<PAGE>
[LOGO]
AUTOMATIC DATA PROCESSING, INC.
ONE ADP BOULEVARD - ROSELAND, NEW JERSEY 07068
---------------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders:
PLEASE TAKE NOTICE that the 1996 Annual Meeting of Stockholders of AUTOMATIC
DATA PROCESSING, INC. (the "Company") will be held at 10:00 a.m., Tuesday,
November 12, 1996 at the Company's corporate headquarters, ONE ADP BOULEVARD,
ROSELAND, NEW JERSEY 07068, for the following purposes:
1. To elect a Board of Directors (Proposal 1);
2. To ratify the appointment of Deloitte & Touche LLP to serve as the
Company's independent certified public accountants for the fiscal year
which began on July 1, 1996 (Proposal 2); and
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only the holders of Common Stock of record at the close of business on
September 13, 1996 are entitled to vote at the meeting. Each stockholder is
entitled to one vote for each share of Common Stock held on the record date.
By order of the Board of Directors
JAMES B. BENSON
SECRETARY
September 23, 1996
Roseland, New Jersey
THE PRESENCE IN PERSON AND/OR THE REPRESENTATION BY PROXY OF THE HOLDERS OF
A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF STOCK ENTITLED TO VOTE IS
NECESSARY AND SUFFICIENT TO CONSTITUTE A QUORUM. ACCORDINGLY, IF YOU DO NOT
EXPECT TO BE PRESENT AT THE MEETING, PLEASE EXECUTE THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, SO THAT YOUR SHARES OF STOCK MAY BE REPRESENTED AT THE
MEETING.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
[LOGO]
AUTOMATIC DATA PROCESSING, INC.
ONE ADP BOULEVARD - ROSELAND, NEW JERSEY 07068
TO BE HELD ON NOVEMBER 12, 1996
SOLICITATION AND REVOCATION OF PROXY
The accompanying proxy is being solicited by the Board of Directors of the
Company for use at the forthcoming Annual Meeting of Stockholders. Each
stockholder giving such a proxy has the power to revoke the same at any time
before it is voted by so notifying the Secretary of the Company in writing. All
expenses in connection with the solicitation will be borne by the Company. This
proxy statement and the accompanying proxy are being mailed to the stockholders
on or about September 23, 1996.
The Company has one class of securities outstanding and entitled to vote at
the Annual Meeting of Stockholders, its Common Stock, par value $.10 per share.
At the close of business on September 13, 1996, the record date for
determination of stockholders entitled to notice of and to vote at the meeting,
the Company had issued and outstanding 290,038,815 shares of Common Stock
(excluding 24,240,573 treasury shares not entitled to vote). Each outstanding
share of Common Stock is entitled to one vote with respect to each matter to be
voted on at the meeting.
The representation in person or by proxy of a majority of the shares
entitled to vote shall constitute a quorum at the Annual Meeting of
Stockholders. Directors are elected by a plurality of the affirmative votes
cast. The affirmative vote of the holders of a majority of the shares cast is
required to ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified public accountants. Under the Company's Restated
Certificate of Incorporation and By-laws and under Delaware law, abstentions and
"non-votes" are counted as present in determining whether the quorum requirement
is satisfied. With regard to the election of Directors, votes may be cast in
favor or withheld. Votes that are withheld will be excluded entirely from the
vote and will have no effect. Abstentions may be specified on any proposal
(other than the election of Directors) and will have the effect of a negative
vote because each proposal (other than the election of Directors) requires the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote. Under applicable Delaware law, a non-vote will have no effect
on the outcome of the election of Directors or any other proposal. A non-vote
occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner.
The Company's Board of Directors has adopted a policy whereby stockholders'
proxies are received by the Company's independent tabulators and the vote is
certified by independent inspectors of election. Proxies and ballots that
identify the vote of individual stockholders will be kept confidential from the
Company's management and directors, except as necessary to meet legal
requirements, in cases where stockholders request disclosure, or in a contested
election.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Properly executed proxies will be voted as marked, and if not marked, will
be voted in favor of the election of the persons named below (each of whom is
now a director) as directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified. If any
nominee does not remain a candidate at the time of the meeting (a situation
which management does not anticipate), proxies solicited hereunder will be voted
in favor of those nominees who do remain as candidates and may be voted for
substitute nominees designated by the Board of Directors.
<TABLE>
<CAPTION>
SERVED AS A
DIRECTOR
CONTINUOUSLY
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------------ --- --------------- -------------------------------------------------------------
<S> <C> <C> <C>
Gary C. Butler 49 1996 Group President of the Employer Services Group of the Company
(1)
Joseph A. Califano, Jr. 65 1982 Chairman of the Board and President, National Center on
Addiction and Substance Abuse at Columbia University (2)
Leon G. Cooperman 53 1991 Chairman and Chief Executive Officer, Omega Advisors, Inc.,
an investment partnership (3)
George H. Heilmeier 60 1994 President and Chief Executive Officer of Bellcore (Bell
Communication Research), a research and engineering
consortium (4)
Ann Dibble Jordan 61 1993 Consultant (5)
Harvey M. Krueger 67 1967 Senior Managing Director of Lehman Brothers, investment
bankers (6)
Charles P. Lazarus 72 1987 Chairman of the Board of Toys "R" Us, Inc., a toy specialty
retail chain (7)
Frederic V. Malek 59 1978 Chairman, Thayer Capital Partners, a merchant banking firm
(8)
Henry Taub 69 1961 Chairman of the Executive Committee of the Board (9)
Laurence A. Tisch 73 1972 Co-Chairman and Co-Chief Executive Officer of Loews
Corporation, which is engaged in the consumer products,
hotel and insurance businesses (10)
Arthur F. Weinbach 53 1989 President and Chief Executive Officer of the Company (11)
Josh S. Weston 67 1977 Chairman of the Board of the Company (12)
</TABLE>
2
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- ------------------------
(1) Mr. Butler was elected director of the Company, effective May 23, 1996, by
action of the Board of Directors. Mr. Butler has held the indicated position
since January 1995. Prior thereto, he had been Group President of the Dealer
Services Group of the Company for more than five years.
