10-K405

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1999

Commission File Number 1-1969

CERIDIAN CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	52-0278528 (IRS Employer Identification No.)
8100 34th Avenue South Minneapolis, Minnesota 55425 (Address of principal executive offices) Telephone No.: (952) 853-8100

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class:
Common stock, par value $.50 Name of each exchange on which registered:
New York Stock Exchange, Inc.;
The Chicago Stock Exchange; and
The Pacific Exchange

    Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. /x/ Yes / / No

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

    The aggregate market value of the voting stock of Ceridian as of February 29, 2000, excluding outstanding shares beneficially owned by executive officers and directors of Ceridian, was $2,863,206,528.

    The number of shares of Ceridian common stock outstanding as of February 29, 2000 was 144,747,756.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 1999 Annual Report to Stockholders of Registrant: Parts I and II
Portions of the Proxy Statement for Annual Meeting of Stockholders, May 25, 2000: Parts III and IV

CERIDIAN CORPORATION

PART I

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Ceridian Corporation and its subsidiaries contained in this report that are not historical in nature, particularly those that utilize terminology such as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes" or "plans," or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to us that could cause such material differences are identified in this report and in the "Management's Discussion and Analysis of Results of Operations and Financial Condition" under the caption "Cautionary Factors That Could Affect Future Results" on pages 15 through 18 of our 1999 Annual Report to Stockholders, which is incorporated by reference into Part II, Item 7 of this report. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any future disclosures we make on related subjects in future reports to the SEC.

Item 1. Business.

General.

    Ceridian Corporation was founded in 1957 and is incorporated in Delaware. Our principal executive office is located at 8100 34th Avenue South, Minneapolis, Minnesota 55425, and our telephone number is (952) 853-8100.

    We operate exclusively in the information services industry. We provide products and services to customers in the human resources, transportation and media information markets through our Human Resource Services businesses, Comdata subsidiary and Arbitron division. These businesses collect, manage and analyze data and process transactions on behalf of our customers, report information resulting from such activities to our customers, and provide our customers with related software applications and services. The technology-based products and services of these businesses are typically provided through long-term customer relationships that result in a high level of recurring revenue.

    In March 1999, our Comdata subsidiary acquired a majority interest in Stored Value Systems, Inc., a former subsidiary of National City Corporation. SVS provides a private-label electronic retail cash card to retailers. We have the option of purchasing the remainder of SVS at a later date.

    In June 1999, we acquired ABR Information Services, Inc. through a cash tender offer and subsequent clean up cash merger that was completed in July 1999. After the merger, we began to refer to ABR and its subsidiaries as Ceridian Benefits Services. Ceridian Benefits Services is a leading provider of comprehensive benefits administration and human resources services to employers seeking to outsource these functions.

    We refer you to Part II, Item 7 and Item 7A of this report for additional description of our business.

Human Resource Services (HRS).

    The businesses comprising HRS offer a broad range of services and software designed to help employers more effectively manage their work forces and information that is integral to human resource processes. HRS' human resource management products and services are provided in the United States, Canada and the United Kingdom through our Ceridian Employer Services, Ceridian Benefits Services, Ceridian Performance Partners, Centrefile and Usertech businesses. HRS' revenue for the years 1999, 1998 and 1997 was as follows:

1999	1998	1997
$828.0 million	$700.3 million	$578.6 million

Payroll processing and tax filing services accounted for about 77% of HRS' 1999 revenue, with about 77% of 1999 payroll processing and tax filing revenue derived from the United States.

    Markets.  The market for human resource services covers a comprehensive range of information management and employer/employee assistance services and software. These products and services include:

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Transaction-oriented administrative services and software products, primarily in areas such as payroll processing, tax filing and benefits administration


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Management support software and services in areas such as human resource administration, regulatory compliance, employee training, work-life effectiveness and employee assistance programs

    The market for these products and services is expected to continue to grow as organizations seek not only to reduce costs and improve productivity by outsourcing administrative services and further automating internal processes, but also to adapt to the increasing scope and complexity of laws and regulations governing businesses and increasingly complicated work-life issues faced by employers and employees.

    We generally classify employers in the human resource services market into three categories:

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Small (fewer than 200 employees)


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Medium (200 to 10,000 employees)


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Large (over 10,000 employees)

Small employers in the human resource services market tend to be relatively more price sensitive, to require less customization or flexibility in product and service offerings and to switch more readily from one provider to another. Medium- and large-sized employers' human resource management needs tend to be more complex, and therefore often require more customization and flexibility in products and services, greater integration among data processing systems and a greater variety of products and services. We believe, however, that with regard to any size employer, a provider of a transaction-based service, such as payroll processing, or employee assistance and work-life services, such as elder care research and referral, is afforded attractive opportunities to complement that core service with additional products and services that are natural adjuncts to that core service and potentially important factors in revenue growth.

    Products and Services.  HRS' human resource management products and services include:

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Payroll processing and tax filing services


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Payroll and human resource information software


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Time and attendance solutions


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Recruiting and skills management software


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Integrated payroll and human resource administration services, including tax deposit services and integrated human resource solutions


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Benefits administration services


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Qualified plan administration services


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Work-life effectiveness and employee assistance programs


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Training

    Payroll Processing and Tax Filing Services.  Our payroll processing for customers in the United States consists primarily of preparing and furnishing employee payroll checks, direct deposit advices and supporting journals and summaries, but does not involve the handling or transmission of customer payroll funds other than with certain small employers. We also supply quarterly and annual social security, Medicare and federal, state and local income tax withholding reports required to be filed by employers and employees. Our payroll tax filing services for customers in the United States consist primarily of collecting funds for federal, state and local employment taxes from customers based on payroll information provided

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by the customers, remitting funds collected to the appropriate taxing authorities, filing applicable returns and handling related regulatory correspondence and amendments. Our tax filing services are provided not only to employers who utilize our payroll processing service, but also to local and regional payroll processors. Payroll-related services are typically priced on a fee-per-item-processed basis.

    Our revenue from payroll tax filing services in the United States also includes investment income earned from tax filing deposits temporarily held pending remittance to taxing authorities on behalf of our customers. We hold our customer's deposits in a fiduciary capacity in a trust. The trust invests primarily in high quality collateralized short-term investments, money market funds, U.S. Treasury and Agency securities, AAA rated asset-backed securities and corporate securities rated A3/A- or better. The duration of investments is carefully managed to meet the liquidity needs of the trust. About 66% of 1999 tax filing revenue was attributable to such investment income. Due to the significance of this investment income, HRS' quarterly revenue and profitability fluctuate as a result of changes in interest rates and in the amount of tax filing deposits held. We maintain interest rate collars to manage this interest rate risk on customer deposits. Because the volume of payroll items processed increases in the first and fourth quarters of each year in connection with employers' year-end reporting requirements, and because the amount of tax filing deposits also tends to be greatest in the first quarter, HRS' revenue and profitability tend to be greater in those quarters.

    Payroll and Human Resource Information Systems (HRIS) Software.  In the United States, we have two primary offerings for payroll processing, our proprietary "Signature" software primarily for larger, more complex customers, and our Powerpay.com products for Internet payroll processing primarily for smaller customers.

        Signature and HRIS Software.  Payroll processing using our Signature software is conducted at 31 district offices located throughout the United States. This payroll system allows our customers to:

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Input their own payroll data via personal computers


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Transmit the data on-line to us for processing


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Retrieve reports and data files from us and print reports and, in certain instances, payroll checks or direct deposit advices on site

Customers can also input payroll data by telephone or batch transmittal, with payroll checks and related reports prepared by us at one of our district processing centers. This payroll processing system also interfaces with both customer and third-party transaction processing systems to facilitate services such as direct deposit of payroll.

    We provide human resource information systems (HRIS) software that runs in either Windows* or DOS environments and serves as a "front-end" to our Signature payroll processing system, allowing our customers to utilize a common database for both payroll and HRIS purposes. This enables the customer to create a single database of employee information for on-line inquiry, updating and reporting in payroll and other areas important to human resource administration and management, such as employee data tracking, government compliance, compensation analysis and benefits administration. We also provide HRIS software for Microsoft† operating environments that incorporates open, industry standard technology, is scalable from standalone applications to full client/server configurations and can be utilized with an existing interface as a front-end for our payroll processing and tax filing services. We have versions of this software that serve as a fully integrated front-end to the Signature payroll processing system.

*

"Windows" is a trademark of Microsoft Corporation.

†

"Microsoft" is a trademark of Microsoft Corporation.

    In 1998, we introduced our Source 500 product, a HRIS, payroll, benefits, recruiting and employee self-service solution. Because of the importance of being able to integrate our payroll processing and tax filing systems with other systems and applications utilized by our customers and potential customers,

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particularly third-party HRIS applications, we have also developed interfaces to exchange employee-related information between our payroll system and the HRIS systems of major software vendors, such as Oracle Corporation, SAP and PeopleSoft Inc.

    We also provide advanced time and attendance software, including a client/server version which complements a wide variety of HRIS and payroll systems, and a series of inter-related software applications that allow employees and managers direct access to employment-related information through telephones, touch screen kiosks, personal computers and Internet/intranet technologies.

        Powerpay.com.  Powerpay.com (formerly Ceridian Small Business Solutions) provides Internet payroll processing, tax filing, unemployment compensation management and related services, primarily for small employers located in the United States. Powerpay.com's Powerpay™ product is a web-based solution that allows customers to complete payroll transactions via the Internet. Powerpay also provides small businesses with access to services such as new hire reporting, tax filing, direct deposit, optional benefits programs, unemployment filing and special reports services that were previously only available to larger companies.

    International Operations.  Approximately 18% of HRS' 1999 revenue was obtained from customers outside of the United States. Our Centrefile Limited subsidiary provides mainframe-based payroll processing services and HRIS software in the United Kingdom. Centrefile's services do not involve the handling or transmission of customer payroll funds.

    Our Canadian HRS operations handle payroll as well as tax filing funds for our Canadian customers. We collect payroll and payroll tax amounts from customers and remit tax amounts to applicable governmental authorities and make direct deposits of payroll amounts to employees' bank accounts. As a result, revenue from our payroll processing services in Canada includes investment income received from temporarily holding these amounts in trust. About 27% of the 1999 revenue of these Canadian businesses was attributable to such investment income. The Canadian trust invests in securities issued by the government and provinces of Canada, highly rated Canada banks and corporations, asset backed trusts and mortgages. We earn income from the trust and charge fees for services similar to those provided in the United States. We also manage interest rate risk in Canada through the use of interest rate collars.

    Benefit Administration and Qualified Plan Administration Services.  HRS includes our Ceridian Benefits Services' businesses that provide employee health and welfare benefits administration and qualified plan administration services to our customers. Employee health and welfare benefits administration services include portability (i.e., COBRA (the "Consolidated Omnibus Budget Reconciliation Act"), HIPAA (the "Health Insurance Portability and Accountability Act of 1996") and state-mandated continuation coverage) compliance services and administration services for benefits provided to active employees, such as open enrollment, employee enrollment and eligibility and flexible spending account administration. Ceridian Benefits Services provides administration services for benefits provided to retired and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. Ceridian Benefits Services provides its portability services through the trade name CobraServ®.

    Ceridian Benefits Services' qualified plan administration services include 401(k) plan administration, profit sharing administration, defined benefit plan administration and ESOP administration which are provided through Ceridian Retirement Plan Services, and Qualified Domestic Relations Order administration.

    Work-life Effectiveness and Employee Assistance Programs.  An additional emphasis of HRS is to provide a variety of employee assistance, work-life balance, management support and training products and services to clients of all sizes throughout the United States, Canada and the United Kingdom. Ceridian Performance Partners is a market leader in providing customers and their employees with a single source for fully integrated work-life effectiveness services and employee assistance programs. Services are delivered through on-line access and telephonic and face-to-face resources. Customers have the capability

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of using the LifeWorks® ROI Calculator to help them evaluate the business impact the work-life effectiveness services and employee assistance programs have had on their organizations.

    The services and programs provided by Ceridian Performance Partners may be customized to meet an individual customer's particular needs. LifeWorks'® portfolio of products allows a customer to choose the mix, level and mode of access to services that best meet their needs. These products range from "high touch technology" capabilities allowing employees to access specific information on-line to comprehensive person-to-person consultation and referral services. Also included are specialized service options such as assistance with college enrollment and aid forms, on-site evaluation of care providers, review of legal documents and an extensive concierge service. These services address workplace effectiveness issues and seek to improve employee recruitment, retention and productivity, and seek to reduce absenteeism as well as increase the customers' recruitment success. Master degree level consultants provide confidential assistance 24 hours a day to customers' employees to help them address issues ranging from everyday matters to crisis situations. Supporting these consultants are research and subject matter experts who provide specialized expertise in areas, such as parenting/child care, elder care, disabilities, addiction disorders, mental health, health and wellness, financial, legal, managerial/supervisory and education/schooling issues. Ceridian Performance Partners has also entered into arrangements with certain service and product providers to provide additional leading edge services and expertise to its customers.

    Training.  Our Usertech business provides customized end-user training and support programs to organizations implementing new systems. Services provided by Usertech include classroom and computer-based training, print-based and on-line user guides and reference and marketing communications programs.

    Sales and Marketing.  Payroll processing, tax filing and human resource management software and services are marketed in the United States through our direct sales force operating through about three dozen offices located throughout the United States. We have established marketing relationships with banks, accounting firms and insurance companies pursuant to which these products and services are offered to the business clients of these entities. The most significant source of customer leads for these transaction-based products and services are referrals from these marketing relationships and existing customers, and other direct marketing efforts, such as telemarketing, direct mail and trade shows. The other HRS businesses, including operations in the United Kingdom and Canada, utilize their own direct sales forces. Customer leads for the products and services of these businesses are generally obtained through referrals, trade shows, product demonstration seminars, third party resellers and direct sales efforts.

    HRS' customer base covers a wide range of industries and markets, and no single customer represented more than 1% of HRS' 1999 revenue. HRS' products and services are provided under written license or service agreements, with contracts for repetitive services generally terminable upon relatively short notice.

    The HRS businesses utilize cooperative marketing relationships with other companies offering products or services that complement those of the HRS businesses as well as informal marketing alliances with human resource consulting firms. The HRS businesses are exploring similar cooperative arrangements with other software, insurance and human resource services providers. HRS is also seeking to further integrate and coordinate the sales and marketing efforts of its businesses and to sell a greater variety of its products and services to the customers of its various businesses.

    Competition.  The human resource services industry is highly competitive. Competition comes from national, regional and local third party transaction processors, as well as from software companies, consulting firms, enterprise wide providers of financial services and internally developed and operated systems and software.

    The majority of all payroll processing and tax filing in the United States, Canada and the United Kingdom is supported in-house, with the remainder supported by third party providers. In the United

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States, Automatic Data Processing, Inc. is the largest third party provider, with us, Paychex, Inc. and ProBusiness Services, Inc. comprising the other three large, national providers. ADP serves all sizes of employers, while Paychex focuses on small employers and ProBusiness focuses on large employers. Other third party payroll and tax filing providers are generally regional and local competitors, although larger, national providers of benefits administration or 401(k) processing services may contemplate expansion into outsourced payroll processing. In both the United Kingdom and Canada, we believe that our respective subsidiaries are the largest outsourced payroll processing providers in terms of revenue, in each case competing with several other national providers, including a subsidiary of ADP, and local providers. Competition in both the payroll processing and HRIS software areas also comes from a number of large, national software companies that provide both payroll processing software for in-house processing as well as HRIS software, often in conjunction with other enterprise management software applications.

    Apart from payroll processing and tax filing services, HRS' businesses generally compete with a variety of national and regional application software companies, training companies, consulting firms and human resource services providers. Generally, the market for these products and services is evolving and is not dominated by a small number of competitors.

    Currently, we believe the principal competitive factors in the human resource services industry are:

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Leadership in technology applications


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Customer service


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Choice of services


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Performance


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Price


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Functionality


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Ease and flexibility of use


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Customer support


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Industry standard technology architecture

We believe that the ability to integrate human resource management software applications with customers' other in-house applications and the ability to provide client/server-based solutions are becoming increasingly important competitive factors. While we believe our HRS businesses are able to compete effectively in the overall human resource services market, our continued ability to compete effectively will depend in large measure on our ability to timely develop and implement new technology, particularly that which incorporates industry standard architecture and client/server-based solutions, and provide leading-edge customer service.

Comdata.

    Our Comdata subsidiary provides transaction processing and information services to the transportation and other industries. Comdata's revenue from products and services for the years 1999, 1998 and 1997, excluding revenue from services to the gaming industry of $5.8 million in 1998 and $133.2 million in 1997, was as follows:

1999	1998	1997
$298.9 million	$261.5 million	$197.8 million

    Comdata's gaming services business was sold to First Data Corporation in exchange for its NTS transportation services business in the first quarter of 1998.

    Principal Market.  The trucking segment of the transportation industry is comprised of both long haul fleets and local fleets. Private fleets predominate in the local fleet segment, but play a lesser role in the

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long haul fleet segment. Common carriers, which provide trucking services to companies that do not have fleets of trucks of their own, predominate in the long haul fleet segment, which is comprised of less-than-truckload and truckload components. The less-than-truckload component, which involves trucks that make multiple stops to load and unload, is characterized by large capital requirements and a relatively high degree of consolidation. The truckload component, which involves the transportation of full loads directly from shipper to final destination without going through any sorting terminals, is highly fragmented and, Comdata believes, is growing at the expense of the less-than-truckload component.

    The majority of Comdata's trucking company customers are common carriers serving the truckload component of the long haul segment. Many of these carriers do not employ their drivers, but instead contract with individual owner-operators. Such owner-operators usually settle their expenses with the common carrier after the completion of each trip. Drivers for truckload carriers often spend weeks on the road at a time, creating a number of unique conditions and business opportunities. Truckload carriers are challenged to monitor and control fuel purchases, provide driver services to aid in recruitment and improve retention, obtain necessary licenses and permits, and effectively manage the routing and logistics of such long-distance trips.

    Services.  Comdata provides services to trucking companies, truck stops and truck drivers in the long haul segment of the trucking industry, and is seeking to expand its service offerings to the local fleet segment. These services primarily involve the use of a proprietary funds transfer card which facilitates truck driver transactions and provides transaction control and trip information for trucking firms. Additionally, Comdata provides assistance in obtaining regulatory permits and other compliance services, driver relations services, local fueling services and discounted telecommunications services in its markets. Also, through its Payment Services Division, Comdata provides its specialty card products and services to customers outside of the transportation industry.

Trucking Company Services (The Comchek® Card). Comdata's funds transfer system, most commonly initiated through the use of Comdata's proprietary Comchek card, is designed to enable truck drivers to obtain funding for purchases and cash advances at truck stops and other locations en route to their destination. Drivers may use the Comchek card to purchase fuel, lodging and other approved items, obtain cash advances from ATM machines or through the use of Comchek drafts, make long distance phone calls and make direct deposits of pay, settlements (for non-employee owner-operators) or trip advances to personal bank accounts. In 1999, Comdata processed approximately 70 million funds transfer transactions involving approximately $11.0 billion for the trucking industry.

    Use of the Comchek card allows the trucking company customer greater control over its expenses by allowing it to set limits on the use of the cards, such as by designating locations where the cards may be used, the frequency with which they may be used, phone numbers which may be called and the amount of authorized use. Use of a Comchek card also enables Comdata to capture and provide transaction and trip-related information to trucking company customers (usually within 24 hours after the completion of a given trip). This information greatly enhances a customer's ability to track and plan fuel purchases and other trip expenses and settle with drivers. Comdata also provides trucking companies with a Windows-based software application that provides trucking companies with on-line access to Comdata's computer system for data on fuel purchases and other trip information, and facilitates pre-and post-trip planning functions. Comdata's MOTRS (Modular Over The Road System) Web-based application enables customers to go on-line for local dial-up access, interactive reporting capabilities, the latest diesel fuel prices and related information from their desktop.

    Use of a Comchek card typically generates a Comchek draft, which is payable through a Comdata bank account. Comdata funds the underlying transaction when the truck stop (or other payee) negotiates the draft by depositing it in its bank account. Comdata bills the trucking company for the amount of the draft plus a portion of the service fee, and collects from the truck stop the balance of the service fee. The trucking company remits payment to Comdata by wire transfer or check, typically within six days, although

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Comdata may bill trucking companies in advance for all funds transfers authorized for any purpose in connection with a particular trip.

    Approximately 15% of Comdata's funds transfer revenue is derived from transactions that do not involve the Comchek card. When a truck driver makes a request at a truck stop for a funds transfer, Comdata verifies that the driver's company has established sufficient credit. Upon presentation of valid identification, the truck stop obtains an authorization number from Comdata and issues a Comchek draft. Comdata also provides the previously described information gathering and processing services in connection with fueling transactions which Comdata does not fund, but instead are billed directly by the truck stop to the trucking company. Fees for these "direct bill" transactions are substantially lower. Comdata also provides fuel price tracking reports and management within a network of truck stops, including cost/plus fuel purchase programs.

    Comdata's Regulatory Compliance division determines the permits needed for a designated trip, truck and load, purchases those permits on behalf of the customer and delivers them by facsimile machine to a truck stop where they can be picked up by the driver. Comdata also provides certain regulatory compliance services, such as processing and auditing of driver trip logs, reporting of fuel taxes, annual licensing and motor vehicle registration verification. Vehicle escort services for oversized loads are also provided.

    Comdata offers a computerized shipment interchange system to help trucking companies find loads for their return trips and reduce empty backhauls. By making specific shipment information available to customers on a subscription basis, available shipments can be matched with available cargo space on a nationwide basis. Comdata generates and delivers invoices on behalf of trucking companies to their customers, and also purchases trucking company freight bills in addition to providing necessary invoicing. As a result of agreements with major telecommunications providers, Comdata offers long distance telecommunications services to its trucking company customers at volume discount rates that might not otherwise be available to these customers.

    Truck Stop Services.  Comdata maintains a nation-wide electronic data network with 24-hour independent truck stop service centers which utilize point-of-sale devices and other computer equipment to facilitate communication with Comdata's database and operations centers. The service centers act as Comdata's agents pursuant to a service center agreement, and typically also offer the funds transfer services of other companies.

    Comdata's merchant services division provides fueling centers with PC-based, point of sale systems which automate the various transactions that occur at a fuel purchase desk, systems which enable customers to transact card-based fuel purchases at the fuel pump, UPC scanning devices and truck stop management software. These systems accept many types of fuel purchase cards currently used by drivers. Comdata also makes long distance telecommunications services available to truck stops at volume discount rates.

    Driver Relations Services.  In order to assist trucking company customers in attracting and retaining drivers, Comdata makes available to trucking company employees and independent drivers the employee assistance and work-life services of Ceridian Performance Partners, and electronic mail services to drivers through kiosks placed in truck stops.

    Local Fueling.  Comdata is a provider of fuel management and payment systems for local transportation fleets. In 1999, Comdata provided local fleet operators with VISA‡ cards for their drivers' fuel purchases that offer the fleet operators transaction control and trip-related information gathering features similar to those of the Comchek card. Comdata is currently providing local fleet operators with Comchek MasterCard§ fleet cards.

‡

"VISA" is a trademark of VISA International Service Association.

§

"MasterCard" is a trademark of MasterCard International Incorporated.

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    Payment Services and Comchek® eCash.  Building upon its transaction processing and funds transfer capabilities, Comdata established its Payment Services Division in 1999 for the purpose of extending Comdata's products and services to customers outside the transportation industry. Comchek eCash, marketed through the Payment Services Division, is a card-based service allowing employers or others to post or load payment of wages and other payments, such as expense reimbursements, to Comchek cards issued to employees and other recipients. Card holders, in turn, may access these funds in a number of ways, including withdrawal of cash from ATMs, point-of-sale purchases at stores or issuance of a Comdata negotiable draft. Long distance telephone service is also available through the card.

    In March 1999, Comdata acquired a majority interest in Louisville, Kentucky-based Stored Value Systems, Inc. Among other services, SVS provides debit cards to major retailers that are used as gift cards, replacing traditional paper gift certificates, for credits for returned product and for retailer promotions. SVS believes that its cards provide certain benefits to retailers and their customers, including, without limitation, ease of use and certain controls previously difficult to realize. Cards and other services available through SVS are also believed to have certain benefits in e-commerce, facilitating transactions between on-line merchants and their customers.

    Sales and Marketing.  Comdata markets its services through a direct sales force operating in various cities throughout the United States, and through a centralized tele-sales operation. Comdata has contracts with approximately 21,000 long haul trucking companies, ranging in size from those with several thousand trucks to those with fewer than five trucks. Comdata also has relationships with approximately 7,000 fueling locations. Contracts with trucking companies generally range from one to three years in duration, while contracts with service centers are typically one or two years in duration. No single customer represented more than 2% of Comdata's 1999 revenue. Comdata is emphasizing the selling of a greater variety of its products and services to its existing customers and customers of Ceridian's other businesses.

    Competition.  The principal competitive factors relevant to funds transfers are marketing efforts, pricing, reliability of computer and communications systems and time required to effect transactions. The major credit and debit card companies are significant competitors of Comdata in that they make cash available to, and facilitate purchases of fuel and other products by, holders of their cards on a nationwide basis. Several other companies also offer similar funds transfer services. In addition, truck stops often negotiate directly with trucking companies for a direct billing relationship. Certain of Comdata's competitors also operate or franchise nationwide truck stop chains. In addition, Comdata competes with service centers (such as truck stops) that offer similar products and services. Comdata also faces increasing competition in the funds transfer area from ATMs that participate in national networks.

