<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Ceridian Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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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[LOGO]
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS ON MAY 22, 1998
Dear Stockholder:
Ceridian Corporation's Annual Meeting of Stockholders will be held in the
Harbor Court Hotel, 550 Light Street, Baltimore, Maryland 21202 on May 22, 1998
at 9:00 a.m. E.D.T. Whether or not you plan to attend, please complete and
return your proxy card.
This proxy statement includes information about the nominees for election to
Ceridian's Board of Directors. It also includes information about a proposal
recommended by the Board to amend Ceridian's Employee Stock Purchase Plan to add
1,000,000 shares to the number of shares of Ceridian's common stock that may be
issued under the Plan.
Enclosed with this proxy statement 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,
[SIG]
Lawrence Perlman
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Corporate Headquarters and Mailing Address:
8100 34th Avenue South
Minneapolis, MN 55425
(612) 853-8100
<PAGE>
CERIDIAN CORPORATION
PROXY STATEMENT
CONTENTS
<TABLE>
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PAGE
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<S> <C>
General Information....................................................................................... 1
Election of Directors (Item 1)............................................................................ 1
The Board of Directors.................................................................................. 1
Nominees for Director................................................................................... 2
Committees of the Board of Directors.................................................................... 4
Directors' Compensation................................................................................. 5
Corporate Governance.................................................................................... 5
Approval of Amendment to Employee Stock Purchase Plan (Item 2)............................................ 7
Compensation Committee Report on Executive Compensation................................................... 9
Stock Price Performance Graph............................................................................. 12
Executive Compensation.................................................................................... 13
Summary Compensation Table.............................................................................. 13
Stock Option Grants..................................................................................... 15
Option Exercises and Option Values...................................................................... 16
Pension Plan............................................................................................ 17
Executive Employment Agreements and Severance Arrangements.............................................. 18
Change of Control Provisions............................................................................ 19
Share Ownership Information............................................................................... 20
Share Ownership of Directors and Management............................................................. 20
Share Ownership of Certain Beneficial Owners............................................................ 21
Independent Auditors...................................................................................... 21
Other Matters............................................................................................. 21
Stockholder Proposals................................................................................... 21
Section 16(a) Beneficial Ownership Reporting Compliance................................................. 22
Solicitation of Proxies................................................................................. 22
</TABLE>
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CERIDIAN CORPORATION
---------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 22, 1998
------------------------
GENERAL INFORMATION
This proxy statement and the enclosed proxy card are being mailed to
Ceridian Corporation stockholders beginning on or about March 30, 1998 in
connection with the solicitation of proxies by Ceridian's Board of Directors
(the "Board") for use at Ceridian's Annual Meeting of Stockholders to be held on
May 22, 1998 (the "Annual Meeting"). Holders of Ceridian's common stock of
record at the close of business on March 23, 1998 will be entitled to vote at
the Annual Meeting. At the close of business on March 23, 1998, 72,551,293
shares of Ceridian common stock were outstanding and entitled to vote at the
Annual Meeting. Each share of Ceridian common stock is entitled to one vote.
When proxy cards are returned properly signed, the shares represented will
be voted as directed. If no direction is given, the shares will be voted as
recommended by the Board. The proxy card 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 sending a
letter to that effect to the Secretary of Ceridian, by submitting another proxy
card with a later date, or by voting in person at the Annual Meeting.
Under Ceridian's Bylaws, the vote required to decide each matter scheduled
to come before the Annual Meeting 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,
abstaining from voting on a matter has the same effect as a vote against the
matter. If, however, a broker indicates on a proxy that it does not have
authority to vote certain shares on a particular matter, those shares will not
be considered present and entitled to vote with respect to that matter. In other
words, "broker non-votes" are not counted as a vote against a matter.
It is Ceridian's policy that the individual votes of a stockholder are kept
confidential prior to the final tabulation of the vote at a stockholders meeting
if the stockholder requests confidential treatment on the proxy card or ballot.
The only exceptions to this policy involve applicable legal requirements and
proxy solicitations in opposition to the Board. Access to proxies and individual
stockholder voting records is limited to the independent election inspectors
(The Bank of New York), who may inform Ceridian at any time whether or not a
particular stockholder has voted.
ELECTION OF DIRECTORS
(ITEM 1)
THE BOARD OF DIRECTORS
Ceridian's business is managed under the direction of the Board, which met
ten times and took action by consent resolution on one occasion during 1997.
Ceridian's Bylaws provide that the Board will determine the number of directors,
which is currently set at ten but will be increased to eleven prior to the
Annual Meeting. The Board has designated as nominees for director the ten
directors presently serving on the Board and Mr. Ronald A. Matricaria. See
"Nominees for Director" for profiles of the nominees. Nine of the current
directors were previously elected by the stockholders, while Robert H. Ewald was
first elected as a director by the Board on February 5, 1998. Although one of
the
1
<PAGE>
current directors, Richard W. Vieser, has reached the retirement age specified
by Ceridian policy for outside directors, the Board has voted to waive this
requirement in Mr. Vieser's case at this time in the interest of ensuring
continuity on the Board, since it is in the process of adding several new
directors in anticipation of a number of retirements over the next two years.
THE BOARD RECOMMENDS A VOTE FOR AND SOLICITS PROXIES IN FAVOR OF THE
NOMINEES NAMED BELOW. Proxies cannot be voted for more than eleven 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 1999 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, 69, 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, Vice Chairman of Betac 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; Varian Associates, Inc. and BTG, Inc. Dr. Davis has
been a director of Ceridian since 1984.
ROBERT H. EWALD Mr. Ewald, 50, has been Executive Vice President and Chief
Operating Officer of Silicon Graphics, Inc., a provider of workstations, servers
and super computers, since October 1997. He was Executive Vice President,
Computer Systems for Silicon Graphics from April 1997 to October 1997. From
December 1994 to March 1997, Mr. Ewald served as President and Chief Operating
Officer of Cray Research, Inc. prior to its merger with Silicon Graphics. He
served as Chief Operating Officer, Super Computer Operations for Cray from
January 1994 to December 1994, and as Executive Vice President and General
Manager of Super Computer Operations for Cray from January 1993 to January 1994.
Mr. Ewald is a director of Silicon Graphics, and was elected as a director of
Ceridian on February 5, 1998.
RICHARD G. LAREAU Mr. Lareau, 69, is a partner in the law firm of
Oppenheimer Wolff & Donnelly LLP. 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 Ceridian since 1971.
RONALD T. LEMAY. Mr. LeMay, 52, is President and Chief Operating Officer of
Sprint Corporation, a global communications company. Mr. LeMay returned to this
position in October 1997 after having served as Chairman, President and Chief
Executive Officer of Waste Management, Inc., a provider of waste management
services, from July 1997 to October 1997. Mr. LeMay was President and Chief
Operating Officer of Sprint from February 1996 to July 1997; Vice Chairman of
Sprint from March 1995 to February 1996; President of Sprint's Long Distance
Division from 1989 until March 1995; and served in several operating and staff
positions with Sprint from 1985 to 1989. Mr. LeMay is a director of Sprint,
Imation Corporation and Yellow Corporation. He has been a director of Ceridian
since January 1997.
GEORGE R. LEWIS Mr. Lewis, 57, is President and Chief Executive Officer of
Philip Morris Capital Corporation, a subsidiary of Philip Morris Companies,
Inc., a consumer packaged goods company. Prior to assuming his current position
in May 1997, Mr. Lewis served as Vice President and Treasurer of Philip Morris
since 1984. Mr. Lewis is a director of Wachovia Corporation and Kemper National
Insurance Companies. Mr. Lewis has been a director of Ceridian since 1994.
