Employment Agreement- Rodriguez

Employment Agreement- Butler

Change in Control Agreement

 

 

 

EX-10.1 2 eh1100888_ex1001.htm EXHIBIT 10.1

EXHIBIT 10.1

 

 

 

 

 

 

 

December 14, 2011

 

 

Carlos Rodriguez

29 Colts Glen Lane

Basking Ridge, NJ 07920

 

Dear Carlos:

 

This letter agreement outlines our understandings concerning your position as the President and Chief Executive Officer of Automatic Data Processing, Inc. (“ADP”).

 

ADP and you agree as follows:

 

1.           Employment and Term.

 

a.           You shall be employed by ADP as its President and Chief Executive Officer reporting to the Board of Directors of ADP (the “Board”) for a period of three years from November 8, 2011, and any continuation of your employment beyond such date will be subject to the approval of the Board.   Any removal of the term “President” from your title after the date hereof shall not be deemed to be any way a diminution of your position, duties, responsibilities or authority.

 

b.           You shall devote your full business time, energy and skill, on an exclusive basis, to the business and affairs of ADP and will use your business time, energy and skill to promote the business and interests of ADP and any and all of the ADP divisions, subsidiaries and affiliates.   Notwithstanding the foregoing, you may serve upon the board of directors (or its equivalent) of other public or private organizations, with the prior approval of the Board.

 

c.           As a condition of your employment, you agree to abide by and be bound by the terms, conditions and provisions of the restrictive covenants set forth on Exhibit A attached hereto, which terms, conditions and provisions are incorporated by reference into this letter agreement.  This obligation survives the term of this letter agreement.

 

2.           Compensation and Benefits.

 

a.           ADP shall pay you a salary of no less than $800,000 per annum, which will be considered annually for adjustment by the Compensation Committee of the Board (the “Compensation Committee”).  Your salary will be paid on a monthly basis.

 

b.           Your target bonus for each fiscal year (i.e., July 1 to June 30) shall be 160% of your salary.   In FY’12, your target bonus will be $1,280,000, which shall not be prorated.   Your actual FY’12 bonus shall be based upon your performance against the performance objectives set by the Compensation Committee in September 2011.  Your bonus for future fiscal years shall be determined by your performance against the performance objectives pre-established by the Compensation Committee for each such fiscal year.

 

 

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c.           You shall continue to participate in all of ADP’s pension, 401(k), medical and health, life, accident, disability and other insurance programs, equity plans, the Automatic Data Processing, Inc. Supplemental Officers Retirement Plan, ADP’s Executive Fleet Program, ADP’s Matching Gift Program, and other compensation and benefits plans and arrangements that are generally available to other ADP executives in accordance with their terms as in effect from time to time.   Subject to applicable law, your participation in any or all such plans and arrangements may be modified or eliminated from time to time in the sole discretion of the Compensation Committee, without the requisite payment of any compensation.

 

3.           Stock Options.

 

At the next regularly scheduled meeting of the Compensation Committee in January 2012, you shall receive a stock option grant of 40,000 shares as previously determined by the Compensation Committee, plus an additional special stock option grant of 150,000 shares.  If the grants, along with the restrictive covenants associated with such grants, are accepted, such options will vest ratably in 25% increments on each of the first four anniversaries of the grant date, and otherwise in accordance with the terms of the grants.

 

       4.      Termination and Severance Payments.

 

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 or pled nolo contendere to a criminal act for which the punishment under applicable law may be imprisonment for more than one year, (ii) willfully or recklessly failed or refused to perform your material obligations as President and Chief Executive Officer, (iii) committed any act or omission of gross negligence in the performance of your material duties hereunder, (iv) committed any act of willful or reckless misconduct, (v) violated your restrictive covenants, or (vi) violated either ADP’s “Code of Business Conduct and Ethics”, or ADP’s “Code of Ethics for Principal Executive Officer and Senior Financial Officers”, as each may be updated from time to time and which can be found at www.adp.com under “About ADP”.

 

b.           If you become permanently and seriously disabled as defined under ADP’s long term disability plan then in effect, 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, and ADP’s obligation to make payments to you (beyond previously accrued and unpaid amounts) shall cease on the date of such termination.

 

 

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c.           If your death occurs while you are actively employed by ADP, ADP’s obligation to make payments to you (beyond previously accrued and unpaid amounts) shall cease on the date of your death.

 

d.           If you elect to resign from ADP, ADP’s obligation to make payments to you (beyond previously accrued and unpaid amounts) shall cease on the date your employment ends.

