. . 3.72 - - 1.07 1.19
Earnings to combined fixed
charges and preferred
stock deficiency. . . $ 18.5 $ 186.0
(1) Results include discontinued operations.
(2) Assumed to be one-third of rental expense.
(3) A tax gross-up would not have a material effect in any year.
</TABLE>
<PAGE>
<TABLE>
SELECTED FIVE-YEAR DATA (Dollars in millions, except per share data)
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990
Revenue $ 916.3 $ 886.1 $ 830.3 $ 763.0 $ 936.2
Earnings (Loss) from continuing operations (1) $ 78.6 $ (22.0) $ (29.1) $ 66.1 $ 45.3
Loss from discontinued operations (2) - - (321.6) (74.7) (42.6)
Extraordinary loss (3) - (8.4) - (1.2) -
Cumulative effect of accounting change (FAS 106) (4) - - (41.8) - -
Net Earnings (Loss) $ 78.6 $ (30.4) $(392.5) $ (9.8) $ 2.7
Net Earnings (Loss) Applicable to Common Stockholders (5) $ 65.6 $ (30.7) $(392.8) $ (10.3) $ 2.2
Primary Earnings Per Common Share
Continuing operations $ 1.43 $ (0.52) $ (0.69) $ 1.54 $ 1.05
Net earnings (loss) $ 1.43 $ (0.71) $ (9.22) $ (0.24) $ 0.05
Shares used in calculation (in thousands) 45,865 43,131 42,617 42,526 42,517
Fully Diluted Earnings Per Common Share (6)
Net earnings $ 1.40
Shares used in calculation (in thousands) 56,249
Balance Sheet Data
Total assets $ 690.3 $ 615.7 $ 551.6 $ 974.7 $1,179.0
Debt obligations $ 18.7 $ 19.4 $ 187.6 $ 184.1 $ 337.9
Stockholders' equity (deficit) (7) $ 186.5 $ 111.3 $(100.9) $ 446.2 $ 448.4
Stockholders' Equity (Deficit) Per Common Share $ (1.09) $ (2.82) $ (2.36) $ 10.24 $ 10.29
Common shares outstanding at end of year (in thousands) 45,402 44,182 42,804 42,530 42,530
Number of Employees at End of Year (8) 7,500 7,600 8,800 9,600 10,500
<FN>
(1) Includes restructuring loss (gain) of $67.0 in 1993, $76.2 in 1992,
$(16.2) in 1991 and $1.5 in 1990 as described in Note B to the
consolidated financial statements.
(2) For additional information, see Note B to the consolidated
financial statements.
(3) The 1993 extraordinary loss relates to the early retirement of
8 1/2% Convertible Subordinated Debentures as described in Note K
to the consolidated financial statements.
(4) The Company adopted FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1992 as described
in Note I to the consolidated financial statements.
(5) As reduced by preferred stock dividends before calculation of primary
earnings (loss) per share.
(6) Fully diluted would not differ from primary earnings (loss) per share
in years prior to 1994.
(7) The Company has not declared a cash dividend on common stock since
1985. For information regarding the sale in 1993 of preferred stock
with a redemption value of $236.0, see Note E to the consolidated
financial statements.
(8) Includes full-time and part-time personnel for continuing operations.
</TABLE>
REPORT OF MANAGEMENT AND INDEPENDENT AUDITORS' REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The following table sets forth revenue for the last three years
for the Company, its two industry segments, and the businesses that
comprise those segments. Additional financial information regarding
the Company's industry segments is contained in Note G, Segment
Data, to the consolidated financial statements.
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1994 1993 1992
(Dollars in millions)
Information Services Segment
Arbitron $121.3 $172.2 $178.3
Ceridian Employer Services 303.3 232.6 209.9
Other Services(1) 5.4 20.0 20.5
Total Information Services 430.0 424.8 408.7
Defense Electronics Segment
Computing Devices International(2) 486.3 461.3 412.4
Other(3) -- -- 9.2
Total Revenue $916.3 $886.1 $830.3
__________________
</TABLE>
[FN]
(1) Consists of revenue from TeleMoney Services and the Company's
related network and computer center operations (collectively,
"TeleMoney"), which were sold in May 1994.
(2) Responsibility for the Company's Business Information Services
operation ("BIS") was transferred to Computing Devices effective
January 1, 1994. BIS' results for the period 1992-1994 are included
in Computing Devices' results.
(3) Consists of revenue from the Benefits Services division of
Employer Services, which was sold during 1992.
The following table sets forth the percentage of total revenue
by industry segment, the gross profit of each industry segment as a
percentage of that segment's revenue, and certain items in the
consolidated statements of operations as a percentage of total
revenue, for the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1994 1993 1992
Revenue:
Information Services 46.9% 47.9% 49.2%
Defense Electronics 53.1% 52.1% 49.7%
Other -- -- 1.1%
Total revenue 100.0% 100.0% 100.0%
Gross profit:
Information Services 54.2% 45.9% 43.2%
Defense Electronics 19.5% 18.4% 18.7%
Other -- -- 18.2%
Total gross profit 35.8% 31.6% 30.7%
Operating expenses
Selling, general & administrative 22.4% 20.1% 19.8%
Technical 5.4% 5.5% 5.6%
Other expense (income) (0.3%) (0.4%) (0.8%)
Restructure loss -- 7.6% 9.2%
Total operating expenses 27.5% 32.8% 33.8%
Earnings (loss) before interest & taxes 8.3% (1.1%) (3.1%)
Interest income (expense) 1.0% (0.9%) 0.2%
Earnings (loss) before income taxes 9.3% (2.1%) (2.9%)
Income tax provision 0.7% 0.4% 0.6%
Earnings (loss) from continuing
operations 8.6% (2.5%) (3.5%)
</TABLE>
Restructuring and Discontinued Operations
The Company's results since the mid-1980s have been
significantly affected by the performance and the subsequent sale,
spin-off or closing of a large number of businesses. These
restructuring actions were taken to remove from the Company
businesses that were poor performers, that required greater
investment than the Company was willing or able to commit, or that
did not fit the Company's strategic focus on businesses that
generate recurring revenue from long-term customer relationships.
Three significant businesses which Ceridian has disposed of are
shown as discontinued operations in Ceridian's consolidated
financial statements. These businesses are the Computer Products
business, which was separately incorporated as Control Data Systems,
Inc. ("Control Data Systems") and whose stock was then distributed
to Ceridian's stockholders as of July 31, 1992; the Automated
Wagering division, which was sold in June 1992; and the Empros
division, which Ceridian sold in March 1993. A larger number of
businesses and operations disposed of did not meet the criteria for
treatment as discontinued operations. Included among the latter
dispositions are Imprimis Technology Incorporated ("Imprimis")
(sold in 1989), ETA Systems Incorporated (closed in 1989), VTC
Incorporated ("VTC") (disposed of in 1989), Micrognosis, Inc.
(sold in 1990), Arbitron's syndicated television ratings service
(discontinued at the end of 1993) and TeleMoney (sold in 1994). The
results of the businesses and operations which did not meet the
criteria for treatment as
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<PAGE>
discontinued operations, including restructure charges and gains
associated with their disposition, are included in Ceridian's results
from continuing operations and significantly affect the years 1989
through 1993.
The cumulative effect of the actions outlined in the preceding
paragraph has been to reduce the Company's revenue from $3.6 billion
in 1988 to a low of $830.3 million in 1992, to reduce the number of
employees from 33,500 at the end of 1988 to 7,500 at the end of
1994, and to reduce the aggregate floor space of facilities owned or
leased by the Company from 15.1 million square feet at the end of
1988 to 4.3 million square feet by the end of 1994, 1.6 million
square feet of which is either sublet or vacant. The reductions in
facilities have been effected in large measure by assignments of
leases and by subleases, often at significant cost to the Company.
Such fundamental changes in the Company have been accompanied by
large restructuring charges. At December 31, 1991, the Company
reported accrued restructure liabilities of $118.1 million,
principally involving obligations relating to the disposition of
VTC, the sale of Imprimis (including under an indemnification
provided to the purchaser for certain environmental liabilities),
the Company's investments in wind energy ventures and Business and
Technology Centers, and excess facilities. The following table
summarizes the major components of restructuring reserves
established and utilized during the three year period ended December
31, 1994, as well as the balance of such reserves at that date.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Restructure and Discontinued Employer Computing
Operations Reserves (1) Arbitron Arbitron Services Devices
(Dollars in millions) TV ScanAm Consolidation Severance Other Total
Reserve Balance 12/31/91 $ - $ - $ - $ 5.1 $113.0 $118.1
1992 Restructure Loss (2) 29.9 8.8 1.1 44.0 83.8
Cash Payments (0.8) (1.7) (5.2) (79.2) (86.9)
Asset Write-Off (28.5) (1.1) (2.4) (32.0)
Discontinued Operations (3) 71.6 71.6
Adoption of FAS 106 (4) (14.0) (14.0)
Other Non-cash Items 0.1 0.1
Reserve Balance 12/31/92 - 0.6 6.0 1.1 133.0 140.7
1993 Restructure Loss (2) 57.0 18.9 5.5 0.3 81.7
Cash Payments (4.1) (0.6) (4.0) (6.1) (44.9) (59.7)
Asset Write-Off (26.8) (15.0) (41.8)
Adoption of FAS 112 (4) (12.0) (12.0)
Other Non-cash Items (0.9) (0.9)
Reserve Balance 12/31/93 26.1 - 20.9 0.5 60.5 108.0
1994 Restructure Loss (2) 15.0 15.0
Sale of TeleMoney (5) 14.1 14.1
Cash Payments (17.4) (8.5) (0.5) (27.3) (53.7)
Other Non-cash Items 2.4 2.5 4.9
Reserve Balance 12/31/94 $ 11.1 $ - $ 12.4 $ - $ 64.8 $ 88.3
<FN>
(1) For additional information, see Note B to the consolidated financial statements.
(2) Does not include restructure gains of $7.6 in 1992, $14.7 in 1993 and $15.0 in 1994.
(3) Represents obligations related to the disposition of discontinued operations.
(4) Represents the reclassification to other liabilities of FAS 106 and FAS 112 obligations
as described in Notes A and I to the consolidated financial statements.
(5) Represents obligations undertaken in connection with the sale of TeleMoney.
</TABLE>
Page 23
<PAGE>
The Company's net restructuring loss of $76.2 million in 1992
included a $30.9 million net restructure loss for Information
Services, $1.1 million in severance costs for Computing Devices and
$44.2 million in charges not attributable to either business
segment. Information Services' net restructuring loss for 1992 was
primarily composed of $29.9 million (primarily asset write-offs)
related to the discontinuance of Arbitron's ScanAmerica service,
which electronically measured and correlated household television
viewing and product purchases through the use of people meters and
product scanning wands, $8.8 million of charges in Employer Services
that principally involved severance and surplus facilities costs
related to the closing of its administrative offices in Greenwich,
Connecticut and a corresponding consolidation of operations, and a
gain of $7.6 million associated with the formation of the
Competitive Media Reporting ("CMR") joint venture involving
Arbitron and VNU Business Information Services, Inc. ("VNU"). The
Company estimates that from 1992 to 1993, the ScanAmerica
discontinuance reduced costs of services (primarily decreased
amortization and depreciation) and technical expense for Arbitron by
a total of about $6.7 million. Although the 1992 restructuring
actions in Employer Services resulted in the elimination of about
$4.1 million of annual employment and facilities costs, the Company
estimates that a majority of the savings were offset by costs
associated with increasing the level of automation and
administrative staff in other locations. The restructure loss not
attributable to either industry segment included $20.9 million of
facilities, litigation and other costs related to past restructuring
actions, $7.4 million primarily consisting of severance and related
costs involving approximately 100 headquarters employees, a $12.0
million provision for postemployment welfare benefits provided to
employees of businesses sold or discontinued, and a $3.7 million
loss from the sale of the Benefits Services division. The latter
charges have not materially benefited the Company's subsequent
results of operations.
The Company's 1993 net restructuring loss of $67.0 million
included $75.9 million in restructuring charges for Information
Services, $5.5 million in charges for Computing Devices, and a net
restructure gain of $14.4 million not attributable to either
industry segment. Information Services' charges included $57.0
million resulting from the October 1993 decision to discontinue
Arbitron's syndicated television and cable ratings service. The
principal components of this charge involved the write-off of
metering and other assets, severance and other costs related to the
termination of approximately 700 employees, and lease and other
obligations related to facilities and equipment. The Company
estimates that the discontinuance of the television ratings service
benefited the Company's 1994 results by about $6 million.
Information Services' 1993 restructuring charges also included $18.9
million of charges recorded by Employer Services. Of this amount,
$11.7 million relates to actions to discontinue payroll data
processing in Employer Services' district offices in conjunction
with a program to consolidate such processing in centralized
processing facilities, $4.8 million relates to actions to
discontinue most telephonic customer support in district offices in
conjunction with a program to consolidate such support activities
into a single national center, and the $2.4 million balance
primarily involves severance costs to downsize Employer Services'
headquarters operations. The principal components of the Employer
Services charges include severance and other costs related to the
termination of about 330 employees, incremental costs to provide
duplicate processing of payrolls and telephonic customer support
during periods of customer transition, and lease and other
obligations related to facilities and equipment. The centralization
of customer
Page 24
<PAGE>
service operations is expected to improve responsiveness to
customer inquiries while also increasing operational efficiencies
once the transition is completed in early 1995. Benefits from the
consolidation of payroll data processing are expected to be realized
beginning in 1996, as discussed below under "1994 Compared with
1993 - Gross Margin."
The restructuring charges recorded by Computing Devices in the
fourth quarter 1993 involved actions taken to reduce employment
levels by 205 employees in its U.S. and U.K. operations, generally
in connection with programs that were completed or which were
terminated, deferred or scaled back by the applicable government
agency. Although these actions resulted in the elimination of
approximately $8 million of annual employment expense, they were not
expected to appreciably improve profitability, but rather were
undertaken to enable Computing Devices to maintain competitive cost
and expense levels. Because pricing of government contracts is
typically predicated on a concept of "allowable" costs, actions to
reduce costs tend to improve profitablility only on fixed price
contracts currently in place. Cost reductions typically do not
affect the profitability of cost reimburseable contracts, since
reduced costs of contract performance result in reduced contract
revenue, nor do they necessarily improve the profitablity of future
fixed price contracts, since those must be bid reflecting a lower
cost structure.
The 1993 net restructuring gain not attributable to either
industry segment consisted of a $0.3 million adjustment to prior
year reserves and a gain of $14.7 million resulting from the
Company's October 1993 receipt of a $35.5 million refund of taxes
and related interest from the Internal Revenue Service. The refund
related to restructure losses recorded by the Company during the
1980s.
