<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by 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)
CERIDIAN CORPORATION
(Name of Person(s) Filing Proxy Statement)
-----------------------------
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:
<PAGE>
[LOGO]
Dear Stockholder:
On behalf of Ceridian's Board of Directors, I am pleased to invite you to
attend Ceridian Corporation's 1999 Annual Meeting of Stockholders. The meeting
will be held at the Hotel Fort Garry, 222 Broadway, Winnipeg, Manitoba, Canada
on Thursday, May 20, 1999 at 8:30 a.m., local time.
The Notice of Annual Meeting of Stockholders and the proxy statement that
follows include information about the following proposals recommended by
Ceridian's Board of Directors to:
(1) Elect eleven individuals to serve as directors of Ceridian.
(2) Amend Ceridian's Restated Certificate of Incorporation to increase the
number of authorized shares of common stock Ceridian is authorized to
issue from 200,000,000 to 500,000,000.
(3) Approve a new 1999 Stock Incentive Plan.
Ceridian's Board of Directors believes that a favorable vote on each of the
matters to be considered at the annual meeting is in the best interests of
Ceridian and its stockholders and unanimously recommends a vote FOR each such
matter. Accordingly, we urge you to review the accompanying materials carefully
and to return the enclosed proxy card promptly.
Your vote is important. Whether you own a few or many shares of stock, it is
important that your shares be represented at the meeting. We hope that you will
be able to attend the annual meeting. Whether or not you can be present at the
meeting in person, please complete, sign, date and return the enclosed proxy
card as promptly as possible to ensure that your vote is counted at the meeting.
If you do attend, your proxy can be revoked at your request in the event you
wish to vote in person.
We look forward to seeing you at the meeting.
Sincerely,
[SIG]
Lawrence Perlman
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
CERIDIAN CORPORATION
PROXY STATEMENT
CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General Information........................................................................................ 1
Election of Directors (Item 1)............................................................................. 2
The Board of Directors................................................................................... 2
Nominees for Director.................................................................................... 2
Committees of the Board of Directors..................................................................... 4
Director Compensation.................................................................................... 5
Corporate Governance..................................................................................... 6
Approval of Amendment to Ceridian's Restated Certificate of Incorporation (Item 2)......................... 7
Proposed Amendment....................................................................................... 7
Purpose and Effect of the Amendment...................................................................... 8
Board Recommendation..................................................................................... 8
Approval of 1999 Stock Incentive Plan (Item 3)............................................................. 9
Introduction............................................................................................. 9
Summary of the 1999 Plan................................................................................. 9
Tax Information Regarding Awards......................................................................... 12
New Plan Benefits........................................................................................ 13
Board Recommendation..................................................................................... 13
Compensation and Human Resources Committee Report on Executive Compensation................................ 14
Stock Price Performance Graph.............................................................................. 17
Executive Compensation..................................................................................... 18
Summary Compensation Table............................................................................... 18
Stock Option Grants...................................................................................... 19
Option Exercises and Option Values....................................................................... 20
Pension Plan............................................................................................. 21
Executive Employment Agreements.......................................................................... 22
Change of Control Provisions............................................................................. 22
Share Ownership Information................................................................................ 24
Share Ownership of Directors and Management.............................................................. 24
Share Ownership of Certain Beneficial Owners............................................................. 25
Independent Auditors....................................................................................... 25
Other Matters.............................................................................................. 25
Stockholder Proposals.................................................................................... 25
Section 16(a) Beneficial Ownership Reporting Compliance.................................................. 26
Solicitation of Proxies.................................................................................. 26
</TABLE>
<PAGE>
[LOGO]
------------------------
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425
------------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 20, 1999
------------------------
GENERAL INFORMATION
This proxy statement and the enclosed proxy card are being mailed to
Ceridian Corporation stockholders beginning on or about April 8, 1999 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 20, 1999 (the "Annual Meeting"). Holders of Ceridian's common stock of
record at the close of business on March 22, 1999 will be entitled to vote at
the Annual Meeting. At the close of business on March 22, 1999, 144,182,032
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
delivering a letter to that effect to the Secretary of Ceridian, by delivering
another proxy card with a later date, or by voting in person at the Annual
Meeting.
Under Ceridian's Bylaws, the holders of a majority of the outstanding shares
of the common stock of Ceridian entitled to vote, present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Annual Meeting. Election of directors by stockholders will be determined
by a plurality of the votes cast by the stockholders present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors. Approval of the amendment to Ceridian's Restated Certificate of
Incorporation to increase the number of shares of common stock Ceridian is
authorized to issue from 200,000,000 to 500,000,000 requires the affirmative
vote of a majority of the shares of common stock outstanding. Approval of the
proposal to approve Ceridian's 1999 Stock Incentive Plan requires the
affirmative vote of a majority of the shares of common stock present in person
or represented by proxy at the Annual 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.
1
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1)
THE BOARD OF DIRECTORS
Ceridian's business is managed under the direction of the Board, which met
nine times during 1998. Ceridian's Bylaws provide that the Board will determine
the number of directors, which is currently set at fourteen but will be
decreased to eleven prior to the Annual Meeting. The Board has designated as
nominees for director eleven of the directors presently serving on the Board.
See "Nominees for Director" for profiles of the nominees. Eight of the current
directors being nominated for election were previously elected by the
stockholders, while Bruce R. Bond, Ronald L. Turner and Nicholas D. Chabraja
were first elected as directors by the Board on July 23, 1998. Two of the
current directors, Charles Marshall and Richard W. Vieser, have reached the
retirement age specified by Company policy for outside directors and will not
stand for re-election. Ronald A. Matricaria will also not stand for re-election.
The Board thanks Messrs. Marshall, Vieser and Matricaria for their dedicated
service to Ceridian. Two other current directors, Ruth M. Davis and Richard G.
Lareau, have also reached the retirement age specified by Ceridian policy for
outside directors. The Board has voted to waive this requirement in each of
their cases at this time in the interest of ensuring continuity on the Board.
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. The
Board has no reason to believe any of the nominees for director will be unable
or unavailable to serve. However, if any nominee should for any reason become
unable or unavailable to serve, proxies will be voted for another nominee
selected by the Board. Alternatively, proxies, at the Board's discretion, may be
voted for such fewer number of nominees as results from a director's inability
or unavailability to serve. Each person elected will hold office until the 2000
Annual Meeting of Stockholders and until his or her successor is duly elected
and qualified, or until earlier resignation or removal.
NOMINEES FOR DIRECTOR
BRUCE R. BOND Mr. Bond, 52, is Chairman, President and Chief Executive
Officer of PictureTel Corporation, a company that develops, manufactures and
markets video and audio conferencing solutions. He was appointed Chairman in
June 1998, and has been President and Chief Executive Officer since February
1998. Prior to joining PictureTel, Mr. Bond served as Chief Executive Officer of
ANS Communications, the networking subsidiary of America Online, Inc., from July
1996 to February 1998. Prior to ANS, Mr. Bond spent seven years with British
Telecom PLC, where he was Managing Director of British Telecom's national
business communications division. Mr. Bond is a director of PictureTel and WITCO
Corporation. Mr. Bond was elected as a director of Ceridian in July 1998.
NICHOLAS D. CHABRAJA Mr. Chabraja, 56, has been Chairman and Chief
Executive Officer of General Dynamics Corporation since June 1997. Mr. Chabraja
served as Vice Chairman of General Dynamics from December 1996 to June 1997,
Executive Vice President from 1994 to December 1996, and Senior Vice President
and General Counsel from 1993 to 1994. Prior to joining General Dynamics, Mr.
Chabraja was a partner at the law firm of Jenner & Block from 1975 and Senior
Partner from 1986 to December 1996. Mr. Chabraja is a director of General
Dynamics. Mr. Chabraja was elected as a director of Ceridian in July 1998.
RUTH M. DAVIS Dr. Davis, 70, 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 Aerospace
Corporation and as a trustee of Consolidated Edison Company of New York. Dr.
Davis is a director of Premark International, Inc.; Principal Financial Group
Inc.; Varian Associates, Inc.; and BTG, Inc. Dr. Davis has been a director of
Ceridian since 1984.
2
<PAGE>
ROBERT H. EWALD Mr. Ewald, 51, has been President and Chief Executive
Officer of E-Stamp Corporation since March 1, 1999. From October 1997 to July
1998, Mr. Ewald served as Executive Vice President and Chief Operating Officer
of Silicon Graphics, Inc., a provider of high performance workstations, servers
and super computers. He was Executive Vice President, Computer Systems for
Silicon Graphics from April 1997 to October 1997. Prior to the merger of Cray
Research, Inc. with Silicon Graphics, Mr. Ewald served as President and Chief
Operating Officer of Cray from December 1994 to March 1997; Chief Operating
Officer, Super Computer Operations from January 1994 to December 1994; and as
Executive Vice President and General Manager of Super Computer Operations from
January 1993 to January 1994. Mr. Ewald has been a director of Ceridian since
February 1998.
RICHARD G. LAREAU Mr. Lareau, 70, 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 Mesabi Trust. Mr. Lareau has been a director of Ceridian since
1971.
