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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.142-12
CERIDIAN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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(CERIDIAN LOGO)
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS ON MAY 10, 1995
Dear Stockholder:
Ceridian Corporation's Annual Meeting of Stockholders will be held in the
Guilford Room, Harbor Court Hotel, 550 Light Street, Baltimore, Maryland 21202
on May 10, 1995 at 9:00 a.m. E.D.T. Whether or not you plan to attend, please
complete and return your proxy card.
This booklet contains the proxy statement, which includes information about
the nominees for election to the Board of Directors. It also includes
information about a proposal recommended by the Board to increase by 3,000,000
shares the number of shares that may be issued pursuant to Ceridian's 1993
Long-Term Incentive Plan. Enclosed with this booklet is the notice of annual
meeting and proxy card.
Please return the accompanying proxy card as promptly as possible to ensure
that your vote is counted at the meeting.
Sincerely,
Lawrence Perlman
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Corporate Headquarters and Mailing Address:
8100 34th Avenue South
Minneapolis, MN 55425
(612) 853-8100
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CERIDIAN CORPORATION
PROXY STATEMENT
CONTENTS
<TABLE>
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PAGE
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<S> <C>
General Information........................................................................................ 3
Election of Directors (Item 1)............................................................................. 4
The Board of Directors................................................................................... 4
Nominees for Director.................................................................................... 4
Committees of the Board of Directors..................................................................... 5
Directors' Compensation.................................................................................. 6
Compensation Committee Interlocks and Insider Participation.............................................. 7
Approval of the Amended and Restated 1993 Long-Term Incentive Plan (Item 2)................................ 7
Introduction............................................................................................. 7
Types of Incentive Awards................................................................................ 8
Provisions Applicable to all Plan Awards................................................................. 9
Tax Information Regarding Stock Option Awards............................................................ 11
Compensation Committee Report on Executive Compensation.................................................... 11
Stock Performance Graph.................................................................................... 15
Executive Compensation..................................................................................... 16
Summary Compensation Table............................................................................... 16
Stock Option Grants...................................................................................... 17
Option Exercises and Option Values....................................................................... 18
Performance Restricted Stock Awards...................................................................... 19
Pension Plan............................................................................................. 19
Executive Employment Agreements.......................................................................... 21
Change of Control Provisions............................................................................. 20
Share Ownership Information................................................................................ 22
Share Ownership of Directors and Management.............................................................. 22
Share Ownership of Certain Beneficial Owners............................................................. 23
Independent Auditors....................................................................................... 23
Other Matters.............................................................................................. 23
Stockholder Proposals.................................................................................... 23
Compliance With Section 16(a) of the Securities Exchange Act............................................. 24
Solicitation of Proxies.................................................................................. 24
1993 Long-Term Incentive Plan (As Amended and Restated as of May 10, 1995)................................. A-1
</TABLE>
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CERIDIAN CORPORATION
---------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 10, 1995
------------------------
GENERAL INFORMATION
This proxy statement and the enclosed proxy card are being mailed to
stockholders beginning on or about March 30, 1995 in connection with the
solicitation of proxies by the Board of Directors of Ceridian Corporation (the
"Company") for use at the Annual Meeting of Stockholders to be held on May 10,
1995 (the "Annual Meeting"). Holders of the Company's common stock (the "Common
Stock") of record at the close of business on March 21, 1995 will be entitled to
vote at the meeting. At the close of business on March 21, 1995, shares of
Common Stock were outstanding and entitled to vote at the Annual Meeting. Each
share of Common Stock is entitled to one vote.
When proxy cards are returned properly signed, the shares represented will
be voted as directed. When no direction is given, the shares will be voted as
recommended by the Board. The proxy also gives discretionary authority to vote
the shares on any other matter which may properly come before the meeting. A
stockholder may revoke a proxy at any time before it is exercised by filing a
revoking instrument with the Secretary of the Company, by submitting another
proxy card with a later date, or by voting in person at the meeting.
The Company's Bylaws specify that except as otherwise provided by Delaware
law or by the Company's Restated Certificate of Incorporation, the vote required
to decide each matter to be brought before a meeting of stockholders is a
majority of the shares of Common Stock represented in person or by proxy at the
meeting and entitled to vote on the matter. Because shares that are held by a
person who abstains from voting on a particular matter are treated as present
and entitled to vote on that matter, an abstention has the same effect as a vote
against the matter. If, however, a broker indicates on a proxy that it does not
have discretionary authority to vote certain shares on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter. In other words, broker non-votes are not counted as a vote
against such a matter.
It is the Company's policy that all stockholder meeting proxies, ballots and
voting tabulations that identify the vote of a particular stockholder are to be
kept confidential if the stockholder has requested confidential treatment on the
proxy card or ballot. If the stockholder so requests, no such document will be
available for examination, nor will the identity and vote of any stockholder be
disclosed prior to the final tabulation of the vote at the stockholders' meeting
except (i) as necessary to meet applicable legal requirements; (ii) to allow the
independent election inspectors to count and certify the results of the vote; or
(iii) in the event of a proxy solicitation in opposition to the Board of
Directors based on an opposition proxy statement filed with the Securities and
Exchange Commission. The independent election inspectors may inform the Company
whether or not a particular stockholder has voted.
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ELECTION OF DIRECTORS
(ITEM 1)
THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors, which met six times in 1994. The Company's Bylaws provide that the
Board shall determine the number of directors, which is currently set at ten.
All ten directors presently serving on the Company's Board have agreed to stand
for re-election and have been designated by the Board as nominees for director.
See "Nominees for Director" for profiles of the nominees. Eight of the nominees
were previously elected by the stockholders, while Mr. George R. Lewis and Ms.
Carole J. Uhrich were first elected as directors by the Board effective November
8, 1994.
The Board recommends a vote FOR and solicits proxies in favor of the
nominees named below. Proxies cannot be voted for more than ten people. If any
nominee becomes unable or unavailable to serve, proxies will be voted for
another nominee selected by the Board. Each person elected will hold office
until the 1996 Annual Meeting of Stockholders and until his or her successor is
duly elected and qualifies, or until earlier resignation or removal.
NOMINEES FOR DIRECTOR
RUTH M. DAVIS Dr. Davis, 66, has been President and Chief Executive Officer
of the Pymatuning Group, Inc., which specializes in technology management
services, since 1981. She serves as Chairman of the Board for the Aerospace
Corporation and as a trustee of Consolidated Edison Company of New York. Dr.
Davis is a director of Air Products and Chemicals, Inc.; Premark International,
Inc.; Principal Financial Group Inc.; Sprint Corporation; SofTech Inc.; Varian
Associates, Inc.; Giddings & Lewis, Inc. and BTG, Inc. Dr. Davis has been a
director of the Company since 1984.
ALLEN W. DAWSON Mr. Dawson, 68, is Chairman Emeritus of Siecor Corporation
("Siecor"), a joint venture of Corning Incorporated and Siemens Corporation.
Siecor manufactures fiber optic cable and ancillary equipment. From 1989 to
1991, Mr. Dawson was Chairman of the Executive Committee of Siecor, and from
1980 to 1989 he was Chairman and Chief Executive Officer of Siecor. Mr. Dawson
has been a director of the Company since 1986.
RONALD JAMES Mr. James, 44, is Vice President-Minnesota of U S WEST
Communications, Inc. ("US West"), a telecommunications company. He has been
employed by US West since 1971, and has held his current position since January
1990. Mr. James is a director of the St. Paul Companies, Inc.; Great Hall
Investment Funds, Inc. and Automotive Industries Holding, Inc. Mr. James has
been a director of the Company since 1991.
RICHARD G. LAREAU Mr. Lareau, 66, is a partner in the law firm of
Oppenheimer Wolff & Donnelly. He is a director of Nash-Finch Company, Merrill
Corporation and Northern Technologies International Corporation, and is a
trustee of the Mesabi Trust, a mineral royalty trust. Mr. Lareau has been a
director of the Company since 1971.
GEORGE R. LEWIS Mr. Lewis, 54, is Vice President and Treasurer of Philip
Morris Companies, Inc. ("Philip Morris"), a consumer packaged goods company. He
has been employed by Philip Morris since 1967, and has held his current position
since 1984. Mr. Lewis is a director of Central Fidelity Banks, Inc. and Kemper
National Insurance Companies. Mr. Lewis was elected as a director of the Company
November 8, 1994.
CHARLES MARSHALL Mr. Marshall, 65, served as Vice Chairman of American
Telephone and Telegraph Company, a telecommunications company, from 1985 until
his retirement in April 1989. Mr. Marshall is a director of GATX Corporation,
HARTMARX Corporation, Sonat Inc., Sundstrand Corporation and Zenith Electronics
Corporation. Mr. Marshall has been a director of the Company since 1989.
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LAWRENCE PERLMAN Mr. Perlman, 56, is Chairman, President and Chief
Executive Officer of the Company. He was appointed Chairman in November 1992,
has been President and Chief Executive Officer since January 1990 and served as
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 a member of the National Advisory
Board of the Chemical Banking Corporation. Mr. Perlman has been a director of
the Company since 1985.