The restructuring activity in 1994 consisted of a net gain of
$7.8 million from the sale of TeleMoney, a gain of $7.2 million from
the final settlement of a tax sharing agreement relating to the
Company's 1986 sale of Commercial Credit Company, and a $15.0
million charge for costs related to age discrimination litigation
arising out of restructuring actions taken by the Company in past
years.
The following table summarizes the cash payments made during
the three year period ended December 31, 1994 with respect to
restructuring reserves, as well as the Company's estimate of
remaining restructuring reserves expected to require cash outlays
during 1995.
<TABLE>
<CAPTION>
Restructure Cash Payments
<S> <C> <C> <C> <C>
Actual Expected
1992 1993 1994 1995
Severance and Related Costs $ 11.4 $ 17.0 $ 14.7 $ 3.8
Equipment Lease Termination 12.8 4.0 4.9 1.7
Vacant Space 30.8 23.4 16.8 7.8
Costs to Dispose of Businesses 25.3 5.1 6.6 0.5
Legal Costs 3.2 4.3 4.3 0.6
Environmental Costs 0.7 1.1 1.2 0.7
Duplicate Processing/Support - - 3.2 3.7
Other 2.7 4.8 2.0 -
Total $ 86.9 $ 59.7 $ 53.7 $ 18.8
</TABLE>
Of the $69.5 million of restructuring reserves expected to
require cash outlays after 1995, the largest portions relate to
obligations with respect to vacant space (generally payable during
1996-1999), the obligation to indemnify the purchaser of Imprimis
against certain environmental remediation costs related thereto
(expected to be payable over ten years or more), and defense or
settlement costs related to age discrimination litigation involving
the Company (see Note O, Legal Matters, to the consolidated
financial statements).
Page 25
<PAGE>
1994 Compared with 1993
For the year ended December 31, 1994, the Company reported net
earnings applicable to common stockholders (after preferred stock
dividends of $13.0 million) of $65.6 million, or $1.40 per fully
diluted share of common stock, on revenue of $916.3 million,
compared to a net loss applicable to common stockholders in 1993 of
$30.7 million, or $.71 per common share, on revenue of $886.1
million. Included in the 1993 results is an $8.4 million
extraordinary loss resulting from the redemption of the Company's 8
1/2% Convertible Subordinated Debentures Due June 15, 2011 (the "8
1/2% Debentures") and a net restructuring loss of $67.0 million.
Revenue. The small increase in Information Services' revenue
from 1993 to 1994 was a function of 30.4% revenue growth in Employer
Services being largely offset by decreased revenue from Arbitron and
the sale of TeleMoney business in April 1994. Somewhat more than
half of Employer Services' revenue growth was attributable to
acquisitions, most significantly the October 1993 acquisition of the
Systems Tax Service ("STS") tax filing business and the June 1994
acquisition of Tesseract Corporation ("Tesseract"), which designs,
develops and supports integrated payroll, human resource management
and benefits administration software systems. Apart from
acquisitions, Employer Services' revenue increased about 14% from
1993 to 1994, primarily reflecting increased payroll processing
revenue, due largely to new customer installations and an increased
year-end 1993 retention rate for existing customers, and increased
revenue from payroll tax filing fees and investment income, due
largely to a higher percentage of Employer Services' payroll
processing customers also utilizing its tax filing service. The
investment income component of the revenue increase reflects average
balances of payroll tax filing deposits in 1994 that were
approximately 25% greater than Employer Services' and STS' combined
balances in 1993, and an average yield on investments that was 4.23%
compared to 4.00% in 1993. Employer Services' revenue and
profitability tend to be the greatest in the first and fourth
quarters of each year because of customers' year-end reporting
requirements and greater tax filing deposit balances in the first
quarter.
Apart from possible future acquisitions, Employer Services'
revenue growth is expected to be between 15% and 20% in 1995. Such
an increase would reflect a full year's revenue from Tesseract and
from User Technology Services, Inc., which was acquired in October
1994, had fiscal 1994 revenue of $4.4 million and provides training
and other services to facilitate the effective utilization of
information management systems. Revenue should also increase as a
result of the December 1994 acquisitions of the assets of Payroll
Tax Management, Inc., a payroll tax filing processor which had
fiscal 1994 revenue of $3.8 million, and the customer base of Human
Effectiveness, Inc., a provider of employee assistance services,
that generated approximately $1 million of revenue in 1994. Revenue
in 1995 is also expected to benefit from increases in U.S. interest
rates during 1994 and early 1995, which should result in an
increased average investment yield on payroll tax filing deposits,
and from a 20% increase from 1993 to 1994 in the annualized revenue
value of orders received by Employer Services. Expected revenue
growth may be moderated somewhat by a small decline in Employer
Services' customer retention percentage from 1993 to 1994 and from
the phased introduction of IRS regulatory changes that will reduce
by one day the period of time the Company may earn investment income
on tax filing deposits collected from its customers.
Page 26
<PAGE>
The Arbitron revenue decrease from 1993 to 1994 was primarily
attributable to the discontinuance of its television ratings
service, which had provided $44.9 million of revenue during 1993.
Also contributing to the decrease was the year-end 1993 transfer
from Arbitron to the CMR joint venture with VNU of certain contracts
for commercial monitoring services, which decreased Arbitron's
revenue in 1994 by $13.8 million. This transfer resulted from an
agreement to shift marketing and sales responsibility for commercial
monitoring services provided to larger advertising agencies from
Arbitron to CMR. Partially offsetting this decrease was a revenue
increase of approximately 7% in 1994 in the other aspects of
Arbitron's business.
The Company expects that continued moderate revenue growth in
1995 in Arbitron's radio ratings business will be augmented by
revenue from two transactions concluded in December 1994. In the
first transaction, the Company exchanged its interest in the CMR
joint venture for an interest in the business of VNU's Scarborough
Research Corporation subsidiary, which produces the "Scarborough
Report" that provides information regarding product/service usage
and media usage in 58 major U.S. markets. As a result of this
transaction, the financial results of the partnership into which the
Scarborough business has been placed will be consolidated with the
Company's financial results with an expected modest increase in
Arbitron's annual revenue. In the second transaction, the Company
acquired the assets of MediaMaps International (now known as Media
Marketing Technologies), which provides Arbitron with a proprietary
marketing analysis system that creates block group-coded data bases
of radio listeners and provides segmentation analyses and map
displays of key listener segments.
Computing Devices' revenue increased 5.4% from 1993 to 1994.
Constraining the revenue increase were the near completion at year-
end 1993 of a contract to manufacture equipment for Control Data
Systems and the July 1993 sale of the Company's Barrios Technology
subsidiary, activities which together provided $29.6 million more
revenue in 1993 than in 1994. Apart from these items, Computing
Devices' revenue increased 12.7% from 1993 to 1994. About 90% of
this revenue increase was attributable to a $49.9 million increase
in revenue from the Iris contract to provide a communications system
to the Canadian defense department. Computing Devices' ongoing U.S.
operations also reported an increase in revenue of 6.6% from 1993 to
1994.
Despite a 25% increase over 1993 in the dollar value of orders
received during 1994 by Computing Devices, the Company expects only
a modest revenue increase in Computing Devices during 1995, which
would include revenue from Paragon Imaging, Inc., a provider of
imaging software to U.S. defense department intelligence agencies
and service commands, which was acquired in December 1994 and had
fiscal 1994 revenue of $4.2 million. A relatively larger portion of
the 1994 orders involves multi-year contracts as compared to orders
received in 1993, resulting in a larger portion of the backlog
attributable to 1994 orders not expected to be reflected in revenue
during the next fiscal year. In addition, because Computing
Devices' Canadian operations have accounted for an increasing
portion of its revenue during the past three years and for slightly
more than half of the 1994 order value, the weakening of the
Canadian dollar is expected to constrain overall revenue growth.
Orders received by Computing Devices U.S. operations in 1994 have
tended to be add-ons to existing programs, reflecting the
cancellation or deferral of new procurement programs due to
government budgetary constraints and increasing competition for the
remaining new procurement programs.
Page 27
<PAGE>
Gross Margin. The Company's gross margin improvement from
31.6% in 1993 to 35.8% in 1994 was primarily due to Information
Services. The most significant factor in the gross margin
improvement in Information Services was the discontinuance of
Arbitron's unprofitable syndicated television ratings service at the
end of 1993. The Company estimates that the discontinuance of the
television ratings service contributed 4.5 percentage points of the
segment's gross margin improvement. The two other significant
factors in the gross margin improvement in Information Services were
the previously mentioned decrease in Arbitron's commercial
monitoring revenue (the cost of such revenue having been a 90%
royalty payable to the CMR joint venture) and the sale of TeleMoney
in May 1994. These two factors contributed an estimated 3.0
percentage points of the segment's gross margin increase. Employer
Services' gross margin was essentially unchanged from 1993 to 1994,
as margin improvements in its tax filing operations and as a result
of the acquisition of Tesseract were offset by decreased gross
margins in payroll processing operations and an increase in lower
margin revenue associated with a human resources information
software consulting service. The margin improvement in tax filing
operations primarily reflected the consolidation of Ceridian's tax
filing activity on STS' more highly automated system. The margin
decrease in payroll processing was due largely to costs to establish
and equip a national customer service center in connection with the
consolidation of Employer Services' telephonic customer service
operations and costs of related actions to upgrade communications
systems.
In January 1995, the Company entered into technology services
and marketing agreements with Integrated Systems Solutions
Corporation ("ISSC"), a wholly-owned subsidiary of International
Business Machines Corporation. Under the technology services
agreement, the term of which extends through December 31, 2004, ISSC
will provide the centralized payroll data processing services
required by Employer Services as part of the program to consolidate
payroll data processing from 31 district offices into centralized
processing centers. Annual service charges payable by the Company
during the term of the agreement are expected to total approximately
$110 million, based on current expectations regarding future system
usage, and are subject to cost of living and other adjustments.
Employer Services believes that the technology services agreement
with ISSC represents the most expeditious, cost-effective and
technologically sound and secure means for it to effect the
consolidation of its payroll data processing. Although
consolidation of the data processing is expected to result in
significant savings to the Company over the term of the technology
services agreement, costs associated with the transition from data
processing in district offices to processing in the ISSC centers are
expected to defer the realization of such savings until a sizeable
percentage of customers have completed the transition. The timing
of this transition will principally be determined by the timing of
the Company's introduction of its enhanced payroll processing
software. The Company expects that beta testing of the enhanced
software with selected new and existing payroll processing customers
will begin in mid-1995, that all new customers and additional
existing customers will begin utilizing the enhanced software in the
first quarter 1996, and that the transition of the remainder of the
existing customer base to the enhanced software will begin in mid-
1996 and continue for approximately eighteen months. Under the
marketing agreement, ISSC will remarket Employer Services' payroll
services and Tesseract software and services, and Employer Services
will jointly market with ISSC the information technology services of
ISSC.
Page 28
<PAGE>
The increase in Computing Devices' gross margin from 1993 to
1994 was attributable to a four percentage point improvement in its
U.S. operations, primarily reflecting actions taken in 1993 to
reduce employment levels and a reduction in low margin revenue from
the manufacture of equipment for Control Data Systems, Inc.
Lessening Computing Devices' overall gross margin improvement was a
decrease in gross margin in its U.K. operations, primarily
reflecting provisions established in 1994 for costs to complete
certain contracts, including a development contract for an avionics
system for the European Fighter Aircraft, and the increase in the
relative revenue contribution from the Iris contract. Although the
gross margin on the Iris contract improved from 1993 to 1994, it has
lower gross margins than most other aspects of Computing Devices'
business.
Operating Expenses. The Company's selling, general and
administrative ("SG&A") expenses increased 15.4% from 1993 to
1994, due largely to additional SG&A expenses resulting from the
acquisitions of STS and Tesseract, including amortization of the
goodwill and other intangible assets associated with those
acquisitions, increased selling expense in other aspects of Employer
Services' operations, and additional compensation expense associated
with a performance restricted stock plan implemented by the Company
(see Note J, Stock Plans, to the consolidated financial statements).
As a percentage of revenue, SG&A expenses for the Company increased
from 20.1% to 22.4%, due principally to an increase in Information
Services from 31.5% of revenue in 1993 to 35.7% of revenue in 1994.
This percentage increase was attributable to Arbitron, reflecting
the sizeable decrease in Arbitron's revenue and the proportionately
smaller decrease in its SG&A expenses. In part this reflects the
past dependence of Arbitron's radio and television services on a
common support structure. Also contributing to the increase were
provisions established for certain administrative proceedings
involving Arbitron. SG&A expenses as a percentage of revenue did,
however, decrease in Employer Services from 1993 to 1994. Computing
Devices' SG&A expenses increased modestly from 1993 to 1994 in both
dollars and as a percentage of revenue.
The Company's technical expense, which includes research and
development, product improvement and bid and proposal costs,
increased slightly in dollars from 1993 to 1994, but decreased from
5.5% to 5.4% of revenue. In the Information Services segment,
technical expense decreased in dollars and as a percentage of
revenue (from 6.2% to 5.6%) from 1993 to 1994. The decrease was due
to the discontinuance of Arbitron's television ratings service and
the sale of TeleMoney. Technical expense did, however, increase in
Employer Services in dollars and slightly as a percentage of
revenue, primarily reflecting the acquisition of Tesseract.
Technical expense also increased in Computing Devices, both in
dollars and as a percentage of revenue (from 4.8% to 5.2%),
primarily due to concept development efforts intended to attract
additional government funding for product development efforts.
Earnings (Loss) Before Interest and Taxes. The Company's
earnings before interest and taxes ("EBIT") in 1994 totaled $76.2
million as compared to a loss before interest and taxes of $10.1
million in 1993. Excluding the $67.0 million net restructure loss
from 1993 results, the Company's EBIT increased 33.9% from 1993 to
1994, from 6.4% of revenue in 1993 to 8.3% of revenue in 1994.
Information Services was the primary contributor to this
improvement, with EBIT (computed without regard to restructuring)
Page 29
<PAGE>
increasing $21.8 million, or 59.0%, from 1993 to 1994. Most of this
increase in Information Services' EBIT was due to Arbitron and
Employer Services, each contributing about an equal amount of the
increase, with the balance reflecting the sale of TeleMoney, which
had a loss in 1993. As a percentage of revenue, EBIT (without
regard to 1993 restructuring) for Information Services increased
from 8.7% in 1993 to 13.6% in 1994. Computing Devices' EBIT
(without regard to 1993 restructuring) increased $3.6 million, or
13.5%, from 1993 to 1994, and as a percentage of revenue from 5.9%
to 6.3% of revenue in the year-to-date comparison.
