Summary
Automatic Data Processing, Inc. (ADP) filed an 8-K on November 15, 2006, detailing a material definitive agreement. This agreement is a letter amendment with S. Michael Martone, who is set to become the Chief Operating Officer (COO) following a previously announced spin-off of the Brokerage Services Group business. The agreement primarily outlines the terms of Mr. Martone's compensation and benefits in the event of a "change in control" at ADP.
Key Highlights
- 1ADP entered into a letter agreement with S. Michael Martone, the incoming COO, on November 15, 2006.
- 2The agreement addresses compensation and benefits for Mr. Martone if his employment is terminated without cause or if he resigns for "good reason" within a specified period after a "change in control" of ADP.
- 3Severance payments range from 200% of his total annual compensation if termination occurs within two years after a change in control, decreasing to 150% in the third year and 100% thereafter.
- 4Stock options will fully vest, and restricted stock with restrictions lapsing within three years will have those restrictions automatically removed upon the specified termination events post-change in control.
- 5The agreement defines "change in control" to include the acquisition of 25% or more of ADP's common stock or approval of a reorganization, merger, or consolidation where prior stockholders no longer hold a majority of voting power.
- 6"Good reason" for resignation is defined as actions leading to a diminution of Mr. Martone's position, authority, duties, responsibilities, or a reduction in compensation or benefits.
- 7The agreement includes a "gross-up" provision to ensure Mr. Martone is in the same after-tax position if any severance payments trigger excise taxes under the Internal Revenue Code.