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CHARLES MARSHALL Mr. Marshall, 68, 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. and Sundstrand Corporation. Mr. Marshall has
been a director of Ceridian since 1989.
RONALD A. MATRICARIA Mr. Matricaria, 55, is Chairman and Chief Executive
Officer of St. Jude Medical, Inc., a provider of medical devices for the
cardiovascular market. Mr. Matricaria has been Chairman of St. Jude since
January 1995, and its Chief Executive Officer since April 1993. Prior to joining
St. Jude, Mr. Matricaria was employed by Eli Lilly and Company, Inc., a
pharmaceutical company, for twenty-three years, with his last position having
been Executive Vice President of Lilly's Pharmaceutical Division and President
of its North American operations. Mr. Matricaria is a director of St. Jude and
Centocor, Inc., and is standing for election as a director of Ceridian for the
first time.
LAWRENCE PERLMAN Mr. Perlman, 59, is Chairman, President and Chief
Executive Officer of Ceridian. He was appointed Chairman in November 1992, and
has been President and Chief Executive Officer since January 1990. He is a
director of Seagate Technology, Inc.; The Valspar Corporation and Computer
Network Technology Corporation. Mr. Perlman has been a director of Ceridian
since 1985.
CAROLE J. UHRICH Ms. Uhrich, 54, is Executive Vice President, Commercial
Imaging of Polaroid Corporation ("Polaroid"), an imaging company. She has been
employed by Polaroid since 1966, and has held her current position since March
1997. From February 1996 to March 1997, she was Executive Vice President, Global
Products Supply for Polaroid. From 1992 until February 1996, she was Vice
President, Manufacturing and Product Development for Polaroid, and prior to that
time served in a series of manufacturing, corporate quality and market research
positions. Ms. Uhrich is a director of Maytag Corporation, and has been a
director of Ceridian since 1994.
RICHARD W. VIESER Mr. Vieser, 70, 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
Berg Electronics, Inc.; Dresser Industries, Inc.; Global Industrial
Technologies, Inc.; Sybron International Corporation and Varian Associates, Inc.
Mr. Vieser has been a director of Ceridian since 1988.
PAUL S. WALSH Mr. Walsh, 42, has been Chief Executive Officer of The
Pillsbury Company since January 1992. Pillsbury is a wholly-owned subsidiary of
Diageo Plc, which was formed in December 1997 as a result of the merger of
Pillsbury's former parent, Grand Metropolitan Plc, and Guinness Plc. Mr. Walsh
is a member of Diageo's Executive Committee, and was an Executive Director of
Grand Metropolitan from October 1995 to December 1997. Mr. Walsh is a director
of Diageo, Federal Express Corporation and the Grocery Manufacturers of America,
and has been a director of Ceridian since 1991.
3
<PAGE>
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
Strategy Review Committee. The following are members of these committees as of
March 1, 1998:
Executive Committee:
Lawrence Perlman, Chair
Richard G. Lareau
Paul S. Walsh
Audit Committee:
Richard W. Vieser, Chair
Ruth M. Davis
Richard G. Lareau
George W. Lewis
Compensation and Human Resources
Committee:
Paul S. Walsh, Chair
Ronald T. LeMay
Charles Marshall
Carole J. Uhrich
Nominating and Board
Governance Committee:
Richard G. Lareau, Chair
Ronald T. LeMay
George W. Lewis
Charles Marshall
Paul S. Walsh
Strategy Review Committee:
Ruth M. Davis, Chair
Lawrence Perlman
Carole J. Uhrich
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 during 1997.
The Audit Committee reviews and recommends to the Board the selection of
Ceridian's independent auditors, consults with the independent auditors and
reviews the scope and significant findings of the audits performed by them,
reviews the adequacy and sufficiency of Ceridian'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 three times during 1997.
The Compensation and Human Resources Committee determines compensation
policies, practices and structures for key employees of Ceridian, approves the
compensation and benefits of executive officers, including the chief executive
officer, reviews the process of managing executive succession, diversity and
development, and assesses the adequacy of Ceridian's human resource policies and
principles. This Committee met seven times during 1997.
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 relevant policies. It also recommends to the Board
compensation for outside directors, evaluates the performance of the chief
executive officer and considers all nominees, including those recommended by
stockholders, for Board membership. This Committee met four times during 1997.
The Strategy Review Committee assists the Board by reviewing and assessing
the strategic plans of Ceridian's business units and Ceridian's performance in
meeting key objectives in connection with acquisitions and other strategic
transactions. It also makes recommendations to the Board on issues relating to
corporate strategy and strategic planning. This Committee met three times during
1997.
During 1997, each director attended at least 75 percent of the meetings of
the Board and his or her committees.
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DIRECTORS' COMPENSATION
The following table summarizes the compensation during 1997 of Ceridian's
outside directors. Directors who are employees are not separately compensated
for service as a director.
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
SECURITY GRANTS
---------------------------------------------------
CASH COMPENSATION SHARES ISSUED
---------------------------- SHARES ISSUED AS AS RESTRICTED
CASH PORTION OF SHARES ONE-HALF OF STOCK AWARD TO
ANNUAL RETAINER MEETING UNDERLYING ANNUAL RETAINER NEW DIRECTOR
NAME ($)(1) FEES ($)(2) OPTIONS (#)(3) (#)(1) (#)(4)
- ------------------------------------- --------------- ----------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Ruth M. Davis........................ $ 20,000 $ 16,000 1,500 369 0
Richard G. Lareau.................... $ 20,000 $ 17,000 1,500 369 0
Ronald T. LeMay...................... $ 27,500 $ 12,000 1,500 0 3,200
George R. Lewis...................... $ 15,000 $ 13,000 1,500 369 0
Charles Marshall..................... $ 15,000 $ 18,000 1,500 369 0
Carol J. Uhrich...................... $ 15,000 $ 19,000 1,500 369 0
Richard W. Vieser.................... $ 20,000 $ 14,000 1,500 369 0
Paul S. Walsh........................ $ 20,000 $ 19,000 1,500 369 0
</TABLE>
- ------------------------
(1) Includes a supplemental annual retainer of $5,000 for the chairs of the
Compensation and Human Resources, Audit, Nominating and Board Governance,
and Strategy Review Committees. Beginning in 1997, one-half of the annual
retainer is paid to each director in office at the beginning of the year in
shares of common stock that are non-transferable while the director serves
on the Board. The annual retainer was $30,000 in 1997 and was increased to
$52,000 for 1998 in connection with the elimination of all meeting fees.
(2) Fees for attendance at Board and committee meetings were $1,000 per meeting
during 1997. Meeting fees have been eliminated effective January 1, 1998.
(3) The exercise price per share of each option granted is 100% of the fair
market value of the underlying common stock on the date the option is
granted. An option becomes exercisable in full six months after its date of
grant, and expires 10 years from its date of grant. For 1998, the annual
option grant was increased to 2,000 shares.
(4) Each newly-elected director receives a one-time award of restricted stock.
The number of restricted shares awarded during 1997 was determined by
dividing an amount equal to four times (2.5 times for 1998) the then current
annual retainer for an outside director by the average closing price of a
share of common stock on the New York Stock Exchange ("NYSE") for the ten
trading days prior to the effective date of the individual's election to the
Board, rounded to the nearest 100 shares. Twenty percent of the restricted
shares will vest on each anniversary of the date of grant, and the shares
may not be transferred before they vest.