CAROLE J. UHRICH Ms. Uhrich, 51, is Group Vice President, Manufacturing and
Product Development of Polaroid Corporation ("Polaroid"), an imaging company.
She has been employed by Polaroid since 1966, and has held her current position
since 1992. Prior to that time, she served in a series of manufacturing,
corporate quality and market research positions. Ms. Uhrich was elected as a
director of the Company November 8, 1994.
RICHARD W. VIESER Mr. Vieser, 67, retired in 1989 after having served as
Chairman, President and Chief Executive Officer of Lear Siegler, Inc. since
March 1987, and Chairman and Chief Executive Officer of FL Aerospace Corp. since
September 1986 and of FL Industries, Inc. since June 1985. He is a director of
Dresser Industries, Inc.; INDRESCO Inc.; Sybron International Corporation and
Varian Associates, Inc. Mr. Vieser has been a director of the Company since
1988.
PAUL S. WALSH Mr. Walsh, 39, is Chief Executive Officer of The Pillsbury
Company ("Pillsbury"), a wholly-owned subsidiary of Grand Metropolitan PLC
("Grand Metropolitan"). Prior to assuming this position in January 1992, Mr.
Walsh was Joint Chief Operating Officer of Grand Metropolitan's Food Sector from
June 1991 to January 1992, Division Chief Executive of Pillsbury from July 1990
to June 1991; and Chief Operating Officer of Pillsbury from April 1989 to July
1990. Prior responsibilities included service as Executive Vice President and
Chief Financial Officer of Grand Metropolitan's Food Sector. Mr. Walsh has been
a director of the Company since 1991.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board elects an Executive Committee, an Audit Committee, a Compensation
and Human Resources Committee, a Nominating and Board Governance Committee and a
Quality and Technology Committee. The following are members of these committees
as of March 1, 1995:
Executive Committee:
Lawrence Perlman, Chair
Ronald James
Richard G. Lareau
Audit Committee:
Richard W. Vieser, Chair
Ruth M. Davis
Allen W. Dawson
Compensation and Human Resources
Committee:
Charles Marshall, Chair
Ronald James
Richard G. Lareau
Paul S. Walsh
Nominating and Board
Governance Committee:
Richard G. Lareau, Chair
Charles Marshall
Paul S. Walsh
Quality and Technology Committee:
Ruth M. Davis, Chair
Allen W. Dawson
Ronald James
Lawrence Perlman
Richard W. Vieser
The Executive Committee acts on matters that arise between Board meetings
and require immediate action. All actions by the Executive Committee are
reported to and are ratified by the Board. The Executive Committee took action
six times in 1994.
The Audit Committee reviews and recommends to the Board the selection of the
Company's independent auditors, consults with the Company's independent auditors
and reviews the scope and significant findings of the audits performed by them,
reviews the adequacy and sufficiency of the
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Company's financial and accounting controls, practices and procedures, the
activities and recommendations of its internal auditors, and its reporting
policies and practices. The Audit Committee met five times in 1994.
The Compensation and Human Resources Committee determines compensation
policies, practices and structures for key employees of the Company, approves
the compensation and benefits of executive officers, evaluates the performance
of the chief executive officer, reviews the process of managing executive
succession, diversity and development, and assesses the adequacy of the
Company's human resource principles and philosophy. This Committee met five
times in 1994.
The Nominating and Board Governance Committee reviews the composition,
organization and governance of the Board and its committees and recommends to
the Board the adoption of policies pertaining thereto, recommends to the Board
compensation for non-management directors, and serves as a nominating committee
that considers all nominees, including those recommended by stockholders, for
Board membership. This Committee met four times during 1994.
The Quality and Technology Committee reviews the systems and processes
comprising the Company's quality management program, evaluates the Company's
technological resources and assets, and assesses the Company's business plans
and strategies in light of external technology trends and internal technological
support. This Committee met three times in 1994.
During 1994, each director attended at least 75 percent of the meetings of
the Board and his or her committees.
DIRECTORS' COMPENSATION
Directors who are employees are not paid directors' fees. In 1994, directors
who were not employees were paid an annual retainer of $20,000, $900 for
attendance at Board meetings, $750 for attendance at committee meetings and
$1,000 per day for time spent on other Company business. In addition, the chairs
of the Compensation and Human Resources, Audit, Nominating and Board Governance,
and Quality and Technology Committees received a supplemental annual retainer of
$3,000. For 1995, the annual retainer will be increased to $22,000, and fees for
attendance at Board and committee meetings will be increased to $1,000. The
other aspects of director compensation will remain the same.
Under the 1993 Non-Employee Director Stock Plan, each director who is not an
employee of the Company receives a one-time grant of 1,000 shares of Common
Stock, restricted as to transfer, upon election to the Board for the first time
(current directors received this grant in 1993 when the Plan was approved by the
Company's stockholders), and an annual grant of an option (first received during
1993) to purchase 1,000 shares of Common Stock upon election or re-election by
the stockholders to the Board. A restricted stock award will be forfeited if the
applicable director's service on the Board is terminated for any reason other
than death or disability within six months from the date it was granted. Shares
subject to a restricted stock award may not be sold, transferred, pledged or
otherwise disposed of until such time as the director's service on the Board
ceases. The exercise price per share of each option granted to a director will
be 100 percent of the fair market value of the underlying Common Stock on the
date the option is granted. An option will become exercisable in full six months
after its date of grant, and will expire 10 years from its date of grant.
Non-employee directors are also entitled to participate in a deferred
compensation plan. Each such director with at least 12 calendar quarters of
service as a director of the Company at the time he or she ceases to be a
director will receive (or, in the event of the director's death, his or her
beneficiary or estate shall receive) quarterly payments for the lesser of 48
calendar quarters or the number of quarters of service as a director. The amount
of each quarterly payment will be one-fourth of the amount of the director's
annual retainer at the time he or she ceases to be a director. The plan makes
such payments subject to conditions involving non-competition, preservation of
proprietary information and providing requested consulting services. If, within
two years of a change of control of the Company (defined as described under
"Executive Compensation -- Change of Control Provisions"), a
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director resigns following a material adverse change in the conditions under
which he or she performs services as a director, or the director is removed from
the Board for any reason other than conduct constituting a felony or the willful
failure to fulfill duties as a director, the director will acquire a fully
vested interest in any benefit accrued under this plan, even though the director
may not have completed 12 calendar quarters of service as a director. During
1994, the Company established and funded (a 1994 contibution of $0.6 million) a
Directors' Benefit Protection Trust out of which benefits under the directors'
deferred compensation plan to persons who cease to be directors of the Company
after December 1, 1994 are to be paid. Assets in this trust remain subject to
the claims of the Company's general creditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Lareau, who served on the Company's Compensation and Human Resources
Committee during 1994, is a partner in the law firm of Oppenheimer Wolff &
Donnelly, which has provided and continues to provide legal representation to
the Company on various matters.
APPROVAL OF THE AMENDED AND RESTATED
1993 LONG-TERM INCENTIVE PLAN
(ITEM 2)
INTRODUCTION
The Ceridian Corporation 1993 Long-Term Incentive Plan (the "Plan") was
adopted by the Board of Directors and approved by the stockholders in 1993.
Under the Plan, stock options, restricted stock awards, stock appreciation
rights and performance units may be granted to such employees and in such
amounts as determined by the Board's Compensation and Human Resources Committee
(the "Compensation Committee").
At its meeting on February 3, 1995, the Board of Directors approved (subject
to stockholder approval) certain amendments to the Plan and authorized the
submission of an amended and restated Plan to the Company's stockholders for
their approval. The substantive changes in the amended and restated Plan from
the Plan approved in 1993 are:
(1) An increase in the number of shares of Common Stock authorized for
issuance under the Plan by 3,000,000 shares, to 6,000,000 shares in total.
(2) An extension of the period during which awards may be made under the
Plan from February 3, 1996 to February 3, 1999.
(3) Provisions designed to ensure that future restricted stock awards
made to persons other than newly hired employees will qualify as
"performance-based compensation" for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Section 162(m)"). These
provisions and others in the Plan are intended to ensure the federal tax
deductibility under Section 162(m) of future compensation paid to the
Company's executive officers in the form of stock options and restricted
stock awards.
As of February 28, 1995, shares of Common Stock remained available for
awards under the Plan. Of the shares of Common Stock subject to Plan awards made
through that date, % involved stock option awards with a fair market value
exercise price, % involved awards of restricted stock with performance
conditions attached (see page 19 for a description of these awards), and %
involved restricted stock awards without performance conditions attached, all of
which were made to newly hired employees. No awards of stock appreciation rights
or performance units have been made under the Plan, nor are there any current
plans to make awards of those types.
The Board believes that stock option and performance restricted stock awards
have been and will continue to be an important element of a compensation program
that is successful in attracting and retaining key employees and aligning their
financial interests with the interests of the stockholders.