 

e.           If during your employment with ADP, ADP terminates your employment for any reason other than “for cause” as described in paragraph 4(a) or for a disability as set forth in paragraph 4(b) or upon your death as set forth in paragraph 4(c) or you elect to resign as set forth in paragraph 4(d), and you execute and do not revoke a Release, you will be paid an amount (in addition to any previously accrued but unpaid amounts) equal to 2.6 times your annual salary for the fiscal year of termination, payable in monthly installments over 12 months.   You will separately receive the bonus for the fiscal year of termination that you would have otherwise have received if your employment had not been terminated, based upon your (and to the extent applicable, ADP’s) actual full-year performance (as determined by the Compensation Committee), prorated to reflect the portion of the fiscal year worked through the date of termination. Further, such amount will be paid in the following fiscal year at the same time that bonuses would have otherwise been paid in the ordinary course, absent termination of employment.

 

f.           You will continue to participate in the Change in Control Severance Plan for Corporate Officers (the “CIC Plan”). In the event of a “change in control” of ADP and a subsequent “qualifying termination” occurs (as such terms are defined in the CIC Plan), you will be entitled to the greater of the benefits and payments under the CIC Plan and this letter agreement.  Further, for the purposes of the application of the “severance benefit” described in Section 1.1 of the CIC Plan, you will be entitled to an amount equal to 200% of “current total annual compensation” (as defined in the CIC plan) under the circumstances of clause 1.1(a)(i) thereof and 150% of current total annual compensation under the circumstances of clause 1.1(a)(ii) thereof.

 

5.            Section 409A.

 

        (a)        For purposes of this letter agreement, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder (and such other Treasury or Internal Revenue Service guidance) as in effect from time to time.   The parties intend that any amounts payable hereunder that are not otherwise exempt from the provisions of Section 409A (including pursuant to the “short term deferral” exception) and which could constitute “deferred compensation” within the meaning of Section 409A will be compliant with Section 409A.

 

        (b)        Notwithstanding anything in this letter agreement to the contrary, if and to the extent required by Section 409A, in the event you are deemed to be a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and you are not “disabled” within the meaning of Section 409A(a)(2)(C), no payments hereunder that are “deferred

 

 

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compensation” subject to Section 409A , and that are due or payable on account of “separation from service” (as defined in Section 409A), shall be made to you prior to the date that is six (6) months after the date of your “separation from service”  or, if earlier, your date of death.  Following any applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A that is also a business day.  

 

        (c)        For purposes of this letter agreement, with respect to payments of any amounts that are considered to be “deferred compensation” subject to Section 409A, references to “termination of employment” (and substantially similar phrases) shall be interpreted and applied in a manner that is consistent with the requirements of Section 409A, and each of the payments that may be made hereunder are designated as separate payments. Any payment or benefit due upon a termination of your employment under paragraph 4.e that represents a “deferral of compensation” within the meaning of Section 409A shall commence to be paid or provided to you 61 days following a “separation from service”, provided that you execute a Release within 60 days following your “separation from service.”

 

        (d)         Any payment or benefit under this letter agreement or otherwise that is eligible for exemption from Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided to you only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which your “separation from service” occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which your “separation from service” occurs.  To the extent any indemnification payment, expense reimbursement, or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise), the amount of any such indemnification payment or expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the indemnification payment or provision of in-kind benefits or expenses eligible for reimbursement in any other calendar year (except for any life-time or other aggregate limitation applicable to medical expenses), and in no event shall any indemnification payment or expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such indemnification payment or expenses, and in no event shall any right to indemnification payment or reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.

 

6.           Miscellaneous.

 

a.           All notices shall be sent to the parties by hand delivery or by certified or registered mail at the addresses set forth above or to any changed address which may be given in writing hereafter.  All notices to ADP shall include two copies to ADP at One ADP Boulevard, Roseland, New Jersey 07068 (one copy to the attention of its General Counsel and the other copy to the attention of the Chairman of the Board).  Unless hand delivered, notices shall be deemed given three business days following the date deposited in the

 

 

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U.S. mails or one business day following the date of delivery to a nationally recognized overnight courier service.

 

b.           In the event that this letter agreement or any provision hereof is declared invalid, unenforceable or illegal by any court, agency, commission or arbitrator(s) having jurisdiction hereof or thereof, neither party shall have any cause of action or claim against the other by reason of such declaration of invalidity, unenforceability or illegality; and any such declaration concerning any provision hereof shall not affect, impair or invalidate the remainder of this letter agreement, but shall be confined in its operation to that provision hereof only and the remainder of this letter agreement shall remain in full force and effect. The parties hereto agree to substitute the invalid, unenforceable or illegal provision by a valid, enforceable or legal one which corresponds to the spirit and purpose of the invalid, unenforceable or illegal provisions to the greatest extent possible.

 

 c.           This letter agreement may not be changed, modified or amended in any manner except by an instrument in writing signed by all parties hereto.

 

d.           This letter agreement is personal to each of the parties hereto and no party hereto may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party.

 

e.           The headings contained in this letter agreement are for reference purposes only and shall not affect the meaning or interpretation of this letter agreement.