Interest Income and Expense. The $14.8 million decrease in
interest expense from 1993 to 1994 principally reflected the
redemption at the end of 1993 of $163.5 million in principal amount
of the Company's 8 1/2% Debentures with the majority of the proceeds
of the sale of the Company's 5 1/2% Cumulative Convertible
Exchangeable Preferred Stock ("5 1/2% Preferred Stock"). The annual
dividend obligation in connection with the 5 1/2% Preferred Stock is
$13.0 million. The increase in interest income over the same period
reflected higher balances of cash and short-term investments during
1994, primarily as a result of the 5 1/2% Preferred Stock offering,
and generally increasing interest rates during 1994.
Taxes and Net Operating Loss Carryforwards. The provisions for
income taxes for the years 1992-1994 primarily represent tax charges
related to the Company's international operations. The Company's
U.S. operations have net operating loss carryforwards ("NOLs") for
financial statement purposes of approximately $1.28 billion, which
if unused will begin to expire in 1997 and which may be used, to the
extent available, to offset earnings from U.S. operations during the
carryforward period. Section 382 of the Internal Revenue Code of
1986, as amended, contains complex rules that place an annual limit
on the amount of NOLs that a company may utilize after stockholders
who own 5% or more of the Company's stock increase their aggregate
percentage ownership in the Company by more than 50 percentage
points over the lowest percentage owned by those shareholders during
the previous three years. Because the amount of the annual limit is
computed utilizing the then current market value of the stock of the
Company, the higher the market value of the Company's stock, the
less stringent the resulting annual limit. Although the Company
does not believe that such an annual limit on NOLs is currently
applicable, it is possible that a combination of stock transfers and
issuances in the past, and future transfers and issuances of the
Company's stock could result in the limitation being imposed in the
future.
1993 Compared with 1992
For the year ended December 31, 1993, the Company reported a
net loss applicable to common stockholders of $30.7 million, or $.71
per common share, on revenue of $886.1 million, compared to a net
loss applicable to common stockholders in 1992 of $392.8 million, or
$9.22 per common share, on revenue of $830.3 million. Included in
the 1993 results is the previously discussed $8.4 million
extraordinary loss, while 1992 results included losses from
discontinued operations of $321.6 million and a $41.8 million charge
for a change in accounting for postretirement health care benefits.
On a continuing operations basis, the Company reported a 1993 net
loss of $22.0 million, or $.52 per common share, compared with a
1992 net loss of $29.1 million, or $.69 per common share.
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<PAGE>
Revenue. The revenue growth in Computing Devices from 1992 to
1993 was primarily due to a $36.1 million revenue increase from the
Iris contract, the September 1992 acquisition of the remaining 56%
equity interest in a U.K. defense electronics systems provider, and
sales of equipment to Control Data Systems which began in August
1992. Revenue from such sales of equipment did, however, steadily
decrease during the course of 1993. That trend, coupled with the
July 1993 sale of a 90% interest in Barrios Technology to the
management of that subsidiary, restrained revenue growth during
1993. The dollar value of orders received by Computing Devices
during 1993 was 28% greater than during 1992, reflecting increases
in its U.S. and Canadian operations and the U.K. acquisition noted
above.
Information Services' revenue increased 3.9% from 1992 to 1993,
principally reflecting 10.8% revenue growth in Employer Services and
a 3.5% revenue decrease in Arbitron. The revenue growth in Employer
Services from 1992 to 1993 was due to increased business volume in
its payroll processing and tax filing operations, the acquisition of
the software applications division of Revelation Technologies, Inc.
in late 1992, the purchase of STS in October 1993 and increased
investment income due to larger average balances of payroll tax
filing deposits during 1993. Arbitron's revenue decrease from 1992
to 1993 was almost entirely due to reduced revenue from local market
television and cable ratings, a service which Arbitron discontinued
at the end of 1993. This revenue decrease was only partially offset
by about a 7% revenue increase in the other aspects of Arbitron's
business.
Gross Margin. The Company's gross margin increased from 30.7%
in 1992 to 31.6% in 1993. Overall margin improvement for the
Company in 1993 was restrained in part by the revenue growth in
Computing Devices, which has historically had a lower gross margin
(but also lower operating expenses as a percentage of revenue) than
the Information Services segment.
The gross margin for Information Services increased from 43.2%
in 1992 to 45.9% in 1993. Arbitron's gross margin improvement from
1992 to 1993 primarily reflected the discontinuance of the
syndicated television ratings service and decreased amortization and
other costs totaling about $5.2 million from its 1992 discontinuance
of the ScanAmerica service. The gross margin increase in Employer
Services from 1992 to 1993 primarily resulted from its increased
revenue, benefits from previously discussed 1992 restructuring
actions and increased investment income from tax filing deposits.
The improvement resulting from these factors was partially offset by
costs relating to the closing of Employer Services' tax filing
operations in Baltimore as a result of the STS acquisition.
Partially offsetting these margin improvements in Arbitron and
Employer Services were increased costs in TeleMoney due largely to
costs associated with equipment upgrades and low margins on
telecommunications services provided to businesses divested or spun-
off by the Company in 1992.
Computing Devices' gross margin decreased slightly from 18.7%
in 1992 to18.4% in 1993. Its gross margin did, however, improve
during the second half of 1993 as compared to the first half of 1993
and the second half of 1992, due primarily to increased gross
margins on the Iris contract as Computing Devices achieved certain
developmental milestones, and to reduced revenue from equipment
sales to former Company operations, which had lower gross margins
than most other aspects of Computing Devices' business.
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Operating Expenses. The Company's SG&A expenses increased from
19.8% of revenue in 1992 to 20.1% of revenue in 1993. In
Information Services, SG&A expenses increased as a percentage of
revenue from 30.0% in 1992 to 31.5% in 1993. The increase was due
to increased expense levels in Employer Services, primarily selling
expense, as Employer Services expanded its sales force and marketing
programs, particularly in the second half of 1993. Partially
offsetting this increase were reduced SG&A expenses, in dollars and
as a percentage of revenue, in Arbitron in 1993, in large measure
reflecting the elimination of certain amortization expense as a
result of the contribution of Arbitron's commercial monitoring
operations to the CMR joint venture in 1992. Computing Devices'
SG&A expenses decreased from 8.3% of revenue in 1992 to 7.8% in
1993.
Technical expense for the Company decreased from 5.6% of
revenue in 1992 to 5.5% in 1993. Technical expense increased in
dollars and as a percentage of revenue in Information Services in
1993 due to increases in Employer Services related to product and
system improvements and to maintaining and upgrading existing system
software. Technical expense for Computing Devices was essentially
unchanged in dollars but decreased as a percentage of revenue from
1992 to 1993, due in part to the increase in revenue from the Iris
contract, which requires little Company-funded research and
development.
The decrease in other income from 1992 to 1993 primarily
reflected decreased earnings from the CMR joint venture and foreign
currency translation gains during the first half of 1992 arising
from Computing Devices' operations in Canada. CMR's performance in
1993 was adversely affected by Arbitron's decreased revenue from
commercial monitoring services, for which it paid a royalty to CMR.
Earnings (Loss) Before Interest and Taxes. The Company's loss
before interest and taxes decreased from $25.5 million in 1992 to
$10.1 million in 1993. Excluding the previously mentioned net
restructuring losses and the extraordinary loss from the Company's
results for 1992 and 1993, the Company's EBIT increased 12.3% from
1992 to 1993, from 6.1% of revenue in 1992 to 6.4% of revenue in
1993. Computed on the same basis, EBIT increased from 8.2% to 8.7%
of revenue in Information Services, and from 5.0% to 5.9% of revenue
in Computing Devices. Also apart from restructuring gains and
losses, the Company's loss not attributable to either industry
segment increased from 1992 to 1993 due in part to certain unusual
gains in 1992 related to reshaping activities.
Interest Income and Expense. Interest expense was little
changed from 1992 to 1993, but interest income decreased $9.5
million. This decrease was primarily due to lower average cash
balances as a result of the Company's 1992 reshaping efforts,
generally lower interest rates, and the September 1992 prepayment of
certain notes receivable held by the Company with above market
interest rates.
Financial Condition
The Company's cash and short-term investments decreased from
$215.8 million at December 31, 1993 to $171.4 million at December
31, 1994. The portion of the December 31, 1993 balance that
represented amounts subject to restrictions was $22.7 million, the
majority of which represented the remaining portion of a customer
advance received in connection with Computing Devices' Iris
contract. None of the December 31, 1994 cash and short-term
investments balance was subject to any restrictions.
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During 1994, operating cash flows provided $35.5 million of
cash, compared to $44.0 million in 1993 and $12.0 million in 1992.
Net earnings adjusted to a cash basis provided cash of $111.0
million in 1994, $46.2 million in 1993 and $69.8 million in 1992.
Reducing these cash flows in 1994 and 1993 were $10 million and $20
million, respectively, in voluntary contributions to the Company's
primary U.S. defined benefit retirement plan, intended to improve
the funded status of that plan. An increase in working capital
utilized $21.8 million of cash in 1994, while reductions in working
capital provided $57.5 million and $29.1 million of cash in 1993 and
1992, respectively. The 1994 working capital increase included an
increase in trade and other receivables, particularly in Employer
Services reflecting increased business volume and end of year
billings, and a decrease in customer advances, particularly in
Computing Devices as the last of a series of semiannual customer
advances on the Iris contract was received in April 1994. Included
in the 1993 cash received from working capital items was the
previously mentioned refund of $35.5 million from the Internal
Revenue Service, of which $10.0 million benefited working capital
and $14.7 million reduced restructure reserves established.
Investing activities utilized $33.8 million of cash during 1994
and $61.7 million during 1993, but provided $87.6 million of cash
during 1992. The net use of cash during 1994 included expenditures
of $65.6 million for business acquisitions, $54.3 of which
represented the amount to acquire Tesseract (net of Tesseract's cash
balances at acquisition), $37.5 million for capital assets and $13.5
million for capitalized software. Cash received from the
liquidation of short-term investments during 1994 totaled $48.8
million, while cash of $33.5 million received during 1994 from the
sale of businesses and investments was primarily attributable to the
sale of TeleMoney and to the final settlement of obligations under
the Commercial Credit Company tax sharing agreement discussed
earlier. The net use of cash for investing activities during 1993
reflected additions to short-term investments of $39.0 million and
expenditures of $27.8 million for capital assets and $6.5 million
for capitalized software, as well as proceeds of $11.4 million from
sales of investments. The increase in capital expenditures from
1993 to 1994 was primarily due to the acquisition of equipment to
upgrade Employer Services' communications and service delivery
capabilities, to further automate Computing Devices production
facilities, and to implement an electronic diary processing and
retrieval system in Arbitron. The increased expenditures for
capitalized software from 1993 to 1994 related primarily to the
acquisition of Tesseract and to ongoing projects in Employer
Services to introduce enhanced payroll processing software and human
resource software applications. Investing activities provided $87.6
million of cash during 1992, reflecting capital expenditures of
$19.3 million, expenditures for the purchase of businesses of $21.8
million (including the Company's U.K. subsidiary and Barrios
Technology), the receipt of $76.6 million from sales of businesses
and assets (most significantly Automated Wagering), and the
collection of $43.9 million from notes related to prior year
business sales (most significantly Imprimis).
The Company's capital expenditures presently planned for 1995
total approximately $44 million, with the expected increase over
1994's level of spending to be about evenly divided between Employer
Services and Computing Devices. Planned capital expenditures for
1995 generally involve equipment and leasehold improvements to
expand and improve Employer Services' communications and service
delivery capabilities, equipment for Computing Devices' engineering
and manufacturing facilities, and
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<PAGE>
leasehold improvements for Arbitron's new Columbia, Maryland production
and service facility. The Company also expects to capitalize in 1995
approximately $13 million of software development costs, primarily for
software to be used in Employer Services' payroll and tax filing operations.
Financing activities provided $3.0 million in cash during 1994,
primarily reflecting the receipt in January of an additional $15.5
million in net cash proceeds from the sale by the Company of
additional shares of 5 1/2% Preferred Stock as a result of the
underwriters' exercise of their over-allotment option, and the
payment of $13.0 million in dividends on that stock. Financing
activities produced $42.6 million in cash during 1993, primarily
from the sale by the Company through an underwritten public offering
of the 5 1/2% Preferred Stock. Net cash proceeds of $213.0 million
from the 1993 sale were received by the Company during December
1993, $168.1 million of which was used to redeem the remaining
$163.5 million principal amount of the Company's 8 1/2% Debentures.
The prepayment of other debt during 1993 related primarily to a
mortgage involving Computing Devices' Canadian operations. During
1992, financing activities used $124.6 million of cash, the largest
portion of which related to the spin-off of Control Data Systems and
included $102 million to capitalize Control Data Systems and $10.9
million to redeem the Company's 4 1/2% cumulative preferred stock in
connection therewith. The use of $13.6 million in 1992 to repay
debt relates principally to the parent company-funded payment of
outstanding short-term debt of the Company's U.K. subsidiary.
During the first three years of the Iris contract, Computing
Devices received semiannual advance payments from the Canadian
government, generally in April and October of each year, each such
payment covering a substantial portion of the expected contract
billings prior to the next scheduled advance payment. The last of
these semiannual advance payments was received in April 1994.
Computing Devices now receives monthly progress payments which may
be supplemented from time to time by customer advances tied to the
achievement of significant contractual milestones. Computing
Devices received a $15 million customer advance in the third quarter
1994 as a result of achieving such a milestone. Because of actions
taken with respect to other aspects of Computing Devices' business
to reduce working capital requirements, these changes in the
contractual payment mechanism under the Iris contract are not
expected to materially increase the overall working capital
requirements of Computing Devices.
The portion of the Company's revenue derived from operations
outside of the U.S. (Computing Devices' operations in Canada and the
U.K.) has increased from 20.1% in 1992 to 24.4% in 1993 to 28.2% in
1994. Despite this trend, the Company believes that its foreign
currency exposure is relatively small and largely limited to a risk
that profits of its overseas operations denominated in Canadian
dollars or pounds will be worth less in U.S. dollars if those
currencies weaken against the U.S. dollar. Almost 90% of the
Company's non-U.S. revenue is from the Canadian operations, and
about three-fourths of the revenue of the Canadian operations is
provided by contracts, principally the Iris contract, which are
denominated in Canadian dollars but contain provisions which protect
the Company from any currency exposure on non-Canadian dollar costs.
In the case of the U.K. operation, which provides the remainder of
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<PAGE>
non-U.S. revenue, approximately 90% of its revenue and costs are
based in pounds. Approximately 10% of the Company's non-U.S.
revenue is U.S. dollar based.