(2) Mr. Califano was a senior partner in the Washington, D.C. office of Dewey
Ballantine from 1983 through 1992. He is also a director of Authentic
Fitness Corporation, Chrysler Corporation, K Mart Corporation, New York/New
England Telephone Cos., Travelers Group, Warnaco Inc. and Health Plan
Services, Inc.
(3) Mr. Cooperman was Chairman and Chief Executive Officer of Goldman Sachs
Asset Management from 1989 until July 1991, and is a limited partner of
Goldman, Sachs & Co. Prior to that time, Mr. Cooperman spent 22 years in
Goldman Sachs' Investment Research Department, in which he served as
partner-in-charge, co-chairman of the Investment Policy Committee and
chairman of the Stock Selection Committee.
(4) Dr. Heilmeier has been President and Chief Executive Officer of Bellcore
(Bell Communication Research) since March 1991. Mr. Heilmeier is also a
director of Compaq Computer Corporation, The MITRE Corporation and TRW, Inc.
(5) Ms. Jordan is the former Director, Social Services Department, Chicago
Lying-In Hospital, University of Chicago Medical Center, a position she
assumed in 1970. She is also a director of Hechinger Company, Johnson &
Johnson Corporation, Salant Corporation and The Travelers, Inc.
(6) Mr. Krueger has been a Senior Managing Director of Lehman Brothers and its
predecessor companies for more than the past five years. He is also a
director of Chaus, Inc., Club Med Inc., IVAX Corporation and R.G. Barry
Corporation.
(7) Mr. Lazarus has been Chairman of the Board of Toys "R" Us, Inc. for more
than the past five years. He is also a director of Loral Corporation.
(8) Mr. Malek has been Chairman of Thayer Capital Partners since 1992. During
1992 he was Campaign Manager, Bush-Quayle '92. Prior to that time, he was
Vice-Chairman of Northwest Airlines, Inc. from 1990 until December 1991, and
was President of Northwest Airlines from 1989 to 1990. Mr. Malek is also a
director of FPL Group Incorporated, National Education Corporation, American
Management Systems Corp., ICF International, Inc., Manor Care Corp.,
Northwest Airlines, Inc., INTRAV, Inc. and various Paine Webber mutual
funds.
(9) Mr. Taub became Honorary Chairman of the Company's Board of Directors in
1986 and has been Chairman of the Executive Committee since 1983. He is also
a director of Hasbro, Inc. and Rite Aid Corp.
(10)Mr. Tisch has been Co-Chairman and Co-Chief Executive Officer of Loews
Corporation for more than the past five years. He is also a director of
Bulova Corporation, Petrie Stores Corp., Federated Department Stores, Inc.,
CNA Financial Corporation and Loews Corporation.
(11)Mr. Weinbach became President and Chief Executive Officer of the Company in
August 1996, having served as President and Chief Operating Officer since
January 1994. Prior to that time, he
3
<PAGE>
had served as Executive Vice President since August 1992, and had, prior
thereto, been Senior Vice President, Administration and Finance, for more
than the past five years. He is also a director of Decision One Corp.
(12)Mr. Weston has been Chairman of the Board of the Company for more than the
past five years. Prior to August 1996, he served as Chairman of the Board
and Chief Executive Officer of the Company for more than the past five
years. He is also a director of Public Service Enterprise Group, Shared
Medical Systems Corporation, Vanstar Corporation and Olsten Corp.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
During the last fiscal year five meetings of the Board of Directors were
held. All directors attended at least 75%, in the aggregate, of the meetings of
the Board of Directors and the committees of which they were members.
The Company has a standing Audit Committee composed of Messrs. Califano,
Cooperman and Krueger, and Ms. Jordan. Mr. Krueger is the Chairman. The
principal functions of the Audit Committee are to (i) make recommendations to
the full Board of Directors concerning the appointment of independent auditors,
(ii) review the scope of the audit and related fees, (iii) review the Company's
accounting principles, policies and reporting practices with the independent and
internal auditors and management, (iv) discuss with the independent auditors the
results of their audit and determine what action, if any, is required with
respect to the Company's internal controls and (v) consider other audit and
non-audit matters from time to time as requested by the full Board of Directors.
The Audit Committee met four times during fiscal 1996.
The Company has a Compensation Committee composed of Messrs. Lazarus, Malek
and Tisch. Mr. Malek is the Chairman. The purpose of the Compensation Committee
is to develop guidelines and review the compensation and performance of officers
of the Company and other Company associates, to review and approve criteria for
granting bonuses and options to officers of the Company, and to develop plans
for managerial succession. The Compensation Committee met four times in fiscal
1996.
The Company has an Executive Committee composed of Messrs. Krueger, Malek,
Taub, Weston and, since August 1, 1996, Weinbach. Mr. Taub is the Chairman. The
purpose of the Executive Committee is to act in the absence of the Board of
Directors. The Executive Committee met twice during fiscal 1996.