 

f.           No failure or delay on the part of any party hereto in the exercise of any right hereunder in enforcing or requiring the compliance or performance by the other party of any of the terms and conditions of this letter agreement shall operate as a waiver of any such right, or constitute a waiver of a breach of any such terms and conditions, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right, nor shall any of the aforementioned failures or delays affect or impair such rights generally in any way.  The waiver by any party of a breach of any term or condition of this letter agreement by the other party shall neither operate as nor be construed as a waiver of any subsequent breach thereof.

 

g.           This letter agreement and its validity, construction and performance shall be governed in all respects by the laws of the State of New Jersey, without giving effect to its conflicts of laws principles.  Any lawsuits arising out of or in connection with this letter agreement shall be brought in the Superior Court of New Jersey, Essex County, or the Federal District Court of the District of New Jersey.  You and ADP hereby consent to the jurisdiction and venue of such courts.  You and ADP waive any right to a trial by jury of any such lawsuit.

 

 

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If the foregoing correctly sets forth our understandings, please sign this letter agreement where indicated, whereupon it will become a binding agreement between us.

 

 

 

Automatic Data Processing, Inc.

 

 

 

 

 

 

 

By:

/s/ Leslie A. Brun

 

 

 

Leslie A. Brun

 

 

 

Chairman of the Board

 

 

 

 

 

      

 

Accepted and Agreed:

 

 

 

 

/s/ Carlos A. Rodriguez

 

 

Carlos A. Rodriguez

 

 


 

 

 

 

 

 

 

 

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EXHIBIT A

 

Restrictive Covenant

 

I acknowledge that in my position(s) with Automatic Data Processing, Inc., its subsidiaries and affiliates (collectively “ADP”), I have access to confidential information and trade secrets of ADP and I enjoy substantial compensation and benefits from ADP.  In consideration of such benefits and because it is in ADP’s best interests that all employees in executive positions execute restrictive covenants, I agree as follows:

 

 

1.

During the period that I am an ADP employee and ending twenty-four months after the date I cease to be an ADP employee for any reason whatsoever (the “Non-Competition Period”), I will not,  directly or indirectly, become or be interested in, employed by, or associated with in any capacity, any person, corporation, partnership or other entity whatsoever (a “Person”) engaged in any aspect of ADP’s businesses, or businesses ADP has formal plans to enter on the date I cease to be an ADP employee (the “Termination Date”), in a capacity which is (i) either the same or similar to any capacity in which I was involved during the last two years of my employment by ADP or (ii) otherwise a senior or executive position.  After the Termination Date, however, nothing shall prevent me from owning, as an inactive investor, securities of any competitor of ADP which is listed on a national securities exchange.  Furthermore, after the Termination Date, I may become employed in a separate, autonomous division of a corporation or other entity, provided such division is not a competitor of ADP.

 

 

2.

During and after my employment by ADP, I will not use, or disclose to any Person any confidential information, trade secrets or proprietary information of ADP, its vendors, licensors, marketing partners or clients, learned by me during my employment and/or any of the names and addresses of clients of ADP.  I acknowledge that I am prohibited from taking any confidential, proprietary or other materials or property of ADP with me upon termination of my employment.  Upon termination of my employment, I shall return all ADP materials (including, without limitation, all memoranda and notes containing the names, addresses and/or needs of ADP clients and bona fide prospective clients) in my possession or over which I exercise control, regardless of whether such materials were prepared by ADP, me or a third party.

 

 

3.

During the Non-Competition Period, I shall not, on my behalf or on behalf of any other Person, directly or indirectly, solicit, contact, call upon, communicate with or attempt to communicate with any Person which was a client or a bona fide prospective client of ADP before the Termination Date to sell, market, license, lease or provide any software, product or service competitive or potentially competitive with any software, product or services sold, marketed, licensed, leased, provided or under development by ADP during the two-year period prior to the Termination Date.

 

 

 


 

 

 

4.

During the Non-Competition Period, I will not, directly or indirectly (i) hire, contract with, solicit, or encourage to leave ADP’s employ any ADP employee, or (ii) hire or contract with any former ADP employee within one year after the date such person ceases to be an ADP employee.

 

 

5.

During my employment by ADP, I shall not accept any position (unless such position is to commence after my employment ceases), compensation, reimbursement or funds, or their equivalent, from any Person engaged in any business in which ADP is engaged.

 

 

6.

A violation of the foregoing covenants not to compete, not to disclose, not to solicit and not to hire will cause irreparable injury to ADP.  ADP shall be entitled, in addition to any other rights and remedies it may have at law or in equity, to an injunction enjoining and restraining me from performing, and continuing in the performance of, any such violation.

 

 

7.