During 1994, Standard and Poor's Ratings Group raised its
rating on the Company's 5 1/2% Preferred Stock to "BB-" from "B"
with an implied senior debt rating of "BB+". Also during 1994,
Moody's Investors Service upgraded its rating on the 5 1/2%
Preferred Stock from "b3" to "b2" and its outlook on the Company
from neutral to positive. In January 1995, Standard and Poor's
Ratings Group affirmed the foregoing rating on the 5 1/2% Preferred
Stock and revised its outlook on the Company from stable to
positive. Also during 1994, the Company's Board of Directors
authorized the Company to repurchase up to 2,000,000 shares of its
common stock in open market or privately negotiated transactions.
Purchases may be made from time to time at the discretion of Company
management, depending on share price and market conditions. The
principal reason for adopting the repurchase program is to provide
shares to be issued under the Company's employee stock plans,
thereby reducing dilution from such plans. As of December 31, 1994,
the Company had repurchased 70,000 shares in the open market at an
average purchase price of $25.50. The Company's domestic revolving
credit agreement limits the amount of cash the Company may expend in
connection with this program to 25% of the amount of the Company's
net income in profitable quarters after the first quarter of 1993.
As of December 31, 1994, the additional amount the Company could
expend in connection with this program totaled $22.6 million.
During May 1994, the Company concluded a one year extension of
its $35 million domestic revolving credit facility with five
commercial banks. Under the terms of the extension, the Company has
credit availability equal to the lesser of $35 million or 75% of the
amount of its eligible accounts receivable until May 30, 1995, all
of which may be used to obtain revolving loans or standby letters of
credit which may not have a final expiration date later than May 30,
1996. The credit facility as extended is unsecured. At December
31, 1994, there were $1.6 million in letters of credit and no
revolving loans outstanding under the facility. Under the terms of
the extended facility, the Company must maintain a minimum
consolidated net worth which is subject to increase based on the
Company's net earnings after December 31, 1993 and certain equity
contributions to the Company after the same date. As of December
31, 1994, the Company was in compliance with this covenant by $29.0
million. The Company is also required to achieve a prescribed level
of operating earnings on a rolling four quarter basis, and is
subject to additional covenants which limit debt, liens, contingent
obligations, operating leases, investments, cash dividends on common
stock, cash repurchases of stock, acquisitions and divestitures.
The Company continues to be in compliance with all covenants
associated with this credit facility.
The Company expects to meet its operating cash needs (including
accrued restructure liabilities), expenditures for capital assets
and software, dividend obligations with respect to the 5 1/2%
Preferred Stock, expenditures for strategic acquisitions of moderate
size and expenditures to repurchase common stock from its existing
cash balances, cash flow from operations and proceeds from the
exercise of stock options.
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Report of Management
The consolidated financial statements and other related financial
information of Ceridian published in this Annual Report were prepared
by Company management, which acknowledges its responsibility therefor.
Such statements and information were prepared in accordance with
generally accepted accounting principles and were necessarily based in
part on reasonable estimates, giving due consideration to materiality.
Ceridian maintains a system of internal controls which, in the
opinion of management, provides reasonable assurance that assets are
adequately safeguarded, that financial records accurately reflect all
transactions and can be relied upon in all material respects in the
prep-aration of financial statements, and that the Company's business
is conducted in compliance with its policy on business ethics. The
control system is supported by written policies and procedures,
and its effectiveness is monitored by a regular program of internal
auditing.
Our independent auditors, KPMG Peat Marwick LLP, in their audit of
Ceridian's consolidated financial statements, considered the internal
control structure of the Company to gain a basic understanding of the
accounting system in order to design an effective and efficient audit
approach, not for the purpose of providing assurance on the system of
internal control.
The Audit Committee, consisting of outside directors, is responsible
to the Board of Directors for reviewing the financial controls and
reporting practices and for recommending appointment of the
independent auditors. The committee meets periodically with
representatives of the internal audit department and the independent
auditors, both with and without Ceridian management being present.
Lawrence Perlman
Chairman, President and
Chief Executive Officer
John R. Eickhoff
Chief Financial Officer
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<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders of Ceridian Corporation:
We have audited the accompanying consolidated balance sheets of
Ceridian Corporation and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of operations and cash
flows for each of the years in the three-year period ended December
31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opin-ion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Ceridian Corporation and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Notes A and I to the consolidated financial state-
ments, the Company changed its method of accounting for postretirement
benefits other than pensions in 1992.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 24, 1995
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share data)
Years Ended December 31,
<S> <C> <C> <C>
1994 1993 1992
Revenue
Product sales $515.9 $442.0 $ 392.7
Services 400.4 444.1 437.6
Total 916.3 886.1 830.3
Cost of revenue
Product sales 401.3 353.1 316.4
Services 187.2 252.9 258.7
Total 588.5 606.0 575.1
Gross profit 327.8 280.1 255.2
Operating expenses
Selling, general and
administrative 205.5 178.1 164.5
Technical expense 49.3 48.6 46.9
Other expense (income) (3.2) (3.5) (6.9)
Restructure loss - 67.0 76.2
Earnings (Loss) before
interest and taxes 76.2 (10.1) (25.5)
Interest income 10.6 8.3 17.8
Interest expense (1.6) (16.4) (16.3)
Earnings (Loss) before
income taxes 85.2 (18.2) (24.0)
Income tax provision 6.6 3.8 5.1
Earnings (Loss) from
continuing operations 78.6 (22.0) (29.1)
Discontinued operations:
Loss from operations - - 164.8
Loss from disposition - - 156.8
Extraordinary loss - 8.4 -
Cumulative effect of
accounting change (FAS 106) - - 41.8
Net earnings (loss) $ 78.6 $ (30.4) $(392.5)
Preferred stock dividends 13.0 0.3 0.3
Net earnings (loss) applicable
to common stockholders $ 65.6 $ (30.7) $(392.8)
Primary earnings (loss) per share:
Continuing operations $ 1.43 $ (0.52) $ (0.69)
Discontinued operations - - (7.55)
Extraordinary loss - (0.19) -
Cumulative effect of
accounting change (FAS 106) - - (0.98)
Total $ 1.43 $ (0.71) $ (9.22)
Fully diluted earnings per share $ 1.40
Shares used in calculations
(in thousands):
Primary 45,865 43,131 42,617
Fully diluted 56,249
<FN>
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS (Dollars in millions, except per share data)
December 31,
<S> <C> <C>
1994 1993
ASSETS
Current assets
Cash and equivalents $ 116.8 $ 112.4
Short-term investments 54.6 103.4
Trade and other receivables
Trade, less allowance of $6.2 and $5.4 73.9 69.2
Unbilled 57.3 45.5
Other 10.2 18.3
Total 141.4 133.0
Inventories 25.8 30.9
Other current assets 7.5 7.5
Total current assets 346.1 387.2
Investments and advances 14.5 28.2
Property, plant and equipment, net 97.8 88.7
Prepaid pension cost 78.0 64.0
Goodwill and other intangibles 128.0 37.4
Other noncurrent assets 25.9 10.2
Total assets $ 690.3 $ 615.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion
of long-term obligations $ 1.2 $ 3.1
Accounts payable 30.7 40.0
Customer advances and deferred income 85.7 70.5
Accrued taxes 56.9 54.2
Employee compensation and benefits 53.5 44.4
Restructure reserves, current portion 18.8 44.8
Other accrued expenses 60.0 59.4
Total current liabilities 306.8 316.4
Long-term obligations, less current portion 17.5 16.3
Deferred income taxes 7.7 6.4
Restructure reserves, less current portion 69.5 63.2
Employee benefit plans 80.5 83.2
Deferred income and other noncurrent liabilities 21.8 18.9
Stockholders' equity
5 1/2% Cumulative Convertible Exchangeable Preferred Stock,
$100 par value (liquidation preference of $236.0 million),
authorized 50,600 shares, issued and outstanding 47,200 4.7 4.7
Common Stock, $.50 par, authorized 100,000,000 shares, issued
45,515,123 and 44,263,369 22.8 22.1
Additional paid-in capital 849.6 824.2
Accumulated deficit (664.2) (729.8)
Other stockholders' equity items (26.4) (9.9)
Total stockholders' equity 186.5 111.3
Total liabilities and stockholders' equity $ 690.3 $ 615.7
<FN>
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions, except per share data)
Years Ended December 31,
<S> <C> <C> <C>
1994 1993 1992
Cash Flows from Operating Activities
Net earnings (loss) $ 78.6 $ (30.4) $(392.5)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used for) operating activities:
Loss from discontinued operations - - 164.8
Loss from disposition of discontinued operations - - 156.8
Extraordinary loss - 8.4 -
Cumulative effect of accounting change (FAS 106) - - 41.8
Restructure reserves:
Reserves established - 67.0 76.2
Reserves utilized (53.7) (59.7) (86.9)
Depreciation 26.1 25.5 22.9
Amortization of deferred assets 6.8 3.4 6.5
Net change in working capital items (21.8) 57.5 29.1
Other (0.5) (27.7) (6.7)
Net cash provided by (used for) operating activities 35.5 44.0 12.0
Cash Flows from Investing Activities
Expended for capital assets (37.5) (27.8) (19.3)
Capitalized software (13.5) (6.5) (1.7)
Short-term investments 48.8 (39.0) 9.9
Proceeds from sales of businesses and assets 33.5 11.4 76.6
Expended for business acquisitions, less cash acquired (65.6) - (21.8)
Collection of notes from asset sales 0.5 0.2 43.9
Net cash provided by (used for) investing activities (33.8) (61.7) 87.6
Cash Flows from Financing Activities
Short-term debt (1.6) 1.6 -
Retirement of public debt - (168.1) -
Repayment of other debt (1.6) (5.8) (13.6)
Redemption of preferred stock - - (10.9)
Payment to capitalize Control Data Systems - - (102.0)
Sale of 5 1/2% Preferred Stock 15.5 213.0 -
Preferred dividends (13.0) (0.3) (0.3)
Other 3.7 2.2 2.2
Net cash provided by (used for) financing activities 3.0 42.6 (124.6)
Effect of exchange rate changes on cash (0.3) (0.9) (5.8)
Net Cash Flows Provided (Used) 4.4 24.0 (30.8)
Cash and equivalents at beginning of year 112.4 88.4 119.2
Cash and equivalents at end of year $ 116.8 $ 112.4 $ 88.4
<FN>
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions, except per share data)
Years Ended December 31,
<S> <C> <C> <C>
1994 1993 1992
Net Change in Working Capital Items
Decrease (Increase) in trade and other receivables $ (12.1) $ 9.8 $ 5.4
Decrease (Increase) in inventories 4.9 12.1 21.4
Decrease (Increase) in net assets of discontinued operations - - (14.9)
Decrease (Increase) in other current assets 3.1 (1.0) 3.5
Increase (Decrease) in accounts payable (18.6) 13.0 1.3
Increase (Decrease) in customer advances and deferred income (1.0) 15.5 7.7
Increase (Decrease) in other current liabilities 1.9 8.1 4.7
Net change in working capital items $ (21.8) $ 57.5 $ 29.1
<FN>
Notes to the Consolidated Statements of Cash Flows
Cash flow from other operating activities includes cash contributions to
pension plans as further described in Note I, "Retirement Plans."
The receivable due from the exercise of the underwriters' overallotment
option at the end of 1993 and the related increase in stockholders' equity,
as described in Note E, "Stockholders' Equity."
The write-off of deferred debt issue costs related to the early retirement
of debt in 1993, and the 1992 addition of $6.7 in mortgage debt and the
equivalent amount of capital expenditures financed, as described in
Note K, "Financing Arrangements."
The effects of foreign currency translation (except on cash balances).
Amounts charged to earnings for restructuring or discontinued operations.
Payments of the underlying obligations are shown as restructure reserves
utilized. Such amounts and related recoveries are described in Note B,
"Restructure Loss and Discontinued Operations."
</TABLE>
<TABLE>
Years Ended December 31,
<S> <C> <C> <C>
Interest and Income Taxes Paid (Refunded) 1994 1993 1992
Interest paid $ 1.7 $ 17.0 $ 17.4
Income taxes paid $ 5.7 $ 8.6 $ 3.6
Income taxes refunded $ (2.2) $ (36.2) $ (0.2)
</TABLE>
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<PAGE>
Notes to Consolidated Financial Statements For the three
years ended December 31, 1994
INDEX TO NOTES
42 A. Accounting Policies
44 B. Restructure Loss and Discontinued Operations
45 C. Income Taxes
46 D. Noncurrent Assets and Liabilities
46 E. Stockholders' Equity
47 F. Supplementary Data to Statements of Operations
48 G. Segment Data
49 H. Property, Plant and Equipment
50 I. Retirement Plans
52 J. Stock Plans
53 K. Financing Arrangements
54 L. Investing Activity
55 M. Leasing Arrangements as Lessee
55 N. Commitments andContingencies
56 O. Legal Matters
A. ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements of Ceridian Corporation
("Ceridian" or the "Company") include the accounts of all majority-
owned subsidiaries.
Investments in other affiliated companies where Ceridian has
significant influence are accounted for by the equity method. The
remaining investments are accounted for by the cost method.
All material intercompany transactions have been eliminated from the
consolidated financial statements.
Change in Accounting for Postretirement and Postemployment Benefits
Effective January 1, 1992, Ceridian adopted Financial Accounting
Standard No. 106 ("FAS 106") with respect to its postretirement health
care and life benefit plans. FAS 106 requires that the expected cost
of these benefits be charged to expense during the periods in which
the employees render service. Under the previous accounting rules,
the expense for these benefits was generally recorded upon receipt of
health care claims or premium invoices.
Effective January 1, 1993, the Company adopted FAS 112, "Employers'
Accounting for Postemployment Benefits," which establishes accounting
standards for employers who provide benefits to former or inactive
employees and their dependents after employment but before retirement.
FAS 112 requires accrual accounting for these benefits. After
consideration of restructuring provisions of $12.0 in June 1992 and
$4.3 in September 1989 primarily related to the continuation of such
benefits to former employees of disposed businesses, the adoption of
FAS 112 did not have a material effect on the Company's financial
position or results of operations.
Changes in Presentation
In certain cases, prior year amounts have been reclassified to conform
to the current year's presentation.
Cash and Short-term Investments
The Company has an arrangement with an independent investment manager
to invest its cash in excess of estimated current requirements in
investment-grade fixed income securities which may have final
maturities of up to two years. Investments which are readily
convertible to cash within three months of purchase are classified in
the balance sheet as cash equivalents. Investments with longer
maturities are considered available-for-sale under FAS 115, adopted
January 1994, and reported in the balance sheet as short-term
investments. The fair value of short-term investments is not
materially different from their amortized cost, and the amount of
investments expected to be held more than one year beyond the balance
sheet date is not considered material. Net changes in short-term
investments, which are shown as investing cash flows in the Statements
of Cash Flows, relate to investment decisions by the independent
investment manager as well as to changes in the cash needs of the
Company.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and depreciated for
financial statement purposes using straight-line and accelerated
methods at rates based on the estimated lives of the assets, which are
generally as follows:
Buildings 40-50 years
Building improvements 5-20 years
Machinery and equipment 3-8 years
Computer equipment 3-6 years
Repairs and maintenance are expensed as incurred. Gains or losses
on dispositions are included in results of operations.