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As a result, the Board believes that it is necessary to increase the number of
shares available for issuance under the Plan and to extend the term of the Plan
to continue to achieve these goals. At the same time, the Board believes that it
is desirable, in light of Section 162(m), to structure the Plan so that stock
option and restricted stock awards generally will qualify as performance-based
compensation for purposes of Section 162(m), and thereby be deductible by the
Company without regard to the deduction limit otherwise imposed by Section
162(m). THE BOARD THEREFORE RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO AMEND AND RESTATE THE PLAN. Approval of this proposal requires the
affirmative vote of a majority of the shares represented and entitled to vote on
this matter.
After giving effect to the amendment of the Plan, approximately
shares of Common Stock would be available for awards under the Plan,
representing % of the number of shares of Common Stock outstanding as of
February 28, 1995, and % of the number of shares outstanding on a fully
diluted basis (which assumes the conversion of the Company's 5 1/2% Cumulative
Convertible Exchangeable Preferred Stock ("5 1/2% Preferred Stock") into
10,384,000 additional shares of Common Stock at $22.72 per share). Shares that
would be available for award under the amended Plan and shares subject to all
currently outstanding employee and director stock options (under the Plan and
various predecessor and ancillary plans) represent % of the number of shares
of Common Stock outstanding as of February 28, 1995, and % of the number of
shares outstanding on a fully diluted basis.
The Plan, as recommended to be amended, is attached as Exhibit A to this
proxy statement. The following summary of its provisions is qualified in its
entirety by reference to that Exhibit.
TYPES OF INCENTIVE AWARDS
Up to 6,000,000 shares of the Company's Common Stock may be the subject of
stock option, restricted stock, stock appreciation right and performance unit
awards under the Plan, an increase of 3,000,000 shares from the Plan as
originally adopted. Although the Plan does not specify what portion of the
shares may be subject to each particular type of award, it is currently
anticipated that most future awards will be stock options and that performance
restricted stock awards will be utilized to a lesser degree. The Plan also
provides that the maximum number of shares of Common Stock that may be the
subject of all awards made under the Plan to any one participant in any one
taxable year of the Company shall not exceed 250,000 shares.
STOCK OPTIONS. Options granted to acquire shares of Common Stock may either
be incentive stock options ("ISOs"), meaning that they will qualify for
specialized tax treatment available under Section 422 of the Internal Revenue
Code, or nonqualified stock options. The terms of each option grant shall be as
approved by the Compensation Committee, subject to certain conditions. The
exercise price per share may not be less than the fair market value of a share
of the underlying Common Stock on the date the option is granted. The closing
price of the Common Stock on the New York Stock Exchange composite tape on March
, 1995 was $ per share. Payment of the exercise price must be in cash
unless the Compensation Committee permits payment in shares of previously owned
Common Stock. An option will generally not be exercisable within six months of
its date of grant, and will expire at the time fixed in the applicable award
agreement, which shall not be more than ten years after the grant date. Unless
the Compensation Committee determines otherwise, an option will become
exercisable as to one-third of the shares subject to the option on each January
1 that occurs at least six months after the date of grant.
RESTRICTED STOCK. The Plan allows awards of shares of Common Stock, which
may not be sold, transferred, pledged or otherwise disposed of until
restrictions on such actions lapse. The Compensation Committee may specify in
connection with any restricted stock award when and to what extent such
restrictions on transferability will lapse, at which time the participant
becomes vested in all or some portion of the award. Restrictions generally may
not lapse within six months of the date of grant. The Plan as amended provides
that all restricted stock awards, other than those that may be made to newly
hired employees, must be performance-based. Such restricted stock awards may not
be granted unless the Compensation Committee has specified the performance goal
applicable to the particular
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performance period relating to such shares, and may not vest, in whole or part,
unless the Compensation Committee has certified that such goal for such
performance period has been attained. The Plan requires that each performance
goal specified by the Compensation Committee must be a relative or absolute
measure of one or more of the following over a specified performance period:
total return to the Company's stockholders; fully diluted earnings per share for
the Company; or earnings before interest and taxes, return on equity or invested
capital, or revenue growth for the Company or a specified subsidiary or division
of the Company. The Compensation Committee has the authority to determine the
specific targets applicable to those performance goals as well as the
performance period for each performance restricted stock award. While
restrictions on transferability remain in effect, a participant has the right to
vote the stock and, unless the Compensation Committee provides otherwise, to
receive any dividends or distributions with respect thereto. If employment
terminates while restrictions on transferability remain in effect, shares still
subject to the restrictions are forfeited.
STOCK APPRECIATION RIGHTS. A stock appreciation right ("SAR") entitles the
recipient to receive a payment from the Company, in the form of cash, Common
Stock or both, equal to the difference between the market value of the number of
shares of Common Stock covered by the SAR as of the exercise date and the
exercise price of the SAR. The terms of an SAR award shall be as determined by
the Compensation Committee, subject to certain Plan requirements. The exercise
price per share may not be less than the fair market value of a share of the
underlying Common Stock on the date the SAR is granted. An SAR will generally
not be exercisable within six months of its date of grant, and will expire at
the time fixed in the applicable award agreement, which shall not be more than
ten years after the grant date. Unless the Compensation Committee determines
otherwise, an SAR will become exercisable as to one-third of the shares subject
to the SAR on each January 1 that occurs at least six months after the date of
grant.
PERFORMANCE UNITS. Performance units may be awarded on such terms and
conditions as the Compensation Committee may specify. Such conditions may
include payment or vesting restrictions which involve continued employment with
the Company and satisfaction by the Company or a specified business unit or
subsidiary of predetermined performance goals approved by the Compensation
Committee at the time the performance units are awarded. Upon satisfaction of
applicable terms and conditions, performance units would be payable in cash,
shares of Common Stock or some combination thereof in the Committee's
discretion.
OPTIONS OR STOCK IN LIEU OF BONUS. The Plan also provides that the
Compensation Committee may, in its discretion, allow a participant to elect to
receive some or all of the participant's annual bonus under the Company's annual
Executive Incentive Plan in the form of nonqualified stock options or shares of
Common Stock rather than in cash. Any such election must be made before the end
of the calendar year preceding the calendar year for which the bonus is payable.
If such an election is permitted, the Compensation Committee would establish the
terms and conditions applicable to the election, including specifying the means
by which the number of options or shares of stock would be determined. Any
option granted pursuant to such an election would have an exercise price equal
to the current market price of the Common Stock as of the first business day of
the calendar year for which the bonus is payable.
Information regarding future awards to be made under the amended Plan if the
stockholders approve the amendments is not presently determinable.
PROVISIONS APPLICABLE TO ALL PLAN AWARDS
PARTICIPANTS. Participants in the Plan are those officers and employees of
the Company (including its subsidiaries and any other entity approved by the
Compensation Committee in which the Company has a significant equity interest)
whose performance has had or can have a significant effect on the success of the
Company. Non-employee directors of the Company are not eligible to participate
in the Plan. Approximately executive and managerial level employees
(including the 10 current executive officers) satisfy the criteria required to
participate in the Plan.
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ADMINISTRATION OF THE PLAN. The Plan is administered by the Compensation
Committee, which will have the authority (i) to interpret the Plan, (ii) to
establish rules for the Plan's administration, (iii) to determine all terms and
conditions of incentive awards to be made under the Plan, subject to the
limitations expressed therein, (iv) to amend or modify the terms of outstanding
awards, including accelerating the exercisability or vesting of an award,
extending the term of an award, or authorizing the grant of a new award in
substitution for a surrendered award, (v) to modify financial goals relating to
the grant, vesting or payment of awards and to exclude the effect of unusual
items from the determination as to whether specified goals have been met, and
(vi) to delegate to directors or officers of the Company such authority of the
Compensation Committee with respect to the Plan as such Committee may determine
in accordance with applicable law, except that no such authority may be
delegated with respect to participants who are executive officers.
AMENDMENT OF THE PLAN. The Board of Directors may amend the Plan in such
respects as is deemed advisable. No such amendment will be effective without the
approval of the Company's stockholders if stockholder approval of the amendment
is required pursuant to Rule 16b-3 under the Securities Exchange Act of 1934,
Section 422 of the Internal Revenue Code or the rules of the New York Stock
Exchange.
SHARE ADJUSTMENTS. If there is any material change in the corporate
structure or shares of Common Stock, such as in connection with a merger,
recapitalization, stock split, stock dividend, or other extraordinary dividend
(including a spinoff), the Compensation Committee (or the board of the surviving
corporation) shall make appropriate adjustments in the aggregate number and kind
of securities subject to award under the Plan and in the number of shares and
purchase price per share, if any, under any awards outstanding under the Plan.
If all or any portion of an award terminates, expires or is cancelled
unexercised or unvested, or if all or any portion of an award is settled or paid
in cash or any form other than Common Stock, then the shares subject to such an
award will automatically become available for reissuance under the Plan.