The Company does not have a Nominating Committee or any committee performing
nominating or similar functions.
Non-employee directors are paid an annual retainer of $25,000, plus $1,000
for each Board of Directors meeting attended. In addition, non-employee
directors are paid $750 for each committee meeting attended, except for the
chairman of such committee, who is paid $1,000 for each meeting he attends, and
except that each non-employee member of the Executive Committee is paid $1,000
for each meeting he attends. Non-employee directors may elect to defer payment
of the above amounts. There are no fees paid to employee directors or other fee
arrangements provided by the Company.
The non-employee directors of the Company are entitled to participate in the
1989 Non-Employee Director Stock Option Plan (the "Directors' Plan") pursuant to
which options for 5,000 shares of Common Stock will automatically be granted to
persons who become non-employee directors at any time after the adoption of the
Directors' Plan. In addition, each non-employee director will be granted
4
<PAGE>
an additional option for 5,000 shares on the first business day after each fifth
anniversary of the date of the initial grant to each such non-employee director,
provided that he or she is then still serving in such capacity. The Directors'
Plan was adopted on November 2, 1989 and will remain in effect until terminated
by action of the Board of Directors. All options have been and will be granted
at the fair market value of the Common Stock, determined on the basis of the
closing price of the Common Stock in consolidated trading on the date of grant,
as reported in The Wall Street Journal. Twenty percent of the options granted
under the Directors' Plan become exercisable on the first anniversary of the
date such options were granted, and twenty percent become exercisable on each
successive anniversary date until all such options are exercisable; provided
that options become exercisable only if the director is then still serving in
such capacity, unless certain specified events occur such as the death,
disability or retirement of a director, in which case the options shall
immediately vest and become fully exercisable. All options granted under the
Directors' Plan have a term of ten years. Under the Directors' Plan, options for
20,000 shares at an exercise price of $11.46 per share and options for 10,000
shares at an exercise price of $28.72 per share have been granted to each of
Messrs. Califano, Krueger, Lazarus, Malek and Tisch; Mr. Cooperman has been
granted an option for 20,000 shares at an exercise price of $19.34; Ms. Jordan
has been granted an option for 10,000 shares at an exercise price of $26.15 per
share; and Mr. Heilmeier has been granted an option for 10,000 shares at an
exercise price of $29.38 per share. Depending upon the date of grant, the
foregoing option grants (all of which were originally grants for 5,000 shares)
reflect the adjustments caused by two 2 for 1 stock splits.
In addition, a non-employee director who chooses to retire after 20 years of
service in such capacity and having attained the age of 70 will receive a
pension of $25,000 per year for the remainder of his or her life. If a
non-employee director chooses to retire after having attained the age of 65 with
15 years of service, he or she will receive a pension of $12,500 per year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The following table contains information as of August 26, 1996 with respect
to the beneficial ownership of Common Stock of the Company by each director and
nominee for director of the Company, by each of the five most highly compensated
executive officers of the Company and by all directors and executive officers of
the Company as a group (including the named individuals). Unless otherwise noted
in the footnotes following the table, the persons as to whom the information is
given had sole voting and investment power over the shares of Common Stock shown
as beneficially owned. To the knowledge of the management of the Company, no
person beneficially owned as of August 26, 1996 more than 5% of the outstanding
shares of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME BENEFICIALLY OWNED (1) PERCENT
- ------------------------------------------------------------ ----------------------- -----------
<S> <C> <C>
Gary C. Butler 208,537 *
Joseph A. Califano, Jr. 22,800 *
Robert J. Casale 190,896 *
Leon G. Cooperman 17,000 *
George H. Heilmeier 2,200 *
Ann Dibble Jordan 6,200 *
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME BENEFICIALLY OWNED (1) PERCENT
- ------------------------------------------------------------ ----------------------- -----------
<S> <C> <C>
Harvey M. Krueger 38,000 *
Charles P. Lazarus 26,000 *
Peter M. Leger 47,797 *
Frederic V. Malek (2) 16,000 *
Henry Taub (3) 4,335,627 1.5%
Laurence A. Tisch 3,200 *
Arthur F. Weinbach 497,223 *
Josh S. Weston (4) 1,078,848 *
Directors and Executive Officers as a group
(20 persons, including those named above) (5) 6,978,341 2.4%
</TABLE>
- ------------------------
* Indicates less than one percent.
(1) Includes shares that may be acquired upon the exercise of options granted by
the Company that are exercisable prior to October 25, 1996. The shares
beneficially owned include 20,000, 22,000, 130,000, 15,000, 2,000, 22,000,
22,000, 33,600, 12,000, 316,000, 610,500 and 6,000 shares subject to such
options granted to Messrs. Butler, Califano, Casale, Cooperman, Heilmeier,
Krueger, Lazarus, Leger, Malek, Weinbach and Weston and Ms. Jordan,
respectively, and 1,411,414 shares subject to such options granted to the
Directors and Executive Officers as a group.
(2) In addition, members of Mr. Malek's immediate family were potential
beneficiaries of charitable trusts or owned outright an aggregate of 1,600
shares of Common Stock of the Company.
(3) Members of Mr. Taub's immediate family were potential beneficiaries of
charitable trusts or owned outright an aggregate of 159,021 shares of Common
Stock of the Company, and a charitable foundation of which Mr. Taub is an
officer owned an aggregate of 7,864 shares of Common Stock of the Company.
(4) In addition, Mr. Weston's daughter owned 400 shares of Common Stock of the
Company.