    While the majority of regulatory services continue to be performed in-house, at least one other nationwide company and several regional companies provide permit services similar to those provided by Comdata. Competition in this market is influenced by price, the expertise of personnel and the ease with which permits may be ordered and received. In addition, Comdata believes that technological advances (such as the Internet) will impact the way regulatory services are defined. These advances may give rise to new competitors or change the way this service is offered.

    Comdata believes that its competitive strengths include its:

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Ability to provide services to trucking companies and drivers at a large number of locations in the continental United States and Canada



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Ability to offer a variety of services, frequently tailored to an individual customer's needs



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Proprietary databases regarding funds transfers and fuel purchases



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Long-term experience relationships in the transportation industry



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High quality of customer service



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Market leader in product design

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    Network and Data Processing Operations.  Comdata's principal communications center for its funds transfer business is located near its headquarters in Brentwood, Tennessee, with a secondary center located in Dallas, Texas. WilTel, a wholesale services subsidiary of WorldCom, is the primary supplier of telecommunications services to Comdata pursuant to an agreement that continues to January 2003. Substantially all of Comdata's internal data processing functions, including its payment processing systems, are provided by IBM Global Services pursuant to an agreement that continues to April 2005.

    Regulation.  Many states require persons engaged in the business of selling or issuing payment instruments (such as the Comchek draft) or in the business of transmitting funds to obtain a license from the appropriate state agency. In certain states, Comdata is required to post bonds or other collateral to secure its obligations to its customers in those states. Comdata believes that it is currently in compliance in all material respects with the regulatory requirements applicable to its business. The failure to comply with the requirements of any particular state could have a material adverse effect on Comdata's business in that state.

Arbitron.

    Arbitron provides media and marketing information (primarily radio audience measurement) to broadcasters, advertising agencies, advertisers and, through a joint venture, newspapers and magazine publishers and TV broadcasters. Arbitron also provides software applications that give customers access to Arbitron's database and, through a joint venture, measurement data concerning consumer retail behavior and media usage. Arbitron's revenue for the years 1999, 1998 and 1997 was as follows:

1999	1998	1997
$215.4 million	$194.5 million	$165.2 million

    Markets.  Significant consolidation of radio station ownership has occurred in the United States in recent years, which has tended to intensify competition within the radio industry and to intensify competition between radio and other forms of media for advertising dollars. At the same time, audiences have become more fragmented as a result of greatly increased programming choices and entertainment/media options. As a result, advertisers increasingly seek to tailor advertising strategies to target specific demographic groups through specific media, and the audience information needs of radio broadcasters, advertising agencies and advertisers have correspondingly become more complex. Increased competition and more complex information requirements have heightened the need of radio broadcasters for improved information management systems and more sophisticated means to analyze such information. In addition, there is a growing demand for quality radio audience information internationally from global advertisers, United States broadcasters who have acquired broadcasting interests in other countries and an increasing number of private commercial broadcasters in other countries.

    These trends also affect other media. As the importance of reaching niche audiences with targeted marketing strategies increases, broadcasters, publishers, advertising agencies and advertisers increasingly require that information regarding exposure to advertising be provided on a more individualized basis and that such information be coupled with information regarding shopping patterns and purchaser behavior. The need for purchase data information may create opportunities for innovative approaches to satisfy these information needs, particularly as technological advances increase the alternatives available to advertisers for reaching potential customers, including the possibilities of interactive communication.

    Services.  Arbitron is a leading provider of radio audience measurement information in the United States. Arbitron estimates audience size and demographics in the United States for local radio stations, and reports this and related data to its customers. This information is used by radio stations to price and sell advertising time and by advertising agencies and large corporate advertisers in purchasing advertising time. Arbitron's proprietary data regarding radio audience size and demographics is provided to customers through multi-year license agreements. Arbitron uses listener diaries to gather radio listening data from

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sample households in the 276 local markets for which it currently provides radio ratings. Respondents mail the diaries to Arbitron's processing center where Arbitron compiles periodic audience measurement estimates. All markets are measured at least twice each year, and major markets are measured four times per year.

    Arbitron also provides software applications that give customers access to Arbitron's database, and enable them to more effectively analyze and understand that information and develop target marketing strategies. Arbitron is also developing applications to enable customers to link information provided by Arbitron's database with information from other databases (such as product purchasing behavior) so as to enable customers to further refine sales strategies and compete more effectively for advertising dollars. The radio audience measurement service and related software sales represented 79% of Arbitron's total 1999 revenue.

    Arbitron also provides measurements of consumer retail behavior and media usage in 262 local markets throughout the United States. Arbitron's Scarborough Research Partnership joint venture provides information regarding product/service usage and media usage in 67 large United States markets, utilizing a sample of consumers in the relevant markets to measure product and service purchases. This information is provided twice each year to newspapers, radio and television broadcasters, cable systems, advertisers and advertising agencies in the form of the Scarborough Report. Arbitron has the exclusive right to market the Scarborough Report to radio broadcasters and cable systems. Arbitron has also developed and introduced in 40 mid-sized United States markets its RetailDirect service, which is a locally oriented, purchase data research service. The service, which utilizes diaries and telephone surveys, provides a profile of the broadcast audience in terms of local media, retail and consumer preferences so that local radio and television broadcasters and cable systems will have information that helps them develop targeted sales and programming strategies. Arbitron's Qualitative Diary service collects consumer and media usage information from Arbitron radio diary keepers in the smaller United States markets.

    Through its Continental Research division, Arbitron provides media, advertising, financial and telecommunications research services in the United Kingdom and Europe. As a result of Arbitron's purchase of the radio station, advertiser/agency and international assets of Tapscan, Inc., Arbitron provides software applications for broadcasters, ad agencies and advertisers that help customers analyze ratings data and make marketing decisions. The Tapscan acquisition contributes to Arbitron's ability to expand into Europe and other geographic markets. Arbitron continues to explore opportunities that would facilitate the expansion of its audience measurement service into selected international markets, provide additional software applications to broadcasters and advertisers and develop measurement products for the Internet.

    Arbitron has developed a portable people meter (PPM) system capable of measuring radio, television, cable, Internet streaming and satellite audiences. During 1999, Arbitron tested the PPM in Manchester, England. In October 1999, Arbitron granted a license to Taylor Nelson Sofres to Arbitron's patented audio encoding technology for television audience measurement services in the United Kingdom. Arbitron's patented audio encoding technology was developed as part of its PPM.

    Sales and Marketing.  As of December 31, 1999, Arbitron provided its radio audience measurement and related services to over 3,400 radio stations and over 2,700 advertising agencies and advertisers nationwide under contracts that vary in length from one to seven years. Arbitron markets its products and services through a direct sales force operating through offices in seven cities around the United States.

    In recent years, a small number of enterprises have greatly expanded their holdings of United States radio broadcasters, and this consolidation of ownership is continuing. As a result of consolidation of United States radio broadcasters, Arbitron has one customer, AMFM, Inc., that represented more than 10% of 1999 segment revenue, and two additional customers that in aggregate represented approximately 17% of 1999 segment revenue. Although the industry consolidation that has led to the increased concentration of Arbitron's customer base could put pressure on the pricing of Arbitron's radio ratings service, it has also contributed to an increase in the number of stations subscribing for the ratings service,

11

as stations have become Arbitron customers upon their acquisition by a larger broadcasting group. It has also been Arbitron's experience that stations which are part of a larger broadcasting group have been somewhat more likely to purchase analytical software applications and other services in addition to the ratings service. Furthermore, Arbitron believes that it is well positioned to provide products and services that meet the needs of large broadcasting groups.

    Competition.  Arbitron competes with another provider of radio audience measurement services which utilizes a different survey methodology than Arbitron. Arbitron also competes with other providers of applications software, qualitative data and proprietary qualitative studies used by broadcasters, cable systems, advertising agencies and advertisers.

Additional Financial Information About Segments.

    We refer you to Note C, Segment Data, on pages 28 and 29 of our 1999 Annual Report to Stockholders for additional financial information about our business segments. This information is incorporated by reference into this section of the report. Note C is part of our consolidated financial statements contained in our 1999 Annual Report to Stockholders, which is attached to this report as Exhibit 13.03.

Other Investments and Divestitures.

    In addition to the acquisitions of Ceridian Benefits Services and a majority interest in SVS, we refer you to Note J, Investing Activity, on page 38 of our 1999 Annual Report to Stockholders for further information on our investing and divesting activities. This information is incorporated by reference into this section of the report. Note J is part of our consolidated financial statements contained in our 1999 Annual Report to Stockholders, which is attached to this report as Exhibit 13.03.

Additional Information.

    Patents and Trademarks.  Ceridian owns or licenses a number of patents which relate to our products and are important to our businesses. A number of our products and services are marketed under federally registered trademarks that are helpful in creating recognition in the marketplace. However, we believe that none of our businesses are materially dependent upon any particular patent, license or trademark, or any particular group of patents, licenses or trademarks.

    Backlog.  Although our businesses are typically characterized by long-term customer relationships that result in a high level of recurring revenue, a substantial portion of our customer contracts used by our businesses are terminable by our customers upon relatively short notice periods, including contracts that have been extended beyond their original terms. In addition, the period between the time a customer agrees to use one of our services and the time the service begins is generally relatively short. For these reasons, we do not believe that meaningful backlog information can be provided for our businesses.

    Research and Development.  The table below reflects the amount of research and development expenses for our continuing operations for the periods indicated.

	Years ended December 31,
	1999			1998			1997
	(Dollars in millions)
Research and development	$	74.4		$	77.8		$	59.6
Percent of revenue		5.5	%		6.7	%		5.5	%

    Our research and development efforts are generally described earlier in this Item in the description of each of our business segments, and also in Part II, Item 7 of this report.

    Employees.  As of March 1, 2000, we employed approximately 10,600 people on a full- or part-time basis. None of our employees are covered by a collective bargaining agreement.

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Executive Officers of the Registrant.

    The following provides information on our executive officers as of March 1, 2000:

Name (Age)	Position	Executive Officer Since
Ronald L. Turner (53)	President and Chief Executive Officer	1993
John R. Eickhoff (59)	Executive Vice President and Chief Financial Officer	1989
Loren D. Gross (54)	Vice President and Corporate Controller	1993
Tony G. Holcombe (44)	Executive Vice President, and President of Ceridian Employer Services	1997
Shirley J. Hughes (54)	Senior Vice President of Human Resources	1998
Gary A. Krow (45)	Executive Vice President, and President of Comdata	1999
James E. MacDougald (56)	Executive Vice President, and President of Ceridian Benefits Services	1999
Stephen B. Morris (56)	Executive Vice President, and President of Arbitron	1992
Gary M. Nelson (48)	Vice President, General Counsel and Secretary	1997
Linda Hall Whitman (51)	Vice President, and President of Ceridian Performance Partners	1998

    Our executive officers are elected by our Board of Directors and serve at the pleasure of the Board of Directors and the Chief Executive Officer. They are customarily elected each year at the meeting of the Board of Directors held in conjunction with the annual meeting of stockholders. There are no immediate family relationships between or among any of our executive officers.

    Ronald L. Turner has been Chief Executive Officer since January 2000 and President since April 1998. He was Chief Operating Officer from April 1998 to January 2000; Executive Vice President of Operations from March 1997 to April 1998; Executive Vice President of Ceridian and President and Chief Executive Officer of our former Computing Devices International division from January 1996 to March 1997; and Vice President of Ceridian and President of Computing Devices International from January 1993 to January 1996. Mr. Turner is a director of FLIR Systems, Inc. and BTG, Inc. Mr. Turner has been a director of Ceridian since July 1998.

    John R. Eickhoff has been Executive Vice President and Chief Financial Officer since January 25, 2000. He was Executive Vice President of Strategic Development from January 3, 2000 to January 25, 2000; Executive Vice President and Chief Financial Officer from May 1995 to January 2000; and Vice President and Chief Financial Officer from June 1993 to May 1995.

    Loren D. Gross has been Vice President and Corporate Controller since July 1993.

    Tony G. Holcombe has been Executive Vice President of Ceridian and President of Ceridian Employer Services since November 1999. Mr. Holcombe was Vice President of Ceridian and President of Comdata from May 1997 to November 1999. Mr. Holcombe was President and Chief Executive Officer of National Processing, Inc., which provides transaction processing services and customized processing solutions, from October 1994 to March 1997, and was Executive Vice President, Corporate Services for National Processing from 1991 through 1994.

    Shirley J. Hughes has been Senior Vice President of Human Resources since June 1998. Ms. Hughes was Vice President of Human Resources of Mercy Health Services from October 1994 to June 1998. From 1992 to 1994, she served as Vice President of Human Resources and Administrative Services of Ceridian.

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    Gary A. Krow has been Executive Vice President of Ceridian and President of Comdata since November 1999. Mr. Krow was Executive Vice President and Chief Operating Officer of Comdata from January 1999 until November 1999; Executive Vice President, Transportation Services, of Comdata from January 1997 until December 1998; Senior Vice President and General Manager, Trendar of Comdata from March 1995 until January 1997; and Vice President, Network Services of Comdata from January 1993 until March 1995.

    James E. MacDougald has been Executive Vice President of Ceridian and President of Ceridian Benefits Services since July 1999. From 1982 until July 1999, he was Chairman, President and Chief Executive Officer of ABR Information Services, Inc.

    Stephen B. Morris has been Executive Vice President of Ceridian and President of Arbitron since January 1996. Mr. Morris was Vice President of Ceridian and President of Arbitron from December 1992 to January 1996.

    Gary M. Nelson has been Vice President and General Counsel since July 1997 and Secretary since October 1998. From 1983 to July 1997, Mr. Nelson was a partner in the Oppenheimer Wolff & Donnelly LLP law firm.

    Linda Hall Whitman has been Vice President since October 1998 and President of Ceridian Performance Partners since April 1996. From October 1995 to March 1996, she was Vice President of Business Integration of Ceridian. Prior to joining Ceridian, Ms. Whitman spent fifteen years at Honeywell, Inc., serving most recently as Vice President of the Home and Building Control consumer business group from 1993 to September 1995.

Item 2. Properties.

    As of March 1, 2000, Ceridian's principal computer and office facilities are located in the metropolitan areas of Minneapolis, Minnesota; Atlanta, Georgia; Columbia, Maryland; New York, New York; Los Angeles, California; Nashville, Tennessee; Dallas, Texas; Boston, Massachusetts; Tampa, Florida; Winnipeg, Ontario, and Quebec, Canada; and London, England.

    The following table summarizes the usage and location of Ceridian's facilities as of March 1, 2000:

FACILITIES
(In thousands of square feet)

	U.S.	Non-U.S.	Total
Type of Property Interest
Owned	515	96	611
Leased	2,962	366	3,328
Total	3,477	462	3,939
Property Interest by Segment
Human Resource Services	1,732	427	2,159
Comdata	410	13	423
Arbitron	276	22	298
Corporate	1,059	0	1,059
Total	3,477	462	3,939
Utilization of Property
Office, Computer Center & Other	2,813	446	3,259
Leased or Subleased to Others	664	16	680
Total	3,477	462	3,939

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    In the year 1999, our total square footage of aggregate space leased and owned worldwide increased from about 3.0 million square feet to close to 4.0 million square feet primarily due to the acquisition of Ceridian Benefits Services in June 1999. This acquisition added twenty-two facilities with a total square footage of approximately 738,000, including a 383,000 square foot office campus that is being renovated in St. Petersburg, Florida that will house certain Ceridian Benefits Services operations and is anticipated to be completed in the first half of 2000.

    We conduct a substantial portion of our operations in leased facilities. Most of these leases contain renewal options and require payments for taxes, insurance and maintenance. Space subject to assigned leases is not included in the table above, and we remain secondarily liable under all such leases. As of December 31, 1999, the assigned leases consisted of 600,000 square feet of space and future rental obligations totaling $7.7 million. We do not anticipate any material non-performance by the assignees of these leases. We also refer you to Note I, Leasing, on page 37 of our 1999 Annual Report to Stockholders for information regarding leased property of Ceridian and our subsidiaries. Note I is part of our consolidated financial statements contained in our 1999 Annual Report to Stockholders, which is attached to this report as Exhibit 13.03.

    A new corporate headquarters building is being constructed in Bloomington, Minnesota. The site is approximately 24.8 acres (6.5 acres is buildable). The new 200,000 square foot, five story facility will replace the current headquarters site in Bloomington, Minnesota whose lease expires in July 2000. The new facility will be occupied by Ceridian Employer Services, Ceridian Performance Partners and corporate staff in May and June of this year.

    None of our owned facilities are subject to any major encumbrances. We believe that our facilities are adequate for their intended purposes, are adequately maintained and are reasonably necessary for current and anticipated output levels of those businesses.

Item 3. Legal Proceedings.

    We refer you to Note L, Legal Matters, on page 40 of our 1999 Annual Report to Stockholders for information regarding legal proceedings involving Ceridian and our subsidiaries. This information is incorporated by reference into this item of the report. Note L is part of our consolidated financial statements contained in our 1999 Annual Report to Stockholders, which is attached to this report as Exhibit 13.03.

Item 4. Submission of Matters to a Vote of Security Holders.

    No matters were submitted to a vote of our stockholders during the fourth quarter of 1999.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

    Our common stock is listed and trades on the New York Stock Exchange, The Chicago Stock Exchange and The Pacific Exchange. The following table provides the high and low sales prices for a share of our common stock on the New York Stock Exchange, as adjusted to reflect a two-for-one stock split in the form of a 100% stock dividend effected in February 1999.

	1999				1998
	High		Low		High		Low
1st Quarter	$	40.50	$	33.25	$	27.8125	$	21.75
2nd Quarter		38.0625		30.4375		30.875		25.3125
3rd Quarter		33.25		24.75		32.25		24.2188
4th Quarter		24.00		16.625		36.00		24.00

    The number of holders of record of Ceridian common stock on March 1, 2000 was 12,583. We have not declared or paid cash dividends on our common stock since 1985, and we have no present intention of paying cash dividends in the future. We did not issue any unregistered securities during the quarter ended December 31, 1999.

Item 6. Selected Financial Data.

    We refer you to the section entitled "Selected Five-Year Data" on the inside front cover of our 1999 Annual Report to Stockholders, which is incorporated into this item by reference and attached to this report as Exhibit 13.01, for information on selected financial data.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

    We refer you to the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 8 through 18 of the 1999 Annual Report to Stockholders, which is incorporated into this item by reference and attached to this report as Exhibit 13.02.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

    We refer you to the section entitled "Quantitative and Qualitative Disclosures About Market Risk" on pages 14 and 15 of our 1999 Annual Report to Stockholders within the "Management's Discussion and Analysis of Results of Operation and Financial Condition," which is incorporated into this item by reference and attached to this report as Exhibit 13.02.

Item 8. Financial Statements and Supplementary Data.

    Our consolidated financial statements described in Item 14(a)1 of this report are incorporated into this item by reference and attached to this report as Exhibit 13.03. We refer you to the section entitled "Supplementary Quarterly Data (Unaudited)" on page 41 of the 1999 Annual Report to Stockholders, which is incorporated into this item by reference and attached to this report as Exhibit 13.04, for additional supplementary financial information.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

    None.

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PART III

Item 10. Directors and Executive Officers of the Registrant.

    We refer you to our Proxy Statement for our 2000 Annual Meeting of Stockholders and the heading "Election of Directors" for information regarding our directors and nominees for director. This information is incorporated by reference into this item of the report.

    We refer you to our Proxy Statement for our 2000 Annual Meeting of Stockholders and the heading "Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance" for information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934. This information is incorporated by reference into this item of the report.

    Information regarding our executive officers is found in Item 1 of this report under the heading "Executive Officers of the Registrant."

Item 11. Executive Compensation.

    We refer you to our Proxy Statement for our 2000 Annual Meeting of Stockholders and the headings "Director Compensation," "Report of Compensation and Human Resources Committee," "Stock Price Performance Graph," "Executive Compensation," and "Executive Employment Agreements and Change of Control." This information is incorporated by reference into this item of the report.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

    We refer you to our Proxy Statement for our 2000 Annual Meeting of Stockholders and the heading "Share Ownership Information." This information is incorporated by reference into this item of the report.

Item 13. Certain Relationships and Related Transactions.

    None.

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PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) 1. Financial Statements of Registrant

    We refer you to the following financial statements and reports included in our 1999 Annual Report to Stockholders, which are attached to this report as Exhibit 13.03 (with the corresponding page numbers in the 1999 Annual Report to Stockholders):

	Page
Independent Auditors' Report	19
Consolidated Statements of Operations for the years ended December 31, 1999, 1998, and 1997	20
Consolidated Balance Sheets as of December 31, 1999 and 1998	21
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997	22
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997	23
Notes to Consolidated Financial Statements for the three years ended December 31, 1999	24-40

(a) 2. Financial Statement Schedules of Registrant

    We refer you to Financial Statement Schedule II—"Ceridian Corporation and Subsidiaries Valuation and Qualifying Accounts," together with the Independent Auditors' report on this schedule, that is found on pages S-1 through S-3 of this report.

(a) 3. Exhibits

    The following is a complete list of Exhibits filed or incorporated by reference as part of this report.

Exhibit	Description
2.01	Asset Purchase Agreement, dated as of November 3, 1997, by and between Ceridian Corporation and General Dynamics Corporation (exhibits and schedules omitted) (incorporated by reference to Exhibit 2.1 to Ceridian's Current Report on Form 8-K dated December 31, 1997 (File No. 1-1969)).
2.02	Closing Agreement, dated as of December 31, 1997, between and among Ceridian Corporation, General Dynamics Corporation, General Dynamics Information Systems, Inc. and CDI Acquisition Company (exhibits and schedules omitted) (incorporated by reference to Exhibit 2.2 to Ceridian's Current Report on Form 8-K dated December 31, 1997 (File No. 1-1969)).
2.03	Exchange Agreement, dated as of January 17, 1998, among First Data Corporation, Integrated Payment Systems Inc., NTS, Inc., First Data Financial Services, L.L.C., Ceridian Corporation, Comdata Network, Inc. and Permicom Permits Services, Inc. (exhibits and schedules omitted) (incorporated by reference to Exhibit 2.03 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).

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2.04	Share Purchase Agreement, dated as of January 26, 1998, among The Toronto-Dominion Bank, Business Windows Inc., 3454916 Canada Inc., Ceridian Corporation, Ceridian Canada Ltd. and Ceridian Canada Holdings, Inc. (exhibits and schedules omitted) (incorporated by reference to Exhibit 2.04 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
2.05	Agreement for the Purchase and Sale of Certain of the Assets of Comcheq Services Limited, dated as of March 10, 1998, among the Canadian Imperial Bank of Commerce, Comcheq Services Limited and Ceridian Canada Ltd. (exhibits and schedules omitted) (incorporated by reference to Exhibit 2.1 to Ceridian's Current Report on Form 8-K dated March 10, 1998 (File No. 1-1969)).
2.06	Asset Purchase Agreement, dated as of November 17, 1998, among Ceridian Corporation, Ceridian Performance Partners Ltd., Letter Allied Limited, Work/Family Directions, Inc., Canadian Work/Family Directions Co., WFD, Francene S. Rodgers, Charles S. Rodgers and the Other Shareholders Party Thereto (exhibits and schedules omitted) (incorporated by reference to Exhibit 2.06 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1998 (File No.  1-1969)).
2.07	Agreement and Plan of Merger dated as of April 30, 1999 among Ceridian Corporation, Spring Acquisition Corporation and ABR Information Services, Inc. (incorporated by reference to Exhibit (c)(1) to Ceridian's Schedule 14D-1 dated May 7, 1999 (File No. 005-44917)).
2.08	Amendment No. 1 to Agreement and Plan of Merger dated as of June 2, 1999 among Ceridian Corporation, Spring Acquisition Corporation and ABR Information Services, Inc. (incorporated by reference to Exhibit (c)(3) to Amendment No. 2 to Ceridian's Schedule 14D-1 dated June 3, 1999 (File No. 005-44917)).
3.01	Restated Certificate of Incorporation of Ceridian Corporation (incorporated by reference to Exhibit 4.01 to Ceridian's Registration Statement on Form S-8 (File No. 33-54379)).
3.02	Certificate of Amendment of Restated Certificate of Incorporation of Ceridian Corporation (incorporated by reference to Exhibit 3 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (File  No. 1-1969)).
3.03	Certificate of Amendment of Restated Certificate of Incorporation of Ceridian Corporation (incorporated by reference to Exhibit 3.01 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-1969)).
3.04	Bylaws of Ceridian Corporation, as amended (incorporated by reference to Exhibit 3.01 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-1969)).
4.01	Indenture dated June 10, 1999 between Ceridian and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.01 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No.  1-1969)).
4.02	Registration Rights Agreement dated June 10, 1999 among Ceridian and Banc of America Securities LLC, Chase Securities Inc., BNY Capital Markets, Inc., TD Securities (USA) Inc. and U.S. Bancorp Piper Jaffray Inc. (incorporated by reference to Exhibit 4.02 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-1969)).
10.01*	Amended and Restated Executive Employment Agreement between Ceridian Corporation and Lawrence Perlman, dated as of November 8, 1996 (incorporated by reference to Exhibit 10.01 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-1969)).