EFFECT OF TERMINATION OF EMPLOYMENT. If a participant's employment is
terminated by reason of death or disability, each stock option award immediately
becomes fully exercisable but any restricted stock award (or portion thereof)
that has not yet vested will be forfeited. If a participant retires, a stock
option will continue for its full term and become exercisable as originally
scheduled, but any restricted stock award (or portion thereof) that has not yet
vested will be forfeited. Treatment of performance units and SARs upon
termination of employment due to death, disability or retirement will be as
provided in the applicable award agreement. If a participant's employment
terminates for any other reason, options that are then exercisable will continue
to be exercisable for 90 days after termination (unless termination is for
cause), but shares of restricted stock not yet vested are forfeited. Treatment
of performance units and stock appreciation rights will be as provided in the
applicable award agreement.
NON-TRANSFERABILITY OF AWARD. No award granted under the Plan may be
transferred by a participant for any reason or by any means, except by will or
by the laws of descent and distribution.
TERM OF THE PLAN. The Plan was effective as of February 3, 1993. The Plan
as amended will terminate on February 3, 1999, three years after its original
termination date.
CHANGE OF CONTROL PROVISIONS. If the employment of a participant in the
Plan is terminated within two years of a change of control of the Company by the
Company for reasons other than substantial nonperformance of duties or felonious
conduct, or by the participant for "good reason," all stock options that have
been outstanding at least six months will immediately become fully exercisable
for the remainder of their terms, and all restricted stock awards that have been
outstanding at least six months will immediately become fully vested.
Performance units and SARs will vest or continue to vest as provided in the
applicable award agreements. The Plan defines a change of control of the Company
and "good reason" for termination of employment in the same manner as summarized
under the caption "Change of Control Provisions" on pages of this proxy
statement.
10
<PAGE>
TAX INFORMATION REGARDING STOCK OPTION AWARDS
An optionee will not incur any federal income tax liability as a result of
the grant of an incentive stock option ("ISO") or a nonqualified stock option.
The same is true when any option becomes exercisable. Upon the exercise of a
nonqualified option, the optionee will generally recognize ordinary income for
federal income tax purposes in an amount equal to the difference between the
fair market value of the shares at the time of exercise and the exercise price.
The income recognized by the optionee will be subject to tax withholding by the
Company, and the Company will be entitled to a tax deduction in an amount equal
to the amount of ordinary income recognized by the optionee. Upon resale of such
shares by the optionee, any difference between the sale price and the fair
market value of the shares at the time the option was exercised will be treated
as capital gain or loss.
Generally, an optionee will not incur federal income tax liability as the
result of an exercise of an ISO. However, except in the case of death or
disability, if an ISO is exercised more than three months after an optionee's
termination of employment (a "disqualifying exercise"), the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the exercise price. In
addition, for purposes of calculating an optionee's alternative minimum tax, if
any, the difference between the fair market value of the shares at the time the
ISO is exercised and the exercise price becomes an item of adjustment. When the
shares acquired upon exercise of an ISO are sold, the optionee will be taxed on
the difference between the sale price and the exercise price. If such a sale
does not occur within two years of the date the ISO was granted or within one
year of the date it was exercised, then the gain, if any, will be treated as
long-term capital gain. If such a sale occurs within either of the time periods
specified in the preceding sentence (a "disqualifying disposition"), then the
portion of the optionee's gain equal to the difference between the fair market
value of the stock on the date of exercise (or, if less, the selling price) and
the exercise price will be treated as ordinary compensation income, while the
balance of any gain would be treated as capital gain. The Company is generally
not entitled to a deduction as the result of the grant or exercise of an ISO.
However, if the optionee recognizes ordinary income as the result of a
disqualifying exercise or disposition, the Company is entitled to a deduction in
an equivalent amount in the taxable year of the Company in which the
disqualifying event occurs.
The foregoing is only a summary of the general effect of U.S. federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Plan and the subsequent sale of shares. This
summary does not discuss the income tax laws of any state or foreign country in
which an optionee may reside.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation and Human Resources Committee (the "Committee"),
comprised solely of non-employee directors, is responsible for establishing and
administering the compensation program for the senior executive officers of the
Company. The Company's executive compensation program is intended to (i) provide
competitive levels of overall compensation to attract and retain well qualified
executives, (ii) motivate executives to achieve the short- and long- term
strategic goals of the Company and (iii) have a direct relationship to the
enhancement of stockholder value. The three components in the Company's
executive compensation program are base salary, annual incentive bonus and
long-term incentive compensation. The program is generally designed so that the
target mix of total compensation is 40% to 60% base salary, with the balance
consisting of performance-based variable components (annual incentive bonus and
long-term incentive compensation). Because the long-term incentive component of
the Company's executive compensation program was supplemented in 1994 by
performance restricted stock awards (described below), in future years the total
mix of compensation could be more heavily weighted toward performance-based
variable components. In addition, greater weight is given to performance-based
compensation at higher levels of responsibility within the Company.
11
<PAGE>
Information regarding competitive compensation levels and practices for
positions comparable to executive officer positions within the Company is
obtained by the Committee from nationwide compensation survey information
collected and evaluated by independent consulting firms, and advice from an
independent, nationally recognized compensation consulting firm. As a result,
comparative compensation information is drawn from a broader range of companies
than those included in the industry indices contained in the performance graph
on page 15, and not all of the companies included in the performance graph
indices are included in the surveys utilized. Based on this information, the
Committee generally targets base salary, total cash compensation (salary plus
annual bonus) and long-term incentive award levels for each executive officer
position to fall in a range between the 50th and 75th percentiles of the
relevant compensation marketplace, although the upper end of this range may be
exceeded if the Committee believes individual circumstances warrant. With the
1994 grant of performance restricted stock awards, total compensation for
executives participating in that program would be expected to exceed the upper
end of this range if total returns to the Company's stockholders over the
specified performance periods relative to other companies in the S&P 500 are
significantly above average.
SALARY. The annual determination of an individual officer's salary with
respect to the prescribed target range is based on a subjective assessment by
the Committee of the responsibilities of the position and the performance,
experience and current salary of the executive filling the position. The 1994
base salary for executive officers was generally within the targeted range.
ANNUAL INCENTIVE BONUS. The annual incentive program provides yearly cash
bonuses to executive officers, although 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. Four executive officers elected to
receive varying portions of their 1994 annual incentive in stock options. For
purposes of this election, an option to acquire one share was valued at
one-third of the option exercise price. The annual determination of an
individual officer'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 philosophy regarding
performance-based compensation.
For 1994, target bonus percentages for executive officers other than Mr.
Perlman ranged from 35% to 55% 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. For staff officers, the financial
component consisted of a requirement that the Company achieve a specified level
of earnings per share ("EPS") during 1994. For officers assigned to operating
units, one-fourth of the financial component consisted of the same Company EPS
requirement and the balance consisted of a requirement that the operating unit
achieve a specified level of pre-tax earnings, except that in the case of
Ceridian Employer Services ("CES"), any payment of the operating unit financial
component at a level above target was based on a requirement that CES satisfy
criteria relating to reinvestment in its business. The 20% non-financial
component was based on the Committee's subjective assessment of the executive
officer's individual performance in the areas of quality improvement and
fostering workforce diversity. 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 executive officers, resulting in
bonus payments for executive officers other than Mr. Perlman ranging between
52.5% and 87% 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.
LONG-TERM INCENTIVES. Long-term incentives are intended to emphasize the
link between executive compensation and improved total returns to the Company's
stockholders. Although the Company's 1993 Long-Term Incentive Plan provides for
the grant of stock options, restricted stock, stock
12
<PAGE>
appreciation rights and performance units, stock options with a fair market
value exercise price have been the primary long-term incentive utilized for
executives in recent years. An annual award of stock options is typically made
to each executive officer, although additional awards may be made at the
Committee's discretion in circumstances such as promotions. During 1994, the
Committee determined that it would be beneficial to the Company and its
stockholders if the annual awards of stock options were supplemented by an
additional long-term incentive which would reward senior executives if and only
if the relative total return to Ceridian's stockholders over a two to four year
performance period exceeded the total returns to stockholders of most other
companies in the S&P 500. The Committee determined that the most desirable means
of accomplishing this result was to award to approximately 50 executives,
including the executive officers, shares of restricted stock, all of which would
vest only if the Company's total return to stockholders over periods ranging
from two to four years is at least in the 90th percentile of all companies in
the S&P 500. Fifty percent of the shares would vest if the Company's total
return to stockholders is at least in the 75th percentile, twenty-five percent
would vest if the Company's total return is at least in the 60th percentile, and
none would vest if total return is less than the 60th percentile. Shares which
do not vest by the end of the fourth year are forfeited. The Committee believes
that this program provides a very direct link between executive compensation and
superior total returns to stockholders, sets challenging performance hurdles,
increases the ownership stake of senior management in the Company, and
appropriately supplements other elements of the executive compensation program.