(5) Members of the immediate families of non-director officers of the Company
owned 1,400 shares of Common Stock of the Company.
STOCKHOLDER APPROVAL REQUIRED
Directors shall be elected by a plurality of the affirmative votes cast at
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following sections of this proxy statement cover the components of the
total compensation of the five most highly compensated executive officers of the
Company. These sections include: (i) a series of tables covering annual and
long-term compensation; (ii) a pension plan table summarizing the annual
benefits payable under the Company's defined benefit retirement plans; (iii) a
report by the Compensation Committee of the Board of Directors describing the
Company's compensation policies for fiscal 1996 for its executive officers and
the rationale upon which its chief executive officer's compensation for fiscal
1996 was based; and (iv) a performance graph comparing the Company's total
stockholder return to the S&P 500 and the S&P Computer Software Services Indices
over a five year period.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Company's chief
executive officer and the four other most highly compensated executive officers
for services in all capacities to the Company for the three years ended June 30,
1996.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
NUMBER OF
SECURITIES
RESTRICTED UNDERLYING ALL
YEAR ANNUAL COMPENSATION(1) STOCK OPTIONS OTHER
NAME AND ENDED -------------------------- AWARDS GRANTED COMPENSATION
PRINCIPAL POSITION JUNE 30, SALARY BONUS (2) (3) (4)
- -------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Josh S. Weston 1996 $ 1,000,000 $ 234,000 $ -- -- $ 11,000
Chairman and Chief Executive 1995 $ 1,000,000 $ 200,000 $ -- -- $ 7,684
Officer 1994 $ 1,068,750 $ -- $ 1,179,640 -- $ 6,521
Arthur F. Weinbach 1996 $ 475,000 $ 235,000 $ -- -- $ 5,861
President and Chief Operating 1995 $ 455,000 $ 225,000 $ -- 40,000 $ 4,568
Officer 1994 $ 405,833 $ 210,000 $ 447,844 40,000 $ 3,520
Gary C. Butler 1996 $ 415,000 $ 228,000 $ 470,375 20,000 $ 6,086
Group President 1995 $ 345,833 $ 220,000 $ -- 20,000 $ 63,961
1994 $ 286,250 $ 180,000 $ 341,656 10,000 $ 2,980
Robert J. Casale 1996 $ 410,000 $ 150,000 $ 474,525 -- $ 5,379
Group President 1995 $ 388,750 $ 160,000 $ -- 15,000 $ 4,599
1994 $ 366,923 $ 175,000 $ -- 15,000 $ 3,529
Peter M. Leger 1996 $ 265,000 $ 102,000 $ -- 20,000 $ 4,265
Division President 1995 $ 241,422 $ 140,000 $ 117,375 40,000 $ 3,831
1994 $ 214,292 $ 100,000 $ -- 20,000 $ 2,500
</TABLE>
- ------------------------
(1) None of the named executive officers received any perquisites or other
personal benefits of an amount, or any other annual compensation of a type,
required to be reported by the Securities and Exchange Commission pursuant
to applicable rules and regulations.
7
<PAGE>
(2) The dollar values shown in the Restricted Stock Awards column are based on
the closing market price of the Company's Common Stock on the date the
restricted shares were granted. Restricted shares may not be transferred or
pledged, but such Company-imposed restrictions lapse with the passage of
time (over periods of up to six years) and continued employment with the
Company.
As of June 30, 1996, the aggregate number of shares of restricted stock held
by a named executive officer and the aggregate fair market value of such
shares (calculated by multiplying the aggregate number of shares held by
such a named executive officer by $38 5/8, the closing price on the New York
Stock Exchange of the Company's Common Stock on June 30, 1996) was: Mr.
Weston, 22,000 shares ($849,750); Mr. Weinbach, 37,400 shares ($1,444,575);
Mr. Casale, 32,400 shares ($1,251,450); Mr. Butler, 39,900 shares
($1,541,137); and Mr. Leger, 6,500 shares ($251,062).
The restricted stock awards to the named executive officers reported in the
table that vest, in whole or in part, in under three years from the date of
grant, together with their vesting schedule, are as follows:
(i)Mr. Weston received a grant of 44,000 restricted shares in fiscal 1994,
of which 22,000 vested in fiscal 1995, and 22,000 shares will vest in
1997, pursuant to the terms of the 1994 Executive Incentive Compensation
Plan based upon the achievement by the Company of certain earnings per
share objectives;
(ii)
Mr. Weinbach received a grant of 17,000 restricted shares in fiscal 1994,
of which 1,000 shares vested in fiscal 1995 and 1996, and 1,000 shares
will vest in each of fiscal 1997 and 1998 and 13,000 shares will vest in
fiscal 1999;
(iii)
Mr. Butler received a grant of 13,000 restricted shares in fiscal 1994,
of which 1,000 shares vested in fiscal 1995 and 1996, 1,000 will vest in
fiscal 1997 and 1998 and 9,000 shares will vest in fiscal 1999, and a
grant of 14,200 restricted shares in fiscal 1996, 1,300 of which vested
in fiscal 1996 and 1,300 will vest in each of fiscal 1997 through 1999
and 9,000 will vest in fiscal 2000;
(iv)
Mr. Casale received a grant of 14,800 restricted shares in fiscal 1996,
of which 800 shares will vest in fiscal 1997, 1,600 will vest in fiscal
1998 and 1999, 800 will vest in fiscal 2000 and 10,000 will vest in
fiscal 2001.