I understand and acknowledge that ADP shall have the sole and exclusive rights to anything relating to its actual or prospective business which I conceive or work on, either in whole or in part, while employed by ADP and that all such work product may be property of ADP as “works for hire” under federal copyright law and may also constitute ADP confidential and proprietary information.  Accordingly, I:

 

 

(a)

will promptly and fully disclose all such items to ADP and will not disclose such items to any other Person without ADP’s prior consent;

 

 

(b)

will maintain on ADP’s behalf and surrender to ADP upon termination of my employment appropriate written records regarding all such items;

 

 

(c)

will, but without personal expense, fully cooperate with ADP, execute all papers and perform all acts requested by ADP to establish, confirm or protect its exclusive rights in such items or to enable it to transfer legal title to such items, together with any patents that may be issued;

 

 

(d)

will, but without personal expense, provide such information and true testimony as ADP may request regarding such items including, without limitation, items which I neither conceived nor worked on but regarding which I have knowledge because of my employment with ADP; and

 

 

(e)

hereby assign to ADP, it successors and assigns, exclusive right, title and interest in and to all such items, including any patents which have been or may be issued.

 

 

 


 


 

 

8.

My obligations under this Agreement shall be binding upon me regardless of which office(s) of ADP I am employed at or position(s) I hold and shall inure to the benefit of any successors or assigns of ADP.  This Agreement supplements and does not supersede any prior agreement(s) on the subject matter addressed herein.

 

 

9.

If any provision of this Agreement is invalid or unenforceable, the balance of this Agreement shall remain in effect.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey. Any waiver of any provision of this Agreement shall be valid only if set forth in an instrument in writing signed by ADP.  Any waiver of any provision shall not be construed as a subsequent waiver of the same provision, or a waiver of any other provision, of this Agreement.  I acknowledge that the terms of this Agreement are reasonable and that I have had a reasonable opportunity to consult with an attorney before agreeing to the terms of this Agreement.

 


 

 

 

 

 

/s/ Carlos A. Rodriguez

 

 

Carlos A. Rodriguez

 

 

 

 

 

December 14, 2011

 

 

 

 

 


 

 

 

 

 

 

 

 

 

June 28, 2006

 

 

 

Gary C. Butler

195 Mt. Harmony Road

Bernardsville, New Jersey 07924

 

Dear Gary:

 

This letter outlines our understandings concerning your employment by Automatic Data Processing, Inc. (“ADP”).

 

 

1.

Employment. You are currently ADP’s President and chief operating officer and, effective August 31, 2006, shall become its chief executive officer and President, subject to the direction and control of ADP’s Board of Directors. You shall also be a member of ADP’s Board of Directors.

 

 

2.

Compensation.

 

 

a)

Effective July 1, 2006, ADP shall pay you a base salary of at least $850,000 per annum.

 

 

b)

Effective July 1, 2006, your target bonus for each fiscal year (i.e. July 1 to June 30) shall be at least $1,200,000. The actual bonus paid for each fiscal year shall be based upon your accomplishments in relation to pre-established performance goals (including revenue 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 and any successor plan thereto (collectively, the “Incentive Plan”).

 

 

c)

(i) ADP will, provided that the pre-established performance goals established by the Compensation Committee under the applicable ADP 2-year performance-based restricted stock program (“PBRS”, the first program of which, pending approval by the Compensation Committee, will commence July 1, 2006 and end June 30, 2008) have been achieved at the 100% target level, sell you at least 32,000 shares of ADP restricted stock in accordance with the terms and conditions of each such PBRS program and pursuant to the Incentive Plan. If the pre-established performance goals at the 100% target level for any such PBRS program are exceeded or are not achieved, the number of shares of restricted stock sold to you pursuant to such PBRS program will be increased or decreased,

 

 

as the case may be, by the amount determined pursuant to the terms and conditions in such program. (The first time shares of ADP restricted stock can be sold to you pursuant to this Paragraph 2(c)(i) will be after the completion of the first PBRS program.)

 

(ii) ADP will, on July 1, 2006, sell you 10,000 shares of its restricted common stock, of which 5,000 shares will have their restrictions lapse January 1, 2007 and 5,000 shares will have their restrictions lapse on January 1, 2008. This grant will bring your total number of shares of restricted stock that have their restrictions lapsing in each of fiscal 2007 and fiscal 2008 to 32,000 shares.

 

 

d)

(i) You will be granted stock options for a minimum of 200,000 shares of ADP common stock each fiscal year (commencing with fiscal 2007) during the term of this agreement; your fiscal 2007 stock option grant made shall be made on July 1, 2006. Subject to the attainment of any pre-established performance goals that may be set by the Compensation Committee (in its sole discretion), vesting of each such stock option shall be in five equal installments of 20% each, commencing one year after the applicable grant date.

 

(ii) In addition, you will be granted a one-time stock option grant for 150,000 shares on July 1, 2006. Subject to the attainment of any pre-established performance goals that may be set by the Compensation Committee (in its sole discretion), vesting of such option shall be in five equal installments of 20% each, commencing one year after the grant date.

 

 

e)

Under ADP’s current 3-year growth incentive plan (the “GIP”), your 100% target level cash bonus will be equal to 70% of your applicable base salary (all as determined by the terms and conditions of the GIP). Under each ADP 2-year accelerated revenue growth program (the “ARP”, the first program of which will, pending approval by the Compensation Committee, commence July 1, 2006 and will end June 30, 2008), the “target number of shares” of ADP restricted stock shall be based on 70% of your applicable base salary (all as determined by the terms and conditions of the applicable ARP).