The annual determination of an individual officer's option award within the
range prescribed for his or her position is based on a subjective assessment by
the Committee of the responsibilities of the position and the performance and
experience of, and past option awards made to, the individual. For 1994, option
awards were generally in the upper half of the targeted range. The determination
of an officer's performance restricted stock award was primarily a function of
the total compensation range targeted for his or her position and the expected
value of the other elements of his or her compensation package, with 60th
percentile total return performance generally expected to result in total
compensation at or near the upper end of the targeted compensation range for the
position, and 75th and 90th percentile total return performance generally
expected to result in total compensation in excess of the upper end of the
targeted range.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Perlman's base salary during 1994
was $600,000, unchanged since 1990, and will be $650,000 in 1995. The Committee
believes Mr. Perlman has performed exceptionally well, and that an increase in
his base salary at this time is warranted. Mr. Perlman's 1994 annual incentive
was determined based solely on the Company's EPS, and amounted to 97.5% of base
salary as compared to a target of 65%, reflecting superior earnings performance
for the Company during 1994.
During 1994, Mr. Perlman was granted a stock option for 80,000 shares and
75,000 shares of performance restricted stock as the long-term incentive portion
of his compensation package. In approving this award, the Committee principally
considered (i) Mr. Perlman's role in the Company's improved 1994 operating
performance; (ii) his work over several years to position the Company for
strategic growth in revenue and earnings; (iii) the increase in the Company's
shareholder value during the year; (iv) the competitive range for Mr. Perlman's
position; and (v) the desire to increasingly orient his compensation toward
performance-based components.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. During 1993, the Internal Revenue
Code (the "Code") was amended to impose on public companies, such as Ceridian,
an annual limit of $1 million on deductions for compensation payments made to
each of the chief executive officer and the four most highly paid executive
officers employed at fiscal year end. Compensation that is considered
"performance-based" according to the Code is not counted toward the $1 million
annual limit.
The Committee supports the philosopy that a significant portion of the total
compensation provided to an executive, particularly the chief executive officer
and others occupying positions of significant responsibility within the Company,
should be performance-based. Consistent with that
13
<PAGE>
philosophy, a large component of the compensation provided to the five highest
compensated officers is in the form of stock options with a fair market value
exercise price, which the Code classifies as "performance-based." Similarly, the
proposed amendments to the 1993 Long-Term Incentive Plan discussed on pages 7
through 11 of this proxy statement include a requirement that any future awards
of restricted stock under that Plan to existing employees must qualify as
"performance-based" for Code purposes.
Although the Committee has considered amending other elements of the
compensation program so that they too can be considered "performance-based" for
purposes of the Code, the Committee believes that it is more important for it to
retain the flexibility to tailor the compensation program in the manner it
believes most beneficial to the Company and its stockholders, than it is to
qualify every aspect of the Company's executive compensation program as
"performance-based" for purposes of the Code. In addition, any non-deductible
amount of future compensation is not expected to be material to the Company, nor
would such non-deductibility financially disadvantage the Company in any manner
given the Company's tax position.
February 28, 1995 Compensation and Human Resources Committee
Charles Marshall, Chairman
Ronald James
Richard G. Lareau
Paul S. Walsh
14
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return during the period
1990-1994 for the Company's Common Stock, the S&P 500 Index, the S&P Computer
Software and Services Index and the S&P Electronics-Defense Index. This graph
assumes the investment of $100 in the Company's Common Stock, the S&P 500 Index
and each of the industry indices on December 31, 1989, and the reinvestment of
all dividends as and when distributed. Included in the dividends reinvested is
the 1992 dividend distribution by the Company to its stockholders of all of the
common stock of the Company's former computer systems subsidiary, Control Data
Systems, Inc. For purposes of this graph, it is assumed that the shares of
Control Data Systems stock were received on the September 1, 1992 ex-dividend
date, sold at the closing market price on that date, and the proceeds reinvested
in shares of Ceridian Common Stock at the closing market price on that date.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(CERIDIAN CORPORATION, THE S&P 500 INDEX AND INDUSTRY INDICES)
15
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation for the past three years of
the Company's five most highly compensated officers as of December 31, 1994,
including the chief executive officer (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------------
------------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2)
- -------------------------------- --------- --------- ----------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence Perlman 1994 $ 600,000 $ 585,164 -- -- 80,000 $ 3,375
Chairman, President 1993 600,000 390,109(3) -- -- 139,998(3) 4,497
and Chief Executive Officer 1992 600,000 445,714 -- -- 170,000 2,706
Ronald L. Turner 1994 300,000 260,000 25,000 3,375
Vice President and 1993 273,625 285,125(5) -- -- 80,000 --
President, Computing 1992 -- -- -- -- -- --
Devices International (4)
Patrick C. Sommers 1994 260,052 122,023(7) -- -- 34,176(7) 3,375
Vice President and 1993 250,000 162,000 254,407(6) -- 30,000 288
President, Ceridian 1992 19,231 14,063 -- -- 50,000 --
Employer Services (4)
Stephen B. Morris 1994 260,040 175,635 -- -- 25,000 2,928
Vice President and 1993 250,008 165,375 -- -- 30,000 --
President, The Arbitron 1992 20,834 9,375 -- -- 50,000 --
Company (4)
John R. Eickhoff 1994 225,000 158,500(7) -- -- 30,822(7) 3,375
Vice President and 1993 187,594 135,113 -- -- 40,000 2,698
Chief Financial Officer 1992 160,000 82,286 -- -- 66,540(8) 2,706
</TABLE>
- ------------------------
(1) The amount reported in this column represents the market value of the shares
of Common Stock awarded on the date of grant, determined by utilizing the
closing price of the Common Stock on the NYSE on the grant date. Holders of
restricted stock are entitled to receive any dividends payable on the Common
Stock, but such dividends are subject to forfeiture if the underlying shares
of stock are forfeited. Performance restricted stock grants made during 1994
are not included in this column, but are reported on page 19 in the table
captioned "Long-Term Incentive Plans -- Awards in Last Fiscal Year." At the
end of 1994, the number and value (based on the closing price of the
Company's Common Stock on the NYSE on December 31, 1994) of aggregate
restricted stock holdings of the Named Executives was as follows:
<TABLE>
<CAPTION>
NAME NO. OF SHARES VALUE ($)
- ------------------------------------------------------ ------------- -------------
<S> <C> <C>
Mr. Perlman........................................... 75,000 $ 2,016,000
Mr. Turner............................................ 53,750 1,444,500
Mr. Sommers........................................... 50,000 1,344,000
Mr. Morris............................................ 50,000 1,344,000
Mr. Eickhoff.......................................... 50,000 1,344,000
</TABLE>
Except for 3,750 shares held by Mr. Turner, all restricted stock holdings
shown in the preceding table reflect shares not yet vested resulting from
performance restricted stock awards made in 1994, the vesting of which are
subject to the satisfaction of performance conditions over two, three and
four year performance periods ending April 30, 1996, 1997 and 1998. All
shares resulting from performance restricted stock awards will vest only if
the Company's total return to
16
<PAGE>
stockholders over the performance periods is at least at the 90th percentile
of companies in the S&P 500; none of such shares will vest if the Company's
total return to stockholders over the performance periods is less than the
60th percentile of S&P 500 companies.
(2) The amounts disclosed for each individual represent the Company's
contributions to the accounts of the named individuals in the Company's
Personal Investment Plan, a 401(k) defined contribution plan.
(3) Mr. Perlman's cash bonus was reduced as a result of his election to receive
a portion of his 1993 bonus in the form of a stock option covering 39,998
shares rather than in cash.
(4) Mr. Turner joined the Company as an executive officer in January 1993, Mr.
Sommers in November 1992 and Mr. Morris in December 1992.
(5) The amount disclosed includes $50,000 paid at the time Mr. Turner joined the
Company, as well as his 1993 annual bonus.
(6) The amount disclosed in this column for Mr. Turner includes $44,371 in
relocation expenses and $35,910 in tax reimbursement payments related
thereto. The amount disclosed for Mr. Sommers includes $131,263 in
relocation expenses and $106,231 in tax reimbursement payments related to
the relocation expenses.
(7) The cash bonuses of Mr. Eickhoff and Mr. Sommers were reduced as a result of
their elections to receive a portion of their 1994 bonuses in the form of
stock options covering 5,822 shares and 9,176 shares, respectively, rather
than in cash.
(8) Amount shown reflects antidilution adjustments resulting from the spinoff of
Control Data Systems, Inc.