19

10.02*	Form of Amendment to Executive Employment Agreement (applicable to agreement between Ceridian and Lawrence Perlman filed as Exhibit 10.01 (incorporated by reference to Exhibit 10.01 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (File No. 1-1969)).
10.03*	Executive Employment Agreement between Ceridian Corporation and Ronald L. Turner, dated October 1, 1999.
10.04*	Executive Employment Agreement between Ceridian Corporation and Stephen B. Morris, dated October 1, 1999, and Amendment No. 1 to such agreement dated October 20, 1999.
10.05*	Executive Employment Agreement between Ceridian Corporation and John R. Eickhoff, dated October 20, 1999
10.06*	Executive Employment Agreement between Ceridian Corporation and Tony G. Holcombe, dated October 1, 1999, and Amendment No. 1 to such agreement dated October 20, 1999.
10.07*	Ceridian Corporation 1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.02 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-1969)).
10.08*	Form of Ceridian Corporation Non-statutory Stock Option Award Agreement (under the 1999 Stock Incentive Plan).
10.09*	Form of Ceridian Corporation Performance-Based and Time-Based Stock Option Award Agreement dated October 20, 1999 (under the 1999 Stock Incentive Plan).
10.10*	Ceridian Corporation 1993 Long-Term Incentive Plan (Amended and Restated as of May 14, 1997) (incorporated by reference to Appendix A to Ceridian's Proxy Statement for Annual Meeting of Stockholders, May 14, 1997 (File No. 1-1969)).
10.11*	Form of Ceridian Corporation Employee Non-Statutory Stock Option Award Agreement (under 1993 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.12 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.12*	Form of Ceridian Corporation Performance-Based Stock Option Award Agreement, dated October 22, 1997 (under the 1993 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.13 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.13*	Form of Ceridian Corporation Performance-Based Stock Option Award Agreement, dated July 22, 1998 (under the 1993 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.11 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-1969)).
10.14*	Form of Ceridian Corporation Performance-Based Stock Option Award Agreement, dated October 21, 1998 (under the 1993 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.12 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-1969)).
10.15*	Form of Ceridian Corporation Performance Restricted Stock Award Agreement (under the 1993 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.17 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-1969)).
10.16*	Ceridian Corporation 1990 Long-Term Incentive Plan (1992 Restatement) (as amended through October 21, 1994) (incorporated by reference to Exhibit 10.12 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)).

20

10.17*	Ceridian Corporation Benefit Equalization Plan, as amended (effective generally as of January 1, 1994) (incorporated by reference to Exhibit 10.14 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)).
10.18*	Ceridian Corporation Employees' Benefit Protection Trust Agreement, dated as of December 1, 1994, between Ceridian Corporation and First Trust National Association (incorporated by reference to Exhibit 10.15 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)).
10.19*	Ceridian Corporation Executive Investment Plan (incorporated by reference to Exhibit 10.17 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-1969)).
10.20*	Ceridian Corporation 1993 Non-Employee Director Stock Plan (incorporated by reference to Exhibit 2 to Ceridian's Proxy Statement for Annual Meeting of Stockholders, May 12, 1993 (File No. 1-1969)).
10.21*	Ceridian Corporation 1996 Director Performance Incentive Plan (as amended through December 15, 1997) (incorporated by reference to Exhibit 10.22 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.22*	Ceridian Corporation Employee Stock Purchase Plan (as amended through May 22, 1998) (incorporated by reference to Exhibit 99.01 to Ceridian's Registration Statement on Form S-8 (File No. 333-58143)).
10.23*	Form of Indemnification Agreement between Ceridian Corporation and its Directors (incorporated by reference to Exhibit 10.16 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1996 (File No.  1-1969)).
10.24	Amended and Restated Credit Agreement, dated as of July 31, 1997, among Ceridian Corporation, Bank of America National Trust and Savings Association as Agent, and the Financial Institutions Parties Thereto (exhibits and schedules omitted) (incorporated by reference to Exhibit 10.1 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (File No. 1-1969)).
10.25	Waiver and First Amendment to Credit Agreement, dated as of December 2, 1997, among Ceridian Corporation, Bank of America National Trust and Savings Association as Agent, and the Financial Institutions Parties Thereto (incorporated by reference to Exhibit 10.25 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.26	Credit Agreement, dated as of January 30, 1998, between The Toronto-Dominion Bank and Ceridian Canada Ltd. (exhibits and schedules omitted) (incorporated by reference to Exhibit 10.26 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-1969)).
10.27	Guarantee Agreement, dated as of January 30, 1998, between Ceridian Corporation and The Toronto-Dominion Bank (incorporated by reference to Exhibit 10.27 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.28	Credit Agreement, dated as of March 2, 1998, between Canadian Imperial Bank of Commerce and Ceridian Canada Ltd. (exhibits and schedules omitted) (incorporated by reference to Exhibit 10.28 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997(File No. 1-1969)).

21

10.29	Guarantee Agreement, dated as of March 2, 1998, between Ceridian Corporation and Canadian Imperial Bank of Commerce (incorporated by reference to Exhibit 10.29 Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.30	Letter Agreement dated as of December 16, 1997, between Comdata Network, Inc. and International Business Machines Corporation pertaining to the Amended and Restated Agreement for Systems Operations Services dated May 1, 1995 between Comdata Network, Inc. and Integrated Systems Solutions Corporation n.k.a. International Business Machines Corporation (exhibits and schedules omitted) (incorporated by reference to Exhibit 10.30 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
10.31	Amended and Restated Agreement for Systems Operations Services dated May 1, 1995 between Comdata Network, Inc. and Integrated Systems Solutions Corporation n.k.a. International Business Machines Corporation (exhibits and schedules omitted) (incorporated by reference to Exhibit 10.20 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-1969)).
10.32	Telecommunications Services Agreement, dated as of September 1, 1997, among WorldCom Network Services, Inc. d.b.a. WilTel, Comdata Network, Inc. and Comdata Telecommunications Services, Inc., including Program Enrollment Terms, as amended (exhibits and schedules omitted) (incorporated by reference to Exhibit 10.32 to Ceridian's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-1969)).
12.01	Computation of Earnings to Fixed Charges.
13.01	Selected Five-Year Data (inside front cover of Ceridian's 1999 Annual Report to Stockholders).
13.02	Management's Discussion and Analysis of Results of Operations and Financial Condition (pages 8 through 18 of Ceridian's 1999 Annual Report to Stockholders).
13.03	Consolidated Financial Statements of Ceridian Corporation (pages 19 through 40 of Ceridian's 1999 Annual Report to Stockholders).
13.04	Supplementary Quarterly Data (Unaudited) (page 41 of Ceridian's 1999 Annual Report to Stockholders).
21.01	Subsidiaries of Ceridian.
23.01	Consent of Independent Auditors—KPMG LLP.
24.01	Power of Attorney.
27.01	Financial Data Schedule.

*

Management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.

    We will provide you with copies of any of the exhibits listed above, upon request and payment of its reasonable expenses in furnishing such exhibits. We will also provide to the Securities and Exchange Commission, upon request, any exhibit or schedule to any of the foregoing exhibits which has not been filed.

(b) Reports on Form 8-K

    We filed no reports on Form 8-K during the quarter ended December 31, 1999.

22

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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, as of March 24, 2000.

CERIDIAN CORPORATION
By:	/s/ RONALD L. TURNER Ronald L. Turner President and Chief Executive Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of March 24, 2000.

/s/ RONALD L. TURNER Ronald L. Turner President and Chief Executive Officer (Principal Executive Officer) and Director	/s/ JOHN R. EICKHOFF John R. Eickhoff Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ LOREN D. GROSS Loren D. Gross Vice President and Corporate Controller (Principal Accounting Officer)
/s/ LAWRENCE PERLMAN Lawrence Perlman, Chairman	/s/ BRUCE R. BOND Bruce R. Bond, Director
/s/ WILLIAM J. CADOGAN William J. Cadogan, Director	/s/ NICHOLAS D. CHABRAJA Nicholas D. Chabraja, Director
/s/ RUTH M. DAVIS Ruth M. Davis, Director	/s/ ROBERT H. EWALD Robert H. Ewald, Director
/s/ RICHARD G. LAREAU Richard G. Lareau, Director	/s/ RONALD T. LEMAY Ronald T. LeMay, Director
/s/ GEORGE R. LEWIS George R. Lewis, Director	/s/ CAROLE J. UHRICH Carole J. Uhrich, Director
/s/ PAUL S. WALSH Paul S. Walsh, Director

23

SCHEDULE II

CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)

Restructure and Discontinued Operations Reserves

	Arbitron TV			Employer Services Consolidation			Other			Total
Reserve Balance 12/31/96	$	5.4		$	9.3		$	42.2		$	56.9
Cash Payments(1)		(1.1	)		(3.2	)		(16.8	)		(21.1	)
Other Non-cash Items		(0.5	)		0.3			0.2			—
Reserve Balance 12/31/97	$	3.8		$	6.4		$	25.6		$	35.8
Cash Payments(1)		(0.5	)		(1.2	)		(1.2	)		(2.9	)
Other Non-cash Items		(0.5	)		0.4			0.3			0.2
Reserve Balance 12/31/98	$	2.8		$	5.6		$	24.7		$	33.1
Cash Payments(2)		(0.3	)		—			(2.0	)		(2.3	)
Other Non-cash Items		(0.4	)		(0.6	)		0.1			(0.9	)
Reserve Balance 12/31/99(2)	$	2.1		$	5.0		$	22.8		$	29.9

(1)

Primarily related to legal and environmental matter, vacant space and employee terminations.

(2)

Primarily related to vacant space and legal and environmental matters.

S-1

SCHEDULE II (CONT.)

CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)

Allowance for Doubtful Accounts Receivable

	Year Ended December 31,
	1999			1998			1997
Balance at beginning of year	$	21.7		$	10.5		$	11.2
Additions charged to costs and expenses		17.1			15.0			7.9
Write-offs and other adjustments(1)		(19.3	)		(3.8	)		(8.6	)
Balance at end of year	$	19.5		$	21.7		$	10.5

(1)

Other adjustments include the effect of acquisitions and dispositions of businesses.

S-2

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION:

    Under date of January 25, 2000, we reported on the consolidated balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the years in the three-year period ended December 31, 1999, as contained in Ceridian's 1999 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1999. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index (see Item 14.(a)2.). This financial statement schedule is the responsibility of Ceridian's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

    In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

	/s/ KPMG LLP
Minneapolis, Minnesota January 25, 2000

S-3

CERIDIAN CORPORATION
ANNUAL REPORT ON FORM 10-K

EXHIBIT INDEX

Exhibit No.		Description of Exhibit
2.01	*	Asset Purchase Agreement, dated as of November 3, 1997, by and between Ceridian Corporation and General Dynamics Corporation (exhibits and schedules omitted).
2.02	*	Closing Agreement, dated as of December 31, 1997, between and among Ceridian Corporation, General Dynamics Corporation, General Dynamics Information Systems, Inc. and CDI Acquisition Company (exhibits and schedules omitted).
2.03	*	Exchange Agreement, dated as of January 17, 1998, among First Data Corporation, Integrated Payment Systems Inc., NTS, Inc., First Data Financial Services, L.L.C., Ceridian Corporation, Comdata Network, Inc. and Permicom Permits Services, Inc. (exhibits and schedules omitted).
2.04	*	Share Purchase Agreement, dated as of January 26, 1998, among The Toronto-Dominion Bank, Business Windows Inc., 3454916 Canada Inc., Ceridian Corporation, Ceridian Canada Ltd. and Ceridian Canada Holdings, Inc. (exhibits and schedules omitted).
2.05	*	Agreement for the Purchase and Sale of Certain of the Assets of Comcheq Services Limited, dated as of March 10, 1998, among the Canadian Imperial Bank of Commerce, Comcheq Services Limited and Ceridian Canada Ltd. (exhibits and schedules omitted).
2.06	*	Asset Purchase Agreement, dated as of November 17, 1998, among Ceridian Corporation, Ceridian Performance Partners Ltd., Letter Allied Limited, Work/Family Directions, Inc., Canadian Work/Family Directions Co., WFD, Francene S. Rodgers, Charles S. Rodgers and the Other Shareholders Party Thereto (exhibits and schedules omitted).
2.07	*	Agreement and Plan of Merger dated as of April 30, 1999 among Ceridian Corporation, Spring Acquisition Corporation and ABR Information Services, Inc.
2.08	*	Amendment No. 1 to Agreement and Plan of Merger dated as of June 2, 1999 among Ceridian Corporation, Spring Acquisition Corporation and ABR Information Services, Inc.
3.01	*	Restated Certificate of Incorporation of Ceridian Corporation.
3.02	*	Certificate of Amendment of Restated Certificate of Incorporation of Ceridian Corporation.
3.03	*	Certificate of Amendment of Restated Certificate of Incorporation of Ceridian Corporation.
3.04	*	Bylaws of Ceridian Corporation, as amended
4.01	*	Indenture dated June 10, 1999 between Ceridian and The Bank of New York, as Trustee.
4.02	*	Registration Rights Agreement dated June 10, 1999 among Ceridian and Banc of America Securities LLC, Chase Securities Inc., BNY Capital Markets, Inc., TD Securities (USA) Inc. and U.S. Bancorp Piper Jaffray Inc.
10.01	*	Amended and Restated Executive Employment Agreement between Ceridian Corporation and Lawrence Perlman, dated as of November 8, 1996.
10.02	*	Form of Amendment to Executive Employment Agreement (applicable to agreement between Ceridian and Lawrence Perlman filed as Exhibit 10.01).
10.03		Executive Employment Agreement between Ceridian Corporation and Ronald L. Turner, dated October 1, 1999.

10.04		Executive Employment Agreement between Ceridian Corporation and Stephen B. Morris, dated October 1, 1999, and Amendment No. 1 to such agreement dated October 20, 1999.
10.05		Executive Employment Agreement between Ceridian Corporation and John R. Eickhoff, dated October 20, 1999
10.06		Executive Employment Agreement between Ceridian Corporation and Tony G. Holcombe, dated October 1, 1999, and Amendment No. 1 to such agreement dated October 20, 1999.
10.07	*	Ceridian Corporation 1999 Stock Incentive Plan.
10.08		Form of Ceridian Corporation Non-statutory Stock Option Award Agreement (under the 1999 Stock Incentive Plan).
10.09		Form of Ceridian Corporation Performance-Based and Time-Based Stock Option Award Agreement dated October 20, 1999 (under the 1999 Stock Incentive Plan).
10.10	*	Ceridian Corporation 1993 Long-Term Incentive Plan (Amended and Restated as of May 14, 1997).
10.11	*	Form of Ceridian Corporation Employee Non-Statutory Stock Option Award Agreement (under 1993 Long-Term Incentive Plan).
10.12	*	Form of Ceridian Corporation Performance-Based Stock Option Award Agreement, dated October 22, 1997 (under the 1993 Long-Term Incentive Plan).
10.13	*	Form of Ceridian Corporation Performance-Based Stock Option Award Agreement, dated July 22, 1998 (under the 1993 Long-Term Incentive Plan).
10.14	*	Form of Ceridian Corporation Performance-Based Stock Option Award Agreement, dated October 21, 1998 (under the 1993 Long-Term Incentive Plan).
10.15	*	Form of Ceridian Corporation Performance Restricted Stock Award Agreement (under the 1993 Long-Term Incentive Plan).
10.16	*	Ceridian Corporation 1990 Long-Term Incentive Plan (1992 Restatement) (as amended through October 21, 1994).
10.17	*	Ceridian Corporation Benefit Equalization Plan, as amended (effective generally as of January 1, 1994).
10.18	*	Ceridian Corporation Employees' Benefit Protection Trust Agreement, dated as of December 1, 1994, between Ceridian Corporation and First Trust National Association.
10.19	*	Ceridian Corporation Executive Investment Plan.
10.20	*	Ceridian Corporation 1993 Non-Employee Director Stock Plan.
10.21	*	Ceridian Corporation 1996 Director Performance Incentive Plan (as amended through December 15, 1997).
10.22	*	Ceridian Corporation Employee Stock Purchase Plan (as amended through May 22, 1998).
10.23	*	Form of Indemnification Agreement between Ceridian Corporation and its Directors.
10.24	*	Amended and Restated Credit Agreement, dated as of July 31, 1997, among Ceridian Corporation, Bank of America National Trust and Savings Association as Agent, and the Financial Institutions Parties Thereto (exhibits and schedules omitted).
10.25	*	Waiver and First Amendment to Credit Agreement, dated as of December 2, 1997, among Ceridian Corporation, Bank of America National Trust and Savings Association as Agent, and the Financial Institutions Parties Thereto.

2

10.26	*	Credit Agreement, dated as of January 30, 1998, between The Toronto-Dominion Bank and Ceridian Canada Ltd. (exhibits and schedules omitted).
10.27	*	Guarantee Agreement, dated as of January 30, 1998, between Ceridian Corporation and The Toronto-Dominion Bank.
10.28	*	Credit Agreement, dated as of March 2, 1998, between Canadian Imperial Bank of Commerce and Ceridian Canada Ltd.
10.29	*	Guarantee Agreement, dated as of March 2, 1998, between Ceridian Corporation and Canadian Imperial Bank of Commerce.
10.30	*	Letter Agreement dated as of December 16, 1997, between Comdata Network, Inc. and International Business Machines Corporation pertaining to the Amended and Restated Agreement for Systems Operations Services dated May 1, 1995 between Comdata Network, Inc. and Integrated Systems Solutions Corporation n.k.a. International Business Machines Corporation (exhibits and schedules omitted).
10.31	*	Amended and Restated Agreement for Systems Operations Services dated May 1, 1995 between Comdata Network, Inc. and Integrated Systems Solutions Corporation n.k.a. International Business Machines Corporation (exhibits and schedules omitted).
10.32	*	Telecommunications Services Agreement, dated as of September 1, 1997, among WorldCom Network Services, Inc. d.b.a. WilTel, Comdata Network, Inc. and Comdata Telecommunications Services, Inc., including Program Enrollment Terms, as amended (exhibits and schedules omitted).
12.01		Computation of Ratio of Earnings to Fixed Charges.
13.01		Selected Five-Year Data (inside front cover of Ceridian's 1999 Annual Report to Stockholders).
13.02		Management's Discussion and Analysis of Results of Operations and Financial Condition (pages 8 through 18 of Ceridian's 1999 Annual Report to Stockholders).
13.03		Consolidated Financial Statements of Ceridian Corporation (pages 19 through 40 of Ceridian's 1999 Annual Report to Stockholders).
13.04		Supplementary Quarterly Data (Unaudited) (page 41 of Ceridian's 1999 Annual Report to Stockholders).
21.01		Subsidiaries of Ceridian.
23.01		Consent of Independent Auditors—KPMG LLP.
24.01		Power of Attorney.
27.01		Financial Data Schedule.

*

Incorporated by Reference

3

QuickLinks

PART I

Item 1. Business.

Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Item 6. Selected Financial Data.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.

PART III

Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

SIGNATURES
CERIDIAN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions)

Restructure and Discontinued Operations Reserves

CERIDIAN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions)