RONALD T. LEMAY Mr. LeMay, 53, 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 April 1995 to April 1996; President of Sprint's Long Distance
Division from 1989 to 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. Mr. LeMay 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
Companies Inc. 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.
LAWRENCE PERLMAN Mr. Perlman, 60, is Chairman and Chief Executive Officer
of Ceridian. He was appointed Chairman in November 1992, and has been Chief
Executive Officer since January 1990. Mr. Perlman was President of Ceridian from
January 1990 to April 1998. He is a director of Seagate Technology, Inc.; The
Valspar Corporation; Computer Network Technology Corporation; and Amdocs
Limited. Mr. Perlman has been a director of Ceridian since 1985.
RONALD L. TURNER Mr. Turner, 52, has been President and Chief Operating
Officer of Ceridian since April 1998. He was Executive Vice President of
Operations of Ceridian from March 1997 to April 1998; an Executive Vice
President of Ceridian and President and Chief Executive Officer of its Computing
Devices International division from January 1996 to March 1997; and Vice
President of Ceridian and President of Computing Devices International from
January 1993 to January 1996. Mr. Turner was President and Chief Executive
Officer of GEC-Marconi Electronics Systems Corporation, a defense electronics
company, from March 1987 to January 1993. Mr. Turner is a director of FLIR
Systems, Inc. and BTG, Inc. Mr. Turner has been a director of Ceridian since
July 1998.
CAROLE J. UHRICH Ms. Uhrich, 55, is Executive Vice President and Assistant
Chief Operating Officer of Polaroid Corporation. She has been employed by
Polaroid since 1966, and has held her current position since September 1998. She
was Executive Vice President of Commercial Imaging from March 1997 to September
1998; Executive Vice President, Global Products Supply from February 1996 to
March 1997; Vice President, Manufacturing and Product Development from 1992 to
3
<PAGE>
February 1996; and prior to that time, served in a series of manufacturing,
corporate quality and market research positions at Polaroid. Ms. Uhrich is a
director of Maytag Corporation. Ms. Uhrich has been a director of Ceridian since
1994.
PAUL S. WALSH Mr. Walsh, 43, 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 Grocery Manufacturers of America.
Mr. Walsh has been a director of Ceridian 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
Strategy Review Committee. The following are members of these committees as of
March 1, 1999:
Executive Committee:
Lawrence Perlman, Chair
Richard G. Lareau
Paul S. Walsh
Audit Committee:
George R. Lewis, Chair
Bruce R. Bond
Ruth M. Davis
Robert H. Ewald
Richard G. Lareau
Richard W. Vieser
Compensation and Human Resources
Committee:
Paul S. Walsh, Chair
Nicholas D. Chabraja
Ronald T. LeMay
Charles Marshall
Ronald A. Matricaria
Carole J. Uhrich
Nominating and Board
Governance Committee:
Richard G. Lareau, Chair
Ronald T. LeMay
George R. Lewis
Charles Marshall
Ronald A. Matricaria
Paul S. Walsh
Strategy Review Committee:
Ruth M. Davis, Chair
Bruce R. Bond
Nicholas D. Chabraja
Robert H. Ewald
Lawrence Perlman
Ronald L. Turner
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. This Committee took action by consent
resolution five times during 1998.
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. This Committee met
five times and took action by consent resolution on one occasion during 1998.
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
4
<PAGE>
succession, diversity and development, and assesses the adequacy of Ceridian's
human resource policies and principles. This Committee met eight times and took
action by consent resolution on one occasion during 1998.
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 five times and took
action by consent resolution on one occasion during 1998.
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
1998.
During 1998, each director, except Messrs. LeMay, Vieser and Walsh, attended
at least 75 percent of the meetings of the Board and his or her committees.
DIRECTOR COMPENSATION
The following table summarizes the compensation during 1998 of Ceridian's
outside directors. Directors who are employees are not separately compensated
for their service as a director.
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
SECURITY GRANTS
-------------------------------------------------
CASH SHARES ISSUED SHARES ISSUED
COMPENSATION AS AS RESTRICTED
--------------- ONE-HALF OF STOCK
CASH PORTION OF SHARES ANNUAL AWARD TO NEW
ANNUAL RETAINER UNDERLYING RETAINER DIRECTOR
NAME ($)(1)(2) OPTIONS(#)(3) (#)(1) (#)(4)
- ------------------------------------------------ --------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Bruce R. Bond................................... $ 22,925 0 0 4,200
Nicholas D. Chabraja............................ 22,925 0 0 4,200
Ruth M. Davis................................... 31,000 4,000 1,136 0
Robert H. Ewald................................. 47,667 4,000 0 5,800
Richard G. Lareau............................... 31,000 4,000 1,136 0
Ronald T. LeMay................................. 26,000 4,000 1,136 0
George R. Lewis................................. 29,065 4,000 1,136 0
Charles Marshall................................ 26,000 4,000 1,136 0
Ronald A. Matricaria............................ 31,730 4,000 0 4,400
Carol J. Uhrich................................. 26,000 4,000 1,136 0
Richard W. Vieser............................... 27,935 4,000 1,136 0
Paul S. Walsh................................... 31,000 4,000 1,136 0
</TABLE>
- ------------------------
(1) Includes a supplemental annual payment of $5,000 for the chairs of the
Compensation and Human Resources, Audit, Nominating and Board Governance,
and Strategy Review Committees. 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.
Directors who were not in office at the beginning of the year receive their
prorated annual retainer entirely in cash. The annual retainer was $52,000
in 1998 and will remain the same for 1999.
5
<PAGE>
(2) Meeting fees were eliminated effective January 1, 1998.
(3) Each director receives an annual option grant of 4,000 shares of common
stock on the date of the annual meeting of stockholders. The exercise price
per share of each option granted is 100 percent 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
ten years from its date of grant. For 1999, the annual option grant will
remain at 4,000 shares.
(4) Each newly-elected director receives a one-time award of restricted stock.
The number of restricted shares awarded during 1998 was determined by
dividing an amount equal to two and one-half times 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 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 seven years
prior to July 1998, there was only one management director on the Board. With
the election of Ronald L. Turner in July 1998, there are presently two
management directors 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 Nominating and Board 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 includes 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 and Human Resources
Committee and Nominating and Board Governance Committee are non-management
directors. The Nominating and Board 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 Nominating and Board 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 each of the other
individual directors. The results of this evaluation and any recommendations for
change are presented to the Board.
6
<PAGE>
7. Any non-management director who has completed or as of the next annual
meeting of stockholders will have completed twelve years of service as a
director shall submit a letter to the Nominating and Board Governance Committee
offering not to stand for re-election to the Board at any future meeting of
stockholders. The Nominating and Board 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 Nominating and Board Governance
Committee offering not to stand for re-election to the Board at the next annual
meeting of the Company's stockholders. The Nominating and Board Governance
Committee shall have complete discretion as to whether such offer shall be
accepted.
9. Unless waived by the Board, 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.
APPROVAL OF AMENDMENT TO CERIDIAN'S
RESTATED CERTIFICATE OF INCORPORATION
(ITEM 2)
PROPOSED AMENDMENT
On February 3, 1999, the Board of Directors declared advisable and
unanimously approved, subject to approval by the stockholders at the Annual
Meeting, an amendment to Ceridian's Restated Certificate of Incorporation (the
"Certificate") to increase the authorized number of shares of common stock from
200,000,000 shares to 500,000,000 shares. The Certificate currently provides
that Ceridian is authorized to issue two classes of stock: 200,000,000 shares of
common stock and 750,000 shares of preferred stock. No change would be made to
the number of authorized shares of preferred stock. As a result, the proposed
amendment would increase the total authorized capital stock of the Company
(including both common stock and preferred stock) from 200,750,000 shares to
500,750,000 shares. Specifically, paragraph A of Article IV of the Certificate
would be amended to read as follows:
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Five Hundred Million, Seven
Hundred Fifty Thousand (500,750,000), consisting of Seven Hundred Fifty
Thousand (750,000) shares of preferred stock of the par value of One
Hundred Dollars ($100.00) per share (the "Preferred Stock"), having a
total par value of Seventy-Five Million Dollars ($75,000,000), and Five
Hundred Million (500,000,000) shares of common stock of the par value of
fifty cents ($.50) per share (the "Common Stock"), having a total par
value of Two Hundred Fifty Million Dollars ($250,000,000).
As of March 22, 1999, of the 200,000,000 shares of common stock currently
authorized, 161,685,596 shares were issued and outstanding (including 17,503,564
treasury shares), and 17,707,024 shares were reserved for issuance in connection
with Ceridian's employee and director stock-based compensation plans. In
addition, as described in Item 3 below, an additional 10,000,000 shares of
common stock have been reserved for issuance under the proposed Ceridian
Corporation 1999 Stock Incentive Plan.
