<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1998 Commission File Number 1-5397
------------------------ ------------
Automatic Data Processing, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter )
Delaware 22-1467904
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One ADP Boulevard, Roseland, New Jersey 07068
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (973) 994-5000
-----------------------------
No change
- - --------------------------------------------------------------------------------
Former name, former address & former fiscal year, if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports required to be filed with the commission and (2) has
been subject to the filing requirements for at least the past 90 days.
X Yes No
- - ------------------------------------ ------------------------------------
As of January 31, 1999 there were 609,042,989 common shares outstanding.
<PAGE>
Form 10Q
Part I. Financial Information
STATEMENTS OF CONSOLIDATED EARNINGS
-----------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $1,274,864 $1,148,026 $2,485,191 $2,186,524
---------- ---------- ---------- ----------
Operating expenses 535,572 490,202 1,065,429 933,585
General, administrative and
selling expenses 284,430 286,427 607,403 575,873
Depreciation and amortization 68,032 58,193 136,939 115,623
Systems development and
programming costs 105,356 91,361 206,096 178,650
Interest expense 5,554 7,303 11,154 14,813
---------- ---------- ---------- ----------
998,944 933,486 2,027,021 1,818,544
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 275,920 214,540 458,170 367,980
Provision for income taxes 107,530 67,150 166,580 115,180
---------- ---------- ---------- ----------
NET EARNINGS $ 168,390 $ 147,390 $ 291,590 $ 252,800
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ .28 $ .25 $ .48 $ .43
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE $ .27 $ .24 $ .47 $ .42
========== ========== ========== ==========
Dividends per share $ .07625 $ .06625 $ .1425 $ .12375
========== ========== ========== ==========
</TABLE>
See notes to consolidated statements.
<PAGE>
Form 10Q
CONSOLIDATED BALANCE SHEETS
---------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, June 30,
Assets 1998 1998
- - ------ ----------- ----------
<S> <C> <C>
Cash and cash equivalents $ 699,283 $ 752,240
Short-term marketable securities 196,712 144,936
Accounts receivable 757,585 727,936
Other current assets 199,522 204,192
----------- ----------
Total current assets 1,853,102 1,829,304
----------- ----------
Long-term marketable securities 781,874 765,272
----------- ----------
Long-term receivables 196,243 177,946
----------- ----------
Land and buildings 389,979 386,745
Data processing equipment 571,342 696,424
Furniture, leaseholds and other 438,826 432,654
----------- ----------
1,400,147 1,515,823
Less accumulated depreciation (837,942) (932,150)
----------- ----------
562,205 583,673
Other assets 239,050 166,112
----------- ----------
Intangibles 1,666,729 1,653,048
----------- ----------
$ 5,299,203 $5,175,355
=========== ==========
Liabilities and Shareholders' Equity
Notes payable $ 89,430 $ 239,811
Accounts payable 71,298 119,803
Accrued expenses & other current
liabilities 766,532 806,297
Income taxes 83,998 55,130
----------- ----------
Total current liabilities 1,011,258 1,221,041
----------- ----------
Long-term debt 165,796 192,063
----------- ----------
Other liabilities 126,945 103,056
----------- ----------
Deferred income taxes 165,198 147,397
----------- ----------
Deferred revenue 107,612 105,347
----------- ----------
Shareholders' equity:
Common stock 62,858 62,858
Capital in excess of par value 611,011 586,329
Retained earnings 3,579,591 3,374,729
Treasury stock (485,458) (515,845)
Accumulated other comprehensive income (45,608) (101,620)
----------- ----------
3,722,394 3,406,451
----------- ----------
$ 5,299,203 $5,175,355
=========== ==========
</TABLE>
See notes to consolidated statements.