 

 

f)

Effective July 1, 2006, ADP will pay you a prerequisite allowance of $125,000 each fiscal year.

 

 

g)

The above salary, bonus, stock and other 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 (including all ADP policies relating to the exercise of stock options following a person’s retirement from, or cessation of employment with, ADP) that are generally available to other ADP senior 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-

 

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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 or, in the case of your death, the “Trust” (as defined in Paragraph 4(c) below) 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 felony and such conviction has been upheld by a final court of law; (ii) failed or refused to perform your obligations as chief executive officer; (iii) committed any act of negligence in the performance of your duties hereunder and failed to take appropriate corrective action (if such corrective action can be taken); or (iv) committed any act of willful misconduct.

 

 

b)

If ADP terminates your employment for any reason other than (A) “for cause”, (B) for death or permanent or serious disability, either physical or mental, (C) on account of a “Change in Control” (as defined in Paragraph 5(a) below), or (D) under the circumstances covered by Paragraphs 6(a) and 6(b) below , you will, for 24 months after such termination date: (i) receive the compensation provided for under Paragraph 2(a) above; (ii) have your Company stock options continue to vest; (iii) have the restrictions on your restricted stock continue to lapse (without regard to any performance goals); and (iv) continue to participate in each of the then ongoing PBRS and ARP restricted stock programs, and the GIP cash program, in the same manner as would have been the case had you continued to be an ADP employee and, if the performance goals established by the Compensation Committee under the applicable programs have been met, you shall receive the number of shares of restricted stock or cash, as the case may be, that you would have been entitled to receive had you continued to be an ADP employee.

 

 

c)

If you die or 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 to the Gary C. Butler Irrevocable Trust dated February 5, 1986, J. Michael Campbell, Trustee (the “Trust”), in the case of your death, or to you, in the case of your termination for disability, your full compensation up to and including the effective date of your termination for death or disability. For 36 months after such termination date, the Trust or you, as the case may be, will: (i) receive the compensation provided for under Paragraph 2(a) above; (ii) receive your restricted stock and unvested ADP stock options, all of which shall automatically vest on the date of your death or termination for disability; and (iii) continue to participate in each of the then ongoing PBRS and ARP restricted stock programs, and the GIP cash program, in the same manner as would have been the case had you continued to be an ADP employee and, if the performance goals established by the Compensation

 

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Committee under the applicable programs have been met, the Trust or you, as the case may be, shall receive the number of shares of restricted stock or cash, as the case may be, that you would have been entitled to receive had you continued to be an ADP employee.

 

 

d)

If you elect to voluntarily leave ADP in the absence of a Change in Control (other than under the circumstances covered by Paragraphs 6(a) and 6(b) below), 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 24 months 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 (i.e. more than 24 months and less than 37 months), or more than three years (i.e. more than 36 months), 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). In addition, (i) the number of shares of restricted stock you would have been entitled to receive had the performance goals been achieved at the 100% target rate in each of the then ongoing PBRS and ARP restricted stock programs shall be immediately and automatically sold to you and all restrictions thereon removed, and (ii) if the Change in Control occurs prior to the completion of the GIP, you will receive the same payment you otherwise would have received had the GIP achieved its 100% target rate. 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. You are also entitled to receive, on an item-by-item basis, the greater of the benefits and payments and more favorable conditions provided under this letter agreement and/or the Automatic Data Processing, Inc. Change in Control Severance Plan for Corporate Officers.

 

 

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.

Definitions. 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”

 

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(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 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.

 

 

(a)

If the Compensation Committee deems it to be in ADP’s best interests that you retire prior to reaching your 65th birthday or if you decide (at your sole discretion) to retire at any time after your 65th birthday, then on the date of your retirement:

 

 

i.

all of your restricted stock then owned by you shall continue to be owned by you and the restrictions thereon will continue to lapse in the same manner as would have been the case had you continued to be an ADP employee;

 

 

ii.

you will continue to participate in each of the then ongoing PBRS and ARP restricted stock programs and the GIP cash program in the same manner as would have been the case had you continued to be an ADP employee and you shall receive the number of shares of restricted stock and/or cash, as the case may be, you would have been entitled to receive had you continued to be an ADP employee, the restrictions on which will continue to lapse in the same manner as would have been the case had you continued to be an ADP employee; and

 

 

iii.

all of your outstanding unvested stock options shall vest on your retirement date

 

 

(b)

If ADP’s Board of Directors confers on any other person (including any other ADP director, officer or associate) any authority, duties, responsibilities or powers

 

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superior or equal to the authority, duties, responsibilities or powers you have as ADP’s chief executive officer on August 31, 2006, you may (at your sole option and discretion) deem such action to constitute a request that you immediately retire in the best interests of ADP, in which case the provisions of Paragraph 6(a) above shall apply.

