April 28, 2005

 

 

 

 

Arthur F. Weinbach

1 Twin Oak Road

Short Hills, New Jersey  07078

 

Dear Art:

 

         This letter outlines our understandings concerning your position as

Chairman and Chief Executive Officer of Automatic Data Processing, Inc. ("ADP").

 

1.       Employment.  You shall be employed by ADP as its Chairman and Chief

         Executive Officer, subject to the direction and control of its Board

         of Directors.  You shall also be a member of ADP's Board of Directors

         and a member of the Board's Executive Committee.

 

2.       Compensation.

 

         a)  ADP shall pay you a salary of at least $850,000 per annum.

 

         b)  Your target bonus for each fiscal year (i.e. July 1 to June 30)

             shall be at least $750,000.  The actual bonus paid for each fiscal

             year shall be based upon your accomplishments in relation to pre-

             established performance goals (including business growth, increased

             profitability and other significant items) established by the

             Compensation Committee of ADP's Board of Directors (the

             "Compensation Committee") pursuant to the terms of ADP's 2001

             Executive Incentive Compensation Plan (the "Incentive Plan").

 

         c)  (i) ADP will continue to sell you restricted stock under the

             Incentive Plan, such that restrictions will lapse during each

             fiscal year on the number of shares of restricted stock which had,

             on the date you originally purchased them, an aggregate market

             value of at least $1 million.  You will also, at all times, own

             sufficient shares of ADP restricted stock on which restrictions

             will lapse during each of the following two fiscal years which

             satisfy the foregoing fiscal year minimum market value test. The

             Compensation Committee may, at its sole discretion, require that

             lapsing of restrictions on your restricted stock in any fiscal year

             will only occur upon the attainment of pre-established performance

             goals pursuant to the Incentive Plan.

 

             (ii) In addition, ADP will, provided that the pre-established

             performance goals have been met, sell you additional restricted

             stock under the terms of ADP's broad-based restricted stock program

             in which all "letter grade" associates may participate.

 

             (iii) If you retire, your restricted stock shall continue to be

             owned by you and the restrictions on such stock will continue to

             lapse in the same manner as would have been the case had you

             continued to be an ADP employee.

 

         d)  You will be granted stock options on an annual basis.  The option

             grants will be for a minimum of 170,000 shares per year.  Vesting

             will be determined by the Compensation Committee (which may, at its

             sole discretion, determine that vesting will only occur upon the

             attainment of pre-established performance goals); however, all of

             your stock options will vest on your retirement.

 

         e)  The above salary, bonus and stock arrangements will be reviewed

             annually by the Compensation Committee and may be increased in its

             sole discretion. You shall also be entitled to participate in all

             of ADP's then current pension, 401(k), medical and health, life,

             accident, disability and other insurance programs, stock purchase

             and other plans and arrangements that are generally available to

             other ADP executives.

 

3.       Term.  The initial term of this letter agreement shall be for a period

         of one year.  This letter agreement shall automatically continue after

         its initial term for successive one-year periods, unless and until

         either of us gives the other written notice at least six months prior

         to the end of the applicable one-year term that this letter agreement

         shall terminate as at the end of such term.

 

4.       Termination.  If your employment with ADP is terminated, you will

         receive the following compensation:

 

         a)  If you are discharged for cause, ADP's obligation to make payments

             to you shall cease on the date of such discharge.  As used herein,

             the term "for cause" shall cover circumstances where ADP elects to

             terminate your employment because you have (i) been convicted of a

             criminal act, (ii) failed or refused to perform your obligations as

             Chairman and Chief Executive Officer, (iii) committed any act of

             negligence in the performance of your duties hereunder and failed

             to take appropriate corrective action, or (iv) committed any act of

             willful misconduct.

 

         b)  If ADP terminates your employment for any reason other than "for

             cause", for permanent or serious disability or on account of a

             "Change in Control", you will, for 18 months after such termination

             date, (i) receive the compensation provided for under Paragraph

             2(a) above, (ii) have the restrictions on your restricted stock

             continue to lapse (without regard to any performance goals), and

             (iii) have your Company stock options continue to vest.

 

         c)  If you become permanently and seriously disabled, either physically

             or mentally, so that you are absent from your office due to such

             disability and otherwise unable substantially to perform your

             services hereunder, ADP may terminate your employment.  ADP shall

             continue to pay you your full compensation up to and including the

             effective date of your termination for disability.  For 36 months

             after such termination date, you will receive the compensation

             provided for under Paragraph 2(a) above and have the restrictions

             on your restricted stock continue to lapse (without regard to any

             performance goals).  All of your outstanding and unvested ADP stock

             options shall automatically vest on the date of your termination

             for disability.

 

         d)  If you elect to voluntarily leave ADP in the absence of a Change in

             Control, ADP's obligation to make any payment to you under this

             Paragraph 4 shall cease on the date your employment ends.