Allowance for Doubtful Accounts Receivable

CERIDIAN CORPORATION ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX

10-K405

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MRV/4Q6T#[R0F*Z0;&"*]]0XB+DI-,>:XXC`N]$/W;L[ZO@E'(=ZST2AVEU6+ MLR$=6OAG20AOZSD^3#?ORY7)]0NVS&579<@R%'1.04WSWHI&QT$WD"$@1$;Q7E'(NXA%F2*'HQ#A,;:^K5/32G4W^7I8(]NF: ME0PA79\:*TQ9@Y]?EM_!O_1!2,^O[;^+Y+M)7PER5;NJG,T'N4_HRR>/G^TT M=JD^8A._2O^XB_(W-[4=#J0MROV MO15:D](*?^4:,Q( M-MD.'T$P%^:?!14]ERZ?R7F9HR=ST%RW/@\5VFY`+C M:XQ-@VR5E9CK:+4@$FK9W#*#D9*<>?#P)1$_$TA2!9$0/ADJIO.# MY-\#`*62@IH-"F5N9'-T7!E("]4>7!E,0T*+TYA;64@+T8R#0HO1FER7!E("]&;VYT#0HO4W5B='EP92`O5'EP93$-"B].86UE("]&-`T*+T9I7!E M("]&;VYT#0HO4W5B='EP92`O5'EP93$-"B].86UE("]&-@T*+T9I7!E("]4>7!E,0T*+TYA;64@+T8W#0HO1FER7!E("]%;F-O9&EN9PT*+T1I9F9E7!E("]086=E#0HO4&%R96YT(#$P M(#`@4@T*+U)E7!E("]086=E#0HO4&%R M96YT(#$P(#`@4@T*+U)E7!E("]086=E M#0HO4&%R96YT(#$P(#`@4@T*+U)E7!E M("]086=E#0HO4&%R96YT(#0S(#`@4@T*+U)E7!E("]086=E#0HO4&%R96YT(#0S(#`@4@T*+U)E7!E("]086=E#0HO4&%R96YT(#0S(#`@4@T*+U)E7!E("]086=E#0HO4&%R96YT(#7!E("]086=E#0HO4&%R96YT(#7!E("]086=E#0HO4&%R96YT M(#7!E("]086=E"!;,"`P M(#4Y-"`W-S1=#0H^/@T*96YD;V)J#0HQ,30@,"!O8FH-"CP\#0HO5'EP92`O M0V%T86QO9PT*+U!A9V5S(#0R(#`@4@T*/CX-"F5N9&]B:@T*>')E9@T*,"`Q M,34-"C`P,#`P,#`P,#`@-C4U,S4@9@T*,#`P,#`P,#`Q-R`P,#`P,"!N#0HP M,#`P,#DQ.#`U(#`P,#`P(&X-"C`P,#`P,#`S,C@@,#`P,#`@;@T*,#`P,#`P M,C$T-R`P,#`P,"!N#0HP,#`P,#@V,CDT(#`P,#`P(&X-"C`P,#`P.# frustrate the purpose of Executive's commitment to Ceridian and forebearance of career options. G. The parties recognize that in light of the above-described commitment and forebearance of career options, it is essential that, for the benefit of Ceridian and its stockholders, provision be made for a Change of Control Termination (as defined below) in order to enable Executive to accept and effectively continue in Executive's position in the face of inherently disruptive circumstances arising from the possibility of a Change of Control of the Parent Corporation (as defined below), although no such change is now contemplated or foreseen. H. The parties wish to replace any and all prior agreements and undertakings with respect to Executive's employment and Change of Control occurrences and compensation. NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in Executive's employment for the term of this Agreement and the parties' agreement to be bound by the terms contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic basis exclusive of benefits, bonuses or incentive payments. 1.02 "BOARD" shall mean the Board of Directors of Parent Corporation. 1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, (a) any Subsidiary (as that term is defined in Section 1.07); and (b) any successor in interest by way of consolidation, operation of law, merger or otherwise. 1.04 "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian which is not generally available to or used by others, or the utility or value of which is not generally known or recognized as standard practice, whether or not the underlying details are in the public domain, including: (a) information or material relating to Ceridian and its business as conducted or anticipated to be conducted; business plans; operations; past, current or anticipated software, products or services; customers or prospective customers; or 2 research, engineering, development, manufacturing, purchasing, accounting, or marketing activities; (b) information or material relating to Ceridian's inventions, improvements, discoveries, "know-how," technological developments, or unpublished writings or other works of authorship, or to the materials, apparatus, processes, formulae, plans or methods used in the development, manufacture or marketing of Ceridian's software, products or services; (c) information on or material relating to Ceridian which when received is marked as "proprietary," "private," or "confidential;" (d) trade secrets of Ceridian; (e) software of Ceridian in various stages of development, including computer programs in source code and binary code form, software designs, specifications, programming aids (including "library subroutines" and productivity tools), programming languages, interfaces, visual displays, technical documentation, user manuals, data files and databases of Ceridian; and (f) any similar information of the type described above which Ceridian obtained from another party and which Ceridian treats as or designates as being proprietary, private or confidential, whether or not owned or developed by Ceridian. Notwithstanding the foregoing, "Confidential Information" does not include any information which is properly published or in the public domain; provided, however, that information which is published by or with the aid of Executive outside the scope of employment or contrary to the requirements of this Agreement will not be considered to have been properly published, and therefore will not be in the public domain for purposes of this Agreement. 1.05 "DISABILITY" shall mean the inability of Executive to perform his or her duties under this Agreement because of illness or incapacity for a continuous period of six months. 1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, any successor in interest by way of consolidation, operation of law, merger or otherwise. "Parent Corporation" shall not include any Subsidiary. 1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of whose securities having ordinary voting power for the election of directors (other than securities having such power only by reason of the occurrence of a contingency) is at the time owned by Parent Corporation and/or one or more Subsidiaries; and (b) any division or business unit (or portion thereof) of Parent Corporation or a corporation described in clause (a) of this Section 1.07. 3 ARTICLE II EMPLOYMENT, DUTIES AND TERM 2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement, Ceridian hereby employs Executive, and Executive accepts such employment. 2.02 DUTIES. Executive shall devote his or her full-time and best efforts to Ceridian and to fulfilling the duties of his or her position which shall include such duties as may from time to time be assigned him or her by Ceridian, provided that such duties are reasonably consistent with Executive's education, experience and background. Executive shall comply with Ceridian's policies and procedures to the extent they are not inconsistent with this Agreement in which case the provisions of this Agreement prevail. 2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII, this Agreement and Executive's employment shall continue until the later of: (a) OCTOBER 1, 2002; and (b) two years after a Change of Control which occurs prior to OCTOBER 1, 2002 ("Initial Term"). Upon expiration of the Initial Term and subject to the provisions of Articles IV, VII and VIII, this Agreement and Executive's employment shall be automatically extended for successive three year periods. ARTICLE III COMPENSATION AND EXPENSES 3.01 BASE SALARY. For all services rendered under this Agreement during the term of this Agreement, Ceridian shall pay Executive a minimum Base Salary at the annual rate currently being paid or, if Executive is not currently in Ceridian's employ, at the annual rate specified in the written offer of employment. If Executive's salary is increased from time to time during the term of this Agreement, the increased amount shall be the Base Salary for the remainder of the term. 3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be at the sole discretion of Ceridian. Except as otherwise provided in Article VII, Ceridian shall have the right, in accordance with their terms, to alter, amend or eliminate any bonus or incentive plans, or Executive's participation therein, without compensation to Executive. 3.03 BUSINESS EXPENSES. Ceridian shall, consistent with its policies in effect from time to time, bear all ordinary and necessary business expenses incurred by Executive in performing his or her duties as an employee of Ceridian, provided that Executive accounts promptly for such expenses to Ceridian in the manner prescribed from time to time by Ceridian. 4 ARTICLE IV EARLY TERMINATION 4.01 EARLY TERMINATION. This Article shall not apply to a Change of Control Termination which is governed solely by the provisions of Article VII, and does not alter the respective continuing obligations of the parties pursuant to Articles V, VI, and IX. 4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement and Executive's employment immediately for cause. For the purpose hereof "cause" means: (a) fraud; (b) misrepresentation; (c) theft or embezzlement of Ceridian assets; (d) intentional violations of law involving moral turpitude; (e) failure to follow Ceridian's conduct and ethics policies; and/or (f) the continued failure by Executive to attempt in good faith to perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such performance which specifically identifies the manner in which it is alleged Executive has not attempted in good faith to perform such duties. In the event of termination for cause pursuant to this Section 4.02, Executive shall be paid at the usual rate of Executive's annual Base Salary through the date of termination specified in any written notice of termination. 4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate this Agreement and Executive's employment without cause on at least 75 days' written notice. In the event of termination of this Agreement and of Executive's employment pursuant to this Section 4.03, compensation shall be paid as follows: (a) if the notice of termination is given by Executive, Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period; (b) if the notice of termination is given by Ceridian, (1) Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period, however, Ceridian shall have the option of making termination of the Agreement and Executive's employment effective immediately upon notice in which case Executive shall be paid a lump sum representing the value of 75 days worth of salary; and (2) Executive shall receive, starting within 15 days after the end of the 5 75 day notice period, two year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis. In addition, Executive shall receive the bonus, if any, to which Executive would otherwise have become entitled under all applicable Ceridian bonus plans in effect at the time of termination of this Agreement had Executive remained continuously employed for the full fiscal year in which termination occurred and continued to perform his or her duties in the same manner as they were performed immediately prior to termination, multiplied by a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which termination occurred and the denominator of which is 12. This bonus amount shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. In addition, Ceridian shall provide or make arrangements for reasonable outplacement services for Executive based on his or her level within Ceridian. (c) In the event that termination occurs pursuant to Section 4.03(b), in addition to the payments specified therein, Ceridian shall pay to Executive an amount equal to one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis, provided Executive executes a release, similar to that attached as Exhibit A, of all claims against Ceridian. 4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall terminate in the event of death or disability of Executive. (a) In the event of Executive's death, Ceridian shall pay an amount equal to 12 months of Base Salary at the rate in effect at the time of Executive's death plus the amount Executive would have received in annual incentive plan bonus for the year in which the death occurs had "target" goals been achieved. Such amount shall be paid (1) to the beneficiary or beneficiaries designated in writing to Ceridian by Executive, (2) in the absence of such designation to the surviving spouse, or (3) if there is no surviving spouse, or such surviving spouse disclaims all or any part, then the full amount, or such disclaimed portion, shall be paid to the executor, administrator or other personal representative of Executive's estate. The amount shall be paid as a lump sum as soon as practicable following Ceridian's receipt of notice of Executive's death. All such payments shall be in addition to any payments due pursuant to Section 4.04(c) below. (b) In the event of Executive's disability, Base Salary shall be terminated as of the end of the month in which the last day of the six-month period of Executive's inability to perform his or her duties occurs. (c) In the event of termination by reason of Executive's death or disability, Ceridian shall pay to Executive any amount equal to (1) the amount Executive would have received in annual incentive plan bonus for the year in which termination occurs 6 had "target" goals been achieved, multiplied by (2) a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which the death or disability occurred and the denominator of which is 12. The amount payable pursuant to this Section 4.04(c) shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. 4.05 RETIREMENT. (a) Executive may terminate this Agreement and Executive's employment as a result of Executive's decision to retire from Ceridian. Executive shall provide Ceridian with at least 75 days' written notice of the date upon which Executive intends to retire. Executive shall be paid at the usual rate of his or her annual Base Salary through the date of retirement stipulated in the written notice. (b) In the event that Executive terminates this Agreement as a result of Executive's decision to retire from Ceridian and Executive is at least 55 years of age with five or more years of service to Ceridian, then Executive (and anyone entitled to claim under or through Executive) shall, until age 65, be entitled to receive from Ceridian the same or equivalent health, dental, accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits programs, policies or arrangements, at the same levels and coverages as Executive was receiving on the day immediately prior to his or her retirement. Executive shall be required to pay no more for the above mentioned benefits than he/she paid as an active employee, or if provided by Ceridian at no cost to employees on the day immediately prior to Executive's retirement, they shall continue to be made available to Executive on this basis. 4.06 ENTIRE TERMINATION PAYMENT. The compensation provided for in this Article IV for early termination of this Agreement and termination pursuant to this Article IV shall constitute Executive's sole remedy for such termination. Executive shall not be entitled to any other termination or severance payment which may be payable to Executive under any other agreement between Executive and Ceridian. ARTICLE V CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT 5.01 CONFIDENTIALITY. Executive will not, during the term or after the termination or expiration of this Agreement or his/her employment, publish, disclose, or utilize in any manner any Confidential Information obtained while employed by Ceridian. If Executive leaves the employ of Ceridian, Executive will not, without Ceridian's prior written consent, retain or take away any drawing, writing or other record in any form containing any Confidential Information. 5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian, Executive will engage in no activity or employment which may conflict with the interest of Ceridian, and will comply with Ceridian's policies and guidelines pertaining to business conduct and ethics. 5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all inventions, discoveries, software, writings and other works of authorship which are conceived, made, discovered, or written jointly or singly on Ceridian time or on Executive's own time, providing the invention, improvement, discovery, software, writing or other work of authorship is capable of being used by Ceridian in the normal course of business, and all such inventions, improvements, discoveries, software, writings and other works of authorship shall belong solely to Ceridian. 7 5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all instruments of assignment and other papers to evidence vestiture of Executive's entire right, title and interest in such inventions, improvements, discoveries, software, writings or other works of authorship in Ceridian, at the request and the expense of Ceridian, and Executive will do all acts and sign all instruments of assignment and other papers Ceridian may reasonably request relating to applications for patents, patents, copyrights, and the enforcement and protection thereof. If Executive is needed, at any time, to give testimony, evidence, or opinions in any litigation or proceeding involving any patents or copyrights or applications for patents or copyrights, both domestic and foreign, relating to inventions, improvements, discoveries, software, writings or other works of authorship conceived, developed or reduced to practice by Executive, Executive agrees to do so, and if Executive leaves the employ of Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to Executive and Ceridian, plus reasonable traveling or other expenses. 5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately preceding sections entitled "Disclosure" and "Instruments of Assignment" do not apply to inventions in which a Ceridian claim of any rights will create a violation of Chapter 181 Minnesota Statutes, Section 181.78, reproduced below and constituting the written notification of its Subdivision 3. 181.78 Agreements; terms relating to inventions Subdivision 1. Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable. Subdivision 2. No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment. Subdivision 3. IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN 8 EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. 5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, data bases, improvements, discoveries, software, writings or other works of authorship useful to Ceridian in the normal course of business, which were conceived, made or written prior to the date of this Agreement and which are excluded from this Agreement. 5.07 SURVIVAL. The obligations of this Article V shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VI NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT 6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a senior executive of Ceridian and is a key executive of Ceridian, (b) Executive has received, and will in the future receive, substantial amounts of Confidential Information, (c) Ceridian's business is conducted on a worldwide basis, and (d) provision for non-competition, non-recruitment and non-disparagement obligations by Executive is critical to Ceridian's continued economic well-being and protection of Ceridian's Confidential Information. In light of these considerations, this Article VI sets forth the terms and conditions of Executive's obligations of non-competition, non-recruitment and non-disparagement subsequent to the termination of this Agreement and/or Executive's employment for any reason. 6.02 NON-COMPETITION. (a) Unless the obligation is waived or limited by Ceridian in accordance with subsection (b) of this Section 6.02, Executive agrees that for a period of three years following termination of employment for any reason ("Non-Compete Period"), Executive will not directly or indirectly, alone or as a partner, officer, director, shareholder or employee of any other firm or entity, engage in any commercial activity in competition with any part of Ceridian's business as conducted as of the date of such termination of employment or with any part of Ceridian's contemplated business with respect to which Executive has Confidential Information. For purposes of this subsection (a), "shareholder" shall 9 not include beneficial ownership of less than five percent (5%) of the combined voting power of all issued and outstanding voting securities of a publicly held corporation whose stock is traded on a major stock exchange. Also for purposes of this subsection (a), "Ceridian's business" shall include business conducted by Ceridian or its affiliates and any partnership or joint venture in which Ceridian or its affiliates is a partner or joint venturer; provided that, "affiliate" as used in this sentence shall not include any corporation in which Ceridian has ownership of less than fifteen percent (15%) of the voting stock. (b) At its sole option Ceridian may, by written notice to Executive at any time within the Non-Compete Period, waive or limit the time and/or geographic area in which Executive cannot engage in competitive activity. (c) During the Non-Compete Period, prior to accepting employment with or agreeing to provide consulting services to, any firm or entity which offers competitive products or services, Executive shall give 30 days prior written notice to Ceridian. Such written notice shall describe the firm and the employment or consulting services to be rendered to the firm or entity, and shall include a copy of the written offer of employment or engagement of consulting services. Ceridian's failure to respond or object to such notice shall not in any way constitute acquiescence or waiver of Ceridian's rights under this Article VI. (d) In the event Executive has provided notice to Ceridian pursuant to subsection (c) of this Section 6.02 and has not accepted employment with or agreed to provide consulting services to, any firm or entity directly as a result of his or her non-competition obligation pursuant to this Section 6.02, Ceridian shall pay Executive an amount equal to the usual rate of Executive's Base Salary in effect at the time of termination on a regular payroll period basis until the end of the Non-Compete Period. There shall be credited against Ceridian's obligation to make such payments any other payments made by Ceridian to Executive pursuant to Article IV of this Agreement. In the event that Ceridian elects, pursuant to subsection (b) of this Section 6.02, to waive all or any portion of the non-competition obligation set forth in subsection (a) hereof, no payment shall be required by Ceridian with respect to the portion of the Non-Compete Period which has been waived. (e) In the event Executive fails to provide notice to Ceridian pursuant to subsection (c) of this Section 6.02 and/or in anyway violates its non-competition obligation pursuant to Section 6.02, Ceridian may enforce all of its rights and remedies provided to it under this Agreement, in law and in equity, and Executive shall be deemed to have expressly waived any rights he or she may have had to payments under subsection (d) of this Section 6.02. 6.03 NON-RECRUITMENT. For a period of three years following termination of employment for any reason, Executive will not initiate or actively participate in any other employer's recruitment or hiring of Ceridian employees. This provision shall not preclude Executive 10 from responding to a request (other than by Executive's employer) for a reference with respect to an individual's employment qualifications. 6.04 NON-DISPARAGEMENT. Executive will not, during the term or after the termination or expiration of this Agreement or Executive's employment, make disparaging statements, in any form, about Ceridian, its officers, directors, agents, employees, products or services which Executive knows, or has reason to believe, are false or misleading. 6.05 SURVIVAL. The obligations of this Article VI shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VII CHANGE OF CONTROL 7.01 DEFINITIONS. For purposes of this Article VII, the following definitions shall be applied: (a) "BENEFIT PLAN" means any formal or informal plan, program or other arrangement heretofore or hereafter adopted by Ceridian for the direct or indirect provision of compensation to Executive (including groups or classes of participants or beneficiaries of which Executive is a member), whether or not such compensation is deferred, is in the form of cash or other property or rights, or is in the form of a benefit to or for Executive. (b) "CHANGE OF CONTROL" shall mean any of the following events: (1) a merger or consolidation to which Parent Corporation is a party if the individuals and entities who were stockholders of Parent Corporation immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined voting power for election of directors of the surviving corporation immediately following the effective date of such merger or consolidation; or (2) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate of securities of Parent Corporation representing twenty-five percent (25%) or more of the total combined voting power of Parent Corporation's then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes of hereof, the following acquisitions shall not constitute a Change of Control: (A) any acquisition by Parent Corporation, or (B) any acquisition by any 11 employee benefit plan (or related trust) sponsored or maintained by Parent Corporation or any corporation controlled by Parent Corporation; or (3) the sale of the properties and assets of Parent Corporation, substantially as an entirety, to any person or entity which is not a wholly-owned subsidiary of Parent Corporation; or (4) the stockholders of Parent Corporation approve any plan or proposal for the liquidation of Parent Corporation; or (5) a change in the composition of the Board at any time during any consecutive 24 month period such that the "Continuity Directors" cease for any reason to constitute at least a seventy percent (70%) majority of the Board. For purposes of this clause, "Continuity Directors" means those members of the Board who either (A) were directors at the beginning of such consecutive 24 month period, or (B) were elected by, or on the nomination or recommendation of, at least a two-thirds (2/3) majority of the then-existing Board; or (6) such other event or transaction as the Board shall determine constitutes a Change of Control. (c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit (including any transfer of property) in the nature of compensation, to or for the benefit of Executive under this Agreement or any Other Agreement or Benefit Plan, which is considered to be contingent on a Change of Control for purposes of Section 280G of the Code. (d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive, either of the following events occurring within two years after a Change of Control: (1) Termination of Executive's employment by Ceridian for any reason other than (A) fraud, (B) misrepresentation, (C) theft or embezzlement of Ceridian assets, (D) intentional violations of law involving moral turpitude, or (E) failure to follow Ceridian's conduct and ethics policies; or (2) Termination of employment with Ceridian by Executive pursuant to Section 7.02 of this Article VII. 12 A Change of Control Termination by Executive shall not, however, include termination by reason of death or Disability. (e) "CODE" means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code shall include the corresponding section of such Code as from time to time amended. (f) "GOOD REASON" means a good faith determination by Executive, in Executive's sole and absolute judgment, that any one or more of the following events has occurred, without Executive's express written consent, after a Change of Control: (1) A change in Executive's reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control, or any removal of Executive from, or any failure to re-elect Executive to, any of such positions, which has the effect of materially diminishing Executive's responsibility or authority; (2) A reduction by Ceridian in Executive's Base Salary as in effect immediately prior to the Change of Control or as the same may be increased from time to time thereafter; (3) Ceridian requiring Executive to be based anywhere other than within 25 miles of Executive's job location at the time of the Change of Control; (4) Without replacement by plans, programs, or arrangements which, taken as a whole, provide benefits to Executive at least reasonably comparable to those discontinued or adversely affected, (A) the failure by Ceridian to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee compensation or benefit plan, program or arrangement, in which Executive is participating immediately prior to a Change of Control; or (B) the taking of any action by Ceridian that would materially adversely affect Executive's participation or materially reduce Executive's benefits under any of such plans, programs or arrangements; (5) The failure by Ceridian to provide office space, furniture, and secretarial support at least comparable to that provided Executive immediately prior to the Change of Control or the taking of any similar action by Ceridian that would materially adversely affect the working conditions in or under which Executive performs his or her employment duties; 13 (6) If Executive's primary employment duties are with a Subsidiary, the sale, merger, contribution, transfer or any other transaction in conjunction with which Parent Corporation's ownership interest in such Subsidiary decreases below the level specified in Section 1.07 of Article I unless (A) this Agreement is assigned to the purchaser/transferee with the provisions of Article VII in full force and effect and operative as if a Change of Control has occurred with respect to the purchaser/transferee as Parent Corporation immediately after the purchase/transfer becomes effective, and (B) such purchaser/transferee has a creditworthiness reasonably equivalent to Parent Corporation's; or (7) Any material breach of this Agreement by Ceridian. (g) "OTHER AGREEMENTS" means any agreement, contract or understanding heretofore or hereafter entered into between Executive and Ceridian for the direct or indirect provision of compensation to Executive. 7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following a Change of Control that occurred during the term of this Agreement, Executive shall have the right, at any time and within Executive's sole discretion, to terminate employment with Ceridian for Good Reason. Such termination shall be accomplished by, and effective upon, Executive giving written notice to Ceridian of Executive's decision to terminate. Except as otherwise expressly provided in this Agreement, upon the exercise of said right, all obligations and duties of Executive under this Agreement shall be of no further force and effect. 7.03 CHANGE OF CONTROL TERMINATION PAYMENT. (a) In the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall, within five days of such termination, make a lump sum payment to Executive in an amount equal to three times the sum of (i) 12 months of Base Salary at the rate in effect at the time of Executive's termination, (ii) the bonus, if any, that Executive would have received under all applicable Ceridian bonus plans for the year in which the termination occurs had "superior" goals been achieved, and (iii) the annual perquisite cash adder Executive would have received in the year in which the termination occurs. (b) In addition to the payments made pursuant to Section 7.03(a) hereof, in the event the Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall provide to Executive a pension supplement equivalent to the difference, if any, between: (i) the monthly benefits to which Executive would have been entitled under the defined benefit pension plan or plans in which Executive participates immediately prior to the Change of Control Termination which includes an additional five years of age and service for terminations on or prior to December 31, 2004 or an additional three years of age and service for terminations after December 31, 2004; and (ii) the amount to which Executive is, in fact, entitled under such defined benefit pension plan or plans. (c) Neither the payments made or the pension supplement provided pursuant to this Section 7.03 nor any other compensation to be provided to Executive by Ceridian pursuant to this Agreement or any other agreement or Benefit Plan which may be considered Change of Control Compensation shall be subject to any limitation on Change of Control Compensation which may otherwise be expressed in any such agreement or Benefit Plan. 14 7.04 TAX REIMBURSEMENT. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payments or distributions by Ceridian to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any payments required under this Section 7.04) (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7.04(d), all determinations required to be made under this Section 7.04, including whether and when a Gross-Up Payment is required and the amount such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ceridian's external auditors (the "Accounting Firm"), which shall provide detailed supporting calculations both to Ceridian and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by Ceridian. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the "Accounting Firm" hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Ceridian. Any Gross-Up Payment, as determined pursuant to this Section 7.04, shall be paid by Ceridian to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Ceridian and Executive. (c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by Ceridian will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Ceridian exhausts its remedies pursuant to Section 7.04(d) and Executive thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Ceridian to or for the benefit of Executive. 15 (d) Executive shall notify Ceridian in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by Ceridian of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive knows of such claim and shall apprise Ceridian of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to Ceridian (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Ceridian notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give Ceridian any information reasonably requested by Ceridian relating to such claim; (ii) take such action in connection with contesting such claim as Ceridian shall reasonably request in writing from time to time, including accepting legal representation with respect to such claim by an attorney reasonably selected by Ceridian; (iii) cooperate with Ceridian in good faith in order to effectively contest such claim; and (iv) permit Ceridian to participate in any proceedings relating to such claim; provided, however, that Ceridian shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.04(d), Ceridian shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Ceridian shall determine; provided further, however, that if Ceridian directs Executive to pay such claim and sue for a refund, Ceridian shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any 16 Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Ceridian's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to Ceridian's complying with the requirements of Section 7.04(d)) promptly pay to Ceridian the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), a determination is made that Executive shall not be entitled to any refund with respect to such claim and Ceridian does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 7.05 INTEREST. In the event Ceridian does not make timely payment in full of the Change of Control Termination payment described in Section 7.03, Executive shall be entitled to receive interest on any unpaid amount at the lower of: (a) the prime rate of interest (or such comparable index as may be adopted) established from time to time by the Bank of America National Trust and Savings Association, New York, New York or its successor in interest; or (b) the maximum rate permitted under Section 280G(d)(4) of the Internal Revenue Code. 7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to enforce or defend his or her rights under this Article VII of this Agreement, or to recover damages for breach thereof, Executive shall be entitled to recover from Ceridian any expenses for attorneys' fees and disbursements incurred. 