7
<PAGE>
PURPOSE AND EFFECT OF THE AMENDMENT
The Board has determined that the number of authorized shares of common
stock should be increased to make additional shares available for issuance from
time to time for stock dividends or stock splits, equity financings,
acquisitions, equity compensation plans (including the proposed 1999 Stock
Incentive Plan, if approved by the stockholders, although the Company currently
has sufficient authorized shares to provide for issuances under such proposed
plan) and other corporate purposes. In February 1999, Ceridian effected a
two-for-one stock split of its common stock (effected in the form of a stock
dividend) following a significant increase in the market price of its common
stock during the past few years. Although there can be no assurance that
Ceridian's stock price will continue to rise or that the Board would declare a
further stock split at any specific price or at all, the Board believes that the
increase in the number of authorized shares of common stock will provide the
Company with the flexibility necessary to maintain a reasonable stock price
through future stock splits (effected in the form of a stock dividend) without
the expense of a special meeting of stockholders or having to wait until the
next annual meeting of stockholders. Other than the shares reserved for issuance
as set forth above, the Board has no present agreement, understanding or plan to
issue any of the additional shares for which approval is sought. If the
amendment is approved by the stockholders, the Board will have the authority to
issue the additional authorized shares of common stock without seeking or
obtaining further stockholder approval, except as may be required by applicable
law.
The additional common stock to be authorized would have rights identical to
the currently outstanding common stock. Approval by the stockholders of the
amendment will not have any immediate effect on the rights of existing
stockholders. To the extent that the additional authorized shares are issued in
the future, they will decrease the percentage equity ownership of existing
stockholders and, depending on the price at which they are issued, could be
dilutive to the existing stockholders. The holders of common stock have no
preemptive rights, which means that they do not have a prior right to purchase
any new issue of capital stock of the Company in order to maintain their
proportionate ownership interests.
Under certain circumstances, an increase in the authorized number of shares
of a corporation's capital stock can provide management with a means of
preventing or discouraging an unsolicited change of control of the corporation.
Shares of authorized but unissued capital stock could (within the limits imposed
by applicable law) be issued in one or more transactions which would make a
change of control more difficult and therefore less likely in that such
additional shares could be used to dilute the stock ownership or voting rights
of a person seeking to obtain control of a corporation. The Board has no present
intention of using the additional shares for such a purpose, and is unaware of
any existing plan or actions that could result in a change of control of the
Company.
In addition to this proposal to increase the number of authorized shares of
common stock, existing provisions of Ceridian's Restated Certificate of
Incorporation and Bylaws could delay or prevent a merger, tender offer or proxy
contest to take control of the Company. Such provisions include (i) a provision
requiring the affirmative vote of at least two-thirds of the outstanding shares
of capital stock of the Company entitled to vote to approve certain business
combinations; and (ii) a provision requiring advance notice for stockholder
proposals and nominations for directors.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT TO CERIDIAN'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK CERIDIAN IS AUTHORIZED TO ISSUE FROM
200,000,000 TO 500,000,000. The vote required to approve the amendment is a
majority of the outstanding shares of common stock of the Company. If the
amendment is approved by the stockholders, it will become effective as of the
date and time a certificate of amendment is filed with the Secretary of State of
the State of Delaware. Such filing will be made as soon as practicable after
approval by the stockholders.
8
<PAGE>
APPROVAL OF 1999 STOCK INCENTIVE PLAN
(ITEM 3)
INTRODUCTION
On February 3, 1999, the Board of Directors declared advisable and
unanimously approved, subject to stockholder approval, the Ceridian Corporation
1999 Stock Incentive Plan ("the 1999 Plan" or the "Plan"). The 1999 Plan
provides for the grant to eligible recipients of stock options, restricted stock
awards and performance units.
The 1999 Plan will supersede and replace in their entirety the Ceridian
Corporation 1993 Long-Term Incentive Plan ("1993 Plan") and the 1990 Long-Term
Incentive Plan ("1990 Plan") (the 1993 Plan and the 1990 Plan are collectively
referred to as the "Prior Plans"). All remaining shares of common stock reserved
for issuance under the Prior Plans will become available for issuance under the
1999 Plan if the Plan is approved by the stockholders. Awards outstanding under
the Prior Plans may continue to be exercised and will continue to become
exercisable, or free of restrictions, in accordance with their terms.
SUMMARY OF THE 1999 PLAN
The major features of the 1999 Plan are summarized below, which summary is
qualified in its entirety to the actual text of the 1999 Plan, a copy of which
may be obtained from the Company.
PURPOSE. The purpose of the Plan is to advance the interests of Ceridian
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.
ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Compensation and Human Resources Committee, which may interpret the Plan,
establish rules for the Plan's administration, determine the terms and
conditions of incentive awards to be made under the Plan (subject to the
limitations expressed in the Plan), modify the terms of outstanding awards to
the extent permitted by the Plan, and delegate such authority to directors or
officers of the Company as permitted by applicable law and the terms of the
Plan.
SHARES TO BE AWARDED. The Plan permits the Compensation and Human Resources
Committee to award stock options, restricted stock awards and performance units.
Up to 10,000,000 shares of common stock may be the subject of awards under the
Plan, plus (a) any shares that, as of the date of the Annual Meeting, are
available for issuance under the Prior Plans, (b) any shares that subsequently
become available for issuance under the Prior Plans as a result of the
forfeiture, termination or expiration of awards under the Prior Plans and that
would otherwise have been available for further issuance under the Prior Plans,
and (c) any shares issued under the 1999 Plan in connection with the settlement,
assumption or substitution of outstanding awards, or obligations to grant future
awards, as a condition of the Company acquiring another entity. The Compensation
and Human Resources Committee may use shares available for issuance under the
Plan as the form of payment for compensation, awards or rights earned or due
under deferred or any other compensation plans or arrangements of the Company or
any subsidiary. The shares available for issuance under the 1999 Plan may, at
the election of the Compensation and Human Resources Committee, be either
treasury shares or shares authorized but unissued. The maximum number of shares
of common stock that may be the subject of Plan awards to any one participant in
any three consecutive fiscal years may not exceed 750,000 shares. The maximum
number of shares of common stock that may be the subject of
9
<PAGE>
incentive stock options is 10,000,000, and the maximum number of shares of
common stock that may be the subject of restricted stock awards that are not
granted in lieu of cash compensation that would otherwise be payable to
participants is 3,500,000.
Shares of common stock that are issued under the 1999 Plan or that are
subject to outstanding awards will be applied to reduce the maximum number of
shares of common stock remaining available for issuance under the Plan. To the
extent that any shares of common stock that are subject to an award under the
1999 Plan or the Prior Plans (a) are not issued to a participant due to the fact
that such award lapses, expires, is forfeited or for any reason is terminated
unexercised or unvested or is settled or paid in cash or (b) are used to satisfy
any exercise price or withholding obligations, such shares will automatically
again become available for issuance under the 1999 Plan. In addition, to the
extent that a participant tenders shares of common stock already owned by the
participant to the Company in satisfaction of any exercise price or withholding
tax obligations, such shares will automatically again become available for
issuance under the Plan. If there is any material change in the corporate
structure or shares of common stock, including as a result of a merger or
consolidation, the Compensation and Human Resources Committee (or the board of
the surviving corporation) will make appropriate adjustments in the aggregate
number and kind of securities available for issuance under the Plan and in the
number and kind of securities and the purchase price per share, if any, under
any awards outstanding under the Plan.
PARTICIPANTS. All employees (including, without limitation, officers and
directors who are also employees) of Ceridian or any subsidiary of Ceridian and
any non-employee directors, consultants and independent contractors of Ceridian
or any subsidiary of Ceridian who, in the judgment of the Compensation and Human
Resources Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of Ceridian or its
subsidiaries are eligible to be granted awards under the 1999 Plan. On March 1,
1999, there were approximately 9,600 employees of Ceridian and its subsidiaries
eligible to be granted awards under the 1999 Plan.
STOCK OPTIONS. Options granted to acquire shares of common stock may either
be incentive stock options or nonqualified stock options. The Compensation and
Human Resources Committee may establish the terms of each option grant, 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. As of March 1, 1999, the fair market value of Ceridian's
common stock was $35.50, the closing price of the common stock on the NYSE.
Payment of the exercise price must be in cash, unless the Compensation and Human
Resources Committee permits payment by means of a "broker exercise notice," in
shares of previously owned common stock, a full recourse promissory note or by a
combination of such methods. An option will generally not be exercisable within
six months of its date of grant, and will expire not more than ten years after
the grant date.
RESTRICTED STOCK AWARDS. A restricted stock award is an award of common
stock that may not be transferred or otherwise disposed of until transferability
restrictions lapse and may have to be returned to the Company upon the
occurrence of certain conditions. Restrictions generally may not lapse within
six months of the date of grant. The Compensation and Human Resources Committee
may impose such restrictions or conditions to the vesting of restricted stock
awards as it deems appropriate, including that the participant remain in the
continuous employ or service of the Company or a subsidiary for a certain period
of time or that the participant or the Company (or any subsidiary or division of
the Company) satisfy certain performance goals or criteria. While restrictions
on transferability remain in effect, a participant has the right to vote the
stock and, unless the Compensation and Human Resources Committee provides
otherwise, to receive any dividends or distributions with respect thereto.
Unless the Compensation and Human Resources Committee determines otherwise,
however, 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
10
<PAGE>
stock award will be subject to the same restrictions as the shares to which such
dividends or distributions relate. In addition, the Compensation and Human
Resources Committee may require that regular quarterly cash dividends be
reinvested in shares of common stock.