<PAGE>
Form 10Q
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
-----------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 291,590 $ 252,800
Expenses not requiring outlay of cash 134,420 133,842
Changes in operating net assets (30,218) 39,657
--------- ---------
Net cash flows from operating activities 395,792 426,299
--------- ---------
Cash Flows From Investing Activities:
Purchase of marketable securities (209,179) (239,835)
Proceeds from sale of marketable securities 145,462 232,612
Capital expenditures (81,648) (79,853)
Other changes to property, plant and equipment 6,738 4,052
Additions to intangibles (35,243) (48,676)
Net dispositions (acquisitions) of businesses 17,671 (176,606)
--------- ---------
Net cash flows from investing activities (156,199) (308,306)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from issuance of notes payable 98,471 61,043
Proceeds from issuance of common stock 48,939 30,241
Repurchases of common stock (85,364) (40,907)
Dividends paid (86,727) (72,719)
Repayments of debt (267,869) (180)
--------- ---------
Net cash flows from financing activities (292,550) (22,522)
--------- ---------
Net change in cash and cash equivalents (52,957) 95,471
Cash and cash equivalents, at beginning of
period 752,240 590,578
--------- ---------
Cash and cash equivalents, at end of
period $ 699,283 $ 686,049
========= =========
</TABLE>
See notes to consolidated statements.
<PAGE>
Form 10Q
NOTES TO CONSOLIDATED STATEMENTS
--------------------------------
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. Adjustments are of a normal recurring nature. These statements
should be read in conjunction with the annual financial statements and related
notes of the Company for the year ended June 30, 1998.
Note A - The results of operations for the six months ended December 31, 1998
may not be indicative of the results to be expected for the year ending
June 30, 1999.
Note B - The Board of Directors declared a two-for-one common stock split
effective on January 1, 1999 to shareholders of record on the close of
business on December 11, 1998.
Note C - A reconciliation of the income and weighted average shares used in the
basic and diluted earnings per share calculations follows:
(In thousands, except EPS)
<TABLE>
<CAPTION>
Periods ended December 31, 1998
----------------------------------------------------
Three month period Six month period
------------------------- ------------------------
Income Shares EPS Income Shares EPS
------ ------ --- ------ ------ ---
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $168,390 604,750 $ 0.28 $291,590 605,025 $ 0.48
Effect of zero coupon
subordinated notes 929 6,147 1,981 6,638
Effect of stock
options - 15,319 - 15,054
------------------------- -------------------------
Diluted EPS $169,319 626,216 $ 0.27 $293,571 626,717 $ 0.47
========================= ========================
<CAPTION>
Periods ended December 31, 1997
----------------------------------------------------
Three month period Six month period
------------------------- ------------------------
Income Shares EPS Income Shares EPS
------ ------ --- ------ ------ ---
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $147,390 587,264 $0.25 $252,800 586,256 $0.43
Effect of zero coupon
subordinated notes 2,464 17,326 5,218 14,280
Effect of stock
options - 12,504 - 12,002
------------------------- --------------------------
Diluted EPS $149,854 617,094 $0.24 $258,018 612,538 $0.42
========================= =========================
</TABLE>
<PAGE>
Form 10Q
Note D - Effective July 1, 1998, the Company adopted FASB Statement No. 130
"Reporting Comprehensive Income." Comprehensive income for the three
and six months ended December 31, 1998 and 1997 follows:
(In thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $168,390 $147,390 $291,590 $252,800
Other comprehensive income:
Foreign currency
translation adjustments 25,182 (8,221) 58,055 (14,611)
Unrealized gains (losses)
on securities (107) (17) (2,043) 1,825
-------- -------- -------- --------
Comprehensive income $193,465 $139,152 $347,602 $240,014
======== ======== ======== ========
</TABLE>
Note E - In November 1998 the Company sold its "front-office" market data
business to Bridge Information Systems, Inc. The transaction gave rise
to a pretax gain of $22 million and a $25 million provision for income
taxes, resulting in a net loss of $3 million.
Note F - In December 1998 the Company entered into an agreement to acquire The
Vincam Group for approximately 7.4 million shares of ADP common stock
in a pooling of interests transaction. Vincam, with net revenues of
approximately $125 million, is a leading Professional Employer
Organization providing a suite of human resource functions to small and
medium sized employers on an outsourced basis. The transaction is
subject to Vincam shareholder and various regulatory approvals and is
expected to close during the quarter ending March 31, 1999.