 

 

(c)

If you elect to retire from ADP for any reason whatsoever, ADP will: (i), subject to ADP’s reasonable prior approval, 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; (ii) allow you to keep your company car; and (iii) 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”):(i) if your employment hereunder terminates other than for cause, 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 (ii) 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” (as defined in the SORP).

 

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/ Arthur F. Weinbach                                  

 

Arthur F. Weinbach

 

 

Chairman and Chief Executive Officer

 

 

 

 

 

 

ACCEPTED AND AGREED:

 

/s/     Gary C. Butler            

Gary C. Butler

 

 

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CHANGE IN CONTROL

AUTOMATIC DATA PROCESSING, INC.

CHANGE IN CONTROL SEVERANCE PLAN

FOR

CORPORATE OFFICERS

(as amended as of June 15, 2006)

 

The purpose of this Change in Control Severance Plan for Corporate Officers (the “Plan”) is to enable Automatic Data Processing, Inc., a Delaware corporation (the “Company”), to offer a form of income protection to “Participants” (as defined in Section 7.5 below) in the event their employment with the Company terminates under certain circumstances due to a “Change in Control” (as defined in Section 7.2 below).

 

ARTICLE I: BENEFITS

 

1.1

Eligibility for Benefits; Benefits; Payment; and Rights of Participants.

 

 

(a)

If a Change in Control occurs prior to the date a Participant’s employment with the Company terminates, then upon the termination of the Participant’s employment by the Company without “Cause” (as defined in Section 7.1 below) or by the Participant for “Good Reason” (as defined in Section 7.4 below) (individually, a “Qualifying Termination”), such Participant shall be paid the applicable “Severance Benefit” (as defined below) and shall receive the additional benefits described in this Article I. The term “Severance Benefit” shall mean:

 

 

(i)

if the Qualifying Termination occurs during the two year period following the Change in Control, an amount equal to 150% of the Participant’s “Current Total Annual Compensation” (as defined in Section 7.3 below); and

 

 

(ii)

if the Qualifying Termination occurs during the third year after the Change in Control, an amount equal to 100% of the Participant’s Current Total Annual Compensation.

 

 

(b)

Any Participant entitled to a Severance Benefit (in accordance with Section 1.1(a) above) shall receive his Severance Benefit in the form of a lump-sum payment within 30 business days, or at such earlier time as required by applicable law, after his employment with the Company terminates.

 

1.2

Additional Benefits. A Participant entitled to receive a Severance Benefit shall also receive the following additional benefits:

 

 

 

 

 

(a)

The Company shall cause options to purchase Company stock (“Stock Options”) held by a Participant that are not fully vested and exercisable on the date of the Qualifying Termination to:

 

 

(i)

where the Qualifying Termination occurs during the two year period following the Change in Control, become fully vested and exercisable as of the date of such Qualifying Termination; and

 

 

(ii)

where the Qualifying Termination occurs during the third year after the Change in Control, become fully vested and exercisable as of the date of such Qualifying Termination as to those Stock Options that would otherwise have vested within one year after the Qualifying Termination.

 

 

(b)

The Company shall cause unvested restricted shares of Company stock (the “Restricted Shares”) held by a Participant on the date of the Qualifying Termination to:

 

 

(i)

where the Qualifying Termination occurs during the two year period following the Change in Control, become fully vested as of the date of such Qualifying Termination as to those Restricted Shares for which the vesting restrictions would otherwise have lapsed within two years after the Qualifying Termination; and

 

 

(ii)

where the Qualifying Termination occurs during the third year after the Change in Control, become fully vested as of the date of such Qualifying Termination as to those Restricted Shares for which the vesting restrictions otherwise would have lapsed within one year after the Qualifying Termination.

 

 

(c)

Where the Qualifying Termination occurs during the two year period following the Change in Control, the number of shares of Restricted Stock a Participant would have been entitled to receive had the performance goals been achieved at the 100% target rate in each of the then ongoing 2-year performance-based restricted stock programs (PBRS) and the 2-year accelerated revenue growth programs (ARP), and/or any successor programs to the PBRS and ARP programs, shall be sold by the Company to such Participant on the date of the Qualifying Termination.

 

1.3

Reduction of Payments. If a Participant determines that his receipt of any payment and/or non-monetary benefit under this Plan (including, without limitation, the accelerated vesting of Stock Options and/or Restricted Shares) (collectively, the “Payments”) would cause him to become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company shall, as and only as instructed by such Participant in writing prior to the date of his Qualifying Termination, reduce his

 

2

 

 

Payments in the manner and in the amounts determined by the Participant to be necessary to avoid the application of such excise tax. If requested by a Participant, the Company shall, at the Company’s expense, determine and advise the Participant prior to his Qualifying Termination of the amount by which the Company would report to the Internal Revenue Service that the Payments to the Participant constitute “excess parachute payments,” as defined in Section 280G of the Code if the Participant does not elect to reduce the Payments as described in this Section 1.3.

