Summary
This 10-Q filing from Automatic Data Processing, Inc. (ADP) on May 3, 2001, primarily details a 'Change in Control Severance Plan for Corporate Officers'. The plan is designed to provide income protection and additional benefits to key executives in the event of a termination of employment following a change in control of the company. The specific benefits, including severance payments and accelerated vesting of stock options and restricted shares, are contingent on the timing of the termination relative to the change in control event. Investors should note that this plan aims to ensure executive retention and smooth transitions during significant corporate events that could otherwise lead to uncertainty.
Key Highlights
- 1ADP has established a Change in Control Severance Plan for Corporate Officers to provide income protection and benefits to key executives.
- 2The plan offers severance benefits equivalent to 150% of current total annual compensation if employment is terminated without cause or for good reason within two years after a change in control.
- 3A reduced benefit of 100% of current total annual compensation is provided if the qualifying termination occurs in the third year after a change in control.
- 4The plan includes accelerated vesting of stock options and restricted shares for participants under specified circumstances following a change in control.
- 5Participants are not required to mitigate their losses by seeking other employment, and severance payments are not reduced by other compensation.
- 6The company reserves the right to amend or terminate the plan, but not in a manner that reduces benefits after a change in control, except for minor adjustments to comply with law.
- 7The plan's terms are subject to New York state law and are funded from the company's general assets, making participants general creditors.
Frequently Asked Questions
The purpose of the plan is to provide income protection and additional benefits to designated corporate officers of ADP in the event their employment is terminated under specific circumstances following a 'Change in Control' of the company. This aims to incentivize executives to remain with the company during periods of uncertainty and potential acquisition or merger.
If a 'Qualifying Termination' (termination by the company without 'Cause' or by the participant for 'Good Reason') occurs within two years after a Change in Control, the participant receives a severance benefit equal to 150% of their Current Total Annual Compensation. If the termination occurs in the third year after a Change in Control, the benefit is 100% of Current Total Annual Compensation.
In addition to severance pay, participants are entitled to accelerated vesting of stock options and restricted shares. If the termination occurs within two years post-Change in Control, all unvested options and restricted shares become fully vested and exercisable. If it occurs in the third year, vesting accelerates for options and shares that would have vested within one year of the termination date.
After a Change in Control, ADP can no longer amend or terminate the plan, except for amendments to comply with changes in applicable law that do not reduce the benefits and payments due in the event of a Qualifying Termination. Any such amendments or terminations by the Board must also be effective at least six months after the action is taken.