Note G - In February 1999 the Company reached a definitive agreement to sell its
Peachtree Software business to The Sage Group plc, for $145 million.
The agreement is subject to regulatory approvals and is expected to
close during the quarter ending March 31, 1999.
<PAGE>
Form 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OPERATING RESULTS
Revenues and earnings again reached record levels during the quarter ended
December 31, 1998.
Revenues and revenue growth by ADP's major business units are shown below:
<TABLE>
<CAPTION>
Revenues
----------------------------------
3 Months Ended 6 Months Ended
December 31, December 31,
-------------- --------------
1998 1997 1998 1997
------ ------- ------ -------
($ in millions)
<S> <C> <C> <C> <C>
Employer Services $ 770 $ 667 $1,465 $1,254
Brokerage Services 221 232 473 455
Dealer Services 186 173 367 339
Other 98 76 180 139
------ ------ ------ ------
$1,275 $1,148 $2,485 $2,187
====== ====== ====== ======
<CAPTION>
Revenue Growth
----------------------------------
3 Months Ended 6 Months Ended
December 31, December 31,
-------------- --------------
1998 1997 1998 1997
------ ------- ------ -------
<S> <C> <C> <C> <C>
Employer Services 15% 21% 17% 20%
Brokerage Services (5) 16 4 17
Dealer Services 8 7 8 8
Other 29 (8) 29 (14)
----- ----- ----- -----
11% 15% 14% 15%
===== ===== ===== =====
</TABLE>
Consolidated revenues for the quarter grew 11% from last year to $1,275
million. Revenue growth in Employer and Dealer Services was 15% and 8%,
respectively. Brokerage Services revenue, down 5%, was impacted by the sale
of the "front office" market data business in the quarter. Excluding the sale
of the front office business, Brokerage Services revenue grew 14%.
The primary components of "Other" revenues are claims services, interest
income, foreign exchange differences and miscellaneous processing services.
In addition, "Other" revenues have been reduced to adjust for the difference
between actual interest income earned on invested tax filing funds and income
credited to Employer Services at a standard rate of 6%.
The sale of the front office business resulted in a $22 million pretax gain,
a $25 million provision for taxes and a $3 million net loss.
Pretax earnings for the quarter increased 29% from last year, helped by the
gain on the "front office" sale. Prior to the one-time impact of the front
office sale, pretax earnings increased 18%. Systems development and
programming investments increased to accelerate automation, migrate to new
computing technologies, and develop new products.
<PAGE>
Form 10Q
Net earnings for the quarter, after a higher effective tax rate, increased
14% to $168 million. Excluding the impact of the front office sale, net
earnings increased 16%. The effective tax rate of 39.0% increased from 31.3%
in the comparable quarter last year. Excluding the impact of the front office
sale, the effective tax rate increased to 32.6% this quarter, primarily as a
result of the greater weighting of taxable versus non-taxable earnings.
Diluted earnings per share grew 13% to $0.27 from $0.24 last year. Excluding
the front office sale, diluted earnings per share increased 17%.
The Company expects double digit revenue growth for the full year and diluted
earnings per share growth of 13-16%.
FINANCIAL CONDITION
The Company's financial condition and balance sheet remain exceptionally
strong, and operations continue to generate a strong cash flow. At December
31, 1998, the Company had cash and marketable securities of $1.7 billion.
Shareholders' equity was $3.7 billion and the ratio of long-term debt to
equity was 4%.
Capital expenditures for fiscal 1999 are expected to approximate $200
million, compared to $199 million in fiscal 1998.
During the first half of fiscal 1999, ADP purchased 2.6 million shares of
common stock for treasury at an average price of approximately $33. The
Company has remaining Board authorization to purchase up to 14.5 million
additional shares to fund equity related employee benefit plans.
During the first half of fiscal 1999,the Company's zero coupon convertible
subordinated notes were converted to 1.6 million shares of common stock.