Page 42
<PAGE>
Goodwill
Goodwill, which represents the excess purchase price over the fair
value of net assets of businesses acquired, is assigned to operating
units based on the benefits derived from the acquisition and amortized
on a straight line basis over the expected periods to be benefited,
ranging up to 20 years. Recorded amounts are regularly reviewed and
recoverability assessed. The review considers factors such as whether
the amortization of the goodwill balance for each business segment
over its remaining life can be recovered through forecasted future
operations (undiscounted and without interest).
Earnings (Loss) Per Share
For 1994, primary earnings per share is calculated by dividing the net
earnings applicable to common stockholders by the weighted average of
outstanding common stock and common stock equivalents. Common stock
equivalents includes the impact of outstanding dilutive stock options
and restricted stock. Fully diluted earnings per share assumes that
the Company's 5 1/2% Preferred Stock was converted to common shares at
the beginning of the reporting period. Therefore, the calculation
uses net earnings without reduction for preferred stock dividends
divided by weighted average common shares and common share equivalents
plus the additional common shares which would have resulted from the
assumed conversion. In the years presented prior to 1994, fully
diluted loss per share would not differ from primary because the
result is antidilutive.
Income Taxes
The provision for income taxes is based on income recognized for
financial statement purposes and includes the effects of temporary
differences between such income and that recognized for tax return
purposes. The Company and its eligible subsidiaries file a consoli-
dated U.S. federal income tax return. Certain subsidiaries which are
consolidated for financial reporting are not eligible to be included
in the consolidated U.S. federal income tax return and separate
provisions for income taxes have been determined for these entities.
The tax benefit of losses from U.S. operations in prior years has been
provided as the losses are utilized.
Except for selective dividends, Ceridian intends to reinvest the
unremitted earnings of its non-U.S. subsidiaries and postpone their
remittance indefinitely. Accordingly, no provision for U.S. income
taxes was required on such earnings during the three years ended
December 31, 1994.
Revenue Recognition
Revenue from product sales is related primarily to fixed price, long-
term contracts with government customers and is recognized on a
percentage of completion basis. Percentage of completion is
determined by reference to the extent of contract performance, future
performance risk and cost incurrence. Costs and estimated earnings in
excess of billings on uncompleted contracts are reported as unbilled
receivables, a portion of which represents a holdback reserve which is
billable as allowed under the contract terms. Contracts in progress
are reviewed quarterly, and sales and earnings are adjusted in current
accounting periods based on revisions in contract value and estimated
costs at completion. Provisions for estimated losses on contracts are
recorded when identified.
Revenue from sales of services is recognized when the services are
performed and billable, except for the portion of Employer Services tax
filing revenue which is recognized as earned from the investment of
customer deposits.
Inventories
Inventories consist primarily of electronic components which are
purchased in anticipation of funding for specific contracts and
programs and are stated at the lower of first in, first out or average
cost or net realizable value. Although inventories include costs
related to long-term contracts, most of the inventoried costs are
expected to be charged to cost of sales within one year. Payments
received in advance of billings on long-term contracts are recorded as
a liability for customer advances until contract milestones are
accomplished.
Payroll Processing and
Payroll Tax Filing Services
In connection with the Company's payroll processing and payroll tax
filing services, the Company files federal, state and local tax
returns, handles related regulatory correspondence and amendments,
absorbs regulatory charges for certain penalties and interest,
collects funds for payment of taxes due, holds such funds in trust
until payment is due, and remits the funds to the appropriate taxing
authority. For services provided, the Company receives fees from
customers and an investment return on funds which are held in trust.
The trust invests in a diversified portfolio composed of obligations
of the United States government and its agencies and obligations of
corporations rated single A or better by nationally recognized debt
rating agencies. The amount of collected but unremitted funds varies
significantly during the year and averaged $867.5 in 1994, $460.0 in
1993 and $298.4 in 1992. The increase in such balances was due
primarily to the acquisition of Systems Tax Service, Inc. in October
1993. The amount of such funds at December 31, 1994, was $918.2.
Page 43
<PAGE>
B. RESTRUCTURE LOSS AND DISCONTINUED OPERATIONS
Restructure Loss
During second quarter 1994, the Company recorded restructure gains of
$7.8 from the sale of its TeleMoney Services and related data services
operations and $7.2 from the final settlement of a tax-sharing
arrangement with a former subsidiary. These gains were offset by a
$15.0 provision for costs related to age discrimination litigation
arising out of downsizing actions taken by the Company in past years.
In 1993, the net restructure loss of $67.0 included charges of $75.9
for Information Services and $5.5 for Defense Electronics. These
charges were offset in part by a gain of $14.4, not attributable to
either industry segment, which includes a gain of $14.7 resulting from
the receipt of a refund of taxes and related interest as further
described in Note C and a $0.3 net adjustment of prior years'
restructuring provisions.
The $75.9 Information Services charges include a charge of $57.0
related to the discontinuance of Arbitron's syndicated television and
cable ratings service, which primarily involves the write-off of
metering and other equipment, severance and other costs related to the
termination of employees, and lease and other obligations related to
facilities and equipment. Also included is a charge of $18.9 for
Employer Services, primarily to consolidate its payroll processing
activities into centralized processing facilities and its customer
service operations into a single national center, beginning in 1994.
The $5.5 charge relates to actions taken by Computing Devices to
reduce employment levels in its U.S. and U.K. operations in relation
to the completion, deferral or termination of certain government
contract programs.
In 1992, the net restructure loss of $76.2 included a write-off of
$29.9 from the discontinuance of Arbitron's ScanAmerica service, $8.8
for the consolidation of certain Employer Services administrative
operations, litigation and other costs largely related to past
restructuring actions of $20.9, severance costs of $8.5, a $12.0
provision for postemployment benefit obligations to employees of
businesses sold or discontinued by the Company, a gain of $7.6 from
the formation of the Competitive Media Reporting ("CMR") joint
venture, and a loss of $3.7 from the sale of the Benefits Services
division.
Discontinued Operations
In second quarter 1992, the Company sold its Automated Wagering
division, adopted a plan of disposal for its Empros energy management
division (sold in March 1993), and substantially completed
preparations to separately incorporate its Computer Products business
as Control Data Systems, Inc. ("Control Data Systems") and make a
dividend distribution of its stock as of July 31, 1992. In light of
the dependence of these businesses on a common proprietary technology
and their dissimilarity to the continuing operations of the Company,
these operations have been separately reported as discontinued
operations in the accompanying consolidated financial statements.
The sale of Automated Wagering resulted in cash proceeds of $42.3
and the recording of a loss of $55.0 in June 1992. The sale of Empros
in March 1993 required a payment of $8.0 to the buyer at the date of
sale, which had been provided for by the recording of a loss of $45.0
in June 1992. The spin-off of Control Data Systems involved cash
payments by Ceridian to Control Data Systems of $50.0 on July 31,
1992, and $52.0 on December 31,1992, along with the contribution on
July 31, 1992, of net assets valued at $34.3, resulting in a dividend
valued at $136.3 to Ceridian stockholders in the form of the common
stock of Control Data Systems. Ceridian recorded a loss of $25.2
related to the spin-off of Control Data Systems and an additional loss
of $31.6 related to its headquarters building, a major portion of
which the Company decided to sublet. The total Company loss arising
from disposition of the discontinued businesses amounted to $156.8, or
$3.68 per share. Operating losses of the three discontinued
businesses for 1992, including restructuring charges of $130.5,
totaled $164.8, or $3.87 per share, on revenue of $380.4.
Page 44
<PAGE>
C. INCOME TAXES
The cumulative amount of undistributed earnings of international
subsidiaries for which U.S. income taxes have not been provided was
approximately $28.3 at December 31, 1994. It is not practical to
estimate the amount of unrecognized deferred U.S. taxes on these
undistributed earnings.
In October 1993, Ceridian received $35.5 from the Internal Revenue
Service representing a refund of taxes and related interest determined
to be owed to the Company as a result of the audit of Ceridian's U.S.
income tax returns for the years 1978-1987. Of that amount, $10.8 was
paid by Ceridian to or on behalf of third parties in accordance with
the tax sharing agreements relating to past restructuring actions,
$10.0 was recorded in accrued taxes and the remaining $14.7 was
recorded as a restructuring gain. Under tax sharing agreements
existing at the time of the disposition of certain former operations
of the Company, Ceridian remains subject to income tax audits in
various jurisdictions for the years 1985-1992. Ceridian considers its
tax accruals adequate to cover any U.S. and international tax
deficiencies not recoverable through deductions in future years.
The Company has U.S. net operating loss carryforwards, future tax
deductions and general business and alternative minimum tax credits
of $976.8, $302.0 and $26.8, respectively, which will be available to
offset substantially all of its U.S. earnings during the carryforward
period. The tax benefits of these items are reflected in the accompanying
table of deferred tax assets and liabilities. If not used, these
carryforwards begin to expire in 1997. U.S. tax rules impose limitations
on the use of net operating losses following certain changes in ownership.
If such a change were to occur with respect to the Company, the limitation
could reduce the amount of these benefits that would be available to
offset future taxable income each year, starting with the year of ownership
change.
<TABLE>
<S> <C> <C> <C>
Components of Earnings and Taxes
1994 1993 1992
Earnings (Loss) Before Income Taxes
U.S. $69.8 $(27.3) $(39.3)
International 15.4 9.1 15.3
Total $85.2 $(18.2) $(24.0)
Income Tax Provision
Current
U.S. $ 0.7 $ - $ -
International 3.1 2.6 2.7
State and other 0.6 0.6 0.5
4.4 3.2 3.2
Deferred
International 2.2 0.6 1.9
Total $ 6.6 $ 3.8 $ 5.1
</TABLE>
<TABLE>
<S> <C> <C> <C>
Effective Rate Reconciliation 1994 1993 1992
U.S. statutory rate 35% 35% 34%
Income tax provision
(benefit) at U.S. statutory rate $29.8 $(6.4) $(8.2)
International rate differences (0.7) (0.8) (0.6)
State income taxes, net 0.6 0.6 0.5
Losses for which no tax benefit was provided 0.7 10.4 13.4
Utilization of loss carryforwards (24.5) - -
Other 0.7 - -
Income tax provision $ 6.6 $ 3.8 $ 5.1
</TABLE>
<TABLE>
Tax Effect of Items That Comprise a Significant Portion of Deferred
Tax Assets and Liabilities at December 31, 1994
<S> <C> <C>
Deferred Tax Deferred Tax
Item Description Asset Liability
Net operating loss carryforwards $ 383.4 $ -
Restructuring and other accruals 92.2
International (7.7)
Other 27.0
Total 502.6 (7.7)
Less valuation allowance (502.6)
Deferred income taxes $ - $ (7.7)
<FN>
The net deferred tax asset at December 31, 1994, is fully offset by a valuation allowance.
During 1994, both the deferred tax asset and the valuation allowance decreased by $21.4.
The amount of the valuation allowance is reviewed annually.
</TABLE>
Page 45
<PAGE>
D. NONCURRENT ASSETS AND LIABILITIES
Company policy regarding accounting for goodwill is presented in Note
A, "Accounting Policies. " The increase in goodwill and other
intangibles in 1994 primarily represents purchased technology and
customer base and goodwill acquired in the purchase of Tesseract
Corporation ("Tesseract") as further described in Note L, "Investing
Activity. " In 1993, the Company began incurring capitalizable costs,
incremental to normal operations, of internally developed software
which will become an integral part of its revenue-producing payroll
processing system. The net amounts of these capitalized costs at
December 31, 1994 and 1993 are $12.9 and $4.1, respectively, and are
included in other noncurrent assets. Amortization of these costs
will be over a 3 to 5 year period beginning in 1995 as elements of the
payroll processing system become operational.
Prepaid pension cost includes the net pension asset related to
funded plans for U.S. and Canadian employees and the intangible asset
related to the Company's supplemental plan, as further described in
Note I.
The liability for employee benefit plans includes postretirement and
postemployment plans and the supplemental pension plan as further
described in Note I.
<TABLE>
<S> <C> <C>
December 31,
Goodwill and Other Intangibles 1994 1993
Goodwill $ 97.1 $ 37.2
Accumulated amortization 5.2 1.8
91.9 35.4
Other intangible assets 41.6 6.5
Accumulated amortization 5.5 4.5
36.1 2.0
$128.0 $ 37.4
</TABLE>
E. STOCKHOLDERS' EQUITY
Preferred Stock
From a class of preferred stock with 750,000 authorized shares (the
"Preferred Stock"), the Company's Board of Directors designated a
series consisting of 50,600 such shares as 5 1/2% Cumulative Convertible
Exchangeable Preferred Stock, par value $100 per share (the "5 1/2%
Preferred Stock"). In December 1993, the Company completed the sale
in an underwritten public offering of 4,400,000 depositary shares,
each representing a one one-hundredth interest in a share of 5 1/2%
Preferred Stock, for $50 per share, or net cash proceeds of $213.0,
and received a commitment from the underwriters to purchase an
additional 320,000 depositary shares, at $50 per share. The
underwriters' commitment is reported as an other receivable of $15.5
at December 31, 1993, which was collected in early January 1994. The
proceeds were used primarily to retire the Company's 8/% Convertible
Subordinated Debentures Due June 15, 2011 (the "8/% Debentures") with
the remainder to be used for working capital and other general
corporate purposes.
Dividends on the 5 1/2% Preferred Stock and depositary shares are
cumulative from the date of issuance and payable on a quarterly basis
commencing on March 31, 1994. The depositary shares are convertible
at the option of the holder into common stock of the Company at a
conversion price of $22.72 per common share, subject to adjustment
under certain conditions. The depositary shares are redeemable, in
whole or in part, at the option of the Company, at any time on or
after December 31, 1996, initially at a redemption price per share of
$51.10 and thereafter at prices declining to $50.00, in all cases plus
accrued and unpaid dividends to the redemption date. The depositary
shares are exchangeable, in whole but not in part, at the option of
the Company, on any quarterly dividend payment date on or after
December 31, 1995, for the Company's 5 1/2% Convertible Subordinated
Debentures due 2008 at a rate of $50.00 principal amount of such
Debentures for each depositary share. The 5 1/2% Preferred Stock and
depositary shares are non-voting except that holders will be entitled
to vote as a separate class to elect two directors if the equivalent
of six or more quarterly dividends shall be in arrears, until the
dividends in arrears are paid in full.