 

1.4

Rights of Participants. Nothing contained herein shall be held or construed to create any liability or obligation on the Company to retain any Participant in its service or in a corporate officer position. All Participants shall remain subject to discharge or discipline to the same extent as if the Plan did not exist.

 

ARTICLE II: FUNDING

 

2.1          Funding. The Plan shall be funded out of the general assets of the Company as and when benefits are payable under the Plan. All Participants shall be solely general creditors of the Company.

 

ARTICLE III: ADMINISTRATION OF THE PLAN

 

3.1

Plan Administrator. The general administration of the Plan shall be placed with the Compensation Committee of the Board or an administrative committee appointed by the Board (the “Committee”).

 

3.2

Reimbursement of Expenses of Committee. The Company shall pay or reimburse the members of the Committee for all reasonable expenses incurred in connection with their duties hereunder.

 

3.3

Action by the Plan Committee. Decisions of the Committee shall be made by a majority of its members attending a meeting at which a quorum is present (which meeting may be held telephonically), or by written action in accordance with applicable law. No member of the Committee may act with respect to a matter which involves only that member.

 

3.4

Delegation of Authority. The Committee may delegate any and all of its powers and responsibilities hereunder to other persons by formal resolution filed with and accepted by the Board. Any such delegation shall not be effective until it is accepted by the Board and the persons designated and may be rescinded at any time by written notice from the Committee to the person to whom the delegation is made.

 

3.5

Retention of Professional Assistance. The Committee may employ such legal counsel, accountants and other persons as may be required in carrying out its

 

3

 

 

work in connection with the Plan, and the Company shall pay the fees and expenses of such persons.

 

3.6

Accounts and Records. The Committee shall maintain such accounts and records regarding the fiscal and other transactions of the Plan, and such other data as may be required to carry out its functions under the Plan and to comply with all applicable laws.

 

3.7

Compliance with Applicable Law. The Company shall be deemed the administrator of the Plan for the purposes of any applicable law and shall be responsible for the preparation and filing of any required returns, reports, statements or other filings with appropriate governmental agencies. The Company shall also be responsible for the preparation and delivery of information to persons entitled to such information under any applicable law.

 

3.8

Reimbursement of Expenses. If any contest or dispute shall arise under this Plan involving termination of a Participant’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall, immediately after the date a court issues a final order from which no appeal can be taken, or with respect to which the time period to appeal has expired, reimburse such Participant for all reasonable legal fees and expenses, if any, paid by the Participant in connection with such contest or dispute (together with interest in an amount equal to the Chase Manhattan Bank prime rate from time to time in effect, such interest to begin to accrue on the dates Participant actually paid such fees and expenses through the date of payment thereof); provided, however, the Participant shall not be entitled to any reimbursement for his legal fees and expenses if a court has made a final determination that the Participant’s position was without merit.

 

ARTICLE IV: AMENDMENT AND TERMINATION

 

4.1

Amendment and Termination. The Company reserves the right to amend or terminate, in whole or in part, any or all of the provisions of this Plan by action of the Board at any time; provided, that, following a Change in Control, the Company shall no longer have the power to amend or terminate the Plan, except for amendments to comply with changes in applicable law which do not reduce the benefits and payments due hereunder in the event of a Qualifying Termination; provided, further, that, in no event shall any amendment reducing the benefits provided hereunder or any Plan termination be effective until at least six months after the date of the applicable action by the Board.

 

ARTICLE V: SUCCESSORS

 

5.1

Successors. The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially

 

4

 

 

all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. In such event, the term “Company”, as used in this Plan, shall mean the Company, as applicable, as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Plan.

 

ARTICLE VI: MISCELLANEOUS

 

6.1

No Duty to Mitigate/Set-off. No Participant entitled to receive a Severance Benefit shall be required to seek other employment or to attempt in any way to reduce any amounts payable to him pursuant to this Plan. The Severance Benefit payable hereunder shall not be reduced by any compensation earned by the Participant as a result of employment by another employer or otherwise. The Company’s obligations to pay the Severance Benefits and to perform its obligations hereunder shall not be affected by any circumstances including without limitation, any set off, counterclaim, recoupment, defense or other right which the Company may have against the Participant.

 

6.2

Headings. The headings of the Plan are inserted for convenience of reference only and shall have no effect upon the meaning of the provisions hereof.

 

6.3

Use of Words. Whenever used in this instrument, a masculine pronoun shall be deemed to include the masculine and feminine gender, and a singular word shall be deemed to include the singular and plural, in all cases where the context so requires.

 

6.4

Controlling Law. The construction and administration of the Plan shall be governed the laws of the State of New York (without reference to rules relating to conflicts of law).

 

6.5

Withholding. The Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it reasonably believes it may have to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to this Plan.