The Company's investment portfolio for corporate and client funds consists
primarily of fixed income securities subject to interest rate risk, including
reinvestment risk. The Company has historically had the ability to hold these
investments until maturity and, therefore, this has not had an adverse impact
on income or cash flows.
OTHER MATTERS
The majority of the Company's services involve computer processing and, as
such, the Year 2000 could have a significant impact on the Company's products
and services. As a result, the Company has worked for several years
addressing both internal and third-party Year 2000 compliance issues. The
majority of the Company's mission-critical systems are Year 2000 compliant
and the few remaining systems, primarily from recent acquisitions, are
expected to be compliant by March 31, 1999. In addition, the Company has been
actively working with external agencies and partners, including government
agencies, to determine and conform to their Year 2000 compliance plans. Third
party interface testing and resolution of Year 200 issues with external
agencies and partners is dependent upon those third parties completing their
own Year 2000 remediation efforts.
<PAGE>
Form 10Q
The Year 2000 remediation is not expected to have a material adverse effect
on the Company's overall results, as these costs are not expected to be
substantially different from normal recurring costs that are incurred for
systems development and implementation.
This report contains "forward-looking statements" based on management's
expectations and assumptions and are subject to risks and uncertainties that
may cause actual results to differ from those expressed. Factors that could
cause differences include: ADP's success in obtaining, retaining and selling
additional services to clients; the pricing of products and services; overall
economic trends, including interest rate and foreign currency trends; impact
of Year 2000; stock market activity; auto sales and related industry changes;
employment levels; changes in technology; availability of skilled technical
associates and the impact of new acquisitions.
PART II. OTHER INFORMATION
Except as noted below, all other items are inapplicable or would result in
negative responses and, therefore, have been omitted.
Item 4. Submission of Matters to a Vote of Security Holders
All share and vote results are prior to the stock split.
The Company's Annual Meeting of the Stockholders was held on November 10,
1998. The following members were elected to the Company's Board of Directors
to hold office for the ensuing year.
Nominee In Favor Withheld
------- -------- --------
Gary C. Butler 248,065,729 1,597,079
Joseph A. Califano, Jr. 247,872,536 1,790,272
Leon G. Cooperman 248,083,612 1,579,196
George H. Heilmeier 248,060,799 1,602,009
Ann Dibble Jordan 247,999,348 1,663,460
Harvey M. Krueger 245,468,769 4,194,039
Frederic V. Malek 247,982,439 1,680,369
Henry Taub 247,927,042 1,735,766
Laurence A. Tisch 247,650,299 2,012,509
Arthur F. Weinbach 248,051,128 1,611,680
Josh S. Weston 247,824,586 1,838,222
The result of the voting on the following additional item was as follows:
(a) Ratify an amendment to the Company's Employees' Savings-Stock Purchase
Plan approved by the Board of Directors increasing by five million shares
the number of shares of Common Stock of the Company that may be acquired by
employees under such plan.
<PAGE>
Form 10Q
PART II. OTHER INFORMATION, continued
The votes of the stockholders on this ratification were as follows:
In Favor Opposed Abstained
-------- ------- ---------
237,283,659 10,979,070 1,400,079
(b) Ratify an amendment to the Restated Certificate of Incorporation of the
Company to increase the number of authorized shares of Common Stock of the
Company to one billion shares.
The votes of the stockholders on this ratification were as follows:
In Favor Opposed Abstained
-------- ------- ---------
233,808,508 14,894,015 960,285
(c) Ratify the appointment of Deloitte & Touche LLP to serve as the Company's
independent certified public accountants for the fiscal year begun on
July 1, 1998.
The votes of the stockholders on this ratification were as follows:
In Favor Opposed Abstained
-------- ------- ---------
248,202,359 254,705 1,205,744
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Number Exhibit
------- -------
3.1 Amended and Restated Certificate of Incorporation of
Automatic Data Processing
27.1 Financial Data Schedule
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AUTOMATIC DATA PROCESSING, INC.