STOCK OPTION GRANTS
The following table summarizes information regarding stock options granted
during 1994 to the Named Executives.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE
--------------------------------------------------------------- AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION ----------------------------
NAME GRANTED (#) YEAR ($/SH)(2) DATE 5% ($) 10% ($)
- -------------------------------- ------------- ----------------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Perlman 80,000(4) 5.7% $ 25.00 11/29/04 $ 1,260,000 $ 3,180,000
Ronald L. Turner 25,000(4) 1.8% 25.00 11/29/04 393,750 993,750
Patrick C. Sommers 9,176(5) 0.6% 19.13 01/03/04 110,588 279,104
25,000(4) 1.8% 25.00 11/29/04 393,750 993,750
Stephen B. Morris 25,000(4) 1.8% 25.00 11/29/04 393,750 993,750
John R. Eickhoff 5,822(6) 0.4% 19.13 01/03/04 70,166 177,086
25,000(4) 1.8% 25.00 11/29/04 393,750 993,750
</TABLE>
- ------------------------
(1) All options were granted under the 1993 Long-Term Incentive Plan. Under that
Plan, the Compensation Committee retains discretion, subject to plan limits,
to modify the terms of outstanding options, including exercisability dates.
Exercisability will generally be accelerated if a recipient's employment is
terminated within two years of a change of control of the Company, as
defined in "Change of Control Provisions" below.
(2) The per share exercise price of each option granted in 1994 is equal to the
market value (closing price on the NYSE) of a share of Common Stock on the
date of grant.
17
<PAGE>
(3) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, overall market conditions and the
optionees' continued employment through the vesting period. The amounts
represented in this table may not necessarily be achieved.
(4) This option becomes exercisable in cumulative one-third installments on
January 1 of 1996, 1997 and 1998.
(5) Option awarded in consideration of Mr. Sommers' election to receive 32% of
his 1994 annual bonus in the form of a stock option rather than cash.
Original option grant on January 3, 1994 of 9,176 shares, corresponding to
maximum potential bonus payment, was confirmed in February 1995 upon
determination of actual bonus payout. Option became fully exercisable on
February 3, 1995 in connection with such determination.
(6) Option awarded in consideration of Mr. Eickhoff's election to receive 19% of
his 1994 annual bonus in the form of a stock option rather than cash.
Original option grant on January 3, 1994 of 5,822 shares, corresponding to
maximum potential bonus payment, was confirmed in February 1995 upon
determination of actual bonus payout. Option became fully exercisable on
February 3, 1995 in connection with such determination.
OPTION EXERCISES AND OPTION VALUES
The following table summarizes information regarding the exercise of stock
options during 1994 by the Named Executives, as well as the December 31, 1994
value of unexercised stock options held by the Named Executives.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
SHARES ACQUIRED VALUE -------------------------- ----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ------------------- --------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Perlman.................. -- -- 450,562 384,474 $ 7,992,753 $ 4,064,619
Ronald L. Turner.................. -- -- 16,667 88,333 204,171 687,829
Patrick C. Sommers................ -- -- 16,667 97,509 183,337 717,277
Stephen B. Morris................. -- -- 16,667 88,333 202,171 683,829
John R. Eickhoff.................. -- -- 70,442 100,486 1,201,234 947,250
</TABLE>
- ------------------------
(1) Represents the difference between the market value of the Company's Common
Stock on December 31, 1994 and the exercise price of the options.
18
<PAGE>
PERFORMANCE RESTRICTED STOCK AWARDS
The following table summarizes information regarding performance restricted
stock awards granted during 1994 to the Named Executives.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
NUMBER OF SHARES, UNITS PERFORMANCE OR OTHER -------------------------------------
OR OTHER RIGHTS (# PERIOD THRESHOLD TARGET MAXIMUM
NAME SHARES) UNTIL MATURATION OR PAYOUT (# SHARES) (# SHARES) (# SHARES)
- ----------------------------- ------------------------- -------------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lawrence Perlman............. 75,000 5/1/94 to 4/30/98 18,750 37,500 75,000
Ronald L. Turner............. 50,000 5/1/94 to 4/30/98 12,500 25,000 50,000
Patrick C. Sommers........... 50,000 5/1/94 to 4/30/98 12,500 25,000 50,000
Stephen B. Morris............ 50,000 5/1/94 to 4/30/98 12,500 25,000 50,000
John R. Eickhoff............. 50,000 5/1/94 to 4/30/98 12,500 25,000 50,000
</TABLE>
Long-term incentive plan awards summarized in the table above consisted of
awards of shares of restricted stock, the vesting of which is subject to certain
performance conditions, under the Company's 1993 Long-Term Incentive Plan. Up to
one-third of the shares awarded will vest on each of April 30, 1996 and 1997 if
the executive is still employed by the Company on those dates and the total
return to the Company's stockholders during the twenty-four and thirty-six month
periods ended on those respective dates meets certain prescribed levels as
compared to other companies in the S&P 500. The remaining one-third of the
shares awarded plus any shares that did not vest at the end of the first two
performance periods will become available to vest as of April 30, 1998 at the
end of the third performance period. 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 (stock price appreciation plus assumed reinvestment of any
dividends or other distributions) over the applicable performance period is at
least at the 60th percentile of companies in the S&P 500, 50% would vest if such
total return is at least at the 75th percentile, and 100% would vest if such
total return is at least at the 90th percentile. If the Company's total return
to stockholders is not at least at the 60th percentile, no shares would vest on
that date. Shares which have not vested as of the end of the third performance
period will be forfeited.
PENSION PLAN
The Company maintains two voluntary, tax qualified, defined benefit
retirement plans for U.S. employees, one for employees of its Computing Devices
International business and the second for other U.S. employees (the "Retirement
Plans"), which are identical in all substantive respects and are funded by
employee salary reduction contributions and Company contributions. The
Retirement Plans were closed to new participants on and after January 2, 1995.
The amount of the annual benefit under the Retirement Plans is based upon an
employee's average annual compensation during the employee's highest consecutive
five-year earnings period with the Company while participating in the Retirement
Plans. Because the Internal Revenue Code limits the annual benefit that may be
paid from tax-qualified plans such as the Retirement Plans, the Company has
established a Benefit Equalization Plan to provide retirees with supplemental
benefits so that they will receive, in the aggregate, the benefits they would
have been entitled to receive under the Retirement Plans had these limits not
been in effect. During 1994, the Company established and funded (a 1994
contribution of $1.7 million) a Benefits Protection Trust out of which benefits
under the Benefit Equalization Plan for persons who terminate employment with
the Company after December 1, 1994 are to be paid. Assets in this trust remain
subject to the claims of the Company's general creditors.
19
<PAGE>
The following table shows estimated annual benefits payable under the
Retirement Plans and the Benefit Equalization Plan to an employee who retires in
1995 at age 65:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 46,056 $ 61,408 $ 76,760 $ 92,112 $ 104,112
300,000 70,056 93,408 116,760 140,112 158,112
400,000 94,056 125,408 156,760 188,112 212,112
500,000 118,056 157,408 196,760 236,112 266,112
600,000 142,056 189,408 236,760 284,112 320,112
700,000 166,056 221,408 276,760 332,112 374,112
800,000 190,056 253,408 316,760 380,112 428,112
900,000 214,056 285,408 356,760 428,112 482,112
1,000,000 238,056 317,408 396,760 476,112 536,112
1,100,000 262,056 349,408 436,760 524,112 590,112
1,200,000 286,056 381,408 476,760 572,112 644,112
</TABLE>
Annual compensation for purposes of the Retirement Plans and the Benefit
Equalization Plan consists of salary and any annual bonus paid during the year
(whether payable in cash or stock options), less the amount contributed by the
employee to the applicable Retirement Plan that year. Compensation for 1994
covered by these Plans for the Named Executives is as follows: Mr. Perlman,
$1,146,933; Mr. Turner, $524,125; Mr. Sommers, $406,382; and Mr. Eickhoff,
$346,921. Mr. Morris elected to participate in a Retirement Plan beginning
January 1, 1995. For purposes of the Retirement Plans and the Benefit
Equalization Plan, an annual bonus is considered part of annual compensation in
the year in which it is paid, rather than the year in which it was earned (the
latter formulation being the basis on which amounts are reported in the Summary
Compensation Table).
As of March 1, 1995, years of credited service for the Named Executives were
as follows: Mr. Perlman, 14.76 years; Mr. Turner, 2.18 years; Mr. Sommers, 2.31
years; Mr. Morris, 0.17 years and Mr. Eickhoff, 31.42 years.
Benefit amounts in the Pension Plan Table are computed assuming payments are
made on the normal life annuity basis and not under any of the various survivor
options. Benefits listed in the table are not subject to deduction for Social
Security or other offset amounts.
20
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of the Named Executives. The
term of each of these agreements is the later of June 30, 1997 (December 31,
1998 in the case of Mr. Perlman) or two years after a "change of control" (as
defined in "Change of Control Provisions" below) occurring before the normal
contract termination date. These agreements generally specify that the
executives are required to devote full time to the Company and will be
compensated in accordance with the compensation policies of the Company, and
contain provisions regarding protection of confidential information, rights in
any intellectual property created by the executive, and restrictions on
competition. If the Company terminates an agreement without cause, the executive
is entitled to receive a lump sum payment equal to two years' base salary (three
years in Mr. Perlman's case). In addition, the agreements for Mr. Perlman and
Mr. Eickhoff provide that in the event of such a termination, each would receive
a supplemental retirement benefit calculated by including the lump sum payment
previously noted in the determination of final average pay for purposes of
computing retirement benefits. Mr. Perlman's agreement additionally provides
that the calculation of such supplemental retirement benefit will include three
additional years of service credit. Also in the event of termination without
cause, Mr. Perlman's agreement provides that his rights and benefits under any
restricted stock or option plans will fully vest, and any restrictions on shares
of stock received under such plans will immediately lapse. Each agreement also
contains certain change of control provisions described below under "Change of
Control Provisions."