(v)Mr. Leger received a grant of 4,000 restricted shares in fiscal 1995, of
which 500 vested in fiscal 1996, 500 will vest in each of fiscal 1997 and
1998, 1,500 will vest in fiscal 1999 and 1,000 will vest in fiscal 2000.
Dividends are paid on restricted stock at the same rate as other outstanding
shares of the Company's Common Stock. In the event of a change of control of
the Company, the unvested portion of the restricted stock of Messrs.
Weinbach, Casale and Butler will be subject to limited accelerated vesting.
(3) The Company does not award Stock Appreciation Rights (SARS).
(4) For the year ended June 30, 1996, consists of the sum of (i) contributions
to the Company's Retirement and Savings Plan (401(k)) in the following
amounts: Mr. Weston, $5,572; Mr. Weinbach, $4,465; Mr. Casale, $3,936; Mr.
Butler, $5,435; and Mr. Leger, $4,265, and (ii) compensatory split-dollar
insurance premiums (with a statistically calculated economic benefit to
8
<PAGE>
the executive determined by Phoenix Home Life Insurance Company for W-2
income purposes) in the following amounts: Mr. Weston, $5,428; Mr. Weinbach,
$1,396; Mr. Casale, $1,443; and Mr. Butler, $651. In fiscal 1995, $60,175 of
relocation benefits were included for Mr. Butler.
STOCK OPTION PLANS
The Company has in effect a 1981 Key Employees' Stock Option Plan (the "1981
Plan") and a 1990 Key Employees' Stock Option Plan (the "1990 Plan"). The 1981
Plan and the 1990 Plan collectively are referred to as the "Option Plans".
Officers and key employees are eligible to participate in the Option Plans,
which permit the issuance, in addition to non-qualified options, of "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company has ceased granting
options under the 1981 Plan, but outstanding options under the 1981 Plan will
remain valid. In the event of a change in control of the Company, the unvested
portion of the stock options of Messrs. Weinbach, Casale and Butler will be
subject to limited accelerated vesting.
The Option Plans are administered by the Compensation Committee of the Board
of Directors. The Committee has the authority to determine the employees to whom
options will be granted and, subject to the Option Plans, the terms and amount
of options granted.
ISOs expire no more than ten years from their date of grant, with an
exercise price equal to 100% of the fair market value on the date of grant.
Non-qualified options may expire as much as 12 years after the date of grant,
but the exercise price need not be equal to 100% of the fair market value on the
grant date.
An optionee has no rights as a stockholder with respect to any shares
covered by his options until the date of issuance of a stock certificate to him
for such shares. During the life of the optionee, the option is exercisable only
by him. No option is exercisable more than 15 days after termination of
employment, or (if termination is due to the death of an optionee) more than six
months after the appointment and qualification of an executor or administrator
of the deceased optionee's estate or 12 months after the death of the optionee,
whichever occurs earlier.
The following table sets forth certain information concerning stock option
grants to the named executive officers during the fiscal year ended June 30,
1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES EXERCISE GRANT DATE
GRANTED IN FISCAL YEAR PRICE EXPIRATION VALUE
NAME (#) (1) (%) ($/SHARE) DATE ($)(2)
- ------------------------------------------------- ----------- ------------------- ----------- ----------- -----------
Josh S. Weston -- -- -- -- --
Arthur F. Weinbach -- -- -- -- --
Gary C. Butler 20,000 .3 38.50 5/22/06 236,932
Robert J. Casale -- -- -- -- --
Peter M. Leger 20,000 .3 32.625 8/10/05 187,381
</TABLE>
9
<PAGE>
- ------------------------
(1) All options were granted pursuant to the 1990 Plan. The options were granted
at an exercise price equal to the fair market value of the Company's Common
Stock on the date of grant. The options were granted for terms of ten years,
and vest during periods from four to six years subsequent to the date of
grant.
(2) The grant date values were calculated on the basis of the Black-Scholes
option pricing model. Options were assumed to be exercised seven years after
the date of grant, based on historical experience. A risk-free interest rate
of 6.75%, stock price volatility of 19% and the dividend yield of 1% were
used in the calculation for the option grant to Mr. Butler. For the grant to
Mr. Leger the risk-free interest rate was 6.7%, the stock price volatility
was 17% and the dividend yield was 1%. A discount of 14% was applied to the
calculated value to reflect the risk of forfeiture during the option term.
The actual value of the options will depend on the market value of the
Company's Common Stock on the dates the options are exercised. No
realization of value from the options is possible without an increase in the
price of the Company's Common Stock, which would benefit all stockholders
commensurately.
AGGREGATED OPTION EXERCISES
FOR FISCAL YEAR ENDED JUNE 30, 1996
AND OPTION VALUES AS OF JUNE 30, 1996
The following table sets forth certain information concerning option
exercises during the last fiscal year by the named executive officers and
unexercised options held by such officers at the end of the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 6/30/96 6/30/96
SHARES ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ --------------- ------------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Josh S. Weston 129,500 $ 3,948,156 610,500 40,000 $ 16,561,000 $ 582,000
Arthur F. Weinbach 36,000 $ 1,100,700 300,000 216,000 $ 8,406,000 $ 2,666,000
Gary C. Butler -- $ -- 64,000 210,000 $ 1,733,000 $ 3,240,000
Robert J. Casale -- $ -- 114,000 136,000 $ 3,094,000 $ 1,955,000
Peter M. Leger -- $ -- 33,600 86,400 $ 546,000 $ 920,000
</TABLE>
DEFINED BENEFIT PLANS
The following table shows the estimated annual retirement benefits payable
under the Company's retirement program, consisting of the Retirement Capital
Accumulation Plan (the "Pension
10
<PAGE>
Plan") and the Supplemental Officers' Retirement Plan (the "Supplemental
Retirement Plan"), to persons in specified average compensation and credited
service classifications, assuming retirement at age 65.