-------------------------------
(Registrant)
Date: February 10, 1999 /s/ Richard J. Haviland
-------------------------------
Richard J. Haviland
Chief Financial Officer
(Principal Financial Officer)
-------------------------------
(Title)
<PAGE>
Exhibit 3.1
AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOMATIC DATA PROCESSING, INC.
-------------------------------
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 242 AND 245 OF
THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-------------------------------
We, the Chairman of the Board and Chief Executive Officer and the
Corporate Vice President and Secretary, respectively, of Automatic Data
Processing, Inc., a corporation existing under the laws of the State of
Delaware, do hereby certify under the seal of said corporation as follows:
I. That the name of the corporation is AUTOMATIC DATA PROCESSING,
INC. (hereinafter called the "Corporation").
II. That the Certificate of Incorporation of the Corporation was
filed by the Secretary of State on the 12th day of June 1961.
III. That this Certificate amends the Certificate of Incorporation by
increasing the number of authorized shares of Common Stock of the
Corporation to 1,000,000,000 shares.
IV. That the amendment and the restatement of the Certificate of
Incorporation of the Corporation have been duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware by an affirmative vote of the holders of a majority
of all outstanding stock entitled to vote at a meeting of stockholders.
V. That the text of the Certificate of Incorporation of the
Corporation, as heretofore amended, is hereby restated, as further amended
by this Certificate, to read in its entirety as follows:
CERTIFICATE OF INCORPORATION
OF
AUTOMATIC DATA PROCESSING, INC.
We, the undersigned, in order to form a corporation for the purposes
hereinafter stated, pursuant to the provisions of Chapter 1 of Title 8 of
the Delaware Code of 1953, do hereby certify as follows:
FIRST: The name of the corporation is AUTOMATIC DATA PROCESSING,
INC. (hereinafter called the "Corporation").
<PAGE>
SECOND: The address of the Corporation's registered office is 9 East
Loockerman St, City of Dover; County of Kent, State of Delaware; and its
registered agent at such address is National Registered Agents, Inc.
THIRD: The nature of the business and purposes to be conducted or
promoted by the Corporation are to engage in, carry on and conduct any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware; and in addition to, and
without limiting the generality of; the foregoing, the following:
(a) To engage in the business of preparing payrolls, performing
statistical, tabulating and clerical services of all kinds,
conducting research and analytical or statistical studies, preparing
business reports and surveys, rendering consulting services to
business and performing business services of any and all kinds of a
similar nature;
(b) To engage in, carry on, conduct and/or participate in any
general or specific branch or phase of the activities, enterprises,
or businesses authorized in this Certificate in the State of Delaware
or in any other state of the United States and in all foreign
countries, and in all territories, possessions and other places, and
in connection with the same, or any thereof; to be and act either as
principal, agent, contractor or otherwise;
(c) To do everything necessary, suitable, convenient or proper
for the accomplishment, attainment or furtherance of; to do every
other act or thing incidental or appurtenant to, growing out of or
connected with, the purposes set forth in this Certificate, whether
alone or in association with others; to possess all the rights,
powers and privileges now or hereafter conferred by the laws of the
State of Delaware upon corporations organized under the General
Corporation Law of the State of Delaware (as the same may be amended
from time to time) or any statute which may be enacted to supplement
or replace it, and, in general, to carry on any of the activities and
to do any of the things herein set forth to the same extent and as
fully as a natural person or a partnership, association, corporation
or other entity, or any of them, might or could do; provided, that
nothing herein set forth shall be construed as authorizing the
Corporation to possess any purpose, object, or power; or to do any
act or thing, forbidden by law to a corporation organized under the
General Corporation Law of the State of Delaware. The foregoing
provisions of this Article shall be construed as purposes, objects
and powers, and each as an independent purpose, object and power; in
furtherance, and not in limitation, of the purposes, objects and
powers granted to the Corporation by the laws of the State of
Delaware; and except as otherwise specifically provided in any such
provision, no purpose, object or power herein set forth shall be in
any way limited or restricted by reference to, or inference from, any
other provision of this Certificate.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is One Billion Three Hundred Thousand (1,000,300,000),
consisting of Three Hundred Thousand (300,000) shares of Preferred Stock, of the
par value of One Dollar ($1.00) per share (hereinafter called "Preferred
Stock"), and One Billion (1,000,000,000) shares of Common Stock, of the par
value of Ten Cents ($.10) per share (hereinafter called "Common Stock").