CHANGE OF CONTROL PROVISIONS
The payment of benefits or vesting of awards under the Company's 1993
Long-Term Incentive Plan ("1993 LTIP"), 1990 Long-Term Incentive Plan ("1990
LTIP"), and the executive employment agreements described above accelerates upon
a "change of control termination." For these purposes, a "change of control" is
defined as (1) a merger or consolidation involving the Company if less than 50
percent of the Company's voting stock after the business combination is held by
persons who were stockholders before the business combination; (2) a sale of the
assets of the Company substantially as an entirety; (3) ownership by a person or
group of at least 25 percent of the Company's voting securities; (4) approval by
the stockholders of a plan for the liquidation of the Company; and (5) certain
changes in the composition of the Company's Board of Directors. The term "change
of control termination" refers to either of the following if it occurs within
two years of a "change of control" of the Company: (i) termination of an
executive's employment by the Company for reasons other than substantial
nonperformance of duties or conduct constituting a felony involving moral
turpitude; or (ii) the executive terminates employment with the Company for
"good reason." "Good reason" is generally defined as an adverse change in an
executive's responsibilities, authority, compensation or working conditions, or
a material breach of an employment agreement by the Company.
If a change of control termination occurs, all shares of restricted stock
held by an executive pursuant to the 1993 or 1990 LTIP will immediately vest,
and all options granted under the 1993 or 1990 LTIP will become exercisable
immediately. The executive employment agreements described above also provide
that following a change of control termination, an executive is entitled to
receive a lump sum payment that is one dollar less than three times the
executive's "annualized includable compensation," which is the average annual
compensation received by the executive from the Company and includable in the
executive's gross income during the five most recent taxable years ending before
the change of control. The agreements for Mr. Perlman and Mr. Eickhoff provide
that the amount of this lump sum payment is to be included in the determination
of final average pay for purposes of computing supplemental retirement benefits.
This lump sum payment would be in lieu of any other severance payment specified
in an executive employment agreement. The executive employment agreements and
stock-based incentive plans also provide that all change of control compensation
pertaining to an executive must be less than the amount which would be
considered a "parachute payment" under the Internal Revenue Code.
21
<PAGE>
SHARE OWNERSHIP INFORMATION
SHARE OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 1995 by each director
or nominee for director, by each of the Named Executives and by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
SHARES OF OF SHARES BENEFICIALLY
COMMON STOCK OWNED,
BENEFICIALLY PERCENT OF COMMON SHARES THAT MAY BE
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNED (1) STOCK OWNED (2) ACQUIRED WITHIN 60 DAYS(3)
- ----------------------------------------------- -------------------- ----------------- --------------------------
<S> <C> <C> <C>
Directors
Ruth M. Davis................................ 3,873 * 2,000
Allen W. Dawson.............................. 6,000 * 2,000
Ronald James................................. 3,100 * 2,000
Richard G. Lareau............................ 5,500(4) * 2,000
George R. Lewis.............................. 1,000 * --
Charles Marshall............................. 5,000 * 2,000
Lawrence Perlman............................. 767,571 1.7% 631,704
Carole J. Uhrich............................. 1,000 * --
Richard W. Vieser............................ 5,000 * 2,000
Paul S. Walsh................................ 4,000 * 2,000
Named Executive Officers
Ronald L. Turner............................. 98,334 0.2% 43,334
Patrick C. Sommers........................... 98,408 0.2% 44,510
Stephen B. Morris............................ 83,334 0.2% 33,334
John R. Eickhoff............................. 175,424 0.4% 117,596
All executive officers, directors and nominees
as a group.................................... 1,598,467(4) 3.4% 1,087,235
<FN>
- ------------------------
(1) Unless otherwise noted, all of the shares shown are held by individuals
possessing sole voting and investment power with respect to such shares.
(2) Number of shares representing less than 0.1% of outstanding Common Stock
designated by *.
(3) All shares shown in this column may be acquired within 60 days through the
exercise of stock options granted by the Company. These shares are treated
as outstanding only when determining the amount and percent owned by the
applicable individual or group.
(4) Does not include 500 shares of common stock owned by Mr. Lareau's wife as
to which Mr. Lareau may be deemed to share voting and investment power, but
as to which shares he disclaims any beneficial interest.
</TABLE>
22
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by each stockholder who is known by the
Company to own beneficially more than 5% of the outstanding Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
- ------------------------------------------------ -------------------- -------------
<S> <C> <C>
FMR Corp. 5,456,387(2) 12.0%
82 Devonshire Street
Boston, MA 02109
The Equitable Companies Incorporated 3,264,611(3) 7.2%
787 Seventh Avenue
New York, NY 10019
and AXA
23 Avenue Matignon
75008 Paris France
<FN>
- ------------------------
(1) Percentage calculated based on the number of shares of the Company's common
stock issued and outstanding as of February 28, 1995.
(2) Beneficial ownership as of December 31, 1994 as reported in Schedule 13G
dated February 13, 1995. These securities are beneficially owned by
Fidelity Management & Research Company and Fidelity Management Trust
Company, both wholly-owned subsidiaries of FMR Corp., as a result of acting
as investment adviser to certain investment companies or as investment
manager of certain institutional accounts. Represents sole power to dispose
or direct the disposition of 5,456,387 shares and sole power to vote or
direct the vote of 116,419 shares. Included in the total number of shares
reported as beneficially owned are 572,880 shares that would be issuable
upon conversion of shares of the Company's 5 1/2% Preferred Stock.
(3) Beneficial ownership as of December 31, 1994 as reported in Schedule 13G
dated February 10, 1995. These securities are held by subsidiaries of AXA
and The Equitable Companies Incorporated, primarily Alliance Capital
Management L.P., which holds them on behalf of client discretionary
investment advisory accounts. Represents sole power to vote or direct the
vote of 2,365,456 shares, sole power to dispose or direct the disposition
of 3,246,456 shares, and shared power to dispose or direct the disposition
of 18,155 shares (including 14,355 shares that would be issuable upon
conversion of shares of the Company's 5 1/2% Preferred Stock).
</TABLE>
The parties identified in the table above have stated in their Schedules 13G
that the Company securities they hold were acquired in the ordinary course of
business and were not acquired for the purpose of and do not have the effect of
changing or influencing the control of the Company and were not acquired in
connection with or as a participant in any transaction having such purpose or
effect.
INDEPENDENT AUDITORS
The Board has selected KPMG Peat Marwick LLP, the Company's present
auditors, to audit the accounts of the Company for the year ending December 31,
1995.
The Board has requested that representatives of KPMG Peat Marwick LLP attend
the Annual Meeting. They will have an opportunity to make a statement if they
desire to do so, and will be available to respond to stockholder questions.
OTHER MATTERS
STOCKHOLDER PROPOSALS
Any stockholder proposal to be included in the proxy materials for the 1996
Annual Meeting of Stockholders must be received by the Company on or before
November , 1995.
The Company's Bylaws require advance written notice to the Company of
stockholder-proposed business or of a stockholder's intention to make a
nomination for director at an annual meeting of
23
<PAGE>
stockholders. They also limit the business which may be conducted at any special
meeting of stockholders to business brought by the Company's Board.
Specifically, the Bylaws provide that business may be brought before an annual
meeting by a stockholder only if the stockholder provides written notice to the
Secretary of the Company not less than 50 or more than 75 days prior to the
meeting, unless notice of the date of the meeting is given to stockholders or is
publicly announced less than 65 days prior to the meeting. In that case, a
stockholder's notice of proposed business must be provided no later than 15 days
following the date notice of the annual meeting was mailed or the public
announcement of the date was made, whichever is earlier. The Company's 1996
Annual Meeting of Stockholders will be held on May 8, 1996. A stockholder's
notice must set forth (i) a description of the proposed business and the reasons
therefor, (ii) the name and record address of the stockholder proponent, (iii)
the class and number of shares of Company stock owned by the stockholder and
(iv) a description of any material interest of the stockholder in the proposed
business.
The Bylaws also provide that a stockholder may nominate a director at an
annual meeting only after providing advance written notice to the Secretary of
the Company within the time limits described above. The stockholder's notice
shall set forth all information about each nominee that would be required under
Securities and Exchange Commission ("SEC") rules in a proxy statement soliciting
proxies for the election of such nominee, as well as the nominee's business and
residence address. The notice must also set forth the name and record address of
the stockholder proponent and the class and number of shares of Company stock
owned by the stockholder proponent.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons who beneficially own more than 10% of
the Company's Common Stock to file with the SEC reports of ownership regarding
the Common Stock and other equity securities of the Company. These persons are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports they file. To the Company's knowledge, based on a review of the
copies of such reports furnished to the Company during the period January 1,
1994 to February 14, 1995, all Section 16(a) filing requirements applicable to
its officers, directors and 10% beneficial owners were complied with.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. The Company has
retained Georgeson & Company, New York, New York, to aid in solicitation of
proxies. The fees and expenses of Georgeson & Company are estimated at $15,000.