PERFORMANCE UNITS. A performance unit is a right to receive a payment from
the Company, in the form of shares of common stock, cash or a combination of
both (as determined by the Compensation and Human Resources Committee), upon the
achievement of established performance goals. A performance unit will vest at
such times and in such installments as may be determined by the Compensation and
Human Resources Committee. The Compensation and Human Resources Committee may
impose such restrictions or conditions to the vesting of performance units as it
deems appropriate, including that the participant remains in the continuous
employ or service of the Company or a subsidiary for a certain period of time or
that the participant or the Company (or any subsidiary or division of the
Company) satisfy certain performance goals or criteria. The Compensation and
Human Resources Committee will have the sole discretion to determine the form in
which payment of the economic value of performance units will be made to a
participant (i.e. cash, common stock, stock units or any combination of the
foregoing).
SECTION 162(M). Under Section 162(m) of the Code, the deductibility of
certain compensation paid to the chief executive officer and the four most
highly compensated officers (other than the chief executive officer) of a
publicly held corporation is limited to $1 million. However, certain types of
compensation are excepted from this limit, including compensation that qualifies
as "performance-based compensation." The Compensation and Human Resources
Committee, in its sole discretion, may designate whether any awards under the
1999 Plan are intended to be "performance-based compensation" within the meaning
of Section 162(m). Any awards so designated will be conditioned on the
achievement of one or more performance goals, and such performance goals will be
established by the Compensation and Human Resources Committee within the time
period prescribed by, and will otherwise comply with the requirements of,
Section 162(m). The Plan contains a number of performance goals that the
Compensation and Human Resources Committee may use either individually,
alternatively or in any combination, applied on a corporate, subsidiary or
business unit basis. The performance goals include cash flow, earnings
(including one or more of gross profit, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization and net
earnings), earnings per share, margins (including one or more of gross,
operating and net income margins), returns (including one or more of return on
assets, equity, investment, capital and revenue and total stockholder return),
stock price, economic value added, working capital, market share, cost
reductions and strategic plan development and implementation. Such goals may
reflect absolute entity or business unit performance or a relative comparison to
the performance of a peer group of entities or other external measure of the
selected performance criteria. The Compensation and Human Resources Committee
may appropriately adjust any evaluation of performance under such goals to
exclude any of the following events; asset write-downs, litigation or claim
judgments or settlements, the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported results, accruals
for reorganization and restructuring programs, uninsured catastrophic losses,
and any extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 or in management's discussion and analysis of financial
performance appearing in the Company's annual report to stockholders for the
applicable year. The maximum dollar value payable to any participant with
respect to awards that are designated as "performance-based compensation" and
that are valued with reference to property other than shares of common stock may
not exceed $5,000,000 in the aggregate during any period of three consecutive
fiscal years of the Company.
EFFECT OF TERMINATION OF EMPLOYMENT. The Compensation and Human Resources
Committee will have the authority, in its sole discretion, to determine the
effect that termination of a participant's employment or other service with
Ceridian and its subsidiaries, whether due to death, disability, retirement or
any other reason, will have on outstanding awards then held by such participant.
11
<PAGE>
TRANSFERABILITY OF AWARDS. The Compensation and Human Resources Committee
may permit the transfer, for estate planning purposes, of an option granted
under the Plan to a participant's family members, or to trusts or other entities
established for the benefit of family members. Except for such estate planning
transfers, no Plan award may be transferred for any reason or by any means,
except by will or by law after a participant's death.
CHANGE OF CONTROL PROVISIONS. The Compensation and Human Resources
Committee will have the authority, in its sole discretion, to determine the
effect a change of control of the Company will have on outstanding awards. A
change of control of the Company will be defined in the manner described under
the heading "Change of Control Provisions" on page 22 of this proxy statement,
unless modified by the Compensation and Human Resources Committee.
AMENDMENT OF THE PLAN. The Board may amend the Plan in such respects as is
deemed advisable, subject to the need for stockholder approval if required
pursuant to Section 422 of the Code or the rules of the NYSE.
TERMINATION OF THE PLAN. Unless terminated earlier by the Board in its sole
discretion, the 1999 Plan will terminate on February 2, 2009. No incentive award
may be granted after such termination. Incentive awards outstanding upon
termination of the Plan may continue to be exercised, or become free of
restrictions, in accordance with their terms.
TAX INFORMATION REGARDING AWARDS
The following is a summary of the general effect of U.S. federal income
taxation upon a participant and Ceridian with respect to the grant and exercise
of awards under the Plan and the subsequent sale of shares, and does not discuss
the income tax laws of any state or foreign country in which a participant may
reside.
STOCK OPTIONS. An optionee will not incur any federal income tax liability
when an incentive stock option ("ISO") or a nonqualified stock option is granted
or becomes exercisable. When a nonqualified option is exercised, the optionee
will generally recognize ordinary income equal to the difference between the
fair market value of the shares at the time of exercise and the aggregate
exercise price. This income will be subject to tax withholding by Ceridian,
which will be entitled to a tax deduction in an amount equal to the income
recognized. 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 a
result of an exercise of an ISO. However, 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 equal to the difference
between the fair market value of the shares on the date of exercise and the
aggregate exercise price. 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 any
gain 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. Ceridian 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 disqualifying disposition, Ceridian
is entitled to a deduction in an equivalent amount.
12
<PAGE>
RESTRICTED STOCK AWARDS. With respect to shares of common stock issued
pursuant to a restricted stock award, a participant may file an election under
Section 83(b) of the Code within thirty days after receipt to include as
ordinary income in the year of receipt an amount equal to the fair market value
of the shares received on the date of receipt (determined as if the shares were
not subject to any risk of forfeiture). If a Section 83(b) election is made, the
participant will not recognize any additional income when the restrictions on
the shares issued in connection with the restricted stock award lapse. Ceridian
will receive a corresponding tax deduction for any amounts includable in the
taxable income of the participant as ordinary income. A participant who does not
make a Section 83(b) election within thirty days of the receipt of the
restricted stock award will recognize ordinary income at the time of the lapse
of the restrictions in an amount equal to the then fair market value of the
shares freed of the restrictions. Ceridian will receive a corresponding tax
deduction for any amounts includable in the taxable income of a participant as
ordinary income. Regardless of whether the participant made a Section 83(b)
election, any gain or loss on the sale of the shares will be capital gain or
loss. The amount of such gain or loss will be equal to the sales price for such
shares less the participant's basis in such shares. Whether the gain is
short-term or long-term depends on the length of time the participant has held
the stock prior to its sale.
PERFORMANCE UNITS. A participant who receives a performance unit will not
recognize any taxable income at the time of the grant. Upon settlement of the
performance unit, the participant will realize ordinary income in an amount
equal to the cash and fair market value of any shares of common stock received
by the participant. Provided that proper withholding is made, Ceridian will be
entitled to a compensation expense deduction for any amounts includable by the
participant as ordinary income. Any gain or loss on the sale of the shares of
common stock received by the participant will be capital gain or loss. The
amount of such gain or loss will be equal to the sales price for such shares
less the participant's basis in such shares. Whether the gain is short-term or
long-term depends on the length of time the participant has held the stock prior
to its sale.
ALTERNATIVE MINIMUM TAX. The alternative minimum tax is computed by adding
special preference items and making special modifications to a taxpayer's
adjusted gross income. One modification is to treat incentive options as if they
were non-statutory options. In calculating alternative minimum taxable income,
participants should include in their income, on the date of exercise, the
difference between the fair market value of the shares and the amount paid for
the shares. The alternative minimum tax is payable to the extent that it exceeds
a participant's regular tax for the year. The amount of a participant's
alternative minimum tax liability attributable to the incentive stock option
may, however, be available as a credit against a portion of the participant's
regular tax liability in future years.
NEW PLAN BENEFITS
No incentive awards have been granted under the 1999 Plan. Neither the
number nor the types of any future incentive awards to be received by or
allocated to particular participants or groups of participants under the 1999
Plan is presently determinable.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE CERIDIAN CORPORATION 1999 STOCK INCENTIVE PLAN. The vote
required to approve the 1999 Stock Incentive Plan is a majority of the
outstanding shares of common stock of the Company present in person or
represented by proxy at the Annual Meeting and entitled to vote on the matter.
13
<PAGE>
COMPENSATION AND HUMAN RESOURCES 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 17,
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 position, competitive practice and
the performance, experience and current salary of the executive filling the
position. The 1998 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 1998 target bonus percentages for executive officers were
calculated to deliver total cash compensation generally within the targeted
range.
For 1998, 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, 80% of the total potential annual bonus was dependent upon Ceridian
achieving specified levels of earnings per share ("EPS") and 20% of the total
potential bonus was dependent upon the operating units achieving balanced levels
of pre-tax earnings for 1998. 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 areas such as fostering work force diversity, Y2K compliance and
productivity improvements. 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
14
<PAGE>
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.