7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination, Executive (and anyone entitled to claim under or through Executive) shall, until age 65, be entitled to receive from Ceridian the same or equivalent health, dental, accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits programs, policies or arrangements, at the same levels and coverages as Executive was receiving on the day immediately prior to 17 the Change of Control at a cost not to exceed the amount Executive would continue to pay had he/she continued to be an active employee of Ceridian. To the extent that election of continuation of any of such coverages, programs, policies, or arrangements is made available to employees terminating at age 55 with 15 or more years of service, Executive shall be required to pay no more for continuation than is required of such employees on the day immediately prior to the Change of Control. If no such continuation program is available, Executive shall be required to pay no more than he/she paid as an active employee, or if provided by Ceridian at no cost to employees on the day immediately prior to the Change of Control, they shall continue to be made available to Executive on this basis. ARTICLE VIII CHANGE OF SUBSIDIARY STATUS In the event that, prior to a Change of Control: (a) a Subsidiary is sold, merged, contributed, or in any other manner transferred, or if for any reason Parent Corporation's ownership interest in any such Subsidiary falls below the level specified in Section 1.07, (b) Executive's primary employment duties are with the Subsidiary at the time of the occurrence of such event, and (c) Executive does not, in conjunction therewith, transfer employment directly to Parent Corporation or another Subsidiary, then: (1) If Executive gives his or her written consent to the assignment of this Agreement to such Subsidiary, or to the purchaser or new majority interest holder of such Subsidiary, (and such assignment is accepted) this Agreement shall remain in full force and effect between Executive and the assignee, except that the provisions of Article VII of this Agreement shall become null and void; (2) If such assignment is not accepted by the Subsidiary or purchaser, then this Agreement shall be deemed to have been terminated by Ceridian without cause pursuant to Section 4.03 of Article IV; and (3) In all other cases, this Agreement shall be deemed terminated for cause pursuant to Section 4.02 of Article IV. ARTICLE IX GENERAL PROVISIONS 9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure in money the damages which will accrue to either party by reason of a failure to perform any of the obligations under this Agreement and therefore injunctive relief is appropriate. Therefore, if either party shall institute any action or proceeding to enforce the provisions 18 hereof, such party against whom such action or proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall not urge in any such action or proceeding the claim or defense that such party has an adequate remedy at law. 9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII, this Agreement shall be binding upon and inure to the benefit of the successors and assigns of Parent Corporation and each Subsidiary, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition of substantially all of the assets or business of Ceridian, and any such successor or assign shall absolutely and unconditionally assume all of Ceridian's obligations hereunder. 9.03 NOTICES. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be in writing and be delivered or mailed to any such party at its address: (a) Ceridian Corporation 8100 34th Avenue South Minneapolis, Minnesota 55425-1640 Attention: Office of General Counsel (b) In the case of Executive shall be: At the address listed on the last page of this Agreement. Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall be deemed received within the second business day thereafter or when it is actually received, whichever is sooner. 9.04 CAPTIONS. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. 9.05 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota and any and every legal proceeding arising out of or in connection with this Agreement shall be brought in the appropriate courts of the State of Minnesota, each of the parties hereby consenting to the exclusive jurisdiction of said courts for this purpose. The parties hereto expressly recognize and agree that the implementation of this Governing Law provision is essential in light of the fact that Parent Corporation's corporate headquarters and its principal executive offices are located within the State of Minnesota, and there is a critical need for uniformity in the interpretation and enforcement of the employment agreements between Ceridian and its senior executives. 19 9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 9.07 WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 9.08 MODIFICATION. Any changes or amendments to this Agreement must be in writing and signed by both parties. 9.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior employment agreements or understandings of the parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement. IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. EXECUTIVE CERIDIAN CORPORATION /s/Ronald L. Turner By: /s/Paul S. Walsh Title: Chair, Compensation and Human Resources Committee Address: - ------------------ - ------------------ 20 EX-10.04 4 EX-10.04 EXHIBIT 10.04 CERIDIAN CORPORATION EXECUTIVE EMPLOYMENT AGREEMENT PARTIES CERIDIAN CORPORATION (A DELAWARE CORPORATION) 8100 34TH AVENUE SOUTH MINNEAPOLIS, MINNESOTA 55425-1640 AND STEPHEN B. MORRIS ("EXECUTIVE") DATE: OCTOBER 1, 1999 RECITALS A. Ceridian wishes to obtain the services of Executive for the duration of this Agreement, and Executive wishes to provide his or her services for such period. B. Ceridian desires reasonable protection of Ceridian's Confidential Information (as defined below). C. Ceridian desires assurance that Executive will not compete with Ceridian, engage in recruitment of Ceridian's employees or make disparaging statements about Ceridian after termination of employment, and Executive is willing to refrain from such competition, recruitment and disparagement. D. Executive desires to be assured of a minimum Base Salary (as defined below) from Ceridian for Executive's services for the term of this Agreement (unless terminated earlier pursuant to the terms of this Agreement). E. It is expressly recognized by the parties that Executive's acceptance of, and continuance in, Executive's position with Ceridian and agreement to be bound by the terms of this Agreement represents a substantial commitment to Ceridian in terms of Executive's personal and professional career and a foregoing of present and future career options by Executive, for all of which Ceridian receives substantial value. F. The parties recognize that a Change of Control (as defined below) may result in material alteration or diminishment of Executive's position and responsibilities and substantially 1 frustrate the purpose of Executive's commitment to Ceridian and forebearance of career options. G. The parties recognize that in light of the above-described commitment and forebearance of career options, it is essential that, for the benefit of Ceridian and its stockholders, provision be made for a Change of Control Termination (as defined below) in order to enable Executive to accept and effectively continue in Executive's position in the face of inherently disruptive circumstances arising from the possibility of a Change of Control of the Parent Corporation (as defined below), although no such change is now contemplated or foreseen. H. The parties wish to replace any and all prior agreements and undertakings with respect to Executive's employment and Change of Control occurrences and compensation. NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in Executive's employment for the term of this Agreement and the parties' agreement to be bound by the terms contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic basis exclusive of benefits, bonuses or incentive payments. 1.02 "BOARD" shall mean the Board of Directors of Parent Corporation. 1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, (a) any Subsidiary (as that term is defined in Section 1.07); and (b) any successor in interest by way of consolidation, operation of law, merger or otherwise. 1.04 "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian which is not generally available to or used by others, or the utility or value of which is not generally known or recognized as standard practice, whether or not the underlying details are in the public domain, including: (a) information or material relating to Ceridian and its business as conducted or anticipated to be conducted; business plans; operations; past, current or anticipated software, products or services; customers or prospective customers; or 2 research, engineering, development, manufacturing, purchasing, accounting, or marketing activities; (b) information or material relating to Ceridian's inventions, improvements, discoveries, "know-how," technological developments, or unpublished writings or other works of authorship, or to the materials, apparatus, processes, formulae, plans or methods used in the development, manufacture or marketing of Ceridian's software, products or services; (c) information on or material relating to Ceridian which when received is marked as "proprietary," "private," or "confidential;" (d) trade secrets of Ceridian; (e) software of Ceridian in various stages of development, including computer programs in source code and binary code form, software designs, specifications, programming aids (including "library subroutines" and productivity tools), programming languages, interfaces, visual displays, technical documentation, user manuals, data files and databases of Ceridian; and (f) any similar information of the type described above which Ceridian obtained from another party and which Ceridian treats as or designates as being proprietary, private or confidential, whether or not owned or developed by Ceridian. Notwithstanding the foregoing, "Confidential Information" does not include any information which is properly published or in the public domain; provided, however, that information which is published by or with the aid of Executive outside the scope of employment or contrary to the requirements of this Agreement will not be considered to have been properly published, and therefore will not be in the public domain for purposes of this Agreement. 1.05 "DISABILITY" shall mean the inability of Executive to perform his or her duties under this Agreement because of illness or incapacity for a continuous period of six months. 1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, any successor in interest by way of consolidation, operation of law, merger or otherwise. "Parent Corporation" shall not include any Subsidiary. 1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of whose securities having ordinary voting power for the election of directors (other than securities having such power only by reason of the occurrence of a contingency) is at the time owned by Parent Corporation and/or one or more Subsidiaries; and (b) any division or business unit (or portion thereof) of Parent Corporation or a corporation described in clause (a) of this Section 1.07. 3 ARTICLE II EMPLOYMENT, DUTIES AND TERM 2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement, Ceridian hereby employs Executive, and Executive accepts such employment. 2.02 DUTIES. Executive shall devote his or her full-time and best efforts to Ceridian and to fulfilling the duties of his or her position which shall include such duties as may from time to time be assigned him or her by Ceridian, provided that such duties are reasonably consistent with Executive's education, experience and background. Executive shall comply with Ceridian's policies and procedures to the extent they are not inconsistent with this Agreement in which case the provisions of this Agreement prevail. 2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII, this Agreement and Executive's employment shall continue until the later of: (a) OCTOBER 1, 2001; and (b) two years after a Change of Control which occurs prior to OCTOBER 1, 2001 ("Initial Term"). Upon expiration of the Initial Term and subject to the provisions of Articles IV, VII and VIII, this Agreement and Executive's employment shall be automatically extended for successive two year periods. ARTICLE III COMPENSATION AND EXPENSES 3.01 BASE SALARY. For all services rendered under this Agreement during the term of this Agreement, Ceridian shall pay Executive a minimum Base Salary at the annual rate currently being paid or, if Executive is not currently in Ceridian's employ, at the annual rate specified in the written offer of employment. If Executive's salary is increased from time to time during the term of this Agreement, the increased amount shall be the Base Salary for the remainder of the term. 3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be at the sole discretion of Ceridian. Except as otherwise provided in Article VII, Ceridian shall have the right, in accordance with their terms, to alter, amend or eliminate any bonus or incentive plans, or Executive's participation therein, without compensation to Executive. 3.03 BUSINESS EXPENSES. Ceridian shall, consistent with its policies in effect from time to time, bear all ordinary and necessary business expenses incurred by Executive in performing his or her duties as an employee of Ceridian, provided that Executive accounts promptly for such expenses to Ceridian in the manner prescribed from time to time by Ceridian. 4 ARTICLE IV EARLY TERMINATION 4.01 EARLY TERMINATION. This Article shall not apply to a Change of Control Termination which is governed solely by the provisions of Article VII, and does not alter the respective continuing obligations of the parties pursuant to Articles V, VI, and IX. 4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement and Executive's employment immediately for cause. For the purpose hereof "cause" means: (a) fraud; (b) misrepresentation; (c) theft or embezzlement of Ceridian assets; (d) intentional violations of law involving moral turpitude; (e) failure to follow Ceridian's conduct and ethics policies; and/or (f) the continued failure by Executive to satisfactorily perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such satisfactory performance which specifically identifies the manner in which it is alleged Executive has not satisfactorily performed such duties. In the event of termination for cause pursuant to this Section 4.02, Executive shall be paid at the usual rate of Executive's annual Base Salary through the date of termination specified in any written notice of termination. 4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate this Agreement and Executive's employment without cause on at least 75 days' written notice. In the event of termination of this Agreement and of Executive's employment pursuant to this Section 4.03, compensation shall be paid as follows: (a) if the notice of termination is given by Executive, Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period; (b) if the notice of termination is given by Ceridian, (1) Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period, however, Ceridian shall have the option of making termination of the Agreement and Executive's employment effective immediately upon notice in which case Executive shall be paid a lump sum representing the value of 75 days worth of salary; and (2) Executive shall receive, starting within 15 days after the end of the 5 75 day notice period, one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis. In addition, Executive shall receive the bonus, if any, to which Executive would otherwise have become entitled under all applicable Ceridian bonus plans in effect at the time of termination of this Agreement had Executive remained continuously employed for the full fiscal year in which termination occurred and continued to perform his or her duties in the same manner as they were performed immediately prior to termination, multiplied by a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which termination occurred and the denominator of which is 12. This bonus amount shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. In addition, Ceridian shall provide or make arrangements for reasonable outplacement services for Executive based on his or her level within Ceridian. (c) In the event that termination occurs pursuant to Section 4.03(b), in addition to the payments specified therein, Ceridian shall pay to Executive an amount equal to one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis, provided Executive executes a release, similar to that attached as Exhibit A, of all claims against Ceridian. 4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement and Executive's employment shall terminate in the event of death or disability of Executive. (a) In the event of Executive's death, Ceridian shall pay an amount equal to 12 months of Base Salary at the rate in effect at the time of Executive's death plus the amount Executive would have received in annual incentive plan bonus for the year in which the death occurs had "target" goals been achieved. Such amount shall be paid (1) to the beneficiary or beneficiaries designated in writing to Ceridian by Executive, (2) in the absence of such designation to the surviving spouse, or (3) if there is no surviving spouse, or such surviving spouse disclaims all or any part, then the full amount, or such disclaimed portion, shall be paid to the executor, administrator or other personal representative of Executive's estate. The amount shall be paid as a lump sum as soon as practicable following Ceridian's receipt of notice of Executive's death. All such payments shall be in addition to any payments due pursuant to Section 4.04(c) below. (b) In the event of Executive's disability, Base Salary shall be terminated as of the end of the month in which the last day of the six-month period of Executive's inability to perform his or her duties occurs. (c) In the event of termination by reason of Executive's death or disability, Ceridian shall pay to Executive any amount equal to (1) the amount Executive would have received in annual incentive plan bonus for the year in which termination occurs 6 had "target" goals been achieved, multiplied by (2) a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which the death or disability occurred and the denominator of which is 12. The amount payable pursuant to this Section 4.04(c) shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. 4.05 RETIREMENT. Executive may terminate this Agreement and Executive's employment as a result of Executive decision to retire from Ceridian. Executive shall provide Ceridian with at least 75 days' written notice of the date upon which Executive intends to retire. Executive shall be paid at the usual rate of his or her annual Base Salary through the date of retirement stipulated in the written notice. 4.06 ENTIRE TERMINATION PAYMENT. The compensation provided for in this Article IV for early termination of this Agreement and termination pursuant to this Article IV shall constitute Executive's sole remedy for such termination. Executive shall not be entitled to any other termination or severance payment which may be payable to Executive under any other agreement between Executive and Ceridian. ARTICLE V CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT 5.01 CONFIDENTIALITY. Executive will not, during the term or after the termination or expiration of this Agreement or his/her employment, publish, disclose, or utilize in any manner any Confidential Information obtained while employed by Ceridian. If Executive leaves the employ of Ceridian, Executive will not, without Ceridian's prior written consent, retain or take away any drawing, writing or other record in any form containing any Confidential Information. 5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian, Executive will engage in no activity or employment which may conflict with the interest of Ceridian, and will comply with Ceridian's policies and guidelines pertaining to business conduct and ethics. 5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all inventions, discoveries, software, writings and other works of authorship which are conceived, made, discovered, or written jointly or singly on Ceridian time or on Executive's own time, providing the invention, improvement, discovery, software, writing or other work of authorship is capable of being used by Ceridian in the normal course of business, and all such inventions, improvements, discoveries, software, writings and other works of authorship shall belong solely to Ceridian. 7 5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all instruments of assignment and other papers to evidence vestiture of Executive's entire right, title and interest in such inventions, improvements, discoveries, software, writings or other works of authorship in Ceridian, at the request and the expense of Ceridian, and Executive will do all acts and sign all instruments of assignment and other papers Ceridian may reasonably request relating to applications for patents, patents, copyrights, and the enforcement and protection thereof. If Executive is needed, at any time, to give testimony, evidence, or opinions in any litigation or proceeding involving any patents or copyrights or applications for patents or copyrights, both domestic and foreign, relating to inventions, improvements, discoveries, software, writings or other works of authorship conceived, developed or reduced to practice by Executive, Executive agrees to do so, and if Executive leaves the employ of Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to Executive and Ceridian, plus reasonable traveling or other expenses. 5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately preceding sections entitled "Disclosure" and "Instruments of Assignment" do not apply to inventions in which a Ceridian claim of any rights will create a violation of Chapter 181 Minnesota Statutes, Section 181.78, reproduced below and constituting the written notification of its Subdivision 3. 181.78 Agreements; terms relating to inventions Subdivision 1. Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable. Subdivision 2. No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment. Subdivision 3. IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN 8 EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. 5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, data bases, improvements, discoveries, software, writings or other works of authorship useful to Ceridian in the normal course of business, which were conceived, made or written prior to the date of this Agreement and which are excluded from this Agreement. 5.07 SURVIVAL. The obligations of this Article V shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VI NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT 6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a senior executive of Ceridian and is a key executive of Ceridian, (b) Executive has received, and will in the future receive, substantial amounts of Confidential Information, (c) Ceridian's business is conducted on a worldwide basis, and (d) provision for non-competition, non-recruitment and non-disparagement obligations by Executive is critical to Ceridian's continued economic well-being and protection of Ceridian's Confidential Information. In light of these considerations, this Article VI sets forth the terms and conditions of Executive's obligations of non-competition, non-recruitment and non-disparagement subsequent to the termination of this Agreement and/or Executive's employment for any reason. 6.02 NON-COMPETITION. (a) Unless the obligation is waived or limited by Ceridian in accordance with subsection (b) of this Section 6.02, Executive agrees that for a period of two years following termination of employment for any reason ("Non-Compete Period"), Executive will not directly or indirectly, alone or as a partner, officer, director, shareholder or employee of any other firm or entity, engage in any commercial activity in competition with any part of Ceridian's business as conducted as of the date of such termination of employment or with any part of Ceridian's contemplated business with respect to which Executive has Confidential Information. For purposes of this subsection (a), "shareholder" shall not include 9 beneficial ownership of less than five percent (5%) of the combined voting power of all issued and outstanding voting securities of a publicly held corporation whose stock is traded on a major stock exchange. Also for purposes of this subsection (a), "Ceridian's business" shall include business conducted by Ceridian or its affiliates and any partnership or joint venture in which Ceridian or its affiliates is a partner or joint venturer; provided that, "affiliate" as used in this sentence shall not include any corporation in which Ceridian has ownership of less than fifteen percent (15%) of the voting stock. (b) At its sole option Ceridian may, by written notice to Executive at any time within the Non-Compete Period, waive or limit the time and/or geographic area in which Executive cannot engage in competitive activity. (c) During the Non-Compete Period, prior to accepting employment with or agreeing to provide consulting services to, any firm or entity which offers competitive products or services, Executive shall give 30 days prior written notice to Ceridian. Such written notice shall describe the firm and the employment or consulting services to be rendered to the firm or entity, and shall include a copy of the written offer of employment or engagement of consulting services. Ceridian's failure to respond or object to such notice shall not in any way constitute acquiescence or waiver of Ceridian's rights under this Article VI. (d) In the event Executive has provided notice to Ceridian pursuant to subsection (c) of this Section 6.02 and has not accepted employment with or agreed to provide consulting services to, any firm or entity directly as a result of his or her non-competition obligation pursuant to this Section 6.02, Ceridian shall pay Executive an amount equal to the usual rate of Executive's Base Salary in effect at the time of termination on a regular payroll period basis until the end of the Non-Compete Period. There shall be credited against Ceridian's obligation to make such payments any other payments made by Ceridian to Executive pursuant to Article IV of this Agreement. In the event that Ceridian elects, pursuant to subsection (b) of this Section 6.02, to waive all or any portion of the non-competition obligation set forth in subsection (a) hereof, no payment shall be required by Ceridian with respect to the portion of the Non-Compete Period which has been waived. (e) In the event Executive fails to provide notice to Ceridian pursuant to subsection (c) of this Section 6.02 and/or in anyway violates its non-competition obligation pursuant to Section 6.02, Ceridian may enforce all of its rights and remedies provided to it under this Agreement, in law and in equity, and Executive shall be deemed to have expressly waived any rights he or she may have had to payments under subsection (d) of this Section 6.02. 6.03 NON-RECRUITMENT. For a period of two years following termination of employment for any reason, Executive will not initiate or actively participate in any other employer's recruitment or hiring of Ceridian employees. This provision shall not preclude Executive 10 from responding to a request (other than by Executive's employer) for a reference with respect to an individual's employment qualifications. 6.04 NON-DISPARAGEMENT. Executive will not, during the term or after the termination or expiration of this Agreement or Executive's employment, make disparaging statements, in any form, about Ceridian, its officers, directors, agents, employees, products or services which Executive knows, or has reason to believe, are false or misleading. 6.05 SURVIVAL. The obligations of this Article VI shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VII CHANGE OF CONTROL 7.01 DEFINITIONS. For purposes of this Article VII, the following definitions shall be applied: (a) "BENEFIT PLAN" means any formal or informal plan, program or other arrangement heretofore or hereafter adopted by Ceridian for the direct or indirect provision of compensation to Executive (including groups or classes of participants or beneficiaries of which Executive is a member), whether or not such compensation is deferred, is in the form of cash or other property or rights, or is in the form of a benefit to or for Executive. (b) "CHANGE OF CONTROL" shall mean any of the following events: (1) a merger or consolidation to which Parent Corporation is a party if the individuals and entities who were stockholders of Parent Corporation immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined voting power for election of directors of the surviving corporation immediately following the effective date of such merger or consolidation; or (2) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate of securities of Parent Corporation representing twenty-five percent (25%) or more of the total combined voting power of Parent Corporation's then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes of hereof, the following acquisitions shall not constitute a Change of Control: (A) any acquisition by Parent Corporation, or (B) any acquisition by any 11 employee benefit plan (or related trust) sponsored or maintained by Parent Corporation or any corporation controlled by Parent Corporation; or (3) the sale of the properties and assets of Parent Corporation, substantially as an entirety, to any person or entity which is not a wholly-owned subsidiary of Parent Corporation; or (4) the stockholders of Parent Corporation approve any plan or proposal for the liquidation of Parent Corporation; or (5) a change in the composition of the Board at any time during any consecutive 24 month period such that the "Continuity Directors" cease for any reason to constitute at least a seventy percent (70%) majority of the Board. For purposes of this clause, "Continuity Directors" means those members of the Board who either (A) were directors at the beginning of such consecutive 24 month period, or (B) were elected by, or on the nomination or recommendation of, at least a two-thirds (2/3) majority of the then-existing Board; or (6) such other event or transaction as the Board shall determine constitutes a Change of Control. (c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit (including any transfer of property) in the nature of compensation, to or for the benefit of Executive under this Agreement or any Other Agreement or Benefit Plan, which is considered to be contingent on a Change of Control for purposes of Section 280G of the Code. (d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive, either of the following events occurring within two years after a Change of Control: (1) Termination of Executive's employment by Ceridian for any reason other than (A) fraud, (B) misrepresentation, (C) theft or embezzlement of Ceridian assets, (D) intentional violations of law involving moral turpitude, (E) failure to follow Ceridian's conduct and ethics policies, or (F) continuing failure by Executive to satisfactorily perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such satisfactory performance which specifically identifies the manner in which it is alleged Executive has not satisfactorily performed such duties; or (2) Termination of employment with Ceridian by Executive pursuant to Section 7.02 of this Article VII. 12 A Change of Control Termination by Executive shall not, however, include termination by reason of death or Disability. (e) "CODE" means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code shall include the corresponding section of such Code as from time to time amended. (f) "GOOD REASON" means a good faith determination by Executive, in Executive's sole and absolute judgment, that any one or more of the following events has occurred, without Executive's express written consent, after a Change of Control: (1) A change in Executive's reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control, or any removal of Executive from, or any failure to re-elect Executive to, any of such positions, which has the effect of materially diminishing Executive's responsibility or authority; (2) A reduction by Ceridian in Executive's Base Salary as in effect immediately prior to the Change of Control or as the same may be increased from time to time thereafter; (3) Ceridian requiring Executive to be based anywhere other than within 25 miles of Executive's job location at the time of the Change of Control; (4) Without replacement by plans, programs, or arrangements which, taken as a whole, provide benefits to Executive at least reasonably comparable to those discontinued or adversely affected, (A) the failure by Ceridian to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee compensation or benefit plan, program or arrangement, in which Executive is participating immediately prior to a Change of Control; or (B) the taking of any action by Ceridian that would materially adversely affect Executive's participation or materially reduce Executive's benefits under any of such plans, programs or arrangements; (5) The failure by Ceridian to provide office space, furniture, and secretarial support at least comparable to that provided Executive immediately prior to the Change of Control or the taking of any similar action by Ceridian that would materially adversely affect the working conditions in or under which Executive performs his or her employment duties; 13 (6) If Executive's primary employment duties are with a Subsidiary, the sale, merger, contribution, transfer or any other transaction in conjunction with which Parent Corporation's ownership interest in such Subsidiary decreases below the level specified in Section 1.07 of Article I unless (A) this Agreement is assigned to the purchaser/transferee with the provisions of Article VII in full force and effect and operative as if a Change of Control has occurred with respect to the purchaser/transferee as Parent Corporation immediately after the purchase/transfer becomes effective, and (B) such purchaser/transferee has a creditworthiness reasonably equivalent to Parent Corporation's; or (7) Any material breach of this Agreement by Ceridian. (g) "OTHER AGREEMENTS" means any agreement, contract or understanding heretofore or hereafter entered into between Executive and Ceridian for the direct or indirect provision of compensation to Executive. 7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following a Change of Control that occurred during the term of this Agreement, Executive shall have the right, at any time and within Executive's sole discretion, to terminate employment with Ceridian for Good Reason. Such termination shall be accomplished by, and effective upon, Executive giving written notice to Ceridian of Executive's decision to terminate. Except as otherwise expressly provided in this Agreement, upon the exercise of said right, all obligations and duties of Executive under this Agreement shall be of no further force and effect. 7.03 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall, within five days of such termination, make a lump sum payment to Executive in an amount equal to three times the sum of (a) 12 months of Base Salary at the rate in effect at the time of Executive's termination, (b) the bonus, if any, that Executive would have received under all applicable Ceridian bonus plans for the year in which the termination occurs had "superior" goals been achieved, and (c) the annual perquisite cash adder Executive would have received in the year in which the termination occurs. In addition, in the event of a Change of Control Termination that occurred during the term of this Agreement, Ceridian shall credit Executive with three additional years of age and service under the Ceridian Corporation Retirement Plan. Neither the payments or age and service credits made pursuant to this Section 7.03 nor any other compensation to be provided to Executive by Ceridian pursuant to this Agreement or any other agreement or Benefit Plan which may be considered Change of Control Compensation shall be subject to any limitation on Change of Control Compensation which may otherwise be expressed in any such agreement or Benefit Plan. 14 7.04 TAX REIMBURSEMENT. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payments or distributions by Ceridian to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any payments required under this Section 7.04) (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7.04(d), all determinations required to be made under this Section 7.04, including whether and when a Gross-Up Payment is required and the amount such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ceridian's external auditors (the "Accounting Firm"), which shall provide detailed supporting calculations both to Ceridian and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by Ceridian. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the "Accounting Firm" hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Ceridian. Any Gross-Up Payment, as determined pursuant to this Section 7.04, shall be paid by Ceridian to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Ceridian and Executive. (c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by Ceridian will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Ceridian exhausts its remedies pursuant to Section 7.04(d) and Executive thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Ceridian to or for the benefit of Executive. 15 (d) Executive shall notify Ceridian in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Ceridian of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive knows of such claim and shall apprise Ceridian of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to Ceridian (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Ceridian notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give Ceridian any information reasonably requested by Ceridian relating to such claim; (ii) take such action in connection with contesting such claim as Ceridian shall reasonably request in writing from time to time, including accepting legal representation with respect to such claim by an attorney reasonably selected by Ceridian; (iii) cooperate with Ceridian in good faith in order to effectively contest such claim; and (iv) permit Ceridian to participate in any proceedings relating to such claim; provided, however, that Ceridian shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.04(d), Ceridian shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Ceridian shall determine; provided further, however, that if Ceridian directs Executive to pay such claim and sue for a refund, Ceridian shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any 16 Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Ceridian's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to Ceridian's complying with the requirements of Section 7.04(d)) promptly pay to Ceridian the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), a determination is made that Executive shall not be entitled to any refund with respect to such claim and Ceridian does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 7.05 INTEREST. In the event Ceridian does not make timely payment in full of the Change of Control Termination payment described in Section 7.03, Executive shall be entitled to receive interest on any unpaid amount at the lower of: (a) the prime rate of interest (or such comparable index as may be adopted) established from time to time by the Bank of America National Trust and Savings Association, New York, New York or its successor in interest; or (b) the maximum rate permitted under Section 280G(d)(4) of the Internal Revenue Code. 7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to enforce or defend his or her rights under this Article VII of this Agreement, or to recover damages for breach thereof, Executive shall be entitled to recover from Ceridian any expenses for attorneys' fees and disbursements incurred. 7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination, Executive (and anyone entitled to claim under or through Executive) shall, until age 65, be entitled to receive from Ceridian the same or equivalent health, dental, accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits programs, policies or arrangements, at the same levels and coverages as Executive was receiving on the day immediately prior to 17 the Change of Control at a cost not to exceed the amount Executive would continue to pay had he/she continued to be an active employee of Ceridian. To the extent that election of continuation of any of such coverages, programs, policies, or arrangements is made available to employees terminating at age 55 with 15 or more years of service, Executive shall be required to pay no more for continuation than is required of such employees on the day immediately prior to the Change of Control. If no such continuation program is available, Executive shall be required to pay no more than he/she paid as an active employee, or if provided by Ceridian at no cost to employees on the day immediately prior to the Change of Control, they shall continue to be made available to Executive on this basis. ARTICLE VIII CHANGE OF SUBSIDIARY STATUS In the event that, prior to a Change of Control: (a) a Subsidiary is sold, merged, contributed, or in any other manner transferred, or if for any reason Parent Corporation's ownership interest in any such Subsidiary falls below the level specified in Section 1.07, (b) Executive's primary employment duties are with the Subsidiary at the time of the occurrence of such event, and (c) Executive does not, in conjunction therewith, transfer employment directly to Parent Corporation or another Subsidiary, then: (1) If Executive gives his or her written consent to the assignment of this Agreement to such Subsidiary, or to the purchaser or new majority interest holder of such Subsidiary, (and such assignment is accepted) this Agreement shall remain in full force and effect between Executive and the assignee, except that the provisions of Article VII of this Agreement shall become null and void; (2) If such assignment is not accepted by the Subsidiary or purchaser, then this Agreement shall be deemed to have been terminated by Ceridian without cause pursuant to Section 4.03 of Article IV; and (3) In all other cases, this Agreement shall be deemed terminated for cause pursuant to Section 4.02 of Article IV. ARTICLE IX GENERAL PROVISIONS 9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure in money the damages which will accrue to either party by reason of a failure to perform any of the obligations under this Agreement and therefore injunctive relief is appropriate. Therefore, if either party shall institute any action or proceeding to enforce the provisions 18 hereof, such party against whom such action or proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall not urge in any such action or proceeding the claim or defense that such party has an adequate remedy at law. 9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII, this Agreement shall be binding upon and inure to the benefit of the successors and assigns of Parent Corporation and each Subsidiary, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition of substantially all of the assets or business of Ceridian, and any such successor or assign shall absolutely and unconditionally assume all of Ceridian's obligations hereunder. 9.03 NOTICES. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be in writing and be delivered or mailed to any such party at its address: (a) Ceridian Corporation 8100 34th Avenue South Minneapolis, Minnesota 55425-1640 Attention: Office of General Counsel (b) In the case of Executive shall be: At the address listed on the last page of this Agreement. Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall be deemed received within the second business day thereafter or when it is actually received, whichever is sooner. 9.04 CAPTIONS. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. 9.05 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota and any and every legal proceeding arising out of or in connection with this Agreement shall be brought in the appropriate courts of the State of Minnesota, each of the parties hereby consenting to the exclusive jurisdiction of said courts for this purpose. The parties hereto expressly recognize and agree that the implementation of this Governing Law provision is essential in light of the fact that Parent Corporation's corporate headquarters and its principal executive offices are located within the State of Minnesota, and there is a critical need for uniformity in the interpretation and enforcement of the employment agreements between Ceridian and its senior executives. 19 9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 9.07 WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 9.08 MODIFICATION. Any changes or amendments to this Agreement must be in writing and signed by both parties. 9.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior employment agreements or understandings of the parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement. IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. EXECUTIVE CERIDIAN CORPORATION /s/Stephen B. Morris By: /s/Gary M. Nelson Title: Vice President, General Counsel And Secretary Address: - --------------------------------- - --------------------------------- 20 AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT This Amendment, dated as of October 20, 1999, amends certain provisions of the Executive Employment Agreement ("Agreement"), dated as of October 1, 1999, between Ceridian Corporation and STEVEN B. MORRIS ("Executive"). Unless otherwise defined herein, capitalized terms used in this Amendment have the meanings given to them in the Agreement. In consideration of you continuing in your employment with Ceridian for the remaining term of the Agreement, and the mutual promises and obligations contained in the Agreement as modified by this Amendment, Executive and Ceridian agree to amend the Agreement as follows: 1. Section 4.02(f) of the Agreement shall be amended in its entirety to read as follows: "(f) the continued failure by Executive to attempt in good faith to perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such performance which specifically identifies the manner in which it is alleged Executive has not attempted in good faith to perform such duties." 2. Section 7.01(d)(1) of the Agreement shall be amended in its entirety to read as follows: "(1) Termination of Executive's employment by Ceridian for any reason other than (A) fraud, (B) misrepresentation, (C) theft or embezzlement of Ceridian assets, (D) intentional violations of law involving moral turpitude, or (E) failure to follow Ceridian's conduct and ethics policies; or" 3. Section 7.03 of the Agreement shall be amended in its entirety to read as follows: "7.03 CHANGE OF CONTROL TERMINATION PAYMENT. (a) In the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall, within five days of such termination, make a lump sum payment to Executive in an amount equal to three times the sum of (i) 12 months of Base Salary at the rate in effect at the time of Executive's termination, (ii) the bonus, if any, that Executive would have received under all applicable Ceridian bonus plans for the year in which the termination occurs had "superior" goals been achieved, and (iii) the annual perquisite cash adder Executive would have received in the year in which the termination occurs. (b) In addition to the payments made pursuant to Section 7.03(a) hereof, in the event the Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall provide to Executive a pension supplement equivalent to the difference, if any, between: (i) the monthly benefits to which Executive would have been entitled under the defined benefit pension plan or plans in which Executive participates immediately prior to the Change of Control Termination which includes an additional three years of age and service; and (ii) the amount to which Executive is, in fact, entitled under such defined benefit pension plan or plans. (c) Neither the payments made or the pension supplement provided pursuant to this Section 7.03 nor any other compensation to be provided to Executive by Ceridian pursuant to this Agreement or any other agreement or Benefit Plan which may be considered Change of Control Compensation shall be subject to any limitation on Change of Control Compensation which may otherwise be expressed in any such agreement or Benefit Plan." 4. The first sentence of Section 7.04(d) of the Agreement shall be amended in its entirety to read as follows: "Executive shall notify Ceridian in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by Ceridian of any Gross-Up Payment." 5. This Amendment is governed by, and shall be construed in accordance with, the laws of the State of Minnesota. 6. Except as herein expressly amended, the Agreement is ratified and confirmed in all respects and shall remain in full force and effect in accordance with its terms. 7. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Ceridian and Executive have caused this Amendment to be duly executed and delivered, and this Amendment shall be effective, as of the date first written above. Following the effectiveness of this Amendment, each reference in the Agreement to "this Agreement," "hereunder," "herein," "hereof," or words of like import shall mean and be a reference to the Agreement as amended by this Amendment. EXECUTIVE CERIDIAN CORPORATION /s/Stephen B. Morris By: /s/Gary M. Nelson Title: Vice President, General Counsel and Secretary Address: - --------------------------------- - --------------------------------- 2 EX-10.05 5 EX-10.05 EXHIBIT 10.05 CERIDIAN CORPORATION EXECUTIVE EMPLOYMENT AGREEMENT PARTIES CERIDIAN CORPORATION (A DELAWARE CORPORATION) 8100 34TH AVENUE SOUTH MINNEAPOLIS, MINNESOTA 55425-1640 AND JOHN R. EICKHOFF ("EXECUTIVE") DATE: OCTOBER 1, 1999 RECITALS A. Ceridian wishes to obtain the services of Executive for the duration of this Agreement, and Executive wishes to provide his or her services for such period. B. Ceridian desires reasonable protection of Ceridian's Confidential Information (as defined below). C. Ceridian desires assurance that Executive will not compete with Ceridian, engage in recruitment of Ceridian's employees or make disparaging statements about Ceridian after termination of employment, and Executive is willing to refrain from such competition, recruitment and disparagement. D. Executive desires to be assured of a minimum Base Salary (as defined below) from Ceridian for Executive's services for the term of this Agreement (unless terminated earlier pursuant to the terms of this Agreement). E. It is expressly recognized by the parties that Executive's acceptance of, and continuance in, Executive's position with Ceridian and agreement to be bound by the terms of this Agreement represents a substantial commitment to Ceridian in terms of Executive's personal and professional career and a foregoing of present and future career options by Executive, for all of which Ceridian receives substantial value. F. The parties recognize that a Change of Control (as defined below) may result in material alteration or diminishment of Executive's position and responsibilities and substantially 1 frustrate the purpose of Executive's commitment to Ceridian and forebearance of career options. G. The parties recognize that in light of the above-described commitment and forebearance of career options, it is essential that, for the benefit of Ceridian and its stockholders, provision be made for a Change of Control Termination (as defined below) in order to enable Executive to accept and effectively continue in Executive's position in the face of inherently disruptive circumstances arising from the possibility of a Change of Control of the Parent Corporation (as defined below), although no such change is now contemplated or foreseen. H. The parties wish to replace any and all prior agreements and undertakings with respect to Executive's employment and Change of Control occurrences and compensation. NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in Executive's employment for the term of this Agreement and the parties' agreement to be bound by the terms contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic basis exclusive of benefits, bonuses or incentive payments. 1.02 "BOARD" shall mean the Board of Directors of Parent Corporation. 1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, (a) any Subsidiary (as that term is defined in Section 1.07); and (b) any successor in interest by way of consolidation, operation of law, merger or otherwise. 1.04 "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian which is not generally available to or used by others, or the utility or value of which is not generally known or recognized as standard practice, whether or not the underlying details are in the public domain, including: (a) information or material relating to Ceridian and its business as conducted or anticipated to be conducted; business plans; operations; past, current or anticipated software, products or services; customers or prospective customers; or 2 research, engineering, development, manufacturing, purchasing, accounting, or marketing activities; (b) information or material relating to Ceridian's inventions, improvements, discoveries, "know-how," technological developments, or unpublished writings or other works of authorship, or to the materials, apparatus, processes, formulae, plans or methods used in the development, manufacture or marketing of Ceridian's software, products or services; (c) information on or material relating to Ceridian which when received is marked as "proprietary," "private," or "confidential;" (d) trade secrets of Ceridian; (e) software of Ceridian in various stages of development, including computer programs in source code and binary code form, software designs, specifications, programming aids (including "library subroutines" and productivity tools), programming languages, interfaces, visual displays, technical documentation, user manuals, data files and databases of Ceridian; and (f) any similar information of the type described above which Ceridian obtained from another party and which Ceridian treats as or designates as being proprietary, private or confidential, whether or not owned or developed by Ceridian. Notwithstanding the foregoing, "Confidential Information" does not include any information which is properly published or in the public domain; provided, however, that information which is published by or with the aid of Executive outside the scope of employment or contrary to the requirements of this Agreement will not be considered to have been properly published, and therefore will not be in the public domain for purposes of this Agreement. 1.05 "DISABILITY" shall mean the inability of Executive to perform his or her duties under this Agreement because of illness or incapacity for a continuous period of six months. 1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, any successor in interest by way of consolidation, operation of law, merger or otherwise. "Parent Corporation" shall not include any Subsidiary. 1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of whose securities having ordinary voting power for the election of directors (other than securities having such power only by reason of the occurrence of a contingency) is at the time owned by Parent Corporation and/or one or more Subsidiaries; and (b) any division or business unit (or portion thereof) of Parent Corporation or a corporation described in clause (a) of this Section 1.07. 3 ARTICLE II EMPLOYMENT, DUTIES AND TERM 2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement, Ceridian hereby employs Executive, and Executive accepts such employment. 2.02 DUTIES. Executive shall devote his or her full-time and best efforts to Ceridian and to fulfilling the duties of his or her position which shall include such duties as may from time to time be assigned him or her by Ceridian, provided that such duties are reasonably consistent with Executive's education, experience and background. Executive shall comply with Ceridian's policies and procedures to the extent they are not inconsistent with this Agreement in which case the provisions of this Agreement prevail. 2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII, this Agreement and Executive's employment shall continue until the later of: (a) December 31, 2001; and (b) two years after a Change of Control which occurs prior to December 31, 2001 ("Initial Term"). ARTICLE III COMPENSATION AND EXPENSES 3.01 BASE SALARY. For all services rendered under this Agreement during the term of this Agreement, Ceridian shall pay Executive a minimum Base Salary at the annual rate currently being paid or, if Executive is not currently in Ceridian's employ, at the annual rate specified in the written offer of employment. If Executive's salary is increased from time to time during the term of this Agreement, the increased amount shall be the Base Salary for the remainder of the term. 3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be at the sole discretion of Ceridian. Except as otherwise provided in Article VII, Ceridian shall have the right, in accordance with their terms, to alter, amend or eliminate any bonus or incentive plans, or Executive's participation therein, without compensation to Executive. 3.03 BUSINESS EXPENSES. Ceridian shall, consistent with its policies in effect from time to time, bear all ordinary and necessary business expenses incurred by Executive in performing his or her duties as an employee of Ceridian, provided that Executive accounts promptly for such expenses to Ceridian in the manner prescribed from time to time by Ceridian. 4 ARTICLE IV EARLY TERMINATION 4.01 EARLY TERMINATION. This Article shall not apply to a Change of Control Termination which is governed solely by the provisions of Article VII, and does not alter the respective continuing obligations of the parties pursuant to Articles V, VI, and IX. 4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement and Executive's employment immediately for cause. For the purpose hereof "cause" means: (a) fraud; (b) misrepresentation; (c) theft or embezzlement of Ceridian assets; (d) intentional violations of law involving moral turpitude; (e) failure to follow Ceridian's conduct and ethics policies; and/or (f) the continued failure by Executive to attempt in good faith to perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such performance which specifically identifies the manner in which it is alleged Executive has not attempted in good faith to perform such duties. In the event of termination for cause pursuant to this Section 4.02, Executive shall be paid at the usual rate of Executive's annual Base Salary through the date of termination specified in any written notice of termination. 4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate this Agreement and Executive's employment without cause on at least 75 days' written notice. In the event of termination of this Agreement and of Executive's employment pursuant to this Section 4.03, compensation shall be paid as follows: (a) if the notice of termination is given by Executive, Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period; (b) if the notice of termination is given by Ceridian, (1) Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period, however, Ceridian shall have the option of making termination of the Agreement and Executive's employment effective immediately upon notice in which case Executive shall be paid a lump sum representing the value of 75 days worth of salary; and (2) Executive shall receive, starting within 15 days after the end of the 5 75 day notice period, one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis. In addition, Executive shall receive the bonus, if any, to which Executive would otherwise have become entitled under all applicable Ceridian bonus plans in effect at the time of termination of this Agreement had Executive remained continuously employed for the full fiscal year in which termination occurred and continued to perform his or her duties in the same manner as they were performed immediately prior to termination, multiplied by a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which termination occurred and the denominator of which is 12. This bonus amount shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. In addition, Ceridian shall provide or make arrangements for reasonable outplacement services for Executive based on his or her level within Ceridian. (c) In the event that termination occurs pursuant to Section 4.03(b), in addition to the payments specified therein, Ceridian shall pay to Executive an amount equal to one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis, provided Executive executes a release, similar to that attached as Exhibit A, of all claims against Ceridian. 4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall terminate in the event of death or disability of Executive. (a) In the event of Executive's death, Ceridian shall pay an amount equal to 12 months of Base Salary at the rate in effect at the time of Executive's death plus the amount Executive would have received in annual incentive plan bonus for the year in which the death occurs had "target" goals been achieved. Such amount shall be paid (1) to the beneficiary or beneficiaries designated in writing to Ceridian by Executive, (2) in the absence of such designation to the surviving spouse, or (3) if there is no surviving spouse, or such surviving spouse disclaims all or any part, then the full amount, or such disclaimed portion, shall be paid to the executor, administrator or other personal representative of Executive's estate. The amount shall be paid as a lump sum as soon as practicable following Ceridian's receipt of notice of Executive's death. All such payments shall be in addition to any payments due pursuant to Section 4.04(c) below. (b) In the event of Executive's disability, Base Salary shall be terminated as of the end of the month in which the last day of the six-month period of Executive's inability to perform his or her duties occurs. (c) In the event of termination by reason of Executive's death or disability, Ceridian shall pay to Executive any amount equal to (1) the amount Executive would have received in annual incentive plan bonus for the year in which termination occurs 6 had "target" goals been achieved, multiplied by (2) a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which the death or disability occurred and the denominator of which is 12. The amount payable pursuant to this Section 4.04(c) shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. 4.05 RETIREMENT. Executive may terminate this Agreement and Executive's employment as a result of Executive decision to retire from Ceridian. Executive shall provide Ceridian with at least 75 days' written notice of the date upon which Executive intends to retire. Executive shall be paid at the usual rate of his or her annual Base Salary through the date of retirement stipulated in the written notice. 4.06 PENSION SUPPLEMENT. If Ceridian terminates Executive's employment without cause prior to Executive's 65th birthday, Ceridian shall provide to Executive, out of its general assets, a monthly supplemental retirement benefit in an amount equal to the actuarial equivalent of the difference, if any between: (a) the monthly benefit to which Executive would have been entitled under the defined benefit pension plan or plans in which he or she participated immediately prior to his or her termination of employment if the amount of payment to which Executive is entitled under Section 4.03(b)(2) were taken into account for purposes of determining his or her "final average pay" or similar term (as then defined under the terms of such plan or plans) for either (1) the year in which Executive's termination of employment occurred; or (2) the prior full year, whichever provides the highest total final average pay; and (b) the amount to which Executive is, in fact, entitled under such plan or plans. The benefit calculated under this Section 4.06 shall be paid at the same time and in the same form as the benefit under the plans with respect to which such calculation is made. 4.07 ENTIRE TERMINATION PAYMENT. The compensation provided for in this Article IV for early termination of this Agreement and termination pursuant to this Article IV shall constitute Executive's sole remedy for such termination. Executive shall not be entitled to any other termination or severance payment which may be payable to Executive under any other agreement between Executive and Ceridian. ARTICLE V CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT 5.01 CONFIDENTIALITY. Executive will not, during the term or after the termination or expiration of this Agreement or his/her employment, publish, disclose, or utilize in any 7 manner any Confidential Information obtained while employed by Ceridian. If Executive leaves the employ of Ceridian, Executive will not, without Ceridian's prior written consent, retain or take away any drawing, writing or other record in any form containing any Confidential Information. 5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian, Executive will engage in no activity or employment which may conflict with the interest of Ceridian, and will comply with Ceridian's policies and guidelines pertaining to business conduct and ethics. 5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all inventions, discoveries, software, writings and other works of authorship which are conceived, made, discovered, or written jointly or singly on Ceridian time or on Executive's own time, providing the invention, improvement, discovery, software, writing or other work of authorship is capable of being used by Ceridian in the normal course of business, and all such inventions, improvements, discoveries, software, writings and other works of authorship shall belong solely to Ceridian. 5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all instruments of assignment and other papers to evidence vestiture of Executive's entire right, title and interest in such inventions, improvements, discoveries, software, writings or other works of authorship in Ceridian, at the request and the expense of Ceridian, and Executive will do all acts and sign all instruments of assignment and other papers Ceridian may reasonably request relating to applications for patents, patents, copyrights, and the enforcement and protection thereof. If Executive is needed, at any time, to give testimony, evidence, or opinions in any litigation or proceeding involving any patents or copyrights or applications for patents or copyrights, both domestic and foreign, relating to inventions, improvements, discoveries, software, writings or other works of authorship conceived, developed or reduced to practice by Executive, Executive agrees to do so, and if Executive leaves the employ of Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to Executive and Ceridian, plus reasonable traveling or other expenses. 5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately preceding sections entitled "Disclosure" and "Instruments of Assignment" do not apply to inventions in which a Ceridian claim of any rights will create a violation of Chapter 181 Minnesota Statutes, Section 181.78, reproduced below and constituting the written notification of its Subdivision 3. 181.78 Agreements; terms relating to inventions Subdivision 1. Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer shall not 8 apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable. Subdivision 2. No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment. Subdivision 3. IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. 5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, data bases, improvements, discoveries, software, writings or other works of authorship useful to Ceridian in the normal course of business, which were conceived, made or written prior to the date of this Agreement and which are excluded from this Agreement. 5.07 SURVIVAL. The obligations of this Article V shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VI NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT 6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a senior executive of Ceridian and is a key executive of Ceridian, (b) Executive has received, and will in the future receive, substantial amounts of Confidential Information, (c) Ceridian's business is 9 conducted on a worldwide basis, and (d) provision for non-competition, non-recruitment and non-disparagement obligations by Executive is critical to Ceridian's continued economic well-being and protection of Ceridian's Confidential Information. In light of these considerations, this Article VI sets forth the terms and conditions of Executive's obligations of non-competition, non-recruitment and non-disparagement subsequent to the termination of this Agreement and/or Executive's employment for any reason. 6.02 NON-COMPETITION. (a) Unless the obligation is waived or limited by Ceridian in accordance with subsection (b) of this Section 6.02, Executive agrees that for a period of two years following termination of employment for any reason ("Non-Compete Period"), Executive will not directly or indirectly, alone or as a partner, officer, director, shareholder or employee of any other firm or entity, engage in any commercial activity in competition with any part of Ceridian's business as conducted as of the date of such termination of employment or with any part of Ceridian's contemplated business with respect to which Executive has Confidential Information. For purposes of this subsection (a), "shareholder" shall not include beneficial ownership of less than five percent (5%) of the combined voting power of all issued and outstanding voting securities of a publicly held corporation whose stock is traded on a major stock exchange. Also for purposes of this subsection (a), "Ceridian's business" shall include business conducted by Ceridian or its affiliates and any partnership or joint venture in which Ceridian or its affiliates is a partner or joint venturer; provided that, "affiliate" as used in this sentence shall not include any corporation in which Ceridian has ownership of less than fifteen percent (15%) of the voting stock. (b) At its sole option Ceridian may, by written notice to Executive at any time within the Non-Compete Period, waive or limit the time and/or geographic area in which Executive cannot engage in competitive activity. (c) During the Non-Compete Period, prior to accepting employment with or agreeing to provide consulting services to, any firm or entity which offers competitive products or services, Executive shall give 30 days prior written notice to Ceridian. Such written notice shall describe the firm and the employment or consulting services to be rendered to the firm or entity, and shall include a copy of the written offer of employment or engagement of consulting services. Ceridian's failure to respond or object to such notice shall not in any way constitute acquiescence or waiver of Ceridian's rights under this Article VI. (d) In the event Executive has provided notice to Ceridian pursuant to subsection (c) of this Section 6.02 and has not accepted employment with or agreed to provide consulting services to, any firm or entity directly as a result of his or her non-competition obligation pursuant to this Section 6.02, Ceridian shall pay Executive an amount equal to the usual rate of Executive's Base Salary in effect at the time 10 of termination on a regular payroll period basis until the end of the Non-Compete Period. There shall be credited against Ceridian's obligation to make such payments any other payments made by Ceridian to Executive pursuant to Article IV of this Agreement. In the event that Ceridian elects, pursuant to subsection (b) of this Section 6.02, to waive all or any portion of the non-competition obligation set forth in subsection (a) hereof, no payment shall be required by Ceridian with respect to the portion of the Non-Compete Period which has been waived. (e) In the event Executive fails to provide notice to Ceridian pursuant to subsection (c) of this Section 6.02 and/or in anyway violates its non-competition obligation pursuant to Section 6.02, Ceridian may enforce all of its rights and remedies provided to it under this Agreement, in law and in equity, and Executive shall be deemed to have expressly waived any rights he or she may have had to payments under subsection (d) of this Section 6.02. 6.03 NON-RECRUITMENT. For a period of two years following termination of employment for any reason, Executive will not initiate or actively participate in any other employer's recruitment or hiring of Ceridian employees. This provision shall not preclude Executive from responding to a request (other than by Executive's employer) for a reference with respect to an individual's employment qualifications. 6.04 NON-DISPARAGEMENT. Executive will not, during the term or after the termination or expiration of this Agreement or Executive's employment, make disparaging statements, in any form, about Ceridian, its officers, directors, agents, employees, products or services which Executive knows, or has reason to believe, are false or misleading. 