Officers and employees of the Company may solicit proxies by further
mailings, by telephone and telegraph, and by personal conversations. No special
compensation will be paid to such persons for these tasks. The Company may
reimburse brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of the stock entitled to be voted
at the meeting.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (AN ANNUAL FILING WITH
THE SEC) FOR THE YEAR ENDED DECEMBER 31, 1994 MAY BE OBTAINED WITHOUT CHARGE BY
WRITING TO CERIDIAN CORPORATION, STOCKHOLDER SERVICES DEPARTMENT, 8100 34TH
AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55425.
By Order of the Board of Directors
John A. Haveman
SECRETARY
Minneapolis, Minnesota
March 30, 1995
24
<PAGE>
EXHIBIT A
CERIDIAN CORPORATION
1993 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF MAY 10, 1995)
1. PURPOSE OF PLAN.
The purpose of the Ceridian Corporation 1993 Long-Term Incentive Plan (as
amended and restated as of May 10, 1995) (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 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.
A-1
<PAGE>
2.13 "NEWLY HIRED EMPLOYEE" means a person who has been an Eligible
Recipient for 90 days or less.
2.14 "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.
2.15 "OPTION" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.16 "PARTICIPANT" means an Eligible Recipient who receives one or more
Incentive Awards under the Plan.
2.17 "PERFORMANCE GOAL" means the absolute or relative measure of one or
more of the following alternatives as specified by the Committee in writing for
any Performance Period, the achievement of which is a condition precedent to the
vesting of a Performance Restricted Stock Award hereunder: Total Return to
Stockholders; fully diluted earnings per share for the Company; or earnings
before interest and taxes, return on equity or invested capital, or revenue
growth for the Company or a specified Subsidiary or division of the Company. Any
such Performance Goal shall be established by the Committee on or before the
latest date permissible to enable the Performance Restricted Stock Award to
qualify as "performance-based compensation" under Section 162(m). For purposes
of this definition, any relative measure of Total Return to Stockholders shall
utilize the Company's Performance Ranking Position, and other financial terms
shall have the same meanings as used in the Company's financial statements.
2.18 "PERFORMANCE PERIOD" means the period of time during which Performance
Goals are measured to determine the vesting of Performance Restricted Stock
Awards.
2.19 "PERFORMANCE RANKING POSITION" means the relative placement of the
Company's Total Return to Stockholders as measured against (i) the Total Return
to Stockholders of other companies in a nationally recognized index such as the
S&P 500, or in a peer group of companies selected by the Committee prior to the
commencement of a Performance Period, or (ii) the performance of such nationally
recognized index itself.
2.20 "PERFORMANCE RESTRICTED STOCK AWARD" means a Restricted Stock Award
the vesting of which is conditioned upon the satisfaction of one or more
Performance Goals.
2.21 "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 criteria.
2.22 "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that are
already owned by the Participant.
2.23 "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.
2.24 "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 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).
2.25 "SECTION 162(M)" means Section 162(m) of the Code.
2.26 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.27 "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
A-2
<PAGE>
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.
2.28 "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.
2.29 "TAX DATE" means the date any withholding tax obligation arises under
the Code for a Participant with respect to an Incentive Award.
2.30 "TOTAL RETURN TO STOCKHOLDERS" with respect to a company means the
total return to a holder of the common stock of that company during a
Performance Period as a result of his or her ownership of that stock during such
Performance Period, such total return to include both the appreciation (or
depreciation) in the per share price of such common stock during such
Performance Period, and the per share fair market value of all dividends and
distributions paid or distributed by such company with respect to such common
stock during such Performance Period, assuming that all such dividends and
distributions are reinvested in shares of such common stock at their fair market
value on the last trading day of the month in which the dividend or distribution
is paid or distributed.
3. 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 directors or 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 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
A-3
<PAGE>
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 6,000,000 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.
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").
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.
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
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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% 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 exercise 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 occurring at least six months after its
date of grant.
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 occurring at least
six months after its date of grant. 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 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 criteria; provided, however, that any Restricted Stock Award
made on or after May 10, 1995 to an Eligible Recipient other than a Newly Hired
Employee must be a Performance Restricted Stock Award. 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 Section
s 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 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.
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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 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
(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.
10.2 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;
(b) All Restricted Stock Awards then held by the Participant 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
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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.
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
directors of the surviving corporation following the effective date of
such merger or consolidation;
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(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;
(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 Control
Termination shall not include a termination of employment by reason of
death, Disability or Retirement.
(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
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(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.
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 (including any Performance Restricted
Stock Award) granted to such Participant 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.
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
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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, 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, Section 422 of the Code or the rules of
the New York Stock Exchange. No termination, suspension
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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, 1999, 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 the
Participants.
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CERIDIAN CORPORATION NOTICE OF ANNUAL MEETING OF
8100 34th Avenue South STOCKHOLDERS TO BE HELD
Minneapolis, Minnesota 55425 MAY 10, 1995
(612) 853-8100
The Annual Meeting of Stockholders of Ceridian Corporation, a Delaware
corporation (the "Company"), will be held in the Guilford Room, Harbor Court
Hotel, 550 Light Street, Baltimore, Maryland 21202 on Wednesday, May 10,
1995 at 9:00 a.m., Eastern Daylight Savings Time, for the following purposes:
(1) To elect directors for the following year;
(2) To approve amendments to the Company's 1993 Long-Term Incentive Plan,
including an amendment to increase by 3,000,000 shares the number of shares
that may be issued pursuant to that Plan; and
(3) To transact such other business as may properly come before the
meeting.
Stockholders of record of the Company's common stock at the close of
business on March 21, 1995 will be entitled to vote at the meeting and any
adjournments. No admission ticket will be necessary.
TO BE SURE THAT YOUR VOTE IS COUNTED, WE URGE YOU TO COMPLETE AND SIGN THE
PROXY CARD BELOW, DETACH IT FROM THIS NOTICE AND RETURN IT IN THE POSTAGE PAID
ENVELOPE ENCLOSED IN THIS PACKAGE AS SOON AS POSSIBLE. The prompt return of your
signed proxy card will assist the Company in reducing the expense of additional
proxy solicitation.
A list of stockholders entitled to vote at the meeting will be open for
examination by any stockholder for any purpose germane to the meeting during
ordinary business hours from April 26, 1995 through May 10, 1995, at the offices
of Venable, Baetjer & Howard, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201.
By Order of the Board of Directors
March 30, 1995 John A. Haveman
SECRETARY
DETACH PROXY CARD HERE
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<TABLE>
<S> <C> <C> <C>
1. Election of Directors: FOR all nominees [] WITHHOLD AUTHORITY to [] FOR, EXCEPT YOU MAY []
listed below vote for all nominees listed below WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE BY
CROSSING OUT HIS OR HER NAME
</TABLE>
Nominees: Ruth M. Davis, Allen W. Dawson, Ronald James, Richard G. Lareau
George R. Lewis, Charles Marshall, Lawrence Perlman,
Carole J. Uhrich, Richard W. Vieser, Paul S. Walsh
2. Proposal to approve amended and restated [] FOR []AGAINST [] ABSTAIN
1993 Long-Term Incentive Plan
Address Change and/or [] If you wish to have your vote on all matters
Comments Mark Here kept confidential in accordance with Ceridian
Corporation policy, check here []
PLEASE SIGN EXACTLY AS NAME IS PRINTED TO
THE LEFT. JOINT OWNERS, CO-EXECUTORS OR
CO-TRUSTEES SHOULD BOTH SIGN. PERSONS SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN SHOULD GIVE THEIR FULL TITLE AS
SUCH.
Dated: ____________________, 199__
_____________________________________________
_____________________________________________
(Please sign, date and return this proxy VOTES MUST BE INDICATED [X]
card in the enclosed envelope) IN BLACK OR BLUE INK
CERIDIAN CORPORATION PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CERIDIAN
CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 10, 1995.
The undersigned appoints Lawrence Perlman and John A. Haveman, and either of
them, the proxies of the undersigned, with full power of substitution in each,
to vote at the Annual Meeting of Stockholders to be held on May 10, 1995 and
at any adjournment or postponement thereof all of the undersigned's shares of
Ceridian Corporation Common Stock held of record on March 21, 1995 in the
manner indicated on the reverse side hereof, and with the discretionary
authority to vote as to any other matters that may properly come before such
meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
ON THE REVERSE SIDE.
This proxy, when properly signed, will be voted in the manner directed.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR PROPOSAL 2.
(Continued, and to be signed and dated, on the reverse side.)