For 1998, payment under the annual incentive program ranged from above
target to superior for executive officers resulting in bonus payments for
executive officers, other than Mr. Perlman, ranging between 50% and 88% of base
salary. For 1998 only, the employment agreement for Shirley Hughes hired in 1998
guaranteed a pro-rated payment of a bonus at target bonus percentage. The
Committee also retains the discretion to adjust an officer's annual incentive
bonus if, in its judgment, such an action is warranted in individual
circumstances.
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 1998, annual
option awards were generally within the targeted range and included for all
executive officers, except Mr. Perlman and Mr. Eickhoff, a time-based option
award and a performance-based option award equal to 50% of the total shares
subject to the two options. The vesting of the performance-based option would
accelerate if a stock price target was achieved within a specified period or if
Ceridian's total return to stockholders for a specified period was at least at
the 60(th) percentile of all companies in the S&P 500. The stock price
performance target was based upon a 15% annualized growth in stock price from
the grant date over an approximately two-year time frame. Mr. Perlman did not
receive any options in 1998. Mr. Eickhoff received a time-based option award of
200,000 shares and a performance-based option award of 80,000 shares during
1998, representing an accelerated grant of the annual stock option awards he
would otherwise have expected to receive during the years 1998-2000. In 1998,
the combination time-based and performance-based stock option awards were also
extended to approximately 25% of the professional exempt level employees to
recognize them as key contributors to the Company's success.
Annual stock option grants were supplemented in 1994 with awards of
performance-based restricted stock. No shares of performance-based 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 did not vest by the end of the final performance period
were forfeited. After the two-year measurement period ended April 30, 1996,
Ceridian achieved a total return to stockholders of 95.9% which ranked in the
88th percentile of the S&P 500 companies; and accordingly, the restrictions on
93.3% of the award shares for that period lapsed. After the three-year
measurement period ended April 30, 1997, Ceridian did not achieve a total return
to stockholders that was at least in the 60th percentile of all companies in the
S&P 500; and accordingly, the restrictions on the award shares for that period
did not lapse. After the four-year measurement period ended April 30, 1998,
Ceridian achieved a total return to stockholders of 139% which ranked in the
61(st) percentile of the S&P 500 companies; and accordingly, the restrictions on
the award shares for that period lapsed. The determination of an officer's
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.
15
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Perlman's base salary during 1998
was $750,000, a 7.1% increase from the previous year and was within the targeted
range. Mr. Perlman's 1998 annual bonus was determined in the manner described
above, and amounted to 97% of base salary. As specified in an amended employment
agreement dated November 8, 1996, Mr. Perlman also received three stock option
awards of 150,000 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 to be 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 the chief executive officer and the four most highly compensated officers
(other than the chief executive officer) of a publicly held corporation 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 Messrs. Perlman, Turner,
Eickhoff, Keil and Morris are subject to this $1 million limit. The
non-deductible amount of compensation paid in 1998 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 2, 1999
Compensation and Human Resources
Committee
Paul S. Walsh, Chairman
Nicholas D. Chabraja
Ronald T. LeMay
Charles Marshall
Ronald A. Matricaria
Carole J. Uhrich
16
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return during the period
1994-1998 for Ceridian's common stock, the S&P 500 Index, and a peer group index
of data services companies. 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 each of Ceridian's common stock,
the S&P 500 Index and the peer group index on December 31, 1993, 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 S&P 500 DATA SERVICES
CORPORATION INDEX PEER GROUP
<S> <C> <C> <C>
Measurement Pt-12/31/93 $100.00 $100.00 $100.00
FYE 12/31/94 $141.45 $101.32 $113.51
FYE 12/31/95 $217.11 $139.40 $153.90
FYE 12/31/96 $213.16 $171.40 $160.90
FYE 12/31/97 $241.12 $228.59 $178.60
FYE 12/31/98 $367.44 $293.91 $222.92
</TABLE>
17
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation for the past three years of
Ceridian's six most highly compensated executive officers as of December 31,
1998. These six individuals are referred to as the "Named Executives."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
AWARDS
ANNUAL COMPENSATION ---------------- PAYOUTS
------------------------- SECURITIES ------------- ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING LTIP COMPENSATION
POSITION YEAR ($)(1) ($) OPTIONS/SARS(#) PAYOUTS($)(2) ($)(3)
- ----------------------------------------- --------- ------------ ----------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Perlman 1998 $ 795,000 $ 727,350 0 $ 377,555 $ 3,600
Chairman and Chief Executive 1997 744,984 455,000 450,000 -- 3,375
Officer 1996 744,984 682,500 450,000 1,113,673 3,375
Ronald L. Turner 1998 418,739 328,240 150,000 251,703 3,600
President and Chief Operating 1997 389,500 274,297 260,000 -- 3,375
Officer 1996 340,000 252,630 60,000 742,465 3,375
John R. Eickhoff 1998 334,984 254,386 280,000 251,703 3,600
Executive Vice President and 1997 334,984 170,500 180,000 -- 3,375
Chief Financial Officer 1996 289,984 218,625 66,000 742,465 3,375
Carl O. Keil 1998 316,330 264,600 130,000 -- 7,200
Vice President and President of 1997 201,907 101,980 220,000 -- 6,525
Ceridian Employer Services (4)
Stephen B. Morris 1998 314,992 235,770 60,000 251,703 3,600
Executive Vice President and 1997 314,992 214,141 166,000 -- 3,375
President of Arbitron 1996 299,992 219,450 60,000 742,465 3,375
Tony G. Holcombe 1998 290,008 196,895 60,000 -- --
Vice President and President of Comdata 1997 185,716 109,064 230,000 -- --
(5)
</TABLE>
- ------------------------
(1) The amounts reported for each individual as salary include an annual expense
allowance paid to such individuals.
(2) The amounts reported in this column represent the market value of shares of
common stock which were granted in 1994 under a performance restricted stock
program and which vested on April 30, 1996 and April 30, 1998, such value
determined by utilizing the closing price of the common stock on the NYSE on
the vesting date.
(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 plan.
(4) Mr. Keil joined Ceridian on April 14, 1997 and was elected as an executive
officer on October 23, 1997.
(5) Mr. Holcombe joined Ceridian on May 13, 1997.
18
<PAGE>
STOCK OPTION GRANTS
The following table summarizes information regarding stock options granted
during 1998 to the Named Executives.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL OPTIONS/ STOCK PRICE APPRECIATION
UNDERLYING SARS 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 -- -- -- -- -- --
Ronald L. Turner 40,000 0.78% $ 26.63 04/03/08 $ 670,950 $ 1,693,350
55,000 1.08% 27.41 10/21/08 949,583 2,396,567
55,000(4) 1.08% 27.41 10/21/08 949,583 2,396,567
John R. Eickhoff 200,000(5) 3.91% 30.75 07/22/08 3,874,500 9,778,500
80,000(6) 1.57% 30.75 07/22/08 1,549,800 3,911,400
Carl O. Keil 30,000(7) 0.59% 26.38 04/13/08 498,488 1,258,088
40,000 0.78% 26.38 04/13/08 664,650 1,677,450
30,000 0.59% 27.41 10/21/08 517,955 1,307,219
30,000(4) 0.59% 27.41 10/21/08 517,955 1,307,219
Stephen B. Morris 30,000 0.59% 27.41 10/21/08 517,955 1,307,219
30,000(4) 0.59% 27.41 10/21/08 517,955 1,307,219
Tony G. Holcombe 30,000 0.59% 27.41 10/21/08 517,955 1,307,219
30,000(4) 0.59% 27.41 10/21/08 517,955 1,307,219
</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) through (7) 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 1998 is equal to the
market value (closing price on the NYSE) of a share of Ceridian common stock
on the date of grant.
(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) Each of these options is performance-based and becomes exercisable in full
on February 15, 2001 since the average closing price of a share of Ceridian
common stock on the NYSE for 20 consecutive trading days during the period
beginning October 21, 1998 and ending January 31, 2001 was greater than
$35.00. If the optionee's employment is terminated due to death, disability
or within two years of a change of control of Ceridian, the option will
become immediately exercisable with respect to all the option shares.
(5) This option becomes exercisable in full on December 31, 2000.
19
<PAGE>
(6) This option becomes exercisable in full on March 31, 2008, unless certain
performance criteria are met in which case the option is subject to
accelerated exercisability as follows: The option will become exercisable as
to all the option shares on December 31, 2000 if the average closing price
of a share of Ceridian common stock on the NYSE for any 20 consecutive
trading days during the period beginning July 22, 1998 and ending December
31, 2000 is equal to or greater than $42.25. If the foregoing stock price
target is not satisfied, the option will nevertheless become exercisable as
to all the option shares on the date that the average closing price of a
share of Ceridian common stock on the NYSE is equal to or greater than
$42.25 for any 20 consecutive trading days during the period beginning
January 1, 2001 and ending June 30, 2001. If neither stock price targets is
satisfied, the option will nevertheless become exercisable as to all the
option shares on June 30, 2001 if Ceridian's total return to stockholders
for the period beginning July 22, 1998 and ending June 30, 2001 is at least
at the 60(th) percentile of all companies in the S&P 500. If the optionee's
employment is terminated due to death, disability or within two years of a
change of control of Ceridian, the option will become immediately
exercisable with respect to all the option shares if the first stock price
performance standard was satisfied prior to the date of such termination of
employment.