6.05 SURVIVAL. The obligations of this Article VI shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VII CHANGE OF CONTROL 7.01 DEFINITIONS. For purposes of this Article VII, the following definitions shall be applied: (a) "BENEFIT PLAN" means any formal or informal plan, program or other arrangement heretofore or hereafter adopted by Ceridian for the direct or indirect provision of compensation to Executive (including groups or classes of participants or beneficiaries of which Executive is a member), whether or not such compensation is deferred, is in the form of cash or other property or rights, or is in the form of a benefit to or for Executive. (b) "CHANGE OF CONTROL" shall mean any of the following events: 11 (1) a merger or consolidation to which Parent Corporation is a party if the individuals and entities who were stockholders of Parent Corporation immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined voting power for election of directors of the surviving corporation immediately following the effective date of such merger or consolidation; or (2) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate of securities of Parent Corporation representing twenty-five percent (25%) or more of the total combined voting power of Parent Corporation's then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes of hereof, the following acquisitions shall not constitute a Change of Control: (A) any acquisition by Parent Corporation, or (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Parent Corporation or any corporation controlled by Parent Corporation; or (3) the sale of the properties and assets of Parent Corporation, substantially as an entirety, to any person or entity which is not a wholly-owned subsidiary of Parent Corporation; or (4) the stockholders of Parent Corporation approve any plan or proposal for the liquidation of Parent Corporation; or (5) a change in the composition of the Board at any time during any consecutive 24 month period such that the "Continuity Directors" cease for any reason to constitute at least a seventy percent (70%) majority of the Board. For purposes of this clause, "Continuity Directors" means those members of the Board who either (A) were directors at the beginning of such consecutive 24 month period, or (B) were elected by, or on the nomination or recommendation of, at least a two-thirds (2/3) majority of the then-existing Board; or (6) such other event or transaction as the Board shall determine constitutes a Change of Control. (c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit (including any transfer of property) in the nature of compensation, to or for the benefit of Executive under this Agreement or any Other Agreement or Benefit Plan, which is considered to be contingent on a Change of Control for purposes of Section 280G of the Code. 12 (d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive, either of the following events occurring within two years after a Change of Control: (1) Termination of Executive's employment by Ceridian for any reason other than (A) fraud, (B) misrepresentation, (C) theft or embezzlement of Ceridian assets, (D) intentional violations of law involving moral turpitude, or (E) failure to follow Ceridian's conduct and ethics policies; or (2) Termination of employment with Ceridian by Executive pursuant to Section 7.02 of this Article VII. A Change of Control Termination by Executive shall not, however, include termination by reason of death or Disability. (e) "CODE" means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code shall include the corresponding section of such Code as from time to time amended. (f) "GOOD REASON" means a good faith determination by Executive, in Executive's sole and absolute judgment, that any one or more of the following events has occurred, without Executive's express written consent, after a Change of Control: (1) A change in Executive's reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control, or any removal of Executive from, or any failure to re-elect Executive to, any of such positions, which has the effect of materially diminishing Executive's responsibility or authority; (2) A reduction by Ceridian in Executive's Base Salary as in effect immediately prior to the Change of Control or as the same may be increased from time to time thereafter; (3) Ceridian requiring Executive to be based anywhere other than within 25 miles of Executive's job location at the time of the Change of Control; (4) Without replacement by plans, programs, or arrangements which, taken as a whole, provide benefits to Executive at least reasonably comparable to those discontinued or adversely affected, (A) the failure by Ceridian to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee compensation or benefit plan, program or arrangement, 13 in which Executive is participating immediately prior to a Change of Control; or (B) the taking of any action by Ceridian that would materially adversely affect Executive's participation or materially reduce Executive's benefits under any of such plans, programs or arrangements; (5) The failure by Ceridian to provide office space, furniture, and secretarial support at least comparable to that provided Executive immediately prior to the Change of Control or the taking of any similar action by Ceridian that would materially adversely affect the working conditions in or under which Executive performs his or her employment duties; (6) If Executive's primary employment duties are with a Subsidiary, the sale, merger, contribution, transfer or any other transaction in conjunction with which Parent Corporation's ownership interest in such Subsidiary decreases below the level specified in Section 1.07 of Article I unless (A) this Agreement is assigned to the purchaser/transferee with the provisions of Article VII in full force and effect and operative as if a Change of Control has occurred with respect to the purchaser/transferee as Parent Corporation immediately after the purchase/transfer becomes effective, and (B) such purchaser/transferee has a creditworthiness reasonably equivalent to Parent Corporation's; or (7) Any material breach of this Agreement by Ceridian. (g) "OTHER AGREEMENTS" means any agreement, contract or understanding heretofore or hereafter entered into between Executive and Ceridian for the direct or indirect provision of compensation to Executive. 7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following a Change of Control that occurred during the term of this Agreement, Executive shall have the right, at any time and within Executive's sole discretion, to terminate employment with Ceridian for Good Reason. Such termination shall be accomplished by, and effective upon, Executive giving written notice to Ceridian of Executive's decision to terminate. Except as otherwise expressly provided in this Agreement, upon the exercise of said right, all obligations and duties of Executive under this Agreement shall be of no further force and effect. 7.03 CHANGE OF CONTROL TERMINATION PAYMENT. (a) In the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall, within five days of such termination, 14 make a lump sum payment to Executive in an amount equal to three times the sum of (i) 12 months of Base Salary at the rate in effect at the time of Executive's termination, (ii) the bonus, if any, that Executive would have received under all applicable Ceridian bonus plans for the year in which the termination occurs had "superior" goals been achieved, and (iii) the annual perquisite cash adder Executive would have received in the year in which the termination occurs. (b) In addition to the payments made pursuant to Section 7.03(a) hereof, in the event the Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall provide to Executive a pension supplement equivalent to the difference, if any, between: (i) the monthly benefits to which Executive would have been entitled under the defined benefit pension plan or plans in which Executive participates immediately prior to the Change of Control Termination which includes an additional three years of age and service; and (ii) the amount to which Executive is, in fact, entitled under such defined benefit pension plan or plans. (c) Neither the payments made or the pension supplement provided pursuant to this Section 7.03 nor any other compensation to be provided to Executive by Ceridian pursuant to this Agreement or any other agreement or Benefit Plan which may be considered Change of Control Compensation shall be subject to any limitation on Change of Control Compensation which may otherwise be expressed in any such agreement or Benefit Plan. 7.04 TAX REIMBURSEMENT. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payments or distributions by Ceridian to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any payments required under this Section 7.04) (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7.04(d), all determinations required to be made under this Section 7.04, including whether and when a Gross-Up Payment is 15 required and the amount such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ceridian's external auditors (the "Accounting Firm"), which shall provide detailed supporting calculations both to Ceridian and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by Ceridian. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the "Accounting Firm" hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Ceridian. Any Gross-Up Payment, as determined pursuant to this Section 7.04, shall be paid by Ceridian to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Ceridian and Executive. (c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by Ceridian will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Ceridian exhausts its remedies pursuant to Section 7.04(d) and Executive thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Ceridian to or for the benefit of Executive. (d) Executive shall notify Ceridian in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by Ceridian of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive knows of such claim and shall apprise Ceridian of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to Ceridian (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Ceridian notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give Ceridian any information reasonably requested by Ceridian relating to such claim; (ii) take such action in connection with contesting such claim as Ceridian shall reasonably request in writing from time to time, including accepting legal representation with respect 16 to such claim by an attorney reasonably selected by Ceridian; (iii) cooperate with Ceridian in good faith in order to effectively contest such claim; and (iv) permit Ceridian to participate in any proceedings relating to such claim; provided, however, that Ceridian shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.04(d), Ceridian shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Ceridian shall determine; provided further, however, that if Ceridian directs Executive to pay such claim and sue for a refund, Ceridian shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Ceridian's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to Ceridian's complying with the requirements of Section 7.04(d)) promptly pay to Ceridian the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), a determination is made that Executive shall not be 17 entitled to any refund with respect to such claim and Ceridian does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 7.05 INTEREST. In the event Ceridian does not make timely payment in full of the Change of Control Termination payment described in Section 7.03, Executive shall be entitled to receive interest on any unpaid amount at the lower of: (a) the prime rate of interest (or such comparable index as may be adopted) established from time to time by the Bank of America National Trust and Savings Association, New York, New York or its successor in interest; or (b) the maximum rate permitted under Section 280G(d)(4) of the Internal Revenue Code. 7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to enforce or defend his or her rights under this Article VII of this Agreement, or to recover damages for breach thereof, Executive shall be entitled to recover from Ceridian any expenses for attorneys' fees and disbursements incurred. 7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination, Executive (and anyone entitled to claim under or through Executive) shall, until age 65, be entitled to receive from Ceridian the same or equivalent health, dental, accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits programs, policies or arrangements, at the same levels and coverages as Executive was receiving on the day immediately prior to the Change of Control at a cost not to exceed the amount Executive would continue to pay had he/she continued to be an active employee of Ceridian. To the extent that election of continuation of any of such coverages, programs, policies, or arrangements is made available to employees terminating at age 55 with 15 or more years of service, Executive shall be required to pay no more for continuation than is required of such employees on the day immediately prior to the Change of Control. If no such continuation program is available, Executive shall be required to pay no more than he/she paid as an active employee, or if provided by Ceridian at no cost to employees on the day immediately prior to the Change of Control, they shall continue to be made available to Executive on this basis. ARTICLE VIII CHANGE OF SUBSIDIARY STATUS In the event that, prior to a Change of Control: (a) a Subsidiary is sold, merged, contributed, or in any other manner transferred, or if for any reason Parent Corporation's ownership interest in any such Subsidiary falls below the level specified in Section 1.07, (b) Executive's primary 18 employment duties are with the Subsidiary at the time of the occurrence of such event, and (c) Executive does not, in conjunction therewith, transfer employment directly to Parent Corporation or another Subsidiary, then: (1) If Executive gives his or her written consent to the assignment of this Agreement to such Subsidiary, or to the purchaser or new majority interest holder of such Subsidiary, (and such assignment is accepted) this Agreement shall remain in full force and effect between Executive and the assignee, except that the provisions of Article VII of this Agreement shall become null and void; (2) If such assignment is not accepted by the Subsidiary or purchaser, then this Agreement shall be deemed to have been terminated by Ceridian without cause pursuant to Section 4.03 of Article IV; and (3) In all other cases, this Agreement shall be deemed terminated for cause pursuant to Section 4.02 of Article IV. ARTICLE IX GENERAL PROVISIONS 9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure in money the damages which will accrue to either party by reason of a failure to perform any of the obligations under this Agreement and therefore injunctive relief is appropriate. Therefore, if either party shall institute any action or proceeding to enforce the provisions hereof, such party against whom such action or proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall not urge in any such action or proceeding the claim or defense that such party has an adequate remedy at law. 9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII, this Agreement shall be binding upon and inure to the benefit of the successors and assigns of Parent Corporation and each Subsidiary, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition of substantially all of the assets or business of Ceridian, and any such successor or assign shall absolutely and unconditionally assume all of Ceridian's obligations hereunder. 9.03 NOTICES. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be in writing and be delivered or mailed to any such party at its address: (a) Ceridian Corporation 8100 34th Avenue South Minneapolis, Minnesota 55425-1640 19 Attention: Office of General Counsel (b) In the case of Executive shall be: At the address listed on the last page of this Agreement. Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall be deemed received within the second business day thereafter or when it is actually received, whichever is sooner. 9.04 CAPTIONS. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. 9.05 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota and any and every legal proceeding arising out of or in connection with this Agreement shall be brought in the appropriate courts of the State of Minnesota, each of the parties hereby consenting to the exclusive jurisdiction of said courts for this purpose. The parties hereto expressly recognize and agree that the implementation of this Governing Law provision is essential in light of the fact that Parent Corporation's corporate headquarters and its principal executive offices are located within the State of Minnesota, and there is a critical need for uniformity in the interpretation and enforcement of the employment agreements between Ceridian and its senior executives. 9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 9.07 WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 9.08 MODIFICATION. Any changes or amendments to this Agreement must be in writing and signed by both parties. 9.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior employment agreements or understandings of the 20 parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement. IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. EXECUTIVE CERIDIAN CORPORATION /s/J. R. Eickhoff By: /s/Gary M. Nelson Title: Vice President, General Counsel Address: - --------------------------------- - --------------------------------- 21 EX-10.06 6 EX-10.06 EXHIBIT 10.06 CERIDIAN CORPORATION EXECUTIVE EMPLOYMENT AGREEMENT PARTIES CERIDIAN CORPORATION (A DELAWARE CORPORATION) 8100 34TH AVENUE SOUTH MINNEAPOLIS, MINNESOTA 55425-1640 AND TONY G. HOLCOMBE ("EXECUTIVE") DATE: OCTOBER 1, 1999 RECITALS A. Ceridian wishes to obtain the services of Executive for the duration of this Agreement, and Executive wishes to provide his or her services for such period. B. Ceridian desires reasonable protection of Ceridian's Confidential Information (as defined below). C. Ceridian desires assurance that Executive will not compete with Ceridian, engage in recruitment of Ceridian's employees or make disparaging statements about Ceridian after termination of employment, and Executive is willing to refrain from such competition, recruitment and disparagement. D. Executive desires to be assured of a minimum Base Salary (as defined below) from Ceridian for Executive's services for the term of this Agreement (unless terminated earlier pursuant to the terms of this Agreement). E. It is expressly recognized by the parties that Executive's acceptance of, and continuance in, Executive's position with Ceridian and agreement to be bound by the terms of this Agreement represents a substantial commitment to Ceridian in terms of Executive's personal and professional career and a foregoing of present and future career options by Executive, for all of which Ceridian receives substantial value. F. The parties recognize that a Change of Control (as defined below) may result in material alteration or diminishment of Executive's position and responsibilities and substantially frustrate the purpose of Executive's commitment to Ceridian and forebearance of career options. G. The parties recognize that in light of the above-described commitment and forebearance of career options, it is essential that, for the benefit of Ceridian and its stockholders, provision be made for a Change of Control Termination (as defined below) in order to enable Executive to accept and effectively continue in Executive's position in the face of inherently disruptive circumstances arising from the possibility of a Change of Control of the Parent Corporation (as defined below), although no such change is now contemplated or foreseen. H. The parties wish to replace any and all prior agreements and undertakings with respect to Executive's employment and Change of Control occurrences and compensation. NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in Executive's employment for the term of this Agreement and the parties' agreement to be bound by the terms contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic basis exclusive of benefits, bonuses or incentive payments. 1.02 "BOARD" shall mean the Board of Directors of Parent Corporation. 1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, (a) any Subsidiary (as that term is defined in Section 1.07); and (b) any successor in interest by way of consolidation, operation of law, merger or otherwise. 1.04 "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian which is not generally available to or used by others, or the utility or value of which is not generally known or recognized as standard practice, whether or not the underlying details are in the public domain, including: (a) information or material relating to Ceridian and its business as conducted or anticipated to be conducted; business plans; operations; past, current or anticipated software, products or services; customers or prospective customers; or 2 research, engineering, development, manufacturing, purchasing, accounting, or marketing activities; (b) information or material relating to Ceridian's inventions, improvements, discoveries, "know-how," technological developments, or unpublished writings or other works of authorship, or to the materials, apparatus, processes, formulae, plans or methods used in the development, manufacture or marketing of Ceridian's software, products or services; (c) information on or material relating to Ceridian which when received is marked as "proprietary," "private," or "confidential;" (d) trade secrets of Ceridian; (e) software of Ceridian in various stages of development, including computer programs in source code and binary code form, software designs, specifications, programming aids (including "library subroutines" and productivity tools), programming languages, interfaces, visual displays, technical documentation, user manuals, data files and databases of Ceridian; and (f) any similar information of the type described above which Ceridian obtained from another party and which Ceridian treats as or designates as being proprietary, private or confidential, whether or not owned or developed by Ceridian. Notwithstanding the foregoing, "Confidential Information" does not include any information which is properly published or in the public domain; provided, however, that information which is published by or with the aid of Executive outside the scope of employment or contrary to the requirements of this Agreement will not be considered to have been properly published, and therefore will not be in the public domain for purposes of this Agreement. 1.05 "DISABILITY" shall mean the inability of Executive to perform his or her duties under this Agreement because of illness or incapacity for a continuous period of six months. 1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as otherwise provided in Article VIII and Section 9.02 of Article IX, any successor in interest by way of consolidation, operation of law, merger or otherwise. "Parent Corporation" shall not include any Subsidiary. 1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of whose securities having ordinary voting power for the election of directors (other than securities having such power only by reason of the occurrence of a contingency) is at the time owned by Parent Corporation and/or one or more Subsidiaries; and (b) any division or business unit (or portion thereof) of Parent Corporation or a corporation described in clause (a) of this Section 1.07. 3 ARTICLE II EMPLOYMENT, DUTIES AND TERM 2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement, Ceridian hereby employs Executive, and Executive accepts such employment. 2.02 DUTIES. Executive shall devote his or her full-time and best efforts to Ceridian and to fulfilling the duties of his or her position which shall include such duties as may from time to time be assigned him or her by Ceridian, provided that such duties are reasonably consistent with Executive's education, experience and background. Executive shall comply with Ceridian's policies and procedures to the extent they are not inconsistent with this Agreement in which case the provisions of this Agreement prevail. 2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII, this Agreement and Executive's employment shall continue until the later of: (a) OCTOBER 1, 2001; and (b) two years after a Change of Control which occurs prior to OCTOBER 1, 2001 ("Initial Term"). Upon expiration of the Initial Term and subject to the provisions of Articles IV, VII and VIII, this Agreement and Executive's employment shall be automatically extended for successive two year periods. ARTICLE III COMPENSATION AND EXPENSES 3.01 BASE SALARY. For all services rendered under this Agreement during the term of this Agreement, Ceridian shall pay Executive a minimum Base Salary at the annual rate currently being paid or, if Executive is not currently in Ceridian's employ, at the annual rate specified in the written offer of employment. If Executive's salary is increased from time to time during the term of this Agreement, the increased amount shall be the Base Salary for the remainder of the term. 3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be at the sole discretion of Ceridian. Except as otherwise provided in Article VII, Ceridian shall have the right, in accordance with their terms, to alter, amend or eliminate any bonus or incentive plans, or Executive's participation therein, without compensation to Executive. 3.03 BUSINESS EXPENSES. Ceridian shall, consistent with its policies in effect from time to time, bear all ordinary and necessary business expenses incurred by Executive in performing his or her duties as an employee of Ceridian, provided that Executive accounts promptly for such expenses to Ceridian in the manner prescribed from time to time by Ceridian. 4 ARTICLE IV EARLY TERMINATION 4.01 EARLY TERMINATION. This Article shall not apply to a Change of Control Termination which is governed solely by the provisions of Article VII, and does not alter the respective continuing obligations of the parties pursuant to Articles V, VI, and IX. 4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement and Executive's employment immediately for cause. For the purpose hereof "cause" means: (a) fraud; (b) misrepresentation; (c) theft or embezzlement of Ceridian assets; (d) intentional violations of law involving moral turpitude; (e) failure to follow Ceridian's conduct and ethics policies; and/or (f) the continued failure by Executive to satisfactorily perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such satisfactory performance which specifically identifies the manner in which it is alleged Executive has not satisfactorily performed such duties. In the event of termination for cause pursuant to this Section 4.02, Executive shall be paid at the usual rate of Executive's annual Base Salary through the date of termination specified in any written notice of termination. 4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate this Agreement and Executive's employment without cause on at least 75 days' written notice. In the event of termination of this Agreement and of Executive's employment pursuant to this Section 4.03, compensation shall be paid as follows: (a) if the notice of termination is given by Executive, Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period; (b) if the notice of termination is given by Ceridian, (1) Executive shall be paid at the usual rate of his or her annual Base Salary through the 75 day notice period, however, Ceridian shall have the option of making termination of the Agreement and Executive's employment effective immediately upon notice in which case Executive shall be paid a lump sum representing the value of 75 days worth of salary; and (2) Executive shall receive, starting within 15 days after the end of the 5 75 day notice period, one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis. In addition, Executive shall receive the bonus, if any, to which Executive would otherwise have become entitled under all applicable Ceridian bonus plans in effect at the time of termination of this Agreement had Executive remained continuously employed for the full fiscal year in which termination occurred and continued to perform his or her duties in the same manner as they were performed immediately prior to termination, multiplied by a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which termination occurred and the denominator of which is 12. This bonus amount shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. In addition, Ceridian shall provide or make arrangements for reasonable outplacement services for Executive based on his or her level within Ceridian. (c) In the event that termination occurs pursuant to Section 4.03(b), in addition to the payments specified therein, Ceridian shall pay to Executive an amount equal to one year's Base Salary payable, at the sole discretion of Ceridian, in either the form of a lump sum payment or on a regular payroll period basis, provided Executive executes a release, similar to that attached as Exhibit A, of all claims against Ceridian. 4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement and Executive's employment shall terminate in the event of death or disability of Executive. (a) In the event of Executive's death, Ceridian shall pay an amount equal to 12 months of Base Salary at the rate in effect at the time of Executive's death plus the amount Executive would have received in annual incentive plan bonus for the year in which the death occurs had "target" goals been achieved. Such amount shall be paid (1) to the beneficiary or beneficiaries designated in writing to Ceridian by Executive, (2) in the absence of such designation to the surviving spouse, or (3) if there is no surviving spouse, or such surviving spouse disclaims all or any part, then the full amount, or such disclaimed portion, shall be paid to the executor, administrator or other personal representative of Executive's estate. The amount shall be paid as a lump sum as soon as practicable following Ceridian's receipt of notice of Executive's death. All such payments shall be in addition to any payments due pursuant to Section 4.04(c) below. (b) In the event of Executive's disability, Base Salary shall be terminated as of the end of the month in which the last day of the six-month period of Executive's inability to perform his or her duties occurs. (c) In the event of termination by reason of Executive's death or disability, Ceridian shall pay to Executive any amount equal to (1) the amount Executive would have received in annual incentive plan bonus for the year in which termination occurs 6 had "target" goals been achieved, multiplied by (2) a fraction, the numerator of which shall be the number of whole months Executive was employed in the year in which the death or disability occurred and the denominator of which is 12. The amount payable pursuant to this Section 4.04(c) shall be paid within 15 days after the date such bonus would have been paid had Executive remained employed for the full fiscal year. 4.05 RETIREMENT. Executive may terminate this Agreement and Executive's employment as a result of Executive decision to retire from Ceridian. Executive shall provide Ceridian with at least 75 days' written notice of the date upon which Executive intends to retire. Executive shall be paid at the usual rate of his or her annual Base Salary through the date of retirement stipulated in the written notice. 4.06 ENTIRE TERMINATION PAYMENT. The compensation provided for in this Article IV for early termination of this Agreement and termination pursuant to this Article IV shall constitute Executive's sole remedy for such termination. Executive shall not be entitled to any other termination or severance payment which may be payable to Executive under any other agreement between Executive and Ceridian. ARTICLE V CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT 5.01 CONFIDENTIALITY. Executive will not, during the term or after the termination or expiration of this Agreement or his/her employment, publish, disclose, or utilize in any manner any Confidential Information obtained while employed by Ceridian. If Executive leaves the employ of Ceridian, Executive will not, without Ceridian's prior written consent, retain or take away any drawing, writing or other record in any form containing any Confidential Information. 5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian, Executive will engage in no activity or employment which may conflict with the interest of Ceridian, and will comply with Ceridian's policies and guidelines pertaining to business conduct and ethics. 5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all inventions, discoveries, software, writings and other works of authorship which are conceived, made, discovered, or written jointly or singly on Ceridian time or on Executive's own time, providing the invention, improvement, discovery, software, writing or other work of authorship is capable of being used by Ceridian in the normal course of business, and all such inventions, improvements, discoveries, software, writings and other works of authorship shall belong solely to Ceridian. 7 5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all instruments of assignment and other papers to evidence vestiture of Executive's entire right, title and interest in such inventions, improvements, discoveries, software, writings or other works of authorship in Ceridian, at the request and the expense of Ceridian, and Executive will do all acts and sign all instruments of assignment and other papers Ceridian may reasonably request relating to applications for patents, patents, copyrights, and the enforcement and protection thereof. If Executive is needed, at any time, to give testimony, evidence, or opinions in any litigation or proceeding involving any patents or copyrights or applications for patents or copyrights, both domestic and foreign, relating to inventions, improvements, discoveries, software, writings or other works of authorship conceived, developed or reduced to practice by Executive, Executive agrees to do so, and if Executive leaves the employ of Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to Executive and Ceridian, plus reasonable traveling or other expenses. 5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately preceding sections entitled "Disclosure" and "Instruments of Assignment" do not apply to inventions in which a Ceridian claim of any rights will create a violation of Chapter 181 Minnesota Statutes, Section 181.78, reproduced below and constituting the written notification of its Subdivision 3. 181.78 Agreements; terms relating to inventions Subdivision 1. Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable. Subdivision 2. No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment. Subdivision 3. IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN 8 EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. 5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, data bases, improvements, discoveries, software, writings or other works of authorship useful to Ceridian in the normal course of business, which were conceived, made or written prior to the date of this Agreement and which are excluded from this Agreement. 5.07 SURVIVAL. The obligations of this Article V shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VI NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT 6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a senior executive of Ceridian and is a key executive of Ceridian, (b) Executive has received, and will in the future receive, substantial amounts of Confidential Information, (c) Ceridian's business is conducted on a worldwide basis, and (d) provision for non-competition, non-recruitment and non-disparagement obligations by Executive is critical to Ceridian's continued economic well-being and protection of Ceridian's Confidential Information. In light of these considerations, this Article VI sets forth the terms and conditions of Executive's obligations of non-competition, non-recruitment and non-disparagement subsequent to the termination of this Agreement and/or Executive's employment for any reason. 