<TABLE>
<CAPTION>
FINAL
5-YEAR YEARS OF CREDITED SERVICE AT RETIREMENT
AVERAGE ---------------------------------------------------------------
COMPENSATION 10 15 20 25 30
- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 400,000 $ 65,000 $ 100,000 $ 118,000 $ 129,000 $ 145,000
500,000 80,000 123,000 143,000 154,000 170,000
600,000 95,000 145,000 168,000 179,000 195,000
700,000 110,000 168,000 193,000 204,000 220,000
800,000 125,000 190,000 218,000 229,000 245,000
900,000 140,000 213,000 243,000 254,000 270,000
1,000,000 155,000 235,000 268,000 279,000 295,000
</TABLE>
Compensation covered by the Pension Plan is limited to January 1 base salary
up to the current compensation limit in effect for the plan year. Compensation
covered under the Supplemental Retirement Plan includes cash compensation and
compensation from restricted stock vesting during the year. Benefits under the
Supplemental Retirement Plan are subject to reduction for social security,
Pension Plan and 401(k) benefits.
Messrs. Casale, Butler and Leger have, in the aggregate, 7, 20 and 3 years
of credited service respectively under the Pension Plan and 6, 7 and 3 years
under the Supplemental Retirement Plan. Mr. Weinbach has 15 years of credited
service under the Pension Plan. The Company has agreed that for purposes of the
Supplemental Retirement Plan, Mr. Weinbach is deemed to have 10 years of
credited service and, unless his employment is terminated for cause, will
receive the maximum benefits available under such Plan.
Mr. Weston is not a participant in the Supplemental Retirement Plan and,
accordingly, the table above does not reflect his retirement benefit. In fiscal
1995, the Company agreed to pay a portion of the annual premium of two life
insurance policies insuring the lives of Mr. Weston and his wife. In return for
the Company's agreement, Mr. Weston agreed to reduce the annual retirement
benefit under his employment contract from $550,000 per year to $382,000 per
year, an amount calculated to reimburse the Company in full for all costs
(including costs for the use of money) of the life insurance premiums paid by
the Company. If the Company does not receive full reimbursement for such costs,
Mr. Weston's retirement benefit will be further reduced or the trust which owns
the life insurance policies will make the Company whole.
EMPLOYMENT AGREEMENTS
Josh S. Weston, the Chairman of the Board and Chief Executive Officer, as
well as a director, of the Company, entered into an employment agreement with
the Company as of June 1, 1983, whose term ran until July 31, 1996, when he
retired as Chief Executive Officer. Mr. Weston's annual salary during the term
of the agreement, as amended, was $1,000,000. The agreement, as amended,
provided that Mr. Weston was eligible to receive an annual bonus of up to
$200,000 in fiscal 1995 and $250,000 in
11
<PAGE>
fiscal 1996, and a restricted stock grant of up to 22,000 shares per year based
upon the Company's earnings per share performance during the year. The agreement
also provided for certain retirement benefits as described in the "Defined
Benefit Plans" section of this proxy statement.
Arthur F. Weinbach entered into an employment agreement with the Company as
of August 1, 1996, the day Mr. Weinbach became Chief Executive Officer of the
Company. The agreement has successive one-year terms unless terminated by the
Company or Mr. Weinbach prior to June 1 of any year. Mr. Weinbach's annual base
salary is to be no less than $580,000, and his annual target bonus no less than
$290,000. The agreement provides that Mr. Weinbach is to be granted restricted
stock awards for a number of shares so that restrictions will lapse in each
fiscal year of the Company on shares with a market value on the date of the
award of at least $500,000, and stock options for 110,000 shares of Common
Stock. If Mr. Weinbach's employment is terminated by the Company without cause,
then he is entitled to receive his base salary for 18 months and continue to
vest in his restricted stock awards and stock options. If his employment is
terminated following a change-in-control of the Company, he will receive a
termination payment equal to a percentage, ranging from 300% if such termination
occurs within two years of such change-in-control to 100% if it occurs after the
third year, of his annual base salary and his average annual bonus for the prior
two years. In addition, all of his stock options will become fully vested and
all of his restricted stock having restrictions lapsing within three years after
such termination shall have such restrictions automatically removed.
Messrs. Casale and Butler have entered into agreements with the Company
which provide for a defined severance period, not to exceed nine months, in the
event of a termination of their employment resulting from a change in control of
the Company.
CERTAIN TRANSACTIONS
Harvey M. Krueger, a director of the Company, is a Senior Managing Director
of Lehman Brothers, which provided various investment banking and brokerage
services to the Company in the past fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee of the Board of Directors is composed of three
outside directors: Messrs. Lazarus, Malek and Tisch.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for setting on behalf of the Board of Directors the base salaries
and the total compensation levels of the Chairman, the President and Chief
Executive Officer and the presidents of the Employer Services, Brokerage
Services and Dealer Services businesses, as well as a structure for other key
executives of the Company. The Committee grants all stock options and reviews
all recommendations for grants of all restricted stock to these and other key
executives.
COMPENSATION POLICIES
The Company's executive compensation policies for fiscal 1996, which were
reviewed by the Committee, were designed to emphasize both competitive and
variable compensation, with direct linkages to business objectives and
exceptional performance.