(7) This option becomes exercisable in cumulative one-third installments on July
31, 1999, July 31, 2000 and October 1, 2001.
OPTION EXERCISES AND OPTION VALUES
The following table summarizes information regarding the exercise of stock
options during 1998 by the Named Executives, as well as the December 31, 1998
value of unexercised stock options held by the Named Executives.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL YEAR IN-THE- MONEY OPTIONS/SARS
SHARES END(#) AT FISCAL YEAR END($)(2)
ACQUIRED VALUE --------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Perlman......... 410,844 $9,489,683 752,664 803,332 $15,752,879 $ 10,714,786
Ronald L. Turner......... -- -- 326,668 403,332 7,009,193 4,681,419
John R. Eickhoff......... 110,000 2,740,803 299,190 478,666 6,392,127 3,923,385
Carl O. Keil............. -- -- 43,336 306,664 723,067 3,772,321
Stephen B. Morris........ 10,000 267,569 255,334 240,666 5,324,489 2,961,162
Tony G. Holcombe......... 26,668 282,543 20,000 243,332 298,125 3,200,231
</TABLE>
- ------------------------
(1) Represents the difference between the market value (closing price on the
NYSE) of Ceridian's common stock on the exercise date and the exercise price
of the options, before payment of applicable income taxes.
(2) Represents the difference between the market value (closing price on the
NYSE) of Ceridian's common stock on December 31, 1998 ($34.91) and the
exercise price of in-the-money options, before payment of applicable income
taxes.
20
<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
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 plan participants 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
1999 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..... $ 69,521 $ 92,694 $ 115,868 $ 139,041 $ 157,041
400,000..... 93,521 124,694 155,868 187,041 211,041
500,000..... 117,521 156,694 195,868 235,041 265,041
600,000..... 141,521 188,694 235,868 283,041 319,041
800,000..... 189,521 252,694 315,868 379,041 427,041
1,000,000... 237,521 316,694 395,868 475,041 535,041
1,200,000... 285,521 380,694 475,868 571,041 643,041
1,400,000... 333,521 444,694 555,868 667,041 751,041
</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 1998 covered by these Plans for the Named Executives is as
follows: Mr. Perlman, $1,158,916; Mr. Turner, $643,430; Mr. Eickhoff, $463,381;
and Mr. Morris, $491,260. Mr. Keil and Mr. Holcombe are not eligible to
participate in the Retirement Plan or the Benefit Equalization 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, 1999, years of credited service for the Named Executives were
as follows: Mr. Perlman, 18.76 years; Mr. Turner, 6.18 years; Mr. Eickhoff,
35.42 years; and Mr. Morris, 4.17.
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.
21
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS
Ceridian has employment agreements with each of the Named Executives. 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 $750,000, 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 150,000 share annual stock option grant and a
300,000 share performance stock option grant made in November 1996, and three
150,000 share stock option grants made during 1997 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 any 20 consecutive trading days during the 180-day period ending April
28, 2000 is greater than or equal to $35.00. 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 annual pay for the
year in which the termination occurs or the prior year, whichever provides for
the highest 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 disability, 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, Eickhoff, Keil, Morris and
Holcombe 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.
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
22
<PAGE>
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 percent 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. In addition to the lump sum payments, the executive officers would
receive an additional payment in an amount such that after the payment of all
taxes, income and excise, the executive will be in the same after-tax position
as if no excise tax under the Internal Revenue Code had been imposed.
23
<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 March 1, 1999 by each director, by
each of the Named Executives, and by all executive officers and directors as a
group.
<TABLE>
<CAPTION>
OF SHARES
SHARES OF COMMON BENEFICIALLY OWNED,
STOCK SHARES THAT MAY BE
BENEFICIALLY PERCENT OF COMMON ACQUIRED WITHIN 60
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNED (1) STOCK OWNED DAYS (2)
- ----------------------------------------------------- ---------------- --------------------- --------------------
<S> <C> <C> <C>
Directors
Bruce R. Bond...................................... 4,946 (3) 0
Nicholas D. Chabraja............................... 4,946 (3) 0
Ruth M. Davis...................................... 22,366 (3) 16,000
Robert H. Ewald.................................... 10,546 (3) 4,000
Richard G. Lareau.................................. 16,620 (3) 7,000
Ronald T. LeMay.................................... 15,282 (3) 7,000
George R. Lewis.................................... 21,392 (3) 12,000
Charles Marshall................................... 29,814 (3) 16,000
Ronald A. Matricaria............................... 9,146 (3) 4,000
Lawrence Perlman................................... 750,986 0.49% 745,996
Ronald L. Turner................................... 389,646 0.25% 356,668
Carole J. Uhrich................................... 21,392 (3) 12,000
Richard W. Vieser.................................. 40,330 (3) 16,000
Paul S. Walsh...................................... 24,836 (3) 16,000
Other Named Executives
John R. Eickhoff................................... 295,760 0.19% 258,938
Carl O. Keil....................................... 79,382 (3) 73,336
Stephen B. Morris.................................. 291,998 0.19% 272,000
Tony G. Holcombe................................... 20,000 (3) 20,000
All executive officers and directors as a group...... 2,158,074 1.39% 1,929,980
</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.
24
<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. 21,385,212(2) 14.0%
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
AXA 19,619,944(3) 12.8%
9 Place Vendome
75001 Paris, France
</TABLE>
- ------------------------
(1) Percentage calculated based on the number of shares of Ceridian's common
stock issued and outstanding as of March 1, 1999.
(2) Beneficial ownership as of December 31, 1998 as reported in a Schedule 13G
dated February 1, 1999. 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 21,385,212 shares and sole
power to vote or direct the vote of 436,498 shares.
(3) Beneficial ownership as of December 31, 1998 as reported in a Schedule 13G
dated February 10, 1999. These securities are held by subsidiaries of AXA,
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 3,379,880 shares, sole power to dispose or direct the disposition of
19,615,716 shares, shared power to vote or direct the vote of 15,995,228
shares, and shared power to dispose or direct the disposition of 4,228
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, 1999.
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 2000
Annual Meeting of Stockholders must be received by Ceridian on or before
February 18, 1999.
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
25
<PAGE>
an annual meeting by a stockholder only if the stockholder provides written
notice to the Secretary of Ceridian not less than 90 or more than 120 days prior
to the meeting, unless notice of the date of the meeting is given to
stockholders or is publicly announced less than 100 days prior to the meeting.
In that case, a stockholder's notice of proposed business must be provided no
later than 10 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 regulations 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 from January 1, 1998 to February 14, 1999,
all of Ceridian's officers, directors and 10% beneficial owners complied with
the applicable Section 16(a) filing requirements.
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.
COPIES OF CERIDIAN'S ANNUAL REPORT ON FORM 10-K (AN ANNUAL FILING WITH THE
SEC) FOR THE YEAR ENDED DECEMBER 31, 1998 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
/s/ Gary M. Nelson
Gary M. Nelson
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Minneapolis, Minnesota
April 8, 1999
26
<PAGE>
CERIDIAN CORPORATION
1999 STOCK INCENTIVE PLAN
1. PURPOSE OF PLAN.
The purpose of the Ceridian Corporation 1999 Stock Incentive Plan (the
"Plan") is to advance the interests of Ceridian Corporation (the "Company")
and its stockholders by enabling the Company and its Subsidiaries to attract
and retain persons of ability to perform services for the Company and its
Subsidiaries by providing an incentive to such individuals through equity
participation in the Company and by rewarding such individuals who contribute
to the achievement by the Company of its economic objectives.
2. DEFINITIONS.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "BOARD" means the Board of Directors of the Company.
2.2 "BROKER EXERCISE NOTICE" means a written notice pursuant to
which a Participant, upon exercise of an Option, irrevocably instructs a
broker or dealer to sell a sufficient number of shares or loan a sufficient
amount of money to pay all or a portion of the exercise price of the Option
and/or any related withholding tax obligations and remit such sums to the
Company and directs the Company to deliver stock certificates to be issued
upon such exercise directly to such broker or dealer.
2.3 "CHANGE OF CONTROL" means an event described in Section 12.1 of
the Plan or such other definition as may be adopted by the Committee from
time to time in its sole discretion.
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 4.4 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.
A-1
<PAGE>
2.8 "ELIGIBLE RECIPIENTS" means all employees (including, without
limitation, officers and directors who are also employees) of the Company or
any Subsidiary and any non-employee directors, consultants and independent
contractors 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, the closing market price per share of the Common Stock as
reported on the New York Stock Exchange Composite Tape on that 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).
2.11 "INCENTIVE AWARD" means an Option, Restricted Stock Award or
Performance Unit granted to an Eligible Recipient pursuant to the Plan.
2.12 "INCENTIVE STOCK OPTION" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.13 "NON-STATUTORY STOCK OPTION" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that
does not qualify as an Incentive Stock Option.
2.14 "OPTION" means an Incentive Stock Option or a Non-Statutory
Stock Option.
2.15 "PARTICIPANT" means an Eligible Recipient who receives one or
more Incentive Awards under the Plan.