The 108,591 shares of 4 1/2% Cumulative Preferred Stock issued and
outstanding at December 31, 1991, were redeemed at par value of $100
per share in July 1992 in connection with the spin-off of Control Data
Systems.
Page 46
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Common Stock, Shares Additional
Additional Paid-In Capital Treasury Common Paid-In Accumulated
and Accumulated Deficit Outstanding Stock Issued Stock Capital Deficit
Balance December 31, 1991 42,530,122 196,738 42,726,860 $21.4 $582.8 $(170.0)
Exercises of stock options 277,750 277,750 0.1 2.2
Forfeitures of restricted stock (4,000) 4,000
Net loss (392.5)
Preferred stock dividends (0.3)
Dividend of Control Data Systems stock (136.3)
Balance December 31, 1992 42,803,872 200,738 43,004,610 21.5 585.0 (699.1)
Exercises of stock options 252,851 252,851 0.1 2.3
Restricted stock awards 119,000 (119,000) (0.2)
Net loss (30.4)
Sale of 5 1/2% Preferred Stock depositary shares 223.8
Preferred stock dividends (0.3)
Issued for purchase of Systems Tax Service 1,005,908 1,005,908 0.5 13.3
Balance December 31, 1993 44,181,631 81,738 44,263,369 22.1 824.2 (729.8)
Repurchase of common shares (70,000) 70,000
Exercises of stock options 462,462 (33,708) 428,754 0.2 4.4
Restricted stock awards 827,500 (4,500) 823,000 0.5 21.4
Net earnings 78.6
Sale of 5 1/2% Preferred Stock depositary shares (0.4)
Preferred stock dividends (13.0)
Balance December 31, 1994 45,401,593 113,530 45,515,123 $22.8 $849.6 $(664.2)
<FN>
Authorized but unissued or treasury common shares reserved for future
issuance as of December 31, 1994, included 4,770,619 shares for
exercise of stock options and awards of restricted stock, as discussed
in Note J, and 10,384,000 shares for conversion of 5 1/2% Preferred Stock
depositary shares.
</TABLE>
<TABLE>
<S> <C> <C> <C>
December 31,
Other Stockholders' Equity Items 1994 1993 1992
Foreign currency translation adjustment $ (2.2) $ (2.0) $ (1.0)
Restricted stock awards (17.6) (2.2) (0.5)
Pension liability adjustment (4.2) (4.1) (2.9)
Treasury stock, at cost (2.4) (1.6) (3.9)
Total $(26.4) $ (9.9) $ (8.3)
</TABLE>
F. SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
Other Expense (Income) 1994 1993 1992
Foreign currency translation expense (income) $ (0.1) $ (0.4) $ (2.3)
Loss (Gain) on sale of assets 0.6 (0.9) 0.2
Other expense (income) (2.8) (1.0) (1.6)
Equity in loss (earnings) of affiliates 0.3 --- 0.6
Share of partnership loss (earnings) (1.2) (1.2) (3.8)
Total $ (3.2) $ (3.5) $ (6.9)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Other Data
Provision for doubtful accounts $ 0.9 $ 1.7 $ 1.0
Research and development $ 35.4 $ 33.4 $ 30.5
Amortization of goodwill $ 3.4 $ 1.5 $ 0.6
Royalty costs $ 12.7 $ 28.4 $ 30.8
</TABLE>
Page 47
<PAGE>
G. SEGMENT DATA
Industry Segments
Information concerning the continuing operations of Ceridian appears
in the accompanying Industry Segment Data table. The two industry
segments are Information Services and Defense Electronics.
The Information Services segment consists of Employer Services and
Arbitron, along with a small services business sold in May 1994. The
Information Services businesses collect, manage and analyze data on
behalf of customers, and report information resulting from that
process to customers. The products and services provided by the
Information Services businesses address specific information
management needs of other businesses to enable them to operate more
efficiently and effectively. The technology-based product and
services of the Information Services businesses are typically provided
through long-term customer relationships that result in a high level
of recurring revenue.
Employer Services offers a broad range of services designed to help
employers manage their work forces more effectively, including payroll
processing, payroll tax filing, human resource information services,
consulting services and employee assistance programs. During 1994,
Employer Services acquired a number of businesses, the largest of
which was Tesseract, as further described in Note L, "Investing
Activity. " Arbitron is the leading provider of radio audience
measurement information in terms of revenue and market share, and also
provides media and marketing information, including information
regarding product purchasing decisions, to broadcasters, cablecasters,
advertising agencies and advertisers. Arbitron's proprietary data
regarding radio audience size and demographics is provided to
customers through multi-year subscription agreements.
The Defense Electronics segment, consisting of Computing Devices
International, develops, manufactures and markets electronic systems,
subsystems and components, and provides systems integration and other
services, primarily to government defense agencies. The "other"
category includes corporate center operations, businesses disposed of
but reported as continuing operations, and net assets of discontinued
operations. Intersegment sales are not material.
Major Customers
Revenue in 1994, 1993 and 1992, respectively, included sales under
prime contracts or subcontracts to the U.S. government of $226, $232
and $239 and the Canadian government of $173, $137 and $95, substantially
all of which are reported in the Defense Electronics segment. Of the
sales to the Canadian government, $154 in 1994, $105 in 1993 and $69 in
1992 were from the Iris contract.
<TABLE>
<S> <C> <C> <C> <C>
Information Defense
Industry Segment Data Services Electronics Other Consolidated
1994
Revenue $430.0 $486.3 $ --- $916.3
Earnings (Loss) before
interest and taxes $ 58.6 $ 30.6 $(13.0) $ 76.2
Identifiable assets $247.3 $210.0 $233.0 $690.3
Capital expenditures $ 23.5 $ 13.4 $ 0.6 $ 37.5
Depreciation $ 14.4 $ 10.1 $ 1.6 $ 26.1
1993
Revenue $424.8 $461.3 $ --- $886.1
Earnings (Loss) before
restructure, interest and taxes $ 36.9 $ 27.0 $ (7.0) $ 56.9
Restructure gain (loss) (75.9) (5.5) 14.4 (67.0)
Earnings (Loss) before
interest and taxes $(39.0) $ 21.5 $ 7.4 $(10.1)
Identifiable assets $133.8 $209.7 $272.2 $615.7
Capital expenditures $ 16.3 $ 10.6 $ 0.9 $ 27.8
Depreciation $ 15.7 $ 8.7 $ 1.1 $ 25.5
1992
Revenue $408.7 $412.4 $ 9.2 $830.3
Earnings (Loss) before
restructure, interest and taxes $ 33.4 $ 20.8 $ (3.5) $ 50.7
Restructure gain (loss) (30.9) (1.1) (44.2) (76.2)
Earnings (Loss) before
interest and taxes $ 2.5 $ 19.7 $(47.7) $(25.5)
Identifiable assets $128.7 $232.1 $190.8 $551.6
Capital expenditures $ 10.0 $ 8.8 $ 0.5 $ 19.3
Depreciation $ 13.5 $ 7.9 $ 1.5 $ 22.9
</TABLE>
Geographic Segments
Page 48
<PAGE>
The Company's international operations consist of defense electronics
operations primarily in Canada and, to a much lesser extent, in the
United Kingdom. The United Kingdom operations are included in the
consolidated financial statements from September 1992, the date of
the acquisition of the 56% interest not previously held by the Company.
Intersegment and export sales are not material. Geographic information
concerning the Company's continuing operations appears in the accompanying
Geographic Segment Data table. The amounts of the parent company's equity
in net assets of and advances to international subsidiaries and branches
were $47.9 and $37.0 at December 31, 1994 and 1993, respectively.
Local currencies have been determined to be functional currencies
for these operations. Foreign currency balance sheets are translated at
the end-of-period exchange rates and earnings statements at the average
exchange rates for each period. The resulting translation gains or losses
are recorded as "foreign currency translation adjustment" in the
stockholders' equity section of the balance sheet. Gains and losses from
translation of assets and liabilities denominated in other than the
functional currency of the operation are recorded in results of operations
as "other expense (income)." Canadian operations include a significant
number of contracts which either provide for exchange rate adjustments
or are denominated in the U.S. dollar, which benefits the management of
exchange rate risk.
<TABLE>
<S> <C> <C> <C>
Geographic Segment Data United States International Consolidated
1994
Revenue $ 658.2 $ 258.1 $ 916.3
Earnings before interest and taxes $ 60.1 $ 16.1 $ 76.2
Identifiable assets $ 554.4 $ 135.9 $ 690.3
1993
Revenue $ 670.2 $ 215.9 $ 886.1
Earnings before restructure,
interest and taxes $ 44.8 $ 12.1 $ 56.9
Restructure loss (65.5) (1.5) (67.0)
Earnings (Loss) before
interest and taxes $ (20.7) $ 10.6 $ (10.1)
Identifiable assets $ 482.6 $ 133.1 $ 615.7
1992
Revenue $ 663.5 $ 166.8 $ 830.3
Earnings before restructure,
interest and taxes $ 42.6 $ 8.1 $ 50.7
Restructure loss (76.0) (0.2) (76.2)
Earnings (Loss) before
interest and taxes $ (33.4) $ 7.9 $ (25.5)
Identifiable assets $ 423.5 $ 128.1 $ 551.6
</TABLE>
H. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<S> <C> <C>
December 31,
1994 1993
Property, plant and equipment
At cost
Land $ 2.9 $ 3.4
Buildings and improvements 72.8 75.3
Machinery and equipment 179.1 162.7
Total 254.8 241.4
Accumulated depreciation 157.0 152.7
Property, plant and equipment, net $ 97.8 $ 88.7
</TABLE>
Page 49
<PAGE>
I. RETIREMENT PLANS
Pension Benefits
Ceridian maintains two defined benefit pension plans for U.S.
employees which were closed to new participants effective
January 1, 1995. Ceridian's Canadian and U.K. subsidiaries have
defined benefit pension plans available to substantially all their
employees which constitute a minor portion of the amounts reported in
the accompanying tables. The plans' assets consist principally of
equity securities, U.S. government securities, and other fixed income
obligations and do not include securities of the Company. Benefits
under these plans are calculated on maximum or career average earnings
and years of participation in the plans. U.S. employees participate
in these plans by means of salary reduction contributions. Certain
former employees are inactive participants in the plans. Employer
cash contributions to the U.S. plans, during the respective plan
years, amounted to $13.8 in 1994, $24.9 in 1993 and $2.3 in 1992.
Retirement plan funding amounts are based on independent consulting
actuaries' determination of the Employee Retirement Income Security
Act of 1974 ("ERISA") funding requirements in the U.S. and local
statutory requirements in other countries.
Vested U.S. plan participants who have terminated employment after
1989 can elect to immediately receive a lump sum distribution as an
alternative to receiving monthly benefits. These distributions
totalled $32.7, $36.0 and $49.0 in the 1994, 1993 and 1992 plan years,
respectively, and did not result in the recognition of any curtailment
gain or loss.
The Company also sponsors a nonqualified supplemental retirement
plan for certain current and former U.S. employees which is not
subject to ERISA benefit limitations, nor does it qualify for the
benefit protection provided by ERISA. The projected benefit obligation
at September 30, 1994 and 1993 for this plan was $19.2 and $19.7,
respectively, and the net periodic pension cost was $2.1 for 1994,
$2.2 for 1993 and $2.2 for 1992. The Company recorded a reduction in
stockholders' equity of $0.1 in 1994, $1.2 in 1993 and $1.7 in 1992,
which represents the increase in the excess of its minimum liability
under this plan over the allowed carrying amount of the related
intangible asset.
A defined contribution plan, satisfying the requirements of IRC
401(k) and to which the Company may make contributions, has been
available to most U.S. employees, but effective January 1, 1995, is
available only to those U.S. employees who participate in a
company-sponsored defined benefit pension plan. The cost recognized
by the Company with respect to this plan was $2.9 in 1994, $1.9 in
1993 and $1.8 in 1992. A second 401(k) defined contribution plan, to
which the Company may also make contributions, was established
effective January 1, 1995, for U.S. employees not participating in a
Company-sponsored defined benefit plan.
<TABLE>
<S> <C> <C>
Funded Status of Defined Benefit September 30,
Retirement Plans at Measurement Date 1994 1993
Actuarial present value of obligation:
Vested benefit obligation $ 585.5 $ 641.5
Accumulated benefit obligation 589.4 645.2
Projected benefit obligation $ 648.7 $ 703.7
Plan assets at fair value 654.5 698.4
Plan assets in excess of (less than) projected
benefit obligation 5.8 (5.3)
Unrecognized net (gain) or loss 44.8 39.6
Prior service cost 35.4 39.7
Unrecognized net asset (12.7) (15.3)
Net pension asset recognized in the
consolidated balance sheet $ 73.3 $ 58.7
<FN>
The assumptions used in determining the funded status information are as follows:
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Rate of Long-term Rate
DiscountRate Salary Progression of Return on Assets
U.S. International U.S. International U.S. International
1994 8.25% 7.5 - 8.0% 4.5% 6.0 - 7.0% 9.0% 8.0 - 9.0%
1993 7.25% 7.5 - 8.0% 4.0% 6.0 - 7.0% 9.0% 8.0 - 9.0%
1992 8.0% 8.0 - 9.0% 4.5% 6.0 - 8.0% 9.5% 8.0 - 9.0%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Net Periodic Pension Cost (Credit) 1994 1993 1992
Service cost $ 6.1 $ 6.0 $ 6.2
Interest cost on projected benefit obligation 51.5 52.2 54.3
Actual return on plan assets (14.7) (103.0) (45.2)
Net amortization and deferral (41.8) 47.5 (12.8)
Total $ 1.1 $ 2.7 $ 2.5
</TABLE>
Page 50
<PAGE>
Postretirement Benefits
Ceridian provides health care and life insurance benefits for eligible
retired employees, including individuals who retired from operations
of the Company that were subsequently sold or discontinued.
The Company sponsors several health care plans for both pre- and
post-age 65 retirees. Plans offered include a managed care option,
HMOs where available, and a catastrophic plan for pre-age 65 retirees.
Post-age 65 retirees have the choice of a company-sponsored Medicare
supplement plan or HMO Medicare plan. Company contributions to these
plans differ for various groups of retirees and future retirees.
Employees hired on or after January 1, 1992, will be allowed to enroll
in company-sponsored plans at retirement, but receive no company
subsidy. For employees hired before January 1, 1992, and retiring in
1992 or later, the Company subsidizes pre-age 65 coverage only. The
Company's subsidy is a fixed dollar contribution determined at
retirement equal to 2.5% of the catastrophic plan cost for each year
of service. Employees who retired prior to 1992 are subject to
various cost-sharing policies depending on when retirement began and
eligibility for Medicare. This is a closed group of retirees. Most
retirees outside the United States are covered by governmental health
care programs, and the Company's cost is not significant.