 

6.6

Severability. Should any provision of the Plan be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions of the Plan unless such determination shall render impossible or impracticable the functioning of the Plan, and in such case, an appropriate provision or provisions shall be adopted so that the Plan may continue to function properly.

 

6.7

Rights Under Other Plans, Policies, Practices and Agreements.

 

 

5

 

 

 

 

(a)

Other than as expressly provided herein, the Plan does not supersede any other plans, policies, and/or practices of the Company.

 

 

(b)

The Plan supersedes any other change in control severance plans, policies and/or practices of the Company as to the Participants; provided, that, the Plan shall not supersede any individual executed agreement or arrangement between a single Participant and the Company in effect on March 21, 2001 or thereafter, which agreement specifically addresses payments or benefits made or provided upon termination of employment or in connection with a Change in Control including, but not limited to, the agreements set out on Appendix “A” hereto (an “Additional Agreement”). If a Participant is due benefits or payments under both an Additional Agreement and the Plan and/or where the Plan and the applicable Additional Agreement have inconsistent or conflicting terms and conditions, the Participant shall receive the greater of the benefits and payments, and the more favorable terms and conditions to him, under the Additional Agreement and the Plan, determined on an item-by-item basis.

 

6.8

Insurance. The Company shall continue to cover the Participants, or cause the Participants to be covered, under any director and officer insurance maintained after a Change in Control for directors and officers of the Company or its successor (whether by the Company or another entity) at no less of a level as that maintained by the Company or its successor for its directors and officers. Such coverage shall continue for any period during which the Participant may have any liability for his actions or omissions. Following a Change in Control and in addition to any rights under any other indemnification agreement, the Company or its successor shall indemnify the Participant to the fullest extent permitted by law against any claims, suits, judgments, expenses arising from, out of, or in connection with the Participant’s services as an officer or director of the Company, or as a fiduciary of any benefit plan of the Company.

 

ARTICLE VII: DEFINITIONS.

 

7.1

“Cause” shall mean: (A) gross negligence or willful misconduct by a Participant which is materially injurious to the Company, monetarily or otherwise; (B) misappropriation or fraud with regard to the Company or its assets; or (C) conviction of, or the pleading of guilty or nolo contendere to, a felony involving the assets or business of the Company. For purpose of the preceding sentence, no act or failure to act by a Participant shall be considered “willful” unless done or omitted to be done by such Participant in bad faith and without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company.

 

 

6

 

 

 

7.2

“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 the Company, any subsidiary of the Company, or any employee benefit plan sponsored or maintained by the Company (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 the Company representing 35% or more of the total combined voting power of the Company’s then outstanding securities; (B) the merger, consolidation or other business combination of the Company (a “Transaction”), other than a Transaction immediately following which the stockholders of the Company 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 Company voting securities immediately prior to the Transaction; or (C) the sale of all or substantially all of the Company’s assets, other than a sale immediately following which the stockholders of the Company 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 Company voting securities immediately prior to the Transaction.

 

7.3

“Current Total Annual Compensation” shall be the sum of the following amounts: (A) the greater of a Participant’s highest rate of annual salary during the calendar year in which his employment terminates or such Participant’s highest rate of annual salary during the calendar year immediately prior to the year of such termination; and (B) the average of a Participant’s annual bonus compensation (prior to any bonus deferral election) earned in respect of the two most recent calendar years immediately preceding the calendar year in which the Participant’s employment terminated.

 

7.4

“Good Reason” shall mean the occurrence of any of the following events after a Change in Control without the Participant’s express written consent: (A) material diminution in the value and importance of a Participant’s position, duties, responsibilities or authority as of the date immediately prior to the Change in Control; or (B) a reduction in a Participant’s aggregate compensation or benefits; or (C) a failure of any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) of the Company to assume in writing the obligations hereunder. A termination for Good Reason shall mean a termination by a Participant effected by written notice given by the Participant to the Company within 30 days after the occurrence of the Good Reason event, unless the Company shall, within 15 days after receiving such notice, take such action as is necessary to fully remedy such Good Reason event in which case the Good Reason event shall be deemed to have not occurred.

 

7.5

“Participant” shall mean an employee who is a corporate officer of the Company on the date of a Change in Control as a result of his election by the Board.

 

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Notwithstanding the foregoing, if an employee who is not a corporate officer on the date of a Change in Control reasonably demonstrates that, in contemplation of the Change in Control or at the request of a party which subsequently causes a Change in Control, the Company removed him from such office, such employee shall also be a Participant.

 

As authorized by the Compensation Committee

of the Board of Directors of Automatic Data

Processing, Inc. on January 23, 2001, and as

ratified and adopted by the Board of Directors

of Automatic Data Processing, Inc. on

March 21, 2001, and as amended by the

Compensation Committee of the Board of

Directors of Automatic Data Processing, Inc.

on June 15, 2006.

 

 

By:

/s/ James B. Benson                                    

 

James B. Benson, General Counsel,

 

 

Corporate Vice President & Secretary

 

 

 

 

 

 

 

 

 

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