CORPORATE GOVERNANCE
Ceridian's Board and management have sought to foster an approach toward
corporate governance that will ensure an independent, informed and effective
Board, responsible and accountable for acting in the best interests of
stockholders. All directors stand for election every year, and all holders of
common stock have equal voting rights. In recent years, the Board and members of
senior management have met with representatives of Ceridian's institutional
stockholders to hear first hand their
5
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views on Ceridian's direction. In 1995, the Board approved a statement of
corporate governance policies which expressed in a consolidated fashion the
corporate governance practices that had evolved within Ceridian over a period of
several years. The statement of policies includes the following:
1. A majority of the directors should be independent. For the past seven
years, there has been only one management director on the Board.
2. The committees of the Board are established based on the Board's
assessment of what is necessary and desirable in light of Ceridian's
circumstances at any particular time and the Board's desire to most effectively
utilize directors' time, experience and expertise.
3. The Governance Committee will review at least annually the size and
composition of the Board to assess whether the personal experience and expertise
of the individual directors, and the overall mix of experience, expertise,
independence and diversity of backgrounds among all the directors will enable
the Board to most effectively monitor Ceridian's performance and actively
participate in developing long-term strategy and financial goals. This review
will include director succession planning, in light of expected future needs of
the Board and Ceridian and application of policies pertaining to tenure on the
Board.
4. All members of the Audit Committee, Compensation Committee and
Governance Committee are non-management directors. The Governance Committee
reviews Board committee structure and assignments at least annually and
recommends any changes to the Board.
5. The chairpersons of the respective Board Committees are expected to
assume leadership roles within the Board pertaining to issues within the purview
of the Committees which they chair.
6. The Governance Committee conducts at least biannually an evaluation of
the performance of the Board as a whole and of each individual director, based
on evaluation forms completed by individual directors. The results of this
evaluation and any recommendations for change are presented to the Board.
7. Any non-management director who has completed or will as of the next
annual meeting of stockholders have completed twelve years of service as a
director shall submit a letter to the Governance Committee offering not to stand
for re-election to the Board at any future meeting of stockholders. The
Governance Committee shall have complete discretion as to whether and when such
offer shall be accepted.
8. Upon a change in the employment status of any non-management director,
that director shall submit a letter to the Governance Committee offering not to
stand for re-election to the Board at the next annual meeting of the Company's
stockholders. The Governance Committee shall have complete discretion as to
whether such offer shall be accepted.
9. Any non-management director must retire from the Board no later than the
next annual meeting of the Company's stockholders occurring after his or her
70th birthday. Any director who is also an officer of the Company shall retire
from the Board immediately upon retirement or termination as an officer and
employee of the Company.
10. The non-management directors meet in executive session at least once per
year, and include in such meeting an evaluation of the performance of the chief
executive officer, based on evaluation and feedback forms previously completed
by the non-management directors.
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APPROVAL OF AMENDMENT TO
EMPLOYEE STOCK PURCHASE PLAN
(ITEM 2)
INTRODUCTION
On December 15, 1997, the Board approved an amendment to the Ceridian
Corporation Employee Stock Purchase Plan (the "ESPP") to increase by 1,000,000
shares (from 500,000 to 1,500,000) the number of shares of Ceridian common stock
that may be issued under the ESPP. The stockholders are being requested to
approve this amendment to the ESPP at the Annual Meeting in accordance with the
requirements of Section 423 of the Internal Revenue Code (the "Code"). The ESPP
was originally approved by the Board on June 29, 1995, and by Ceridian's
stockholders on May 8, 1996. The ESPP qualifies as an employee stock purchase
plan within the meaning of Section 423 of the Code.
As of December 31, 1997, 47,738 shares remained of the 500,000 shares of
Ceridian common stock originally authorized for issuance under the ESPP. Because
annual purchases under the ESPP are now in excess of 200,000 shares,
continuation of the ESPP requires that additional shares be added to that plan.
The Board believes that the ESPP has been successful in advancing the interests
of Ceridian and its stockholders by encouraging employees of Ceridian and its
designated subsidiaries to purchase Ceridian common stock through regular
payroll deductions. THE BOARD THEREFORE RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL TO AMEND THE EMPLOYEE STOCK PURCHASE PLAN. The vote required to
approve the amendment to the ESPP is a majority of the shares of common stock
represented in person or by proxy at the Annual Meeting and entitled to vote on
the matter.
SUMMARY OF THE EMPLOYEE STOCK PURCHASE PLAN
The following summary describes the principal features of the ESPP after
giving effect to the proposed amendment.
ELIGIBILITY TO PARTICIPATE. Any employee of Ceridian or one of its
designated subsidiaries is eligible to participate in the ESPP during any
offering period if he or she was so employed on the last day of the calendar
month preceding that offering period, and was not at that time on long-term
disability or unpaid leave status. Eligible employees become participants in the
ESPP by submitting to Ceridian an enrollment form by the last business day of
the month preceding the applicable offering period. Because participation in
ESPP is voluntary, and one's level of participation is a matter of personal
choice, future purchases under the ESPP are not determinable.
PURCHASES UNDER THE ESPP. Shares of Ceridian common stock will be purchased
on behalf of ESPP participants approximately five business days after the end of
each offering period, using payroll deductions that have accumulated during the
preceding offering period. The offering periods are three months long and begin
on March 16, June 16, September 16, and December 16 each year. The per share
purchase price under the ESPP is 85% of the lesser of the closing price on the
NYSE of a share of common stock on the first day or last day of the applicable
offering period.
RIGHTS TO PURCHASE SHARES. As of the first day of each offering period,
each participant is granted the right to purchase as many whole and fractional
shares of common stock as his or her payroll deductions during that offering
period will purchase at the price described earlier, but not to exceed a number
of shares equal to $6,250 divided by the fair market value of a share of common
stock on the first day of the offering period. Subject to that limitation, the
number of shares purchased at the end of an offering period is determined by
dividing a participant's payroll deductions during that offering period by the
purchase price. Participants may not transfer or otherwise dispose of their
rights or the amount of their payroll deductions under the ESPP.
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PAYROLL DEDUCTIONS. Shares may be purchased under the ESPP only with
payroll deductions; no separate cash payments may be utilized. Participants
designate on their enrollment forms the amount of money they want deducted from
each paycheck to purchase common stock under the ESPP. The minimum payroll
deduction permitted is $25 per month, and the maximum permitted is $5,312.50
(85% of $6,250) per offering period. No interest is paid on payroll deductions
between the time the money is withheld from a participant's paycheck and the
time the money is used to purchase common stock. Payroll deduction amounts may
be increased, decreased or suspended as of the beginning of the next offering
period if a change form is submitted to Ceridian by the last business day of the
month preceding the applicable offering period. Once begun, payroll deductions
in the amount specified will continue during each succeeding offering period
until the participant changes the amount, withdraws from the ESPP, or Ceridian
terminates the ESPP.
WITHDRAWING FROM THE ESPP. A participant may withdraw from the ESPP at any
time by providing written notice to Ceridian, and will receive a refund of
payroll deductions not already used to purchase common stock. A participant will
be deemed to have withdrawn from the ESPP if he or she suspends all payroll
deductions to the ESPP for four consecutive offering periods, or if, for any
reason, his or her net pay each payday after deductions not related to the ESPP
becomes less than the amount designated to be deducted each payday for
contribution to the ESPP. Any participant who has withdrawn from the ESPP but
remains eligible to participate in the ESPP may re-enroll in the ESPP in the
manner described earlier.