The Board of Directors is hereby authorized to issue the shares of the
Preferred Stock in one or more series, to fix by resolution, to the extent now
or hereafter permitted by the laws of the State of Delaware, the designation
such series, the dividend rate of such series and the date or dates and other
provisions respecting the payment of dividends, the provisions, if any, for a
sinking fund for the shares of
<PAGE>
such series, the preferences of such series with respect to dividends and in the
event of the liquidation or dissolution of the Corporation, the provisions, if
any, respecting the redemption of the shares of such series, the voting rights,
if any, of the shares of such series, the terms, if any, upon which the shares
of such series shall be convertible into or exchangeable for any other shares of
stock of the Corporation and any other relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof;
of the shares of such series.
Subject to the payment or setting apart for payment of any preferential
dividends which the holders of shares of any series of Preferred Stock shall be
entitled to receive, the holders of the Common Stock shall be entitled to
receive such dividends as may be declared thereon from time to time by the Board
of Directors, in its discretion, from any assets legally available for the
payment of dividends.
In the event of the liquidation or dissolution of the Corporation, whether
voluntary or involuntary, after distribution to the holders of all shares of any
series of Preferred Stock which shall be entitled to a preference over the
holders of Common Stock of the full preferential amounts to which they are
entitled, the holders of Common Stock shall be entitled to share ratably in the
distribution of the remaining assets of the Corporation available for
distribution to shareholders.
Except as otherwise expressly provided in any resolution adopted by the
Board of Directors granting voting rights to the holders of shares of any series
of Preferred Stock and except as otherwise required by law the entire voting
power of the Corporation shall be vested in the Common Stock, and each share of
Common Stock shall have one vote for each share thereof held.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and it is expressly
provided that the same are intended to be in furtherance and not in limitation
or exclusion of the powers conferred by law:
1. Members of the Board of Directors may be elected either by
written ballot or by voice-vote.
2. The Board of Directors may from time to time make, alter, or
repeal the By-laws of the Corporation; provided, that any By-laws made,
amended, or repealed by the Board of Directors may be amended or
repealed, and new By-laws may be made, by the stockholders of the
Corporation.
3. The Corporation shall indemnify all directors and officers of the
Corporation to the full extent permitted by the General Corporation Law
of the State of Delaware (and in particular Paragraph 145 thereof), as
from time to time amended, and may purchase and maintain insurance on
behalf of such directors and officers. In addition, the Corporation
shall, in the manner and to the extent as the By-laws of the Corporation
shall provide, indemnify to the full extent permitted by the General
Corporation law of the State of Delaware (and in particular Paragraph 145
thereof), as from time to time amended, such other persons as the By-laws
shall provide, and may purchase and maintain insurance on behalf of such
other persons.
4. A director of the Corporation shall not be held personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; except for liability (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any
<PAGE>
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of any
director of the Corporation existing at the time of; or for or with
respect to any acts or omissions occurring prior to, such repeal or
modification.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may; on the application in a summary
way of this Corporation or of any creditor or stockholder thereof; or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such a manner as the said Court directs. If a majority in
number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
IN WITNESS WHEREOF, We, Arthur F. Weinbach, Chairman of the Board and
Chief Executive Officer, and James B. Benson, Corporate Vice President and
Secretary, of AUTOMATIC DATA PROCESSING, INC., have signed this Certificate and
caused the corporate seal of the corporation to be hereunto affixed this 11th
day of November, 1998.
---------------------------------------------
Arthur F. Weinbach
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Attest:
--------------------------------------
James B. Benson
CORPORATE VICE PRESIDENT AND SECRETARY
[Corporate Seal]
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