As described in Note A, Ceridian adopted FAS 106, effective
January 1, 1992, with respect to retiree health care and life
benefits.
The cumulative effect of this change in accounting was a charge of
$41.8, which, combined with $14.0 previously accrued in connection
with the disposition of businesses, provided an accrued benefit
obligation of $55.8.
The following tables present the funded status of the plan,
reconciled to the accrued postretirement benefit cost recognized in
the Company's balance sheet at December 31, 1994 and 1993, and the
components of the net periodic postretirement benefit cost for the
three years ended December 31, 1994. The Company does not prefund
these costs.
<TABLE>
Funded Status of Postretirement
Health Care and Life Plans
December 31,
<S> <C> <C>
1994 1993
Accumulated postretirement
benefit obligation:
Retirees $42.9 $47.3
Fully eligible active
participants 3.2 5.0
Other active participants 6.8 11.2
52.9 63.5
Unrecognized net gain (loss) 3.7 (7.6)
Accrued benefits cost $55.6 $56.9
Current portion $ 6.0 $ 6.0
Noncurrent portion 50.6 49.9
Total $56.6 $55.9
</TABLE>
<TABLE>
Net Periodic Postretirement
Benefit Cost
<S> <C> <C> <C>
1994 1993 1992
Service cost of
benefits earned $0.3 $0.4 $0.4
Interest cost on
benefit obligation 4.0 4.4 4.0
Other --- --- (2.0)
Net periodic
benefit cost $4.3 $4.8 $2.4
</TABLE>
The assumed health care cost trend rate used in measuring the
benefit obligation is 14.0% pre-age 65 and 10% post-65 in 1994,
declining at a rate of 1% per year to an ultimate rate of 5.75% in
2003 pre-age 65 and 1999 post-age 65. A one percent increase in this
rate in each year would increase the benefit obligation at December
31, 1994 by $3.5 and the aggregate service and interest cost for 1994
by $0.3. The weighted average discount rates used in determining the
benefit obligation at December 31, 1994 and 1993 are 8.25% and 7.25%,
respectively.
Page 51
<PAGE>
J. STOCK PLANS
During 1993, the 1993 Long-Term Incentive Plan ("1993 LTIP") was
adopted to succeed a similar plan adopted in 1990. The 1993 LTIP
authorizes the issuance until February 1996 of up to 3,000,000 common
shares in connection with awards of stock options, restricted stock,
stock appreciation rights and performance units to key executive and
managerial employees. The exercise price of stock options issued under
the 1993 LTIP may not be less than the fair market value of the
underlying stock at the date of grant. An option generally becomes
exercisable as to one-third of the shares subject to the grant each
January 1 falling at least six months after the date of grant, and
expires not later than ten years after grant. The 1993 LTIP provides
for the accelerated exercisability of options and the accelerated lapse
of transfer restrictions on restricted stock if a participant's
employment terminates for specified reasons within two years of a
change of control of the Company.
During 1994, 828,000 common shares, restricted as to transferability
and subject to possible forfeiture, were awarded pursuant to the 1993
LTIP to senior executives under a performance restricted stock
program. Under the terms of these awards, up to one-third of the
shares awarded are eligible to vest as of April 30, 1996 and 1997 with
the remaining one-third and any shares not previously vested eligible
to vest on April 30, 1998, but vesting will occur only if the
executive is still employed by the Company on those dates and only to
the extent that the total return to holders of Ceridian common stock
over two, three and four year performance periods ending on those
dates meets certain prescribed levels as compared to other companies
in the S&P 500. Of the shares eligible to vest on any given date,
generally 25% of the shares would vest if the Company's total return
to stockholders over the applicable performance period is at least at
the 60th percentile of companies in the S&P 500, 50% would vest at the
75th percentile, and 100% would vest at the 90th percentile. If the
60th percentile is not achieved, no shares would vest on that date.
Shares which have not yet vested as of the end of the third
performance period will be forfeited.
In 1993, the Company established the 1993 Non-Employee Director
Stock Plan which provides for the issuance of up to 50,000 common
shares in connection with awards of stock options and restricted stock
to non-employee directors of the Company. Under this plan, each such
director receives a one-time grant of 1,000 shares of restricted stock
upon election to the Board, and receives an annual stock option grant
covering 1,000 shares upon re-election. Options to purchase 14,000
shares and 9,000 shares of restricted stock have been awarded under
this plan as of December 31, 1994.
In connection with the 1994 acquisition of Tesseract, the Company
adopted the Tesseract Long-Term Incentive Plan pursuant to which
options to acquire up to 500,000 shares of the Company's common stock
may be awarded to employees of Tesseract. In connection with the
1993 acquisition of Systems Tax Service, the Company adopted the STS
Special Incentive Plan pursuant to which 107,000 shares of restricted
stock were awarded to senior executives of STS.
In July, 1994, the Company's Board of Directors authorized the
repurchase by the Company of up to 2,000,000 of its outstanding common
shares for the purpose of providing shares to be issued under the
Company's stock-based compensation plans, thereby reducing dilution of
common stockholders' equity. At December 31, 1994, the Company had
repurchased 70,000 shares for this purpose.
Accounting for restricted stock awards does not affect total
stockholders' equity. The restricted stock award account,
representing unearned compensation, will be reduced as compensation
expense is charged to operations. Compensation expense is estimated
based on the number of awarded shares expected to become unrestricted
at each vesting date and the market price of Ceridian common stock at
the end of the reporting period. The amount of compensation expense
charged to 1994 operations under the performance-based program was
$5.9.
<TABLE>
<S> <C> <C> <C> <C>
Option Price Available
Stock Plans Per Share Outstanding Exercisable for Grant
At December 31,1991 $ 8.25-$52.81 2,210,454 763,466 543,631
Spin-off adjustment 7.09-40.24 309,067 104,904 ---
Granted 8.75-15.88 1,002,272 (1,002,272)
Became exercisable 7.09-18.57 729,377
Exercised 7.52-12.38 (277,750) (277,750)
Canceled 8.38-52.81 (462,264) (370,625) 462,043
Expired 26.00-30.81 (4,320) (4,320)
At December 31, 1992 $ 7.09-$40.24 2,777,459 945,052 3,402
Authorized 3,157,000
Granted 14.25-19.13 1,069,965 (1,069,965)
Became exercisable 7.09-15.96 401,174
Exercised 7.30-16.27 (252,851 (252,851)
Canceled 7.52-14.75 (40,557) (93) 40,557
Expired 7.30-32.29 467 467
Awards of restricted stock (119,000)
At December 31, 1993 $ 7.09-$40.24 3,554,483 1,093,749 2,011,994
Authorized 500,000
Granted 19.13-26.38 1,388,855 (1,388,855)
Became exercisable 7.52-23.63 731,702
Exercised 7.52-24.45 (462,462) (462,462)
Canceled 7.52-24.13 (261,394) (4,278) 265,821
Expired 24.44-40.24 (5,928) (5,928) (1,895)
Awards of restricted stock (830,000)
At December 31, 1994 $ 7.09-$31.74 4,213,554 1,352,783 557,065
Average option price $16.92
</TABLE>
Page 52
<PAGE>
K. FINANCING ARRANGEMENTS
Debt obligations activity in 1994 involved minor transactions
primarily involving short-term debt of the Company's U.K. subsidiary,
payment of maturities on existing debt of the Company's Canadian and
U.K. subsidiaries and obligations related to business acquisitions.
U.K. subsidiary debt of $6.4 at December 31, 1994, was secured by a
lien on the subsidiary's assets which were carried at $39.9 at that
date.
During May 1994, the Company concluded a one year extension of its
$35 million domestic revolving credit facility. Under the terms of
the extension, the Company will be provided with credit availability
equal to the lesser of $35 million or 75% of the amount of its
eligible accounts receivable until May 30, 1995, all of which may be
used to obtain revolving loans or standby letters of credit which may
not have a final expiration date later than May 30, 1996. The credit
facility as extended is unsecured. At December 30, 1994, there were
$1.6 in letters of credit and no revolving loans outstanding under the
facility.
Letter of credit fees are generally equal to 0.60 % per annum of the
amount of each letter of credit, unless the letter of credit involves
a payment guarantee, in which case the rate is 1.20 % per annum. The
commitment fee on the unused portion of the facility is 0.30 % per
annum. Borrowings under the Credit Agreement are available at Bank of
America's reference rate. Under the terms of the extended facility,
the Company must maintain a minimum consolidated net worth which is
subject to increase based on the Company's net earnings after
December 31, 1993, and certain equity contributions to the Company
after the same date. As of December 31, 1994, the Company was in
compliance with this covenant by $29.0. The Company is also required
to achieve a prescribed level of operating earnings on a rolling four
quarter basis, and is subject to additional covenants which limit debt,
liens, contingent obligations, operating leases, investments, cash
dividends on common stock, cash repurchases of stock, acquisitions
and divestitures. The Company continues to be in compliance with
all covenants associated with this credit facility. In December 1993,
the Company redeemed at 102.55% the $163.5 outstanding principal amount
of its 8 1/2% Debentures resulting in a cash expenditure of $168.1 and an
extraordinary loss from early retirement of debt of $8.4, including
$3.8 of unamortized debt issuance costs. Other debt activity in 1993
primarily involved prepayment of $4.4 on a mortgage on the headquarters
of the Company's Canadian subsidiary and utilization of credit lines
maintained by the Company's U.K. subsidiary.
The primary changes in debt during 1992 included the payment of $7.4
of secured notes of a windpower partnership, the establishment of a
$6.7 mortgage obligation on a new facility in Canada, the addition of
$15.5 of revolving and medium-term debt through the acquisition of the
U.K subsidiary, and the payment of $6.9 of such revolving debt before
the end of 1992.
<TABLE>
December 31,
<S> <C> <C>
Debt Obligations 1994 1993
Short-term debt $ -- $ 1.6
Mortgages payable 9.7 10.1
Other long-term debt obligations 9.0 7.7
Total debt obligations 18.7 19.4
Less short-term debt and current portions of long-term debt 1.2 3.1
Long-term obligations, less current portions $ 17.5 $16.3
</TABLE>
<TABLE>
Aggregate Amounts of Maturities at December 31, 1994
1995 1996 1997 1998 1999 Thereafter Total
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgages payable* $ 0.2 $ 0.2 $ 0.2 $ 0.2 $ 0.2 $ 8.7 $ 9.7
Other 1.0 1.4 5.8 0.8 -- -- 9.0
Total $ 1.2 $ 1.6 $ 6.0 $ 1.0 $ 0.2 $ 8.7 $ 18.7
<FN>
*$3.6 prepaid in January 1995.
</TABLE>
Page 53
<PAGE>
L. INVESTING ACTIVITY
In May 1994, Ceridian sold TeleMoney Services and related network and
computer center operations to First Data Resources Inc. and received
$24.3 of net cash proceeds. Under the sale agreement, the Company
committed to use certain data services to be provided by the sold
operation on a take-or-pay basis over a period ending April 30, 1995,
to provide at no cost temporary facilities for certain of the sold
operations, and to certain other obligations, all of which were
recorded as restructure reserves. After consideration of these
obligations and the carrying value of net assets sold, the Company
recognized a restructuring gain from the sale of $7.8.
In June 1994, Ceridian acquired all of the outstanding stock of
Tesseract Corporation. Tesseract provides integrated payroll, human
resource management and benefits administration software systems, and
related services. The acquisition, which was accounted for
as a purchase, used $54.3 in cash, including the purchase price of
$60.0 and direct acquisition costs of $1.5, reduced by cash acquired
of $7.2. In addition to cash acquired, the Company received assets
valued at $9.9 and liabilities, primarily deferred income, of $28.2.
The Company also recorded intangible assets, primarily related to
Tesseract's customer base and technology, valued at $37.0 with
amortization periods ranging from 10 to 20 years, and goodwill of
$35.6 with a life of 20 years.
Over the course of 1994, but primarily in fourth quarter, Ceridian
acquired or invested in several small businesses which, collectively,
resulted in a net cash expenditure of $11.3 and the recording of $5.6
of assets, $14.4 of liabilities and $20.1 of goodwill and other
intangible assets with amortization periods ranging from 5 to 15
years. These acquisitions had little impact on Ceridian's 1994
operations.
In October 1993, the Company purchased Systems Tax Service, Inc.
("STS"), a California-based payroll tax filing processor, for
1,005,908 shares of Ceridian common stock. After consideration of
restrictions on resale of the shares and other direct acquisition
costs, the transaction was valued at $18.8 and resulted in the
recording of goodwill and other intangible assets of $21.1 to be
amortized over a 15-year period.
In June 1993, the Company sold a 90% interest in its Barrios
Technology, Inc. subsidiary to the management of that business and
received a $5.2 promissory note. In fourth quarter 1994, the carrying
value of the note was reduced to an estimated realizable value of
$0.8 by a $3.7 charge to operations.
Effective January 1, 1992, Ceridian contributed capital assets and
deferred assets of Arbitron to the CMR joint venture formed with VNU
Business Information Services, Inc. ("VNU") in return for $32.5 in
cash and a half interest in the venture valued at $9.8. As a result
of this transaction, the Company recognized a restructure gain of
$7.6, representing the excess of the cash received over the carrying
amount of the assets contributed to the venture. In December 1994,
the Company sold its interest in the CMR joint venture to VNU in
exchange for a 50.5% interest in a partnership into which the business
and assets of VNU's Scarborough Research Corporation subsidiary had
been placed, resulting in no gain or loss.
During third quarter 1992, the Company received a prepayment of
$37.9 on its 12% note receivable, due October 1, 1995, from Seagate
Technology, Inc. and agreed to reduce the interest rate on the
remaining balance of $10.0 to 7.7%. The Company also received a
prepayment of the $6.0 remaining balance on a 12% long-term note
receivable from Information Resources, Inc.
At the end of third quarter 1992, Ceridian purchased the remaining
56 percent equity interest in an affiliated U.K. company, Computing
Devices Company Limited ("CDCL UK"), for $10.8, of which $5.4 was
recorded as goodwill to be amortized over a 20-year period.
<TABLE>
<S> <C> <C> <C>
December 31,
Investments and Advances 1994 1993 1992
Beginning balance $ 28.2 $ 30.3 $ 57.3
Investment in CMR joint venture (11.6) 0.2 11.4
Partial payment of note from Seagate (37.9)
Adjustment for consolidation of CDCL UK (4.3)
Other activity, net (2.1) (2.3) 3.8
Ending balance $ 14.5 $ 28.2 $ 30.3
<FN>
At December 31, 1994, all investments were accounted for by the cost method.