TERMINATION OF EMPLOYMENT. Termination of a participant's employment for
any reason, including retirement or death, will immediately terminate
participation in the ESPP. Payroll deductions credited to such participant's
ESPP account that have not already been used to purchase common stock will be
returned to the participant or his or her beneficiaries.
SHARES AVAILABLE UNDER THE ESPP. Up to 1,500,000 shares of Ceridian common
stock may be purchased under the ESPP, and these shares may be either authorized
but unissued shares or treasury shares. If there is any change in the number of
outstanding shares of common stock as the result of a stock split, consolidation
of shares, stock dividend (including a spin-off) or similar transaction, the
aggregate number of securities available for purchase under the ESPP, the number
of shares each ESPP participant has the right to purchase during the current
offering period and the purchase price of those shares will be appropriately
adjusted. If Ceridian is the surviving corporation in a merger or other
reorganization, similar equitable adjustments will be made. If Ceridian is not
the surviving corporation in such a transaction, the ESPP will terminate unless
provision is made in connection with that transaction for the ESPP to continue
on substantially similar terms.
ADMINISTRATION OF THE ESPP. The ESPP is administered by Ceridian's
Compensation and Human Resources Committee, which has the authority to interpret
the ESPP, to establish rules and make determinations regarding the ESPP, and to
delegate this authority to directors or officers of Ceridian in accordance with
applicable law.
AMENDMENT AND TERMINATION OF THE ESPP. The Board may, in its discretion,
amend or terminate the ESPP at any time, except that no amendment may (i)
adversely affect previously granted rights to purchase common stock without the
consent of the participant(s) affected; (ii) cause the ESPP to fail to meet the
requirements of Section 423 of the Code; or (iii) be made without stockholder
approval if required under Section 423 of the Code, the rules of the NYSE, or
Rule 16b-3 under the Securities Exchange Act of 1934. If the ESPP is terminated,
all payroll deductions not already used to purchase common stock will be
refunded and all outstanding rights to purchase common stock will be canceled.
8
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TAX INFORMATION REGARDING THE ESPP
Because the ESPP is intended to comply with Section 423 of the Code, a
participant will not realize any taxable income when he or she is granted the
right at the beginning of an offering period to purchase shares, or when he or
she purchases shares at the end of an offering period. The federal income tax
consequences a participant must recognize when he or she disposes of shares
purchased through the ESPP depend on how long the participant kept the shares
before disposing of them.
If a participant sells the shares two or more years after the first day of
the applicable offering period, then at that time the participant will recognize
as ordinary income the lesser of (i) the difference between the fair market
value of the shares on the date of sale and the amount the participant paid for
the shares, or (ii) 15% of the fair market value of the shares on the first day
of the applicable offering period. If the shares are sold within this two year
holding period, then the participant will recognize as ordinary income an amount
equal to the difference between the fair market value of the shares on the last
day of the applicable offering period and the amount the participant paid for
the shares. In either case, in addition to the amount recognized as ordinary
income, a participant may recognize a capital gain or loss in an amount equal to
the difference between (a) the amount received from the sale of the shares and
(b) the sum of the amount paid for the shares and the amount recognized as
ordinary income.
Ceridian is not entitled to a deduction for amounts taxed to a participant
as ordinary income or capital gain, except for ordinary income recognized by a
participant as a result of selling shares within the two year holding period
described above.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Ceridian's Compensation and Human Resources Committee (the "Committee") is
comprised solely of outside directors and is responsible for establishing and
administering the compensation program for Ceridian's executive officers. The
compensation program is designed to be competitive with other well-managed
companies with which Ceridian competes for executives, to reward superior
performance with superior levels of compensation, and to more closely align the
interests of senior management with the interests of Ceridian's stockholders.
The three components of Ceridian's executive compensation program are base
salary, annual incentive bonus and long-term incentive compensation. The target
mix of total compensation is 20% to 40% base salary, with greater weight given
to performance-based compensation (annual incentive bonus and long-term
incentive compensation) at higher levels of responsibility within Ceridian.
Performance goals for incentive compensation plans are determined by the
Committee in conjunction with the Board's approval of Ceridian's strategic and
operating plans.
Information regarding competitive compensation levels and practices for
positions comparable to Ceridian's executive officer positions 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 peer group index utilized in the performance graph on page 12,
and not all of the companies included in the peer group index are included in
the surveys utilized. Based on this information, the Committee generally targets
base salary and total cash compensation (salary plus annual bonus) for each
executive officer position to fall in a range between the 50th and 75th
percentiles of the relevant compensation marketplace, although base salary and
total cash compensation may fall outside this range if the Committee believes
individual circumstances warrant.
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
9
<PAGE>
position, competitive practice and the performance, experience and current
salary of the executive filling the position. The 1997 base salaries for
executive officers were generally within the targeted range.
ANNUAL INCENTIVE BONUS. 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 same factors considered with respect to
determining salaries, and the Committee's philosophy regarding performance-based
compensation. The 1997 target bonus percentages for executive officers were
calculated to deliver total cash compensation generally within the targeted
range.
For 1997, target bonus percentages for executive officers ranged from 35% to
65% of base salary, with the maximum possible bonus one and one-half times the
target amount and the threshold bonus one-half of the target amount. For a staff
officer, generally 100% of the total potential annual bonus was dependent upon
Ceridian achieving specified levels of earnings per share ("EPS") for 1997. For
an executive officer assigned to an operating unit, 20% of the total potential
bonus consisted of the same Ceridian EPS requirement, 50% consisted of a
requirement that the operating unit achieve specified levels of pre-tax
earnings, 20% consisted of a requirement that the operating unit achieve
specified levels of revenue growth, and 10% was based on the Committee's
subjective assessment of the executive officer's individual performance in the
area of fostering work force diversity. Payment of the financial components of
the annual bonus could be made at, above or below the target percentages
depending on whether the financial performance of Ceridian (and, if applicable,
the business unit to which the executive was assigned) met, exceeded or fell
short of the applicable budgeted amounts, but no bonus would be payable if the
applicable threshold amounts were not achieved. The Committee retains discretion
to exclude the financial impact of unusual or extraordinary events from the
calculation of the financial components of annual bonuses, and to adjust a bonus
payment if warranted in individual circumstances.
To determine the earnings component of 1997 annual bonuses, the Committee
initially assessed the financial performance of Ceridian and its business units
without regard to the gain from the sale of its defense electronics division,
the recognition of the future tax benefits of Ceridian's net operating loss
carryforwards, and the asset impairment and other unusual charges that were
recorded during 1997. On this basis, the Ceridian EPS and Human Resource
Services and Arbitron pretax earnings components were at or near maximum payout
levels. The Committee next subjectively weighed the successful 1997
implementation of a long-term strategic goal, namely focusing Ceridian solely on
information services through the sale of the defense electronics business,
against the factors that gave rise to the 1997 charges, and consequently
exercised its discretion to reduce payment of the Ceridian EPS and Human
Resource Services earnings components to target level. After combining these
results with the results of the revenue growth and non-financial components,
payments under the annual incentive program ranged from target to near superior
for the executive officers, resulting in bonus payments for executive officers
ranging between 35% and 74.3% of base salary. For 1997 only, the employment
agreements for Mr. Keil and another executive officer hired in 1997 guaranteed
payment of a bonus at target bonus percentage. Mr. Turner also received a
supplemental bonus of $50,000 in recognition of his efforts in connection with
the sale of the defense electronics business.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives for executive
officers consist primarily of annual awards of stock options. The Committee
generally targets these awards for each executive officer position to fall
between the 50th and 75th percentiles of the relevant compensation marketplace.