12
<PAGE>
The primary components of the compensation package for key executives for
fiscal 1996 were base salary, bonus, restricted stock and stock options. The
Company and the Committee have always believed that stock ownership in the form
of restricted stock and longer-term stock option vesting is vital in linking
management to stockholder interests. The Company sets its salary and bonus
targets BELOW the median of market range levels of comparable companies included
in the S&P 500 Index. Therefore, executives derive more from stock price
appreciation as a percent of total compensation than in a company whose base
salary levels are set at market levels or higher.
ANNUAL COMPENSATION
Annual compensation consists of a base salary and a cash bonus. The base
salaries for executives for fiscal 1996 were determined based upon the job grade
of the position, the salary range of the job grade and the performance of the
executive.
Key executives earned cash bonuses in fiscal 1996 based upon individual
annual accomplishments versus individual pre-established goals that included
business growth and increased profitability. Performance goals also included
quality/service, product development, organization development and leadership.
LONG-TERM COMPENSATION
Long-term compensation is comprised of restricted stock and stock options.
The Company has from time to time sold shares of restricted stock to executive
officers and other key employees, at par value, in recognition of their
individual levels of relative responsibility and prospective contributions to
the business. Company imposed restrictions on transfer or pledge of the
restricted stock generally lapse over the ensuing five years, and are subject to
continued employment. The restricted stock plan is designed to encourage stock
ownership, longevity, and long-term performance. The Committee also considers
the dollar value of annually vested restricted stock in setting annual cash
compensation.
Stock options are granted, usually every two years, to executive officers
and other key employees in amounts based upon their job grade and individual
performance. Stock options are granted at fair market value as of the date of
grant, and have a term of up to ten years. Stock options provide incentive for
the creation of stockholder value over the long-term, and also significantly aid
in executive recruiting and retention.
Restricted stock and stock option grants were made to individual key
executives during fiscal 1996 on a basis consistent with the above guidelines.
BENEFITS
The Company provided certain supplemental benefits to key executives during
fiscal 1996 to ensure that it could compete effectively for executive talent.
These supplemental benefits included additional company paid life insurance and
certain additional retirement benefits described in the "Defined Benefit Plans"
section of this proxy statement.
CEO COMPENSATION
The Committee meets annually without the Chief Executive Officer present to
evaluate his performance and to determine his compensation.
The base salary for fiscal 1996 for Mr. Weston, the Chief Executive Officer,
was determined by the terms of his employment agreement with the Company as
described in the "Employment Agreements" section of this proxy statement. Under
the terms of that agreement, his salary could only grow
13
<PAGE>
if earnings per share grew. In fiscal 1996, Mr. Weston's base salary was
$1,000,000. His cash compensation has always been below the median of the base
compensation of chief executive officers at companies included in the S&P 500
Index with annual revenues between $1 and $5 billion, as surveyed by the
Company.
The incentives of the Chief Executive Officer were provided in the form of
restricted stock and stock options. This ensured that the Chief Executive
Officer and the Company's stockholders would have a commonality of purpose in
enhancing stockholder value. As set forth in the 1994 Executive Incentive
Compensation Plan, the Chief Executive Officer will be eligible to receive a
cash bonus, as well as restricted stock, based upon the Company's earnings per
share performance during the year.
The Committee has granted Mr. Weston, during the last five years, stock
options totaling 40,000 shares and the opportunity to purchase 44,000 shares of
restricted stock. In fiscal 1996, the Company achieved a 14% earnings per share
growth, its 35th consecutive year of double digit earnings per share growth.
Based on those results and pursuant to the terms of the 1994 Executive Incentive
Compensation Plan, Mr. Weston received a bonus of $234,000, and 22,000 of the
44,000 shares of restricted stock previously purchased by him vested. The
Committee believes that Mr. Weston's leadership has been instrumental in
achieving the Company's unparalleled record of growth in earnings per share.
Compensation Committee
of the Board of Directors
Frederic V. Malek, Chairman
Charles P. Lazarus
Laurence A. Tisch
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative return on the Common Stock of
the Company for the most recent five years with the cumulative total return on
the S&P 500 Index and the S&P Computer Software Services Index ("CSSI") over the
same period, assuming an initial investment of $100 on June 30, 1991, with all
dividends reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AUTOMATIC DATA PROCESSING COMPUTER SOFTWARE & SERVICES INDEX S&P 500 INDEX
<S> <C> <C> <C>
Jun-91 100 100 100
Jun-92 132.85 113.41 112.84
Jun-93 150.59 166.67 128.87
Jun-94 168.39 188.81 130.68
Jun-95 201.37 293.92 164.75
Jun-96 250 391.51 207.59
</TABLE>
PROPOSAL 2
APPOINTMENT OF AUDITORS
At the Annual Meeting of Stockholders, the stockholders will vote on the
ratification of the appointment of Deloitte & Touche LLP, certified public
accountants, as independent auditors to audit the accounts of the Company and
its subsidiaries for the fiscal year begun July 1, 1996. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Stockholders and
will have an opportunity to make a statement if he desires. He will be available
to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS.
15
<PAGE>
OTHER MATTERS
So far as the Board of Directors is aware, only the aforementioned matters
will be acted upon at the meeting. If any other matters properly come before the
meeting, the accompanying proxy may be voted on such other matters in accordance
with the best judgment of the person or persons voting said proxy.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1997 Annual Meeting
must be received by the Company for inclusion in the 1997 Proxy Statement no
later than May 23, 1997.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended June 30, 1996, which
is not a part of the proxy soliciting material, is being mailed to the Company's
stockholders together with this proxy statement.