2.16 "PERFORMANCE GOAL" means one or more of the following
performance goals, either individually, alternatively or in any combination,
applied on a corporate, subsidiary or business unit basis: cash flow,
earnings (including one or more of gross profit, earnings before interest and
taxes, earnings before interest, taxes, depreciation and amortization and net
earnings), earnings per share, individually, margins (including one or more
of gross, operating and net income margins), returns (including one or more
of return on assets, equity, investment, capital and revenue and total
stockholder return), stock price, economic value added, working capital,
market share, cost reductions and strategic plan development and
implementation. Such goals may reflect absolute entity or business unit
performance or a relative comparison to the performance of a peer group of
entities or other external measure of the selected performance criteria. The
Committee may appropriately adjust any evaluation of performance under such
goals to exclude any of the following events: asset write-downs, litigation
or claim judgments or settlements, the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, accruals for reorganization and restructuring programs, uninsured
catastrophic losses, and any extraordinary non-recurring items as described
in Accounting Principles Board Opinion No. 30 or in management's discussion
and analysis of financial performance appearing in the Company's annual
report to stockholders for the applicable year.
2.17 "PERFORMANCE UNIT" means a right granted to an Eligible
Recipient pursuant to Section 8 of the Plan to receive a payment from the
Company, in the form of Common Stock, cash, Stock Units or a combination of
the foregoing, upon the achievement of established performance criteria.
2.18 "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that
are already
A-2
<PAGE>
owned by the Participant or, with respect to any Incentive Award, that are to
be issued upon the grant, exercise or vesting of such Incentive Award.
2.19 "PRIOR PLANS" mean the Company's 1993 Long-Term Incentive Plan
and the 1990 Long-Term Incentive Plan.
2.20 "RESTRICTED STOCK AWARD" means an award of Common Stock or
Stock Units granted to an Eligible Recipient pursuant to Section 7 of the
Plan that is subject to the restrictions on transferability and the risk of
forfeiture imposed by the provisions of such Section 7.
2.21 "RETIREMENT" means the termination (other than for Cause or by
reason of death or Disability) 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
(such period of service to be 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).
2.22 "SECTION 162(m)" means Section 162(m) of the Code.
2.23 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.24 "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one share of Common Stock that is payable in the form of Common
Stock, cash or any combination of the foregoing.
2.25 "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.
2.26 "TAX DATE" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive Award.
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 "Non-Employee Directors"
within the meaning of Rule 16b-3 under the Exchange Act and, if the Board so
determines in its sole discretion, who are "outside directors" within the
meaning of Section 162(m). 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-3
<PAGE>
(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, Stock Units or any combination of the
foregoing.
(b) The Committee will have the authority under the Plan to
amend or modify the terms of any outstanding Incentive Award in any
manner, including, without limitation, the authority to modify the
number of shares or other terms and conditions of an Incentive Award,
extend the term of an Incentive Award or accelerate the exercisability
or vesting or otherwise terminate any restrictions relating to an
Incentive Award; provided, however that the amended or modified terms
are permitted by the Plan as then in effect and that any Participant
adversely affected by such amended or modified terms has consented to
such amendment or modification.
(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.
(d) The Committee may permit or require the deferral of any
payment, issuance or other settlement of an Incentive Award subject to
such rules and procedures as
A-4
<PAGE>
the Committee may establish, including the conversion of such payment,
issuance or other settlement into Options or Stock Units and the
payment or crediting of interest, dividends or dividend equivalents.
4. SHARES AVAILABLE FOR ISSUANCE.
4.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as
provided in Section 4.4 of the Plan, the maximum number of shares of Common
Stock that will be available for issuance under the Plan will be 10,000,000
shares, plus (a) any shares that, as of the date the Plan is approved by the
stockholders of the Company, are available for issuance under the Prior
Plans, (b) any shares that subsequently become available for issuance under
the Prior Plan as a result of the forfeiture, termination or expiration of
awards under the Prior Plans and that would otherwise have been available for
further issuance under the Prior Plans, and (c) any shares issued under the
Plan in connection with the settlement, assumption or substitution of
outstanding awards, or obligations to grant future awards, as a condition of
the Company acquiring another entity. The Committee may use shares available
for issuance under the Plan as the form of payment for compensation, awards
or rights earned or due under deferred or any other compensation plans or
arrangements of the Company or any Subsidiary. 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 CALCULATION OF SHARES AVAILABLE. 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. To the extent that any
shares of Common Stock that are subject to an Incentive Award under the Plan
or the Prior Plan (a) are not issued to a Participant due to the fact that
such Incentive Award lapses, expires, is forfeited or for any reason is
terminated unexercised or unvested, or is settled or paid in cash or (b) are
used to satisfy any exercise price or withholding obligations, such shares
will automatically again become available for issuance under the Plan. In
addition, to the extent that a Participant tenders (either by actual delivery
or by attestation) shares of Common Stock already owned by the Participant to
the Company in satisfaction of any exercise price or withholding tax
obligations, such shares will automatically again become available for
issuance under the Plan.
4.3 ADDITIONAL LIMITATIONS. Notwithstanding any other provisions
of the Plan to the contrary and subject, in each case, to adjustment as
provided in Section 4.4 of the Plan, (a) no more than 10,000,000 shares of
Common Stock may be issued under the Plan with respect to Incentive Stock
Options, (b) no more than 3,500,000 shares of Common Stock may be issued
under the Plan with respect to Restricted Stock Awards that are not granted
in lieu of cash compensation that would otherwise be payable to Participants,
and (c) no Participant in the Plan may be granted Incentive Awards relating
to more than 750,000 shares of Common Stock in the aggregate during any
period of three consecutive fiscal years of the Company.
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)
A-5
<PAGE>
as to the number and kind of securities or other property (including cash)
available for issuance or payment under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants, (a) the number and
kind of securities or other property (including cash) subject to outstanding
Options, and (b) the exercise price of outstanding Options.
5. PARTICIPATION.
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected
to contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or
more Incentive Awards, singly or in combination or in tandem with other
Incentive Awards, as may be determined by the Committee in its sole
discretion. Incentive Awards will be deemed to be granted as of the date
specified in the grant resolution of the Committee, which date will be the
date of any related agreement with the Participant.
6. OPTIONS.
6.1 GRANT. An Eligible Recipient may be granted one or more
Options under the Plan, and such Options will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion and reflected in the award
agreement evidencing such Option. The Committee may designate whether an
Option is to be considered an Incentive Stock Option or a Non-Statutory Stock
Option. To the extent that any Incentive Stock Option granted under the Plan
ceases for any reason to qualify as an "incentive stock option" for purposes
of Section 422 of the Code, such Incentive Stock Option will continue to be
outstanding for purposes of the Plan but will thereafter be deemed to be 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; provided, however, that such
price will not be less than 100% of the Fair Market Value of one share of
Common Stock on the date of grant or, with respect to an Incentive Stock
Option (110% of the Fair Market Value if, at the time the Incentive Stock
Option is granted, the Participant owns, directly or indirectly, more than
10% of the total combined voting power of all classes of stock of the Company
or any parent or subsidiary corporation of the Company).
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 from its date of grant (other
than in connection with a Participant's death or Disability or in connection
with a Change of Control of the Company) and no Incentive Stock Option may be
exercisable after 10 years from its date of grant (five years from its date
of grant if, at the time the Incentive Stock Option is granted, the
Participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company).
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
A-6
<PAGE>
of a Broker Exercise Notice, Previously Acquired Shares (including through
delivery of a written attestation of ownership of such Previously Acquired
Shares if permitted, and on terms acceptable, to the Committee in its sole
discretion), a full recourse promissory note (on terms acceptable to the
Committee in its sole discretion) or by 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 AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK
OPTIONS. To the extent that the aggregate Fair Market Value (determined as of
the date an Incentive Stock Option is granted) of the shares of Common Stock
with respect to which incentive stock options (within the meaning of Section
422 of the Code) are exercisable for the first time by a Participant during
any calendar year (under the Plan and any other incentive stock option plans
of the Company or any subsidiary or parent corporation of the Company (within
the meaning of the Code)) exceeds $100,000 (or such other amount as may be
prescribed by the Code from time to time), such excess Options will be
treated as Non-Statutory Stock Options. The determination will be made by
taking incentive stock options into account in the order in which they were
granted. If such excess only applies to a portion of an Incentive Stock
Option, the Committee, in its discretion, will designate which shares will be
treated as shares to be acquired upon exercise of an Incentive Stock Option.
7. RESTRICTED STOCK AWARDS.
7.1 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 and
reflected in the award agreement evidencing such Restricted Stock Award. 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 or that the Participant or the Company (or any Subsidiary or
division thereof) satisfy certain performance criteria; provided, however,
that no Restricted Stock Award may vest prior to six months from its date of
grant (other than in connection with a Participant's death or Disability or
in connection with a Change of Control of the Company).
7.2 RIGHTS AS A STOCKHOLDER; TRANSFERABILITY. Except as provided
in Sections 7.1, 7.3 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 7 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.
7.3 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
A-7
<PAGE>
the shares to which such dividends or distributions relate and will be paid
currently 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.