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 1997, annual
option awards were generally within the targeted range. The repricing of stock
options is prohibited under Ceridian's stock-based compensation plans.
10
<PAGE>
Annual stock option grants were supplemented in 1994 with awards of
performance restricted stock (which is the only type of restricted stock award
that may be made to existing employees), and in 1997 with awards of performance
stock options. No shares of performance restricted stock could vest unless
Ceridian's total return to stockholders over performance periods of two, three
and four years beginning April 30, 1994 was at least in the 60th percentile of
all companies in the S&P 500, and all shares could vest only if Ceridian's total
return to stockholders was at least in the 90th percentile. Shares which do not
vest by the end of the final performance period will be forfeited. Performance
stock option awards generally can become exercisable in installments if
Ceridian's stock price appreciates to specified levels over two, three and four
year periods beginning July 31, 1997 (see "Stock Option Grants" on page 15). 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. A performance stock option award for an officer typically
involved 1.5 times the number of shares covered by his or her annual stock
option award during 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Perlman's base salary during 1997
was $700,000, unchanged from the previous year and within the targeted range.
Mr. Perlman's 1997 annual bonus was determined in the manner described above,
and amounted to 65% of base salary. As specified in an amended employment
agreement dated November 8, 1996, Mr. Perlman also received three stock option
awards of 75,000 shares each during 1997, representing an accelerated grant of
the annual stock option awards he would otherwise have expected to receive
during the years 1997-1999. Mr. Perlman's salary, annual bonus target percentage
and long-term incentive compensation are determined by the Committee in
accordance with the practices described above. These determinations are based
primarily on the Committee's subjective evaluation of Mr. Perlman's performance,
Ceridian's performance, and its stock price performance. No specific weighting
is assigned to the factors considered by the Committee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code limits to $1 million the tax deduction for annual compensation paid
to each of the executive officers named on page 13 unless certain requirements
are met. One of these requirements is that compensation over $1 million be based
on Ceridian's attainment of performance goals established in the manner
prescribed by Section 162(m). While Ceridian has satisfied these requirements
with respect to compensation in the form of stock options, other forms of
compensation received by the five named executive officers are subject to this
$1 million limit. The non-deductible amount of compensation paid in 1997 was not
material. The Committee supports the philosophy that a significant portion of
the total compensation provided to an executive should be performance-based, and
has taken steps to qualify all long-term incentive compensation in the future as
deductible under Section 162(m). At the same time, the Committee believes that
it is important for it to retain the flexibility to tailor the salary and bonus
components of the compensation program in the manner it believes most beneficial
to Ceridian and its stockholders.
February 27, 1998
Compensation and Human Resources
Committee
Paul S. Walsh, Chairman
Ronald T. LeMay
Charles Marshall
Carole J. Uhrich
11
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return during the period
1993-1997 for Ceridian's common stock, the S&P 500 Index, and a peer group index
of data services companies. In light of the 1997 sale of Ceridian's defense
electronics division, the total returns of a peer group index of defense
electronics companies is no longer relevant and is no longer presented. The peer
group index of data services companies, weighted for market capitalization,
consists of Automatic Data Processing, Inc.; Bisys Group, Inc.; Computer
Sciences Corporation; Dun & Bradstreet Corporation; Electronic Data Systems
Corporation; Equifax, Inc.; First Data Corporation; Fiserv, Inc.; Information
Resources, Inc.; National Data Corporation; and Paychex, Inc.
The graph assumes the investment of $100 in Ceridian's common stock, the S&P
500 Index and the peer group index on December 31, 1992, and the reinvestment of
all dividends as and when distributed.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(CERIDIAN CORPORATION, THE S&P 500 INDEX AND PEER GROUP INDEX)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CERIDIAN DATA SERVICES S&P 500
CORPORATION PEER GROUP INDEX
<S> <C> <C> <C>
1992 $100.00 $100.00 $100.00
1993 $124.59 $105.16 $110.08
1994 $176.23 $119.37 $111.53
1995 $270.49 $161.84 $153.45
1996 $265.57 $169.20 $188.68
1997 $300.41 $187.82 $251.63
</TABLE>
12
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation for the past three years of
Ceridian's five most highly compensated executive officers as of December 31,
1997, as well as the compensation during the same period of two additional
individuals who were among Ceridian's five most highly compensated executive
officers during 1997 but were no longer executive officers of Ceridian at
December 31, 1997. These seven individuals are referred to as the "Named
Executives."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS
ANNUAL COMPENSATION ---------------- PAYOUTS
------------------------ SECURITIES ------------- ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING LTIP COMPENSATION
POSITION YEAR ($)(1) ($) OPTIONS/SARS(#) PAYOUTS($)(2) ($)(3)
- ------------------------------------- --------- ----------- ----------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Perlman 1997 $ 744,984 $ 455,000 225,000 -- $ 3,375
Chairman, President and 1996 744,984 682,500 225,000 $ 1,113,673 3,375
Chief Executive Officer 1995 649,992 633,750 80,000 -- 3,375
Ronald L. Turner 1997 389,500 274,297 130,000 -- 3,375
Executive Vice President, 1996 340,000 252,630 30,000 742,465 3,375
Operations 1995 300,000 222,900 25,000 -- 3,375
Stephen B. Morris 1997 314,992 214,141 83,000 -- 3,375
Executive Vice President and 1996 299,992 219,450 30,000 742,465 3,375
President of the Arbitron Company 1995 260,040 189,249 25,000 -- 3,375
John R. Eickhoff 1997 334,984 170,500 90,000 -- 3,375
Executive Vice President and 1996 289,984 218,625 33,000 742,465 3,375
Chief Financial Officer 1995 240,000 263,000 30,000 -- 3,375
Carl O. Keil 1997 201,907 101,980 110,000 -- 6,525
Vice President and President of
Ceridian Employer Services (4)
Ronald James 1997 354,992 181,500 -- 188,933 748,255(6)
Former Executive Vice President and 1996 348,646 181,500 80,000 -- 6,750
President of Human Resource Services
(5)
George L. McTavish 1997 326,501 79,202 -- -- 1,092,164(8)
Former Executive Vice 1996 373,144 27,851 30,000 -- --
President and Chief Executive 1995 348,140 139,256 82,000 -- --
Officer of Comdata Holdings
Corporation (7)
</TABLE>
- ------------------------
(1) The amounts reported for each individual as salary for 1997 and 1996 include
cash payments received during the year equal in amount to the value of an
annual expense allowance that had been made available to such individuals
and other Ceridian executives in 1995 and earlier years.