</TABLE>
Page 54
<PAGE>
M. LEASING ARRANGEMENTS AS LESSEE
Ceridian conducts a substantial portion of its operations in leased
facilities. Most such leases contain renewal options and require
payments for taxes, insurance, and maintenance. Although in most
cases management expects that leases will be renewed or replaced by
other leases in the normal course of business, downsizing activities
in recent years have resulted in a diminished need for such renewals
and replacements, and increased subletting of leased facilities and
assignment of leases. In connection with these assigned leases,
Ceridian remains secondarily liable for future rental obligations
totaling $41.4 at December 31, 1994. The Company does not anticipate
any material nonperformance by the assignees of these leases, which
principally involve Control Data Systems and Seagate Technology, Inc.
Virtually all leasing arrangements for equipment and facilities are
operating leases and are not included in the consolidated balance
sheets. The rental payments under these leases are charged to
operations as incurred. The amounts in the accompanying tables do not
include obligations related to idle or disposed facilities which have
been recorded as liabilities in the consolidated balance sheet as the
result of restructuring actions.
The amounts of rental expense and sublease income for each of the
three years ended December 31, 1994 appear in the following table.
<TABLE>
<S> <C> <C> <C>
Rental Expense 1994 1993 1992
Rental expense $38.5 $41.2 $49.3
Sublease rental income (2.7) (2.4) (4.0)
Net rental expense $35.8 $38.8 $45.3
</TABLE>
Future minimum noncancelable lease payments and related sublease
income, on operating leases existing at December 31, 1994 which have
an initial term of more than one year, are described in the following
table.
<TABLE>
Future Minimum Lease Payments
<S> <C> <C> <C>
Sublease
Lease Rental
Payments Income Net
1995 $30.9 $2.6 $28.3
1996 26.7 2.3 24.4
1997 23.7 2.4 21.3
1998 19.4 2.3 17.1
1999 17.7 2.3 15.4
Thereafter 47.0 10.0 37.0
</TABLE>
N. COMMITMENTS AND CONTINGENCIES
In January 1995, Ceridian entered into a technology services agreement
with Integrated Systems Solutions Corporation ("ISSC"), a wholly-owned
subsidiary of IBM Corporation. Under the technology services
agreement, whose term extends through December 31, 2004, ISSC will
provide centralized computer processing services required by the
Company's Employer Services business for payroll processing customers
nationwide. While the Company expects to spend approximately $110.0
over the term of the agreement, the future minimum noncancelable
annual service charges payable by the Company are $4.0 in 1995, $5.6
in 1996, $3.5 in 1997 and $2.4 in 1998.
At December 31, 1994, Ceridian held intermediate-term interest rate
swap agreements with two financial institutions for an aggregate
notional amount of $175.0 with no collateral required. The purpose of
these agreements is to effectively convert a portion of the interest
which the Company earns from deposits held by Employer Services on
behalf of payroll tax filing customers from a floating to a fixed rate
basis. The Company considers the risk of accounting loss through non-
performance under these agreements to be negligible.
Largely as a result of divestitures and the formation of certain
cooperative ventures in recent years, the Company has agreed to incur
or retain a variety of contingent liabilities. Most significantly, in
connection with the spin-off of Control Data Systems, Ceridian agreed
to indemnify the U.S. Pension Benefit Guaranty Corporation ("PBGC") if
the Control Data Systems defined benefit pension plan is terminated in
a distress termination and the PBGC is unable to recover the full
amount of any unfunded benefit liabilities. The maximum amount of
this contingent liability, included in the total below, is $16.0,
which will decrease by $4.0 each July 31 beginning in 1996. The
Company monitors all such contingent liabilities and has established
restructure or other reserves for those which it believes are probable
of payment. With respect to these contingent obligations, other than
litigation, the Company believes that there is a possibility that it
may be exposed to estimated losses totaling $25.0 as of December 31,
1994, if third parties fail to meet certain performance requirements.
The Company does not anticipate such nonperformance.
Page 55
<PAGE>
O. LEGAL MATTERS
Age Discrimination Litigation. Certain former employees, purporting
to act on behalf of a class of former employees of the Company who
were terminated after the age of 40, filed suit against the Company in
U.S. District Court in Minnesota in 1990 alleging violations of the
Age Discrimination in Employment Act. An earlier administrative
proceeding before the Equal Employment Opportunity Commission
involving some of the named plaintiffs was dismissed in October 1988.
With the court's permission, plaintiffs invited all individuals in the
alleged class to join as additional plaintiffs. About 1,100 former
employees indicated a desire to do so. In addition, certain of the
plaintiffs in this action, along with other individuals, filed two
parallel age discrimination class action lawsuits in state court in
Minnesota, which have been stayed pending resolution of the federal
court action.
In December 1992, the federal district court denied plaintiffs'
motion for certification of the requested class of former employees,
but ordered that putative class members would be allowed to file
individual age discrimination claims against the Company. In
response, eight complaints covering 419 of the putative class members
were filed against the Company in early 1993. Later that year the
Company made individual settlement offers to these plaintiffs, 92 of
whom accepted offers in an aggregate amount of $0.6.
In late 1993, the parties agreed to commence by September 1994 a
series of three six-week test trials, each involving twelve randomly
selected plaintiffs, that were to be determinative as to issues of
liability, but not damage amounts (if any), with respect to the
plaintiffs involved. The Company agreed to the test case process and
has explored settlement opportunities principally because of the costs
of defending these actions. In light of settlement discussions that
occurred in the second quarter 1994 and the Company's estimates of
costs to defend these actions, the Company established reserves
totaling $15 million with respect to these cases in June 1994. The
Company indicated at that time that it was prepared to either absorb
that amount in settlement costs if settlement were to occur within a
reasonable period of time or commit that amount to the defense of
these actions, as a result of which the Company firmly believes it
would prevail.
The first test trial did not begin by the specified time, and
counsel for the plaintiffs took the position that he did not wish to
reinstitute the test trial process. As a result, the parties are
proceeding with discovery pursuant to a schedule established by an
earlier order of the court which contemplates discovery continuing
into 1997. In late 1994, the federal district judge to whom these
cases were assigned was appointed to the Eighth U.S. Circuit Court of
Appeals, so the cases were reassigned to another district judge. That
judge indicated in early 1995 that he wished to reconsider the earlier
order denying collective treatment of these matters.
Seagate Securities Litigation.
In 1991, the Company and Lawrence Perlman, its chairman, president and
CEO, were named as co-defendants in a lawsuit filed in U.S. District
Court for the Northern District of California against Seagate
Technology, Inc., certain of its present or former officers, and three
investment banking firms. The plaintiffs purport to act on behalf of
a class consisting of all purchasers of Seagate common stock during
the period October 11, 1990 through June 26, 1991 (the "Class
Period"). During the Class Period, the Company sold 10.7 million
shares of Seagate common stock in a registered public offering.
The plaintiffs allege that during the Class Period, the defendants
acted in concert with each other to issue false and misleading public
statements regarding Seagate's earnings, products and future prospects
which artificially inflated the price of Seagate common stock during
the Class Period and permitted the Company and the individual
defendants to profit from stock sales during the Class Period. The
plaintiffs allege that such conduct violated federal securities laws
and also allege "controlling person" liability under those laws
against, among others, the Company and Mr. Perlman. The Company
believes that the claims against it and Mr. Perlman are without merit,
and has notified Seagate that this matter and any expenses the Company
incurs in connection therewith are subject to an indemnification
obligation undertaken by Seagate at the time it issued the 10.7
million shares to the Company as partial payment for Seagate's
purchase of the Company's Imprimis subsidiary.
Other Matters. The Company is also involved in a number of other
judicial and administrative proceedings considered normal in the
nature of its current and past operations, including employment-
related disputes, contract disputes and tort claims. It is
anticipated that final disposition of some of these proceedings may
not occur for several years.
In the opinion of management, the final disposition of all current
judicial and administrative proceedings will not, considering the
merits of the claims and available reserves, have a material adverse
effect on the Company's financial position or results of operations.
Page 56
<PAGE>
<TABLE>
SUPPLEMENTARY QUARTERLY DATA (Unaudited) (Dollars in millions, except per share data)
1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Revenue $234.1 $242.4 $218.5 $221.3 $226.9 $208.9 $225.9 $224.4
Cost of revenue 146.3 160.1 143.5 138.6 155.1 138.7 159.9 152.3
Gross profit 87.8 82.3 75.0 82.7 71.8 70.2 66.0 72.1
Selling, general and administrative 57.2 51.3 48.2 48.8 47.9 44.4 42.8 43.0
Technical expense 13.1 13.6 11.7 10.9 11.4 12.6 12.4 12.2
Other expense (income) (2.5) (1.2) 0.1 0.4 (2.3) (0.6) (0.6) -
Restructure loss (1) - - - - 67.0 - - -
Earnings (Loss) before interest
and taxes 20.0 18.6 15.0 22.6 (52.2) 13.8 11.4 16.9
Interest income 2.8 2.7 3.2 1.9 2.6 2.0 2.1 1.6
Interest expense (0.4) (0.4) (0.4) (0.4) (4.2) (4.1) (4.1) (4.0)
Earnings (Loss) before income taxes 22.4 20.9 17.8 24.1 (53.8) 11.7 9.4 14.5
Income tax provision 1.6 1.7 1.4 1.9 0.2 1.0 1.0 1.6
Earnings (Loss) before
extraordinary item 20.8 19.2 16.4 22.2 (54.0) 10.7 8.4 12.9
Extraordinary loss (2) - - - - 8.4 - - -
Net earnings (loss) $ 20.8 $ 19.2 $ 16.4 $ 22.2 $(62.4) $ 10.7 $ 8.4 $ 12.9
Net earnings (loss) applicable
to common stockholders (3) $ 17.5 $ 16.0 $ 13.1 $ 19.0 $(62.7) $ 10.7 $ 8.4 $ 12.9
Primary earnings (loss) per share:
Before extraordinary item $ 0.38 $ 0.35 $ 0.29 $ 0.42 $(1.24) $ 0.25 $ 0.20 $ 0.30
Extraordinary loss - - - - (0.19) - - -
Net earnings (loss) $ 0.38 $ 0.35 $ 0.29 $ 0.42 $(1.43) $ 0.25 $ 0.20 $ 0.30
Fully diluted earnings per share (4) $ 0.37 $ 0.34 $ 0.29 $ 0.40
Shares used in calculations
(in thousands):
Primary 46,017 46,191 45,840 45,584 43,844 42,957 42,883 42,833
Fully diluted 56,401 56,575 56,224 55,968
Common Stock-per share
Market price ranges (5)
High 27 1/8 27 1/2 25 5/8 24 3/4 19 7/8 18 1/2 16 1/8 16 1/8
Low 23 1/2 24 21 1/2 18 1/2 17 1/2 14 3/8 13 14 3/8
<FN>
No cash dividends have been declared on common stock during the periods presented.
(1) For details on restructuring activity, see Note B, "Restructure Loss and Discontinued Operations."
(2) For details on the early retirement of debentures, see Note K, "Financing Arrangements."
(3) As reduced by preferred stock dividends for calculation of primary earnings (loss) per share.
(4) Fully diluted would not differ from primary earnings (loss) per share in 1993.
(5) Source: New York Stock Exchange-Composite Transactions.
</TABLE>
Page 57
<PAGE>
<PAGE>
Exhibit 22
CERIDIAN CORPORATION
SUBSIDIARIES
AT DECEMBER 31, 1994
State or
other Jurisdiction
Name of Incorporation
CD Plus S.A. France
Ceridian Properties, Inc. Delaware
Computing Devices Canada Ltd. Canada
Computing Devices Company Limited (Hastings) United Kingdom
Computing Devices Hastings Limited United Kingdom
Computing Devices Eastborne Limited United Kingdom
Computing Devices International Employment, Inc. Delaware
Earth Energy Systems, Inc. New Jersey
Paragon Imaging, Inc. Florida
ScanAmerica, L.P. (Limited Partnership) Delaware
Scarborough Research Delaware
Tesseract Corporation California
User Technology Services Inc. New York
VTC C-MOS Incorporated Delaware
<PAGE>
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
OF CERIDIAN CORPORATION
We consent to incorporation by reference in Registration Statements
Nos. 2-97570, 2-67753, 33-15920, 2-93345, 2-81865, 33-26839, 33-34045, 33-
49601, 33-54379, 33-56325 and 33-56833 on Forms S-8 of Ceridian Corporation
of our reports dated January 24, 1995. Such reports relate to the
consolidated financial statements and related financial statement schedule
of Ceridian Corporation and subsidiaries as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994
and are included or incorporated by reference in the 1994 Annual Report on
Form 10-K of Ceridian Corporation.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 21, 1995
<PAGE>
Exhibit 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Ceridian Corporation (the "Company"), a Delaware corporation, do hereby
make, nominate and appoint JOHN R. EICKHOFF, STEVEN J. OLSON and JOHN A.
HAVEMAN, and each of them, to be my attorney in fact for three months from
the date hereof, with full power and authority to sign his name on the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended; provided that such Form
10-K is first reviewed by the Audit Committee of the Board of Directors of
the Company and by my attorney in fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed such
Form 10-K.
IN WITNESS WHEREOF, I have signed this Power of Attorney as of
February 3, 1995.
/s/Lawrence Perlman /s/George R. Lewis
Lawrence Perlman George R. Lewis
/s/Ruth M. Davi /s/Charles Marshall
Ruth M. Davis Charles Marshall
/s/Allen W. Dawson /s/Carole J. Uhrich
Allen W. Dawson Carole J. Uhrich
/s/Ronald James /s/Richard W. Vieser
Ronald James Richard W. Vieser
/s/Richard G. Lareau /s/Paul S. Walsh
Richard G. Lareau Paul S. Walsh
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<CASH> 116,800
<SECURITIES> 54,600
<RECEIVABLES> 147,600
<ALLOWANCES> 6,200
<INVENTORY> 25,800
<CURRENT-ASSETS> 346,100
<PP&E> 254,800
<DEPRECIATION> 157,000
<TOTAL-ASSETS> 690,300
<CURRENT-LIABILITIES> 306,800
<BONDS> 18,700
<COMMON> 22,800
0
4,700
<OTHER-SE> 159,000
<TOTAL-LIABILITY-AND-EQUITY> 690,300
<SALES> 515,900
<TOTAL-REVENUES> 916,300
<CGS> 401,300
<TOTAL-COSTS> 588,500
<OTHER-EXPENSES> (3,200)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,600
<INCOME-PRETAX> 85,200
<INCOME-TAX> 6,600
<INCOME-CONTINUING> 78,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,600
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.40
</TABLE>