For the Board of Directors
James B. Benson
SECRETARY
Roseland, New Jersey
September 23, 1996
16
<PAGE>
[Form of Proxy -- Front]
[LOGO]
AUTOMATIC DATA PROCESSING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROPERLY EXECUTED PROXIES WILL BE VOTED AS MARKED AND, IF NOT MARKED, WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN THE ACCOMPANYING PROXY
STATEMENT AND FOR PROPOSAL (2) ON THE REVERSE SIDE.
The undersigned hereby appoints Arthur F. Weinbach and Josh S. Weston, and
each of them, attorneys and proxies with full power of substitution, in the
name, place and stead of the undersigned, to vote as proxy at the 1996 Annual
Meeting of Stockholders of Automatic Data Processing, Inc. to be held at the
corporate offices of the Company, ONE ADP BOULEVARD, ROSELAND, NEW JERSEY 07068,
on Tuesday, November 12, 1996 at 10:00 A.M., or at any adjournment or
adjournments thereof, according to the number of votes that the undersigned
would be entitled to cast if personally present.
Either of said attorneys and proxies or substitutes, who shall be present at
such meeting or at any adjournment or adjournments thereof, shall have all the
powers granted to such attorneys and proxies.
PLEASE DATE, SIGN AND MAIL THE PROXY PROMPTLY IN THE SELF-ADDRESSED RETURN
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. WHEN SIGNING
AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR
FULL TITLE AS SUCH. IF SHARES ARE HELD JOINTLY, BOTH OWNERS SHOULD SIGN.
The nominees for Director are Gary C. Butler, Joseph A. Califano, Jr., Leon G.
Cooperman, George H. Heilmeier, Ann Dibble Jordan, Harvey M. Krueger, Charles P.
Lazarus, Frederic V. Malek, Henry Taub, Laurence A. Tisch, Arthur F. Weinbach
and Josh S. Weston.
<PAGE>
- ------------------- -----------------
ACCOUNT NUMBER COMMON MARK VOTES LIKE THIS /X/
[Form of Proxy -- Back]
<TABLE>
<S> <C> <C> <C> <C>
The Board of Directors Recommends a vote FOR the proposals regarding:
(1) Election of Directors FOR WITHHOLD
(INSTRUCTIONS: To withhold authority to vote for all nominees listed Authority to vote for all
any individual nominee, write that nominee's on the reverse side nominees on the reverse
name in the space provided below.) (except as marked to side / /
the contrary) / /
----------------------------------------- FOR AGAINST ABSTAIN
(2) Appointment of Deloitte & Touche LLP / / / / / /
(3) Upon any and all other matters which may properly come before the meeting or any adjournment thereof.
</TABLE>
<TABLE>
<S> <C> <C>
SIGNATURE DATE
---------------------- -------------------------
TO ELIMINATE DUPLICATE MAILINGS, PLEASE
MARK THIS BOX / / SIGNATURE DATE
---------------------- -------------------------
</TABLE>
<PAGE>
[ADP Letterhead]
September 23, 1996
John Doe
123 Main Street
New York, New York 10005
Dear Shareholder:
You are cordially invited to join us at the 1996 Annual Meeting of
Stockholders of Automatic Data Processing, Inc. This year's meeting will be held
at the corporate offices of the Company at One ADP Boulevard, Roseland, New
Jersey, on Tuesday, November 12, 1996, starting at 10:00 a.m. I hope you will be
able to attend. At the meeting we will elect directors, and will vote on the
appointment of Deloitte & Touche LLP as independent auditors.
It is important that your shares be voted whether or not you plan to be
present at the meeting. You should specify your choices by marking the
appropriate boxes on the proxy form on the reverse side, and date, sign and
return your proxy form in the enclosed, postpaid return envelope as promptly as
possible. If you date, sign and return your proxy form without specifying your
choices, your shares will be voted in accordance with the recommendation of your
directors.
As in the past years, we will discuss the business of the Company and its
subsidiaries during the meeting. I welcome your comments and suggestions, and we
will provide time during the meeting for questions from shareholders. I am
looking forward to seeing you at the meeting.
Sincerely,
[Art Weinbach]
<PAGE>
YOUR PROXY
ADP'S TELEPHONE PROXY VOTING SERVICE
VOTE COUNTS
QUICK - CONVENIENT - IMMEDIATE
CALL TODAY!
Now you can vote your proxy right over the telephone. It's fast, convenient, and
your Proxy is immediately confirmed and posted.
Just dial 1-800-VOTE ADP and follow the 4 easy steps below. If you prefer, you
can send in your proxy vote by filling out the attached proxy form below.
Phone 1-800-VOTE ADP
1-800-868-3237
CONTROL NUMBER: 2067718316
1. Read the accompanying Proxy Statement and the proxy form below.
2. Phone the toll free number printed above.
3. Once you've been connected, enter your Control Number printed on the
top center of the proxy form below.
4. Then follow the simple instructions the Vote ADP voice will provide
you.
DIRECTOR NOMINEES: (01) GARY C. BUTLER, (02) JOSEPH A. CALIFANO, JR., (03)
LEON G. COOPERMAN, (04) GEORGE H. HEILMEIER, (05) ANN DIBBLE JORDAN, (06)
HARVEY M. KRUEGER, (07) CHARLES P. LAZARUS, (08) FREDERIC V. MALEK, (09) HENRY
TAUB, (10) LAURENCE A. TISCH, (11) ARTHUR F. WEINBACH, (12) JOSH S. WESTON