(2) The amounts reported in this column represent the market value of shares of
common stock which were granted in 1994 (1996 in the case of Mr. James)
under a performance restricted stock program and which vested on April 30,
1996 (January 1, 1997 in the case of Mr. James), such value
13
<PAGE>
determined by utilizing the closing price of the common stock on the NYSE on
the vesting date. At the end of 1997, the number and value (based on the
closing price of Ceridian's common stock on the NYSE on December 31, 1997)
of aggregate restricted stock holdings of the Named Executives was as
follows:
<TABLE>
<CAPTION>
NAME NO. OF SHARES VALUE ($)
------------------ ------------- -------------
<S> <C> <C>
Mr. Perlman..................................................... 51,667 $ 2,366,994
Mr. Turner...................................................... 34,451 1,578,286
Mr. Morris...................................................... 34,451 1,578,286
Mr. Eickhoff.................................................... 34,451 1,578,286
Mr. Keil........................................................ -- --
Mr. James....................................................... -- --
Mr. McTavish.................................................... -- --
</TABLE>
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 a final performance period ending April 30, 1998. 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.
(3) The amounts disclosed for each individual represent Ceridian's contributions
to the accounts of the named individuals in Ceridian's 401(k) defined
contribution plans and, in the case of Mr. James and Mr. McTavish, severance
payments, as described in notes (6) and (8).
(4) Mr. Keil joined Ceridian on April 14, 1997 and was elected as an executive
officer on October 23, 1997.
(5) Mr. James served as an executive officer of Ceridian from January 1, 1996 to
September 4, 1997.
(6) Represents $741,730 in contractual severance payments made in connection
with the termination of Mr. James' employment with Ceridian, and $6,525 in
Ceridian contributions to Mr. James' account in Ceridian's 401(k) plan.
(7) Mr. McTavish was an executive officer of Ceridian from December 12, 1995,
when Comdata was acquired by Ceridian, to November 14, 1997. Amounts shown
for 1995 reflect compensation received from both Comdata and Ceridian.
(8) Represents $1,089,914 in severance payments made under a severance
compensation agreement that was assumed by Ceridian in connection with its
acquisition of Comdata, and $2,250 in Ceridian contributions to Mr.
McTavish's account in Ceridian's 401(k) plan.
14
<PAGE>
STOCK OPTION GRANTS
The following table summarizes information regarding stock options granted
during 1997 to the Named Executives.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) YEAR ($/SH)(2) DATE ($)(3)
- -------------------------------------- ------------- --------------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Lawrence Perlman 75,000 3.33% $ 37.00 1/30/07 $ 1,078,553
75,000(4) 3.33% 33.38 4/30/07 1,076,880
75,000(4) 3.33% 43.75 7/31/07 1,380,428
Ronald L. Turner 20,000 0.89% 42.38 6/20/07 329,356
65,000(5) 2.89% 42.50 7/30/07 1,191,336
45,000 2.00% 40.00 10/22/07 699,602
Stephen B. Morris 50,000(5) 2.22% 42.50 7/30/07 916,412
33,000 1.46% 40.00 10/22/07 513,041
John R. Eickhoff 55,000(5) 2.44% 42.50 7/30/07 1,008,053
35,000 1.55% 40.00 10/22/07 544,133
Carl O. Keil 25,000 1.11% 30.75 4/14/07 298,787
25,000(5) 1.11% 42.50 7/30/07 458,205
40,000 1.78% 40.00 10/22/07 337,956
20,000(5) 0.89% 40.00 10/22/07 621,866
Ronald James -- -- -- -- --
George L. McTavish -- -- -- -- --
</TABLE>
- ------------------------
(1) All options were granted under Ceridian's 1993 Long-Term Incentive Plan,
which prohibits the repricing of any stock option and, under most
circumstances, accelerating the exercisability of any stock option.
Exercisability will, however, generally be accelerated if an optionee's
employment is terminated due to death or disability or is terminated within
two years of a change of control of Ceridian. Except as provided in notes
(4) and (5) below, all options become exercisable in cumulative one-third
installments beginning one year after the respective grant dates, and all
options expire ten years after the respective grant dates.
(2) The per share exercise price of each option granted in 1997 is equal to the
fair market value (closing price on the NYSE) of a share of Ceridian common
stock on the date of grant.
(3) The grant date present values have been estimated using the Black-Scholes
option pricing model using the following weighted-average assumptions:
expected time of exercise of approximately six years, expected volatility of
32.7%, no dividends and a risk free interest rate of 5.3%. No adjustments
have been made for the fact that options are not transferable and are
subject to a risk of forfeiture.
(4) These options become exercisable in full on April 30, 2000.
(5) Each of these options becomes exercisable in full on July 30, 2006, and is
subject to accelerated exercisability as provided in the following sentence.
One-third of the shares subject to the option will become exercisable on
July 31, 1999 if the average closing price of a share of Ceridian common
stock on the NYSE for any 20 consecutive trading day period ending prior to
that date is greater than $54.00, two-thirds of the shares in the aggregate
will become exercisable on July 31, 2000 if such average closing price for
any 20 consecutive trading day period ending prior to that
15
<PAGE>
date is greater than $62.00, and all of the shares will become exercisable
on October 1, 2001 if such average closing price for any 20 consecutive
trading day period ending prior to that date is greater than $72.00. If the
final share price target is not satisfied, the option will nevertheless
become exercisable as to three-fourths of the shares in the aggregate on
October 1, 2001 if Ceridian's total return to stockholders for the period
July 31, 1997 through September 30, 2001 is at least at the 75th percentile
of all companies in the S&P 500. If employment is terminated due to death,
disability or within two years of a change of control of Ceridian, the
option will immediately become exercisable with respect to that portion of
the shares that corresponds to the greatest stock price performance standard
satisfied prior to such termination of employment.
OPTION EXERCISES AND OPTION VALUES
The following table summarizes information regarding the exercise of stock
options during 1997 by the Named Executives, as well as the December 31, 1997
value of unexercised stock options held by the Named Executives.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
SHARES ACQUIRED VALUE -------------------------- -----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- ------------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Perlman............. 108,616 $ 3,180,759 478,421 504,999 $ 12,839,581 $ 2,512,781
Ronald L. Turner............. -- -- 115,001 174,999 2,756,080 818,145
Stephen B. Morris............ -- -- 95,001 127,999 2,128,830 630,057
John R. Eickhoff............. -- -- 163,595 140,333 4,503,666 674,721
Carl O. Keil................. -- -- -- 110,000 -- 808,125
Ronald James (2)............. -- -- 26,667 53,333 94,868 189,732
George L. McTavish (3)....... 37,017 912,042 90,049 28,333 1,837,246 58,087
</TABLE>
- ------------------------
(1) Represents the difference between the market value of Ceridian's common
stock on December 31, 1997 ($45.8125) and the exercise price of in-the-money
options.
(2) An additional 16,667 shares became exercisable on January 2, 1998, and the
balance of the unexercisable shares were forfeited in connection with Mr.
James' termination of employment. Exercisable shares remain exercisable
until April 2, 1998.
(3) Exercisability with respect to 60,190 shares had been accelerated in
connection with Mr. McTavish's termination of employment in accordance with
a change of control termination agreement between Mr. McTavish and Comdata,
which was assumed by Ceridian in connection with its acquisition of Comdata.
These shares will remain exercisable until November 14, 1998. Under the
terms of Ceridian's 1993 Long-Term Incentive Plan applicable to retirements,
the balance of the shares will become exercisable and remain exercisable
during the term of the applicable option as provided in the corresponding
award agreements.