7.4 ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions
referred to in this Section 7, the Committee may (a) 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 (b) 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.
8. PERFORMANCE UNITS.
An Eligible Recipient may be granted one or more Performance Units
under the Plan, and such Performance Units will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may impose
such restrictions or conditions, not inconsistent with the provisions of the
Plan, to the vesting of such Performance Units as it deems appropriate,
including, without limitation, that the Participant remain in the continuous
employ or service of the Company or any Subsidiary for a certain period or
that the Participant or the Company (or any Subsidiary or division thereof)
satisfy certain performance goals or criteria. The Committee will have the
sole discretion to determine the form in which payment of the economic value
of Performance Units will be made to a Participant (i.e., cash, Common Stock,
Stock Units or any combination of the foregoing) or to consent to or
disapprove the election by a Participant of the form of such payment.
9. PERFORMANCE-BASED COMPENSATION PROVISIONS.
The Committee, in its sole discretion, may designate whether any
Incentive Awards are intended to be "performance-based compensation" within
the meaning of Section 162(m). Any Incentive Awards so designated will be
conditioned on the achievement of one or more Performance Goals, and such
Performance Goals will be established by the Committee within the time period
prescribed by, and will otherwise comply with the requirements of, Section
162(m). The maximum dollar value payable to any Participant with respect to
Incentive Awards that are designated as "performance-based compensation" and
that are valued with reference to property other than shares of Common Stock
may not exceed $5,000,000 in the aggregate during any period of three
consecutive fiscal years of the Company.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE.
10.1 RIGHTS UPON TERMINATION. The Committee will have the
authority, in its sole discretion, to determine the effect that termination
of a Participant's employment or other service with the Company and all
Subsidiaries, whether due to death, Disability, Retirement or any other
reason, will have on outstanding Incentive Awards then held by such
Participant.
10.2 MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the
other provisions of
A-8
<PAGE>
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 at any time on or after the date of grant,
including following such termination), cause Options (or any part thereof)
then held by such Participant to become or continue 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 or become free of restrictions
following such termination of employment or service, in each case in the
manner determined by the Committee; provided, however, that no Option or
Restricted Stock Award may become exercisable or vest prior to six months
from its date of grant (other than in connection with a Participant's death
or Disability or in connection with a Change of Control of the Company) or
remain exercisable or continue to vest beyond its expiration date.
10.3 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 (up
to the minimum statutory rate) by electing to tender Previously Acquired
Shares, a Broker Exercise Notice or a promissory note (on terms acceptable to
the Committee in its sole discretion), or by 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) "Benefit Plan" means any formal or informal plan,
program or other arrangement heretofore or hereafter adopted by the
Company or any Subsidiary for the direct or indirect provision of
compensation to the Participant (including groups or classes of
participants or beneficiaries of which the Participant is a member),
whether or not such compensation is deferred, is in the form of cash
or other property or rights, or is in the form of a benefit to or for
the Participant.
(b) "Change of Control" means any of the following events:
A-9
<PAGE>
(a) 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 immediately following the effective date
of such merger or consolidation;
(b) 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 persons or entities acting in concert;
(c) 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;
(d) the stockholders of the Company approve any plan
or proposal for the liquidation of the Company; or
(e) 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.
A-10
<PAGE>
12.2 EFFECT OF A CHANGE OF CONTROL. The Committee will have the
authority, in its sole discretion, to determine the effect that a Change of
Control of the Company will have on outstanding Incentive Awards then held by
such Participant.
12.3 AUTHORITY TO MODIFY CHANGE OF CONTROL PROVISIONS. Prior to a
Change of Control of the Company, unless otherwise provided in the agreement
evidencing the Incentive Award, the Participant will have no rights under
this Section 12, and the Committee will have the authority, in its sole
discretion, to rescind, modify or amend the provisions of this Section 12
without the consent of any Participant.
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.
(a) Except pursuant to testamentary will or the laws of descent
and distribution and except as expressly permitted by Section 13.3(b) of
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. 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 (to the extent permitted pursuant to Section 10
of the Plan) will be made by, the Participant's designated beneficiary.
For purposes of the Plan, a "designated beneficiary" will be the
beneficiary or beneficiaries designated by the Participant in a writing
filed with the Committee in such form and at such time as the Committee
will require in its sole discretion. If a Participant fails to designate
a beneficiary, or if the
A-11
<PAGE>
designated beneficiary does not survive the Participant or dies before
the designated beneficiary's exercise of all rights under the Plan,
payment of any amounts due under the Plan will be made to, and exercise
of any Options (to the extent permitted pursuant to Section 10 of the
Plan) may be made by, the Participant's personal representative.
(b) The Committee may, in its discretion, authorize all or a
portion of the Options to be granted to a Participant to be on terms
which permit transfer by such Participant to (i) the spouse, ex-spouse,
children, step-children or grandchildren of the Participant (the "Family
Members"), (ii) a trust or trusts for the exclusive benefit of such
Family Members, (iii) a partnership in which such Family Members are the
only partners, or (iv) such other persons or entities as the Committee,
in its discretion, may permit, provided that (1) there may be no
consideration for such a transfer (other than the possible receipt of an
ownership interest in an entity to which such a transfer is made), (2)
the award agreement pursuant to which such Options are granted must be
approved by the Committee and must expressly provide for transferability
in a manner consistent with this Section 13.3(b), (3) timely written
notice of the transfer must be provided to the Company by the
Participant, and (4) subsequent transfers of the transferred Options
shall be prohibited except for those in accordance with Section 13.3(a).
Following transfer, any such Option and the rights of any transferee with
respect thereto will continue to be subject to the same terms and
conditions as were applicable immediately prior to the transfer,
including that the events of termination of employment or other service
as provided in the Plan and in any applicable award agreement will
continue to be applied with respect to the original Participant, with the
transferee bound by the consequences of any such termination of
employment or service as specified in the Plan and the applicable award
agreement. The Company will be under no obligation to provide notice of
termination of a Participant's employment or other service to any
transferee of such Participant's Options. Notwithstanding any Option
transfer pursuant to this Section 13.3(b), the Participant will remain
subject to and liable for any employment-related taxes in connection with
the exercise of such Option.
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.
A-12
<PAGE>
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 Section 422 of the Code or the rules
of the New York Stock Exchange. No termination, suspension or amendment of
the Plan may adversely affect any outstanding Incentive Award without the
consent of the affected Participant; provided, however, that this sentence
will not impair the right of the Committee to take whatever action it deems
appropriate under Section 4.4 and Section 12 of the Plan.
16. EFFECTIVE DATE AND DURATION OF THE PLAN.
The Plan is effective as of February 3, 1999, the date it was adopted
by the Board. The Plan will terminate at midnight on February 2, 2009, 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 Delaware.
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.
A-13
<PAGE>
[LOGO]
CERIDIAN CORPORATION
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425
(612) 853-8100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
The Annual Meeting of Stockholders of Ceridian Corporation, a Delaware
corporation ("Ceridian"), will be held in the Hotel Fort Garry, 222 Broadway,
Winnipeg, Manitoba, Canada on Thursday, May 20, 1999 at 8:30 a.m., Central
Daylight Savings Time, for the following purposes:
(1) To elect directors for the following year;
(2) To amend Ceridian's Restated Certificate of Incorporation to
increase the number of shares of common stock Ceridian
is authorized to issue from 200,000,000 to 500,000,000; and
(3) To approve a new 1999 Stock Incentive Plan.
Stockholders of record of Ceridian's common stock at the close of
business on March 22, 1999 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 6, 1999 through May 20, 1999, at the
office of Ceridian Canada Ltd., 125 Garry Street, Winnipeg, Manitoba, Canada,
R3C 3P2.
By Order of the Board of Directors
/s/ Gary M. Nelson
Gary M. Nelson
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
April 8, 1999
PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
1. Election of Directors
FOR all nominees listed below [ ]
WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
FOR, EXCEPT YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY
CROSSING OUT HIS OR HER NAME [ ]
Nominees: Bruce R. Bond, Nicholas D. Chabraja, Ruth M. Davis, Robert H.
Ewald, Richard G. Lareau, Ronald T. LeMay, George R. Lewis,
Lawrence Perlman, Ronald L. Turner, Carole J. Uhrich, Paul S.
Walsh
2. Proposal to approve amendment to Ceridian's Restated Certificate of
Incorporation to increase the number of shares of common stock Ceridian is
authorized to issue from 200,000,000 to 500,000,000.
[ ] FOR [ ] AGAINST [ ]ABSTAIN
3. Proposal to approve a new 1999 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ]ABSTAIN
Address Change and/or Comments Mark Here [ ]
If you wish to have your vote on all matters 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: , 1999
------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
SIGNATURE(S)
(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 20, 1999.
The undersigned appoints Lawrence Perlman and Gary M. Nelson, 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 20,
1999 and at any adjournment or postponement thereof all of the undersigned's
shares of Ceridian Corporation common stock held of record on March 22, 1999
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 PROPOSALS 2 AND 3.
(Continued, and to be signed and dated, on the reverse side.)
CERIDIAN CORPORATION
P.O. BOX 11290
NEW YORK, N.Y. 10203-0290