 

         e)  If a Change in Control occurs and if your employment is terminated

             (other than for cause) or you resign for "Good Reason" within two

             years after such Change in Control event, you will receive a

             termination payment equal to 300% of your "Current Total Annual

             Compensation".  This termination payment will be reduced to either

             200% or 100% of your Current Total Annual Compensation if such

             termination or resignation occurs during the third year, or more

             than three years, after such Change in Control event, whichever is

             applicable.  In addition, all of your ADP stock options will become

             fully vested, and all of your ADP restricted stock having

             restrictions lapsing within three years after the date of such

             termination or resignation shall have such restrictions

             automatically removed (without regard to any performance goals).

             ADP will also pay you a tax equalization payment in an amount which

             when added to the other amounts payable to you under this Paragraph

             4(e) will place you in the same after-tax position as if the excise

             tax penalty of Section 4999 of the Internal Revenue Code of 1986 or

             any successor statute of similar import did not apply.

 

         f)  The termination of this letter agreement or your employment shall

             not affect those provisions of this letter agreement that apply to

             any period or periods subsequent to such termination.

 

5.       For purposes of this Agreement, the following definitions shall apply:

 

         a)  "Change in Control" shall mean the occurrence of any of the

             following:  (A)  any "Person" (as defined in Section 3(a)(9) of the

             Securities Exchange Act of 1934, as amended (the "Exchange Act")),

             excluding ADP, any subsidiary of ADP, or any employee benefit plan

             sponsored or maintained by ADP (including any trustee of any such

             plan acting in his capacity as trustee), becoming the "beneficial

             owner" (as defined in Rule 13d-3 under the Exchange Act) of

             securities of ADP representing 25% or more of the total combined

             voting power of ADP's then outstanding securities; (B) the merger,

             consolidation or other business combination of ADP (a

             "Transaction"), other than a Transaction immediately following

             which the stockholders of ADP immediately prior to the Transaction

             continue to be the beneficial owners of securities of the resulting

             entity representing more than 65% of the voting power in the

             resulting entity, in substantially the same proportions as their

             ownership of ADP voting securities immediately prior to the

             Transaction; or (C) the sale of all or substantially all of ADP's

             assets, other than a sale immediately following which the

             stockholders of ADP immediately prior to the sale are the

             beneficial owners of securities of the purchasing entity

             representing more than 65% of the voting power in the purchasing

             entity, in substantially the same proportions as their ownership of

             ADP voting securities immediately prior to the Transaction.

 

         b)  "Good Reason" shall mean:  (A) any action which results in a

             diminution in any respect in your current position, authority,

             duties or responsibilities as ADP's Chairman and Chief Executive

             Officer; or (B) a reduction in the overall level of your

             compensation or benefits.

 

         c)  "Current Total Annual Compensation" shall be the total of the

             following amounts:  (A)  the greater of your current annual salary

             for the calendar year in which your employment terminates or for

             the calendar year immediately prior to the year of such

             termination; and (B)  the average of your annual bonus compensation

             (prior to any bonus deferral election), for the two most recent

             calendar years immediately preceding the year in which your

             employment terminates.

 

6.       Retirement. If you elect to retire from ADP, ADP will: (a) provide you

         with appropriate office and secretarial support until your 72nd

         birthday, which office will not, in any event, be located in an ADP

         facility; (b) allow you to keep your company car; and (c) allow you to

         use the ADP travel group to make your personal travel arrangements

         using your own funds.

 

7.       SORP.  Under the Automatic Data Processing, Inc. Supplemental Officers

         Retirement Plan (the "SORP"), if your employment hereunder terminates

         other than for cause:  (i) your "Future Service" period shall be deemed

         to be 17 years as of the date of your termination; (ii) your "Final

         Average Annual Pay" shall, to the extent applicable, be deemed to

         include the applicable compensation attributable to the periods covered

         by the termination payments made to you hereunder; and (iii) if the

         Compensation Committee deems it to be in ADP's best interests that you

         retire prior to your 65th birthday, any early retirement benefit

         payable under the SORP will not be actuarially reduced to reflect the

         payment of benefits before your "Normal Retirement Date".  Your Final

         Average Annual Pay will not, in any event, be less than the aggregate

         of the minimum annual salary, bonus and restricted stock amounts

         payable to you under Paragraphs 2(a), 2(b) and 2(c)(i) above.

 

         This letter supersedes and replaces the letter dated as of August 13,

2001 between us.

 

         If the foregoing correctly sets forth our understandings, please sign

this letter agreement where indicated, whereupon it will become a binding

agreement between us.

 

                                              Very truly yours,

 

                                              AUTOMATIC DATA PROCESSING, INC.

 

 

                                              By:/s/   James B. Benson

                                                 ------------------------------

                                                       JAMES B. BENSON

                                                   CORPORATE VICE PRESIDENT

 

ACCEPTED AND AGREED:

 

 

 /s/ Arthur F. Weinbach

-------------------------------

    ARTHUR F. WEINBACH

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