16
<PAGE>
PENSION PLAN
Ceridian maintains a voluntary, tax qualified, defined benefit retirement
plan for U.S. employees (the "Retirement Plan") which is funded by employee
salary reduction contributions and employer contributions. The Retirement Plan
was closed to new participants effective January 2, 1995. The amount of the
annual benefit under the Retirement Plan is based upon an employee's average
annual compensation during the employee's highest consecutive five-year earnings
period with Ceridian while participating in the Retirement Plan. Because the
Internal Revenue Code limits the annual benefit that may be paid from
tax-qualified plans such as the Retirement Plan, Ceridian 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 Plan had these limits not been in effect.
Ceridian has established and funded a Benefits Protection Trust out of which
benefits under the Benefit Equalization Plan for persons who terminate
employment with Ceridian after December 1, 1994 are to be paid. Assets in this
trust remain subject to the claims of Ceridian's general creditors.
The following table shows estimated annual benefits payable under the
Retirement Plan and the Benefit Equalization Plan to an employee who retires in
1998 at age 65:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
300,000 $ 69,665 $ 92,887 $ 116,109 $ 139,331 $ 157,331
400,000 93,665 124,887 156,109 187,331 211,331
500,000 117,665 156,887 196,109 235,331 265,331
600,000 141,665 188,887 236,109 283,331 319,331
800,000 189,665 252,887 316,109 379,331 427,331
1,000,000 237,665 316,887 396,109 475,331 535,331
1,200,000 285,665 380,887 476,109 571,331 643,331
1,400,000 333,665 444,887 556,109 667,331 751,331
</TABLE>
Annual compensation for purposes of the Retirement Plan and the Benefit
Equalization Plan consists of salary and any annual bonus paid during the year,
less the amount contributed by the employee to the Retirement Plan that year.
Compensation for 1997 covered by this Plan for the Named Executives is as
follows: Mr. Perlman, $1,329,239; Mr. Turner, $594,735; Mr. Morris, $496,221;
and Mr. Eickhoff, $527,374. Mr. Keil is not, and Mr. James and Mr. McTavish were
not, eligible to participate in the Retirement Plan. For purposes of the
Retirement Plan 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, 1998, years of credited service for the Named Executives were
as follows: Mr. Perlman, 17.76 years; Mr. Turner, 5.18 years; Mr. Morris, 3.17
years; and Mr. Eickhoff, 34.42 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.
17
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
Ceridian has employment agreements with Messrs. Perlman, Turner, Morris,
Eickhoff and Keil. These agreements generally provide that the executives are
required to devote full time to Ceridian in their specified positions, and
contain provisions regarding protection of confidential information, rights in
any intellectual property created by the executive, restrictions on competition,
and change of control compensation (as described below under the caption "Change
of Control Provisions").
The agreement with Mr. Perlman, the term of which extends to April 30, 2000,
provides for an annual base salary of $700,000 for 1997 and $750,000 thereafter,
an annual bonus targeted at 65% of base salary and a $200,000 post-retirement
benefits allowance. The agreement specifies the long-term incentive awards to be
provided during the term of the agreement, which consist of a 75,000 share
annual stock option grant and a 150,000 share performance stock option grant
made in November 1996, and three 75,000 share stock option grants made during
1997 (see "Stock Option Grants" on page 15) that represent an accelerated grant
of the annual stock option awards he would otherwise have expected to receive
during the years 1997-1999. The performance stock option grant will become
exercisable in full on April 30, 2000 if on that date Mr. Perlman's successor as
chief executive officer of Ceridian has been designated by the Board, and the
average closing price of a share of Ceridian common stock on the NYSE for a 20
trading day period prior to April 30, 2000 is greater than or equal to $70.00.
If Ceridian terminates the agreement without cause, Mr. Perlman would be
entitled to receive (1) a lump sum payment equal to two years' base salary
(three years if a release of claims is signed), (2) a proportionate share of the
bonus he would otherwise have received if he had remained employed with Ceridian
for the full year in which termination occurred, (3) a supplemental retirement
benefit calculated by including an additional three years' base salary in the
determination of final average pay and by including a number of additional years
of service credit equal to the number of years of base salary received in the
previously described lump sum payment, and (4) accelerated exercisability of
stock options granted prior to the date of the employment agreement. If Mr.
Perlman retires early to permit his designated successor to assume the position
of chief executive officer, he is to receive his base salary and target bonus
through the end of the year in which he retires, the post-retirement benefits
allowance, accelerated exercisability of options granted in 1997 and possible
proportionate accelerated exercisability of the performance stock option. The
agreement also specifies amounts to be paid to Mr. Perlman or his beneficiaries
if the agreement is terminated due to death or disability (generally a
proportionate share of the bonus payable at "target performance" for the year in
which termination occurred and, in the event of disabiltiy, five months base
salary or, in the event of death, one year's base salary and bonus at target
performance).
The term of the agreements with Messrs. Turner, Morris, Eickhoff and Keil is
the later of June 30, 1999 or two years after a change of control of Ceridian
occurring before that date. If Ceridian terminates an agreement without cause,
the executive is entitled to receive a lump sum payment equal to one year's base
salary (two years if a release of claims is signed) and a proportionate share of
the bonus the executive would otherwise have received if he had remained
employed with Ceridian for the full year in which termination occurred. The
agreement for Mr. Eickhoff also provides that in the event of such a
termination, he would receive a supplemental retirement benefit calculated by
including an additional year's base salary in the determination of final average
pay. The agreements also contain provisions comparable to those in Mr. Perlman's
agreement with regard to payments to be made if termination occurs due to death
or disability.
In connection with the acquisition of Comdata, Ceridian assumed and amended
a severance compensation agreement between Comdata and Mr. McTavish. Upon Mr.
McTavish's termination of employment in November 1997 and in accordance with
that agreement, he received a lump sum severance payment (see "Summary
Compensation Table" on page 13), two years of life, health and disability
insurance coverage and accelerated exercisability of stock options granted prior
to Ceridian's acquisition of Comdata (see "Option Exercises and Option Values"
on page 16). Upon
18
<PAGE>
Mr. James' termination of employment in January 1998, he received a lump sum
severance payment in accordance with his executive employment agreement (see
"Summary Compensation Table" on page 13).
CHANGE OF CONTROL PROVISIONS
The exercisability of stock options or the vesting of other awards under
Ceridian's stock-based compensation plans and the payment of benefits under 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 Ceridian if less than 50 percent of
Ceridian'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
Ceridian substantially as an entirety; (3) ownership by a person or group acting
in concert of at least 25% of Ceridian's voting securities; (4) approval by the
stockholders of a plan for the liquidation of Ceridian; and (5) certain changes
in the composition of Ceridian's Board. The term "change of control termination"
refers to either of the following if it occurs within two years of a "change of
control" of Ceridian: (i) termination of a participant's employment by Ceridian
for any reason other than continuing failure to satisfactorily fulfill
employment duties or conduct that constitutes fraud, theft, embezzlement or an
intentional violation of law involving moral turpitude; or (ii) the executive
terminates employment with Ceridian for "good reason." A change of control
termination does not include termination of employment due to death or
disability. The term "good reason" is generally defined as an adverse change in
an executive's responsibilities, authority, compensation, benefits or working
conditions, or a material breach of an employment agreement by Ceridian.
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 "base
amount," which is the average annual compensation received by the executive from
Ceridian during the five taxable years preceding the change of control, and to
receive from Ceridian until age 65 the same health and welfare benefits the
executive received immediately prior to 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 the executive employment
agreements. The stock-based compensation plans and executive employment
agreements also provide that compensation that may be received by an executive
as a result of a change of control of Ceridian must be less than the amount that
would be considered a "parachute payment" under Section 280G of the Code if and
only if imposition of this limitation would result in greater net after-tax
proceeds to an executive.
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<PAGE>
SHARE OWNERSHIP INFORMATION
SHARE OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Ceridian's common stock as of February 28, 1998 by each director or
nominee for director, by each of the five most highly compensated executive
officers, and by all executive officers, directors and nominees for director as
a group.
<TABLE>
<CAPTION>
OF SHARES
SHARES OF COMMON BENEFICIALLY OWNED,
STOCK BENEFICIALLY PERCENT OF COMMON SHARES THAT MAY BE
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNED (1) STOCK OWNED ACQUIRED WITHIN 60 DAYS(2)
- ----------------------------------------------- -------------------- ----------------- --------------------------
<S> <C> <C> <C>
Directors
Ruth M. Davis................................ 8,810 (3) 6,000
Robert H. Ewald.............................. 2,900 (3) 0
Richard G. Lareau............................ 8,437(4) (3) 4,000
Ronald T. LeMay.............................. 5,268 (3) 1,500
George R. Lewis.............................. 8,323 (3) 4,000
Charles Marshall............................. 12,922 (3) 6,000
Ronald A. Matricaria......................... -- -- --
Lawrence Perlman............................. 609,611 0.84% 556,754
Carole J. Uhrich............................. 8,323 (3) 4,000
Richard W. Vieser............................ 18,022 (3) 6,000
Paul S. Walsh................................ 11,974 (3) 6,000
Named Executive Officers
Ronald L. Turner............................. 179,904 0.25% 131,667
Stephen B. Morris............................ 153,892 0.21% 111,667
John R. Eickhoff............................. 232,253 0.32% 181,928
Carl O. Keil................................. 11,065 (3) 8,334
All executive officers, directors and nominees
as a group.................................... 1,321,990(4) 1.80% 1,064,184
</TABLE>
- ------------------------
(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) All shares shown in this column may be acquired within 60 days through the
exercise of stock options granted by Ceridian. These shares are treated as
outstanding only when determining the amount and percent owned by the
applicable individual or group.
(3) Number of shares represents less than 0.1% of outstanding common stock.
(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.
20
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Ceridian's common stock by each stockholder who is known by
Ceridian to own beneficially more than 5% of its 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. 11,762,406(2) 16.25%
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
AXA-UAP 8,890,284(3) 12.28%
23 Avenue Matignon
75008 Paris, France
</TABLE>
- ------------------------
(1) Percentage calculated based on the number of shares of Ceridian's common
stock issued and outstanding as of February 28, 1998.
(2) Beneficial ownership as of December 31, 1997 as reported in a Schedule 13G
dated February 14, 1998. These securities are beneficially owned by the
named parties as a result of their direct and indirect ownership of Fidelity
Management & Research Company and Fidelity Management Trust Company, which
act as investment adviser to certain investment companies and as investment
manager of certain institutional accounts, respectively. Represents sole
power to dispose or direct the disposition of 11,762,406 shares and sole
power to vote or direct the vote of 251,549 shares.
(3) Beneficial ownership as of December 31, 1997 as reported in a Schedule 13G
dated February 10, 1998. These securities are held by subsidiaries of
AXA-UAP, principally The Equitable Companies Incorporated and its subsidiary
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 1,489,389 shares, sole power to dispose or direct the
disposition of 8,888,683 shares, shared power to vote or direct the vote of
7,257,301 shares, and shared power to dispose or direct the disposition of
1,601 shares.
INDEPENDENT AUDITORS
The Board has selected KPMG Peat Marwick LLP, Ceridian's present auditors,
to audit Ceridian's accounts for the year ending December 31, 1998.
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 1999
Annual Meeting of Stockholders must be received by Ceridian on or before
November 30, 1998.
21
<PAGE>
Ceridian's Bylaws require advance written notice to Ceridian of
stockholder-proposed business or of a stockholder's intention to make a
nomination for director at an annual meeting of stockholders. They also limit
the business which may be conducted at any special meeting of stockholders to
business brought by the 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 Ceridian 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. A stockholder's notice must set forth (i) a description of the proposed
business and the reasons for it, (ii) the name and address of the stockholder
making the proposal, (iii) the class and number of shares of Ceridian 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
Ceridian within the time limits described above. The stockholder's notice must
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 making the nomination and the class and number of shares of
Ceridian stock owned by that stockholder.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Ceridian's
directors, executive officers and persons who beneficially own more than 10% of
Ceridian's common stock to file with the SEC reports of ownership regarding the
common stock and other Ceridian equity securities. These persons are required by
SEC regulation to furnish Ceridian with copies of all Section 16(a) reports they
file. To Ceridian's knowledge, based on a review of the copies of such reports
received during the period January 1, 1997 to February 14, 1998, all Section
16(a) filing requirements applicable to its officers, directors and 10%
beneficial owners were complied with except that there was an inadvertent
failure to include the November 1996 receipt of two stock option awards covering
75,000 and 150,000 shares, respectively, in Lawrence Perlman's year-end 1996
Form 5 report filed in February 1997. This report was subsequently amended to
include information regarding the two stock option awards.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by Ceridian, which 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 Ceridian 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. Ceridian 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 Annual Meeting.
22
<PAGE>
COPIES OF CERIDIAN'S ANNUAL REPORT ON FORM 10-K (AN ANNUAL FILING WITH THE
SEC) FOR THE YEAR ENDED DECEMBER 31, 1997 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
VICE PRESIDENT AND SECRETARY
Minneapolis, Minnesota
March 30, 1998
23
<PAGE>
CERIDIAN CORPORATION
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425
(612) 853-8100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1998
The Annual Meeting of Stockholders of Ceridian Corporation, a Delaware
corporation ("Ceridian"), will be held in the Harbor Court Hotel, 550 Light
Street, Baltimore, Maryland 21202 on Friday, May 22, 1998 at 9:00 a.m., Eastern
Daylight Savings Time, for the following purposes:
(1) To elect directors for the following year; and
(2) To approve an amendment to Ceridian's Employee Stock Purchase Plan to
add 1,000,000 shares to the number of shares of Ceridian's common stock
that may be issued under the Plan.
Stockholders of record of Ceridian's common stock at the close of business
on March 23, 1998 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 Ceridian 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 May 8, 1998 through May 22, 1998, 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, 1998 John A. Haveman
VICE PRESIDENT AND SECRETARY
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY to [ ] FOR, EXCEPT YOU MAY WITHHOLD
listed below vote for all nominees listed below AUTHORITY TO VOTE FOR ANY NOMINEE
BY CROSSING OUT HIS OR HER NAME
</TABLE>
Nominees: Ruth M. Davis, Robert H. Ewald, Richard G. Lareau, Ronald T. LeMay,
George R. Lewis, Charles Marshall, Ronald A. Matricaria, Lawrence
Perlman, Carole J. Uhrich, Richard W. Vieser, Paul S. Walsh
<TABLE>
<S> <C> <C> <C>
2. Proposal to approve amendment to Employee Stock Purchase Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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: , 1998
-------------------------
------------------------------
(PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.) VOTES
MUST BE INDICATED [X] IN BLACK OR BLUE INK.
<PAGE>
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 22, 1998.
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 22, 1998
and at any adjournment or postponement thereof all of the undersigned's shares
of Ceridian Corporation common stock held of record on March 23, 1998 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.)