6.02 NON-COMPETITION. (a) Unless the obligation is waived or limited by Ceridian in accordance with subsection (b) of this Section 6.02, Executive agrees that for a period of two years following termination of employment for any reason ("Non-Compete Period"), Executive will not directly or indirectly, alone or as a partner, officer, director, shareholder or employee of any other firm or entity, engage in any commercial activity in competition with any part of Ceridian's business as conducted as of the date of such termination of employment or with any part of Ceridian's contemplated business with respect to which Executive has Confidential Information. For purposes of this subsection (a), "shareholder" shall not include 9 beneficial ownership of less than five percent (5%) of the combined voting power of all issued and outstanding voting securities of a publicly held corporation whose stock is traded on a major stock exchange. Also for purposes of this subsection (a), "Ceridian's business" shall include business conducted by Ceridian or its affiliates and any partnership or joint venture in which Ceridian or its affiliates is a partner or joint venturer; provided that, "affiliate" as used in this sentence shall not include any corporation in which Ceridian has ownership of less than fifteen percent (15%) of the voting stock. (b) At its sole option Ceridian may, by written notice to Executive at any time within the Non-Compete Period, waive or limit the time and/or geographic area in which Executive cannot engage in competitive activity. (c) During the Non-Compete Period, prior to accepting employment with or agreeing to provide consulting services to, any firm or entity which offers competitive products or services, Executive shall give 30 days prior written notice to Ceridian. Such written notice shall describe the firm and the employment or consulting services to be rendered to the firm or entity, and shall include a copy of the written offer of employment or engagement of consulting services. Ceridian's failure to respond or object to such notice shall not in any way constitute acquiescence or waiver of Ceridian's rights under this Article VI. (d) In the event Executive has provided notice to Ceridian pursuant to subsection (c) of this Section 6.02 and has not accepted employment with or agreed to provide consulting services to, any firm or entity directly as a result of his or her non-competition obligation pursuant to this Section 6.02, Ceridian shall pay Executive an amount equal to the usual rate of Executive's Base Salary in effect at the time of termination on a regular payroll period basis until the end of the Non-Compete Period. There shall be credited against Ceridian's obligation to make such payments any other payments made by Ceridian to Executive pursuant to Article IV of this Agreement. In the event that Ceridian elects, pursuant to subsection (b) of this Section 6.02, to waive all or any portion of the non-competition obligation set forth in subsection (a) hereof, no payment shall be required by Ceridian with respect to the portion of the Non-Compete Period which has been waived. (e) In the event Executive fails to provide notice to Ceridian pursuant to subsection (c) of this Section 6.02 and/or in anyway violates its non-competition obligation pursuant to Section 6.02, Ceridian may enforce all of its rights and remedies provided to it under this Agreement, in law and in equity, and Executive shall be deemed to have expressly waived any rights he or she may have had to payments under subsection (d) of this Section 6.02. 6.03 NON-RECRUITMENT. For a period of two years following termination of employment for any reason, Executive will not initiate or actively participate in any other employer's recruitment or hiring of Ceridian employees. This provision shall not preclude Executive 10 from responding to a request (other than by Executive's employer) for a reference with respect to an individual's employment qualifications. 6.04 NON-DISPARAGEMENT. Executive will not, during the term or after the termination or expiration of this Agreement or Executive's employment, make disparaging statements, in any form, about Ceridian, its officers, directors, agents, employees, products or services which Executive knows, or has reason to believe, are false or misleading. 6.05 SURVIVAL. The obligations of this Article VI shall survive the expiration or termination of this Agreement and Executive's employment. ARTICLE VII CHANGE OF CONTROL 7.01 DEFINITIONS. For purposes of this Article VII, the following definitions shall be applied: (a) "BENEFIT PLAN" means any formal or informal plan, program or other arrangement heretofore or hereafter adopted by Ceridian for the direct or indirect provision of compensation to Executive (including groups or classes of participants or beneficiaries of which Executive is a member), whether or not such compensation is deferred, is in the form of cash or other property or rights, or is in the form of a benefit to or for Executive. (b) "CHANGE OF CONTROL" shall mean any of the following events: (1) a merger or consolidation to which Parent Corporation is a party if the individuals and entities who were stockholders of Parent Corporation immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined voting power for election of directors of the surviving corporation immediately following the effective date of such merger or consolidation; or (2) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate of securities of Parent Corporation representing twenty-five percent (25%) or more of the total combined voting power of Parent Corporation's then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes of hereof, the following acquisitions shall not constitute a Change of Control: (A) any acquisition by Parent Corporation, or (B) any acquisition by any 11 employee benefit plan (or related trust) sponsored or maintained by Parent Corporation or any corporation controlled by Parent Corporation; or (3) the sale of the properties and assets of Parent Corporation, substantially as an entirety, to any person or entity which is not a wholly-owned subsidiary of Parent Corporation; or (4) the stockholders of Parent Corporation approve any plan or proposal for the liquidation of Parent Corporation; or (5) a change in the composition of the Board at any time during any consecutive 24 month period such that the "Continuity Directors" cease for any reason to constitute at least a seventy percent (70%) majority of the Board. For purposes of this clause, "Continuity Directors" means those members of the Board who either (A) were directors at the beginning of such consecutive 24 month period, or (B) were elected by, or on the nomination or recommendation of, at least a two-thirds (2/3) majority of the then-existing Board; or (6) such other event or transaction as the Board shall determine constitutes a Change of Control. (c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit (including any transfer of property) in the nature of compensation, to or for the benefit of Executive under this Agreement or any Other Agreement or Benefit Plan, which is considered to be contingent on a Change of Control for purposes of Section 280G of the Code. (d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive, either of the following events occurring within two years after a Change of Control: (1) Termination of Executive's employment by Ceridian for any reason other than (A) fraud, (B) misrepresentation, (C) theft or embezzlement of Ceridian assets, (D) intentional violations of law involving moral turpitude, (E) failure to follow Ceridian's conduct and ethics policies, or (F) continuing failure by Executive to satisfactorily perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such satisfactory performance which specifically identifies the manner in which it is alleged Executive has not satisfactorily performed such duties; or (2) Termination of employment with Ceridian by Executive pursuant to Section 7.02 of this Article VII. 12 A Change of Control Termination by Executive shall not, however, include termination by reason of death or Disability. (e) "CODE" means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code shall include the corresponding section of such Code as from time to time amended. (f) "GOOD REASON" means a good faith determination by Executive, in Executive's sole and absolute judgment, that any one or more of the following events has occurred, without Executive's express written consent, after a Change of Control: (1) A change in Executive's reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control, or any removal of Executive from, or any failure to re-elect Executive to, any of such positions, which has the effect of materially diminishing Executive's responsibility or authority; (2) A reduction by Ceridian in Executive's Base Salary as in effect immediately prior to the Change of Control or as the same may be increased from time to time thereafter; (3) Ceridian requiring Executive to be based anywhere other than within 25 miles of Executive's job location at the time of the Change of Control; (4) Without replacement by plans, programs, or arrangements which, taken as a whole, provide benefits to Executive at least reasonably comparable to those discontinued or adversely affected, (A) the failure by Ceridian to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee compensation or benefit plan, program or arrangement, in which Executive is participating immediately prior to a Change of Control; or (B) the taking of any action by Ceridian that would materially adversely affect Executive's participation or materially reduce Executive's benefits under any of such plans, programs or arrangements; (5) The failure by Ceridian to provide office space, furniture, and secretarial support at least comparable to that provided Executive immediately prior to the Change of Control or the taking of any similar action by Ceridian that would materially adversely affect the working conditions in or under which Executive performs his or her employment duties; 13 (6) If Executive's primary employment duties are with a Subsidiary, the sale, merger, contribution, transfer or any other transaction in conjunction with which Parent Corporation's ownership interest in such Subsidiary decreases below the level specified in Section 1.07 of Article I unless (A) this Agreement is assigned to the purchaser/transferee with the provisions of Article VII in full force and effect and operative as if a Change of Control has occurred with respect to the purchaser/transferee as Parent Corporation immediately after the purchase/transfer becomes effective, and (B) such purchaser/transferee has a creditworthiness reasonably equivalent to Parent Corporation's; or (7) Any material breach of this Agreement by Ceridian. (g) "OTHER AGREEMENTS" means any agreement, contract or understanding heretofore or hereafter entered into between Executive and Ceridian for the direct or indirect provision of compensation to Executive. 7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following a Change of Control that occurred during the term of this Agreement, Executive shall have the right, at any time and within Executive's sole discretion, to terminate employment with Ceridian for Good Reason. Such termination shall be accomplished by, and effective upon, Executive giving written notice to Ceridian of Executive's decision to terminate. Except as otherwise expressly provided in this Agreement, upon the exercise of said right, all obligations and duties of Executive under this Agreement shall be of no further force and effect. 7.03 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall, within five days of such termination, make a lump sum payment to Executive in an amount equal to three times the sum of (a) 12 months of Base Salary at the rate in effect at the time of Executive's termination, (b) the bonus, if any, that Executive would have received under all applicable Ceridian bonus plans for the year in which the termination occurs had "superior" goals been achieved, (c) the annual perquisite cash adder Executive would have received in the year in which the termination occurs, and (d) the highest annual aggregate amount of basic and performance matching contributions made by Ceridian on behalf of Executive into the Ceridian Corporation Savings and Investment Plan (401(k) Plan) over the last three fiscal years prior to termination of Executive. Neither the payments made to Executive pursuant to this Section 7.03 nor any other compensation to be provided to Executive by Ceridian pursuant to this Agreement or any other agreement or Benefit Plan which may be considered Change of Control Compensation shall be subject to any limitation on Change of Control Compensation which may otherwise be expressed in any such agreement or Benefit Plan. 14 7.04 TAX REIMBURSEMENT. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payments or distributions by Ceridian to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any payments required under this Section 7.04) (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7.04(d), all determinations required to be made under this Section 7.04, including whether and when a Gross-Up Payment is required and the amount such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ceridian's external auditors (the "Accounting Firm"), which shall provide detailed supporting calculations both to Ceridian and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by Ceridian. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the "Accounting Firm" hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Ceridian. Any Gross-Up Payment, as determined pursuant to this Section 7.04, shall be paid by Ceridian to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Ceridian and Executive. (c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by Ceridian will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Ceridian exhausts its remedies pursuant to Section 7.04(d) and Executive thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Ceridian to or for the benefit of Executive. 15 (d) Executive shall notify Ceridian in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Ceridian of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive knows of such claim and shall apprise Ceridian of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to Ceridian (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Ceridian notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give Ceridian any information reasonably requested by Ceridian relating to such claim; (ii) take such action in connection with contesting such claim as Ceridian shall reasonably request in writing from time to time, including accepting legal representation with respect to such claim by an attorney reasonably selected by Ceridian; (iii) cooperate with Ceridian in good faith in order to effectively contest such claim; and (iv) permit Ceridian to participate in any proceedings relating to such claim; provided, however, that Ceridian shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.04(d), Ceridian shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Ceridian shall determine; provided further, however, that if Ceridian directs Executive to pay such claim and sue for a refund, Ceridian shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any 16 Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Ceridian's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to Ceridian's complying with the requirements of Section 7.04(d)) promptly pay to Ceridian the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by Ceridian pursuant to Section 7.04(d), a determination is made that Executive shall not be entitled to any refund with respect to such claim and Ceridian does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 7.05 INTEREST. In the event Ceridian does not make timely payment in full of the Change of Control Termination payment described in Section 7.03, Executive shall be entitled to receive interest on any unpaid amount at the lower of: (a) the prime rate of interest (or such comparable index as may be adopted) established from time to time by the Bank of America National Trust and Savings Association, New York, New York or its successor in interest; or (b) the maximum rate permitted under Section 280G(d)(4) of the Internal Revenue Code. 7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to enforce or defend his or her rights under this Article VII of this Agreement, or to recover damages for breach thereof, Executive shall be entitled to recover from Ceridian any expenses for attorneys' fees and disbursements incurred. 7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination, Executive (and anyone entitled to claim under or through Executive) shall, until age 65, be entitled to receive from Ceridian the same or equivalent health, dental, accidental death and dismemberment, short and long-term disability, life insurance coverages, and all other insurance policies and health and welfare benefits programs, policies or arrangements, at the same levels and coverages as Executive was receiving on the day immediately prior to 17 the Change of Control at a cost not to exceed the amount Executive would continue to pay had he/she continued to be an active employee of Ceridian. To the extent that election of continuation of any of such coverages, programs, policies, or arrangements is made available to employees terminating at age 55 with 15 or more years of service, Executive shall be required to pay no more for continuation than is required of such employees on the day immediately prior to the Change of Control. If no such continuation program is available, Executive shall be required to pay no more than he/she paid as an active employee, or if provided by Ceridian at no cost to employees on the day immediately prior to the Change of Control, they shall continue to be made available to Executive on this basis. ARTICLE VIII CHANGE OF SUBSIDIARY STATUS In the event that, prior to a Change of Control: (a) a Subsidiary is sold, merged, contributed, or in any other manner transferred, or if for any reason Parent Corporation's ownership interest in any such Subsidiary falls below the level specified in Section 1.07, (b) Executive's primary employment duties are with the Subsidiary at the time of the occurrence of such event, and (c) Executive does not, in conjunction therewith, transfer employment directly to Parent Corporation or another Subsidiary, then: (1) If Executive gives his or her written consent to the assignment of this Agreement to such Subsidiary, or to the purchaser or new majority interest holder of such Subsidiary, (and such assignment is accepted) this Agreement shall remain in full force and effect between Executive and the assignee, except that the provisions of Article VII of this Agreement shall become null and void; (2) If such assignment is not accepted by the Subsidiary or purchaser, then this Agreement shall be deemed to have been terminated by Ceridian without cause pursuant to Section 4.03 of Article IV; and (3) In all other cases, this Agreement shall be deemed terminated for cause pursuant to Section 4.02 of Article IV. ARTICLE IX GENERAL PROVISIONS 9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure in money the damages which will accrue to either party by reason of a failure to perform any of the obligations under this Agreement and therefore injunctive relief is appropriate. Therefore, if either party shall institute any action or proceeding to enforce the provisions 18 hereof, such party against whom such action or proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall not urge in any such action or proceeding the claim or defense that such party has an adequate remedy at law. 9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII, this Agreement shall be binding upon and inure to the benefit of the successors and assigns of Parent Corporation and each Subsidiary, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition of substantially all of the assets or business of Ceridian, and any such successor or assign shall absolutely and unconditionally assume all of Ceridian's obligations hereunder. 9.03 NOTICES. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be in writing and be delivered or mailed to any such party at its address: (a) Ceridian Corporation 8100 34th Avenue South Minneapolis, Minnesota 55425-1640 Attention: Office of General Counsel (b) In the case of Executive shall be: At the address listed on the last page of this Agreement. Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall be deemed received within the second business day thereafter or when it is actually received, whichever is sooner. 9.04 CAPTIONS. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. 9.05 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota and any and every legal proceeding arising out of or in connection with this Agreement shall be brought in the appropriate courts of the State of Minnesota, each of the parties hereby consenting to the exclusive jurisdiction of said courts for this purpose. The parties hereto expressly recognize and agree that the implementation of this Governing Law provision is essential in light of the fact that Parent Corporation's corporate headquarters and its principal executive offices are located within the State of Minnesota, and there is a critical need for uniformity in the interpretation and enforcement of the employment agreements between Ceridian and its senior executives. 19 9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 9.07 WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 9.08 MODIFICATION. Any changes or amendments to this Agreement must be in writing and signed by both parties. 9.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior employment agreements or understandings of the parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement. IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. EXECUTIVE CERIDIAN CORPORATION /s/Tony G. Holcombe By: /s/Gary M. Nelson Title: Vice President, General Counsel and Secretary Address: - ------------------ - ------------------ 20 AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT This Amendment, dated as of October 20, 1999, amends certain provisions of the Executive Employment Agreement ("Agreement"), dated as of October 1, 1999, between Ceridian Corporation and TONY G. HOLCOMBE ("Executive"). Unless otherwise defined herein, capitalized terms used in this Amendment have the meanings given to them in the Agreement. In consideration of you continuing in your employment with Ceridian for the remaining term of the Agreement, and the mutual promises and obligations contained in the Agreement as modified by this Amendment, Executive and Ceridian agree to amend the Agreement as follows: 1. Section 4.02(f) of the Agreement shall be amended in its entirety to read as follows: "(f) the continued failure by Executive to attempt in good faith to perform his or her duties as reasonably assigned to Executive pursuant to Section 2.02 of Article II of this Agreement for a period of 60 days after a written demand for such performance which specifically identifies the manner in which it is alleged Executive has not attempted in good faith to perform such duties." 2. Section 7.01(d)(1) of the Agreement shall be amended in its entirety to read as follows: "(1) Termination of Executive's employment by Ceridian for any reason other than (A) fraud, (B) misrepresentation, (C) theft or embezzlement of Ceridian assets, (D) intentional violations of law involving moral turpitude, or (E) failure to follow Ceridian's conduct and ethics policies; or" 3. The first sentence of Section 7.04(d) of the Agreement shall be amended in its entirety to read as follows: "Executive shall notify Ceridian in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by Ceridian of any Gross-Up Payment." 4. This Amendment is governed by, and shall be construed in accordance with, the laws of the State of Minnesota. 5. Except as herein expressly amended, the Agreement is ratified and confirmed in all respects and shall remain in full force and effect in accordance with its terms. 6. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Ceridian and Executive have caused this Amendment to be duly executed and delivered, and this Amendment shall be effective, as of the date first written above. Following the effectiveness of this Amendment, each reference in the Agreement to "this Agreement," "hereunder," "herein," "hereof," or words of like import shall mean and be a reference to the Agreement as amended by this Amendment. EXECUTIVE CERIDIAN CORPORATION /s/Tony G. Holcombe By: /s/Gary M. Nelson Title: Vice President, General Counsel and Secretary Address: - ------------------ - ------------------ EX-10.08 7 EX-10.08 EXHIBIT 10.08 NON-QUALIFIED STOCK OPTION AGREEMENT (Time-Based Stock Option) THIS AGREEMENT is entered into and effective as of ____________ (the "Date of Grant"), by and between Ceridian Corporation (the "Company") and __________________________ (the "Optionee"). A. The Company has adopted the Ceridian Corporation 1999 Stock Incentive Plan (as may be amended or supplemented, the "Plan") authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the "Committee"), to grant stock options to employees of the Company and its Subsidiaries (as defined in the Plan). B. The Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of the Company pursuant to the Plan. Accordingly, the parties agree as follows: 1. GRANT OF OPTION. The Company hereby grants to the Optionee the right, privilege and option (the "Option") to purchase shares (the "Option Shares") of the Company's common stock, $0.50 par value (the "Common Stock"), according to the terms and subject to the conditions hereinafter set forth and as set forth in the Plan. The Option granted hereunder shall not be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. OPTION EXERCISE PRICE. The per share price to be paid by Optionee in the event of an exercise of the Option will be $___________. 3. DURATION OF OPTION AND TIME OF EXERCISE. 3.1 INITIAL PERIOD OF EXERCISABILITY. Except as provided in Sections 3.2 and 3.3 hereof, the Option shall become exercisable with respect to one-third of the Option Shares on each of the first, second and third anniversaries of the Date of Grant. The foregoing rights to exercise the Option will be cumulative with respect to the Option Shares becoming exercisable on each such date, but in no event will the Option be exercisable after, and the Option will become void and expire as to all unexercised Option Shares at, 5:00 p.m. (Minneapolis time) on tenth anniversary of the Date of Grant (the "Time of Option Termination"). 3.2 TERMINATION OF EMPLOYMENT. (a) TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event the Optionee's employment with the Company and all Subsidiaries is terminated by reason of death, Disability (as defined in the Plan) or Retirement (as defined in the Plan), the Option will become immediately exercisable in full and remain exercisable until the Time of Option Termination. (b) TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT. In the event that the Optionee's employment with the Company and all Subsidiaries is terminated for any reason other than death, Disability or Retirement, or the Optionee is in the employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Optionee continues in the employ of the Company or another Subsidiary), all rights of the Optionee under the Plan and this Agreement will immediately terminate without notice of any kind, and the Option will no longer be exercisable; provided, however, that, if such termination is due to any reason other than termination by the Company or any Subsidiary for Cause (as defined in Section 9 of this Agreement), the Option will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event after the Time of Option Termination). 3.3 CHANGE IN CONTROL. (a) IMPACT OF CHANGE IN CONTROL. If a Change in Control (as defined in Section 9 of this Agreement) of the Company occurs, and the Option has been outstanding for at least two months, the Option will become immediately exercisable in full and will remain exercisable until the Time of Option Termination, regardless of whether the Optionee remains in the employ of the Company or any Subsidiary. In addition, if a Change in Control of the Company occurs, the Committee, in its sole discretion and without the consent of the Optionee, may determine that the Optionee will receive, with respect to some or all of the Option Shares, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the excess of the Fair Market Value (as defined in the Plan) of such Option Shares immediately prior to the effective date of such Change in Control of the Company over the option exercise price per share of the Option. (b) AUTHORITY TO MODIFY CHANGE OF CONTROL PROVISIONS. Prior to a Change of Control, the Optionee will have no rights under this Section 3.3, and the Committee will have the authority, in its sole discretion, to rescind, modify or amend this Section 3.3 without the consent of the Optionee. 4. MANNER OF OPTION EXERCISE. 4.1 NOTICE. This Option may be exercised by the Optionee in whole or in part from time to time, subject to the conditions contained in the Plan and in this Agreement, by delivery, in person, by facsimile or electronic transmission or through the mail, to the Company at its principal executive office in Minneapolis, Minnesota (Attention: Corporate Treasury), of a written notice of exercise. Such notice must be in a form satisfactory to the Committee, must identify the Option, must specify the number of Option Shares with respect to which the Option is being exercised, and must be signed by the person or persons so exercising the Option. Such notice must be accompanied by payment in full of the total exercise price for the Option Shares to be purchased. In the event that the Option is being exercised, as provided by the Plan and Section 3.2 of this Agreement, by any person or persons other than the Optionee, the notice must be accompanied by appropriate proof of right of such person or persons to exercise the Option. If the Optionee retains the Option Shares purchased, as soon as practicable after the effective exercise of the Option, the Optionee will be recorded on the stock transfer books of the 2 Company as the owner of the Option Shares purchased, and the Company will deliver to the Optionee one or more duly issued stock certificates evidencing such ownership. 4.2 PAYMENT. At the time of exercise of the Option, the Optionee must pay the total exercise price of the Option Shares to be purchased entirely in cash (including a check, bank draft or money order, payable to the order of the Company); provided, however, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payment to be made, in whole or in part, by tender of a full recourse promissory note, a Broker Exercise Notice or Previously Acquired Shares (as such terms are defined in the Plan), or by a combination of such methods. In the event the Optionee is permitted to pay the total purchase price of the Option in whole or in part with Previously Acquired Shares, the value of such shares will be equal to their Fair Market Value on the date of exercise of the Option and delivery of any such Previously Acquired Shares may be made through delivery of a written attestation of ownership if permitted by the Committee. 5. RIGHTS AND RESTRICTIONS OF OPTIONEE; TRANSFERABILITY. 5.1 EMPLOYMENT. Nothing in this Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment of the Optionee at any time, nor confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary at any particular position or rate of pay or for any particular period of time. 5.2 RIGHTS AS A STOCKHOLDER. The Optionee will have no rights as a stockholder unless and until all conditions to the effective exercise of the Option (including, without limitation, the conditions set forth in Sections 4 and 6 of this Agreement) have been satisfied and the Optionee has become the holder of record of such shares. No adjustment will be made for dividends or distributions with respect to the Option Shares as to which there is a record date preceding the date the Optionee becomes the holder of record of such Option Shares, except as may otherwise be provided in the Plan or determined by the Committee in its sole discretion. 5.3 RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of the Optionee in the Option prior to exercise may be assigned or transferred, or subjected to any lien, during the lifetime of the Optionee, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. The Optionee will, however, be entitled to designate a beneficiary to receive the Option upon such Optionee's death in the manner provided by the Plan, and, in the event of the Optionee's death, exercise of the Option (to the extent permitted pursuant to Section 3.2(a) of this Agreement) may be made by the Optionee's designated beneficiary. 5.4 RESTRICTIONS REGARDING EMPLOYMENT. (a) The Optionee agrees that he or she will not take any Adverse Actions (as defined below) against the Company or any Subsidiary at any time during the period that the Option is or may yet become exercisable in whole or in part or at any time before one year following the Optionee's termination of employment with the Company or any Subsidiary, whichever is later (the "Restricted Period"). The Optionee acknowledges that damages which may arise from a breach of this Section 5.4 may be impossible to ascertain or prove with certainty. Notwithstanding anything in this Agreement or the Plan to the contrary, in the event that the Company determines in its sole discretion that the Optionee has taken Adverse Actions against the Company or any Subsidiary at any time during the Restricted Period, in addition to other legal remedies which may be available, (i) the Company will be entitled to an immediate 3 injunction from a court of competent jurisdiction to end such Adverse Action, without further proof of damage, (ii) the Committee will have the authority in its sole discretion to terminate immediately all rights of the Optionee under the Plan and this Agreement without notice of any kind, and (iii) the Committee will have the authority in its sole discretion to rescind the exercise of all or any portion of the Option to the extent that such exercise occurred within six months prior to the date the Optionee first commences any such Adverse Actions and require the Optionee to disgorge any profits (however defined by the Committee) realized by the Optionee relating to such exercised portion of the Option or any Option Shares issued or issuable upon such exercise. Such disgorged profits paid to the Company must be made in cash (including check, bank draft or money order) or, with the Committee's consent, shares of Common Stock with a Fair Market Value on the date of payment equal to the amount of such payment. The Company will be entitled to withhold and deduct from future wages of the Optionee (or from other amounts that may be due and owing to the Optionee from the Company or a Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligation. (b) For purposes of this Agreement, an "Adverse Action" will mean any of the following: (i) engaging in any commercial activity in competition with any part of the business of the Company or any Subsidiary as conducted during the Restricted Period for which the Optionee has or had access to trade secrets and/or confidential information; (ii) diverting or attempting to divert from the Company or any Subsidiary any business of any kind, including, without limitation, interference with any business relationships with suppliers, customers, licensees, licensors, clients or contractors; (iii) making, or causing or attempting to cause any other person or entity to make, any statement, either written or oral, or convey any information about the Company or any Subsidiary that is disparaging or that in any way reflects negatively on the Company or any Subsidiary; or (iv) engaging in any other activity that is hostile, contrary or harmful to the interests of the Company or any Subsidiary, including, without limitation, influencing or advising any person who is employed by or in the service of the Company or any Subsidiary to leave such employment or service to compete with the Company or any Subsidiary or to enter into the employment or service of any actual or prospective competitor of the Company or any Subsidiary, influencing or advising any competitor of the Company or any Subsidiary to employ to otherwise engage the services of any person who is employed by or in the service of the Company or any Subsidiary, or improperly disclosing or otherwise misusing any trade secrets or confidential information regarding the Company or any Subsidiary. (c) Should any provision of this Section 5.4 of the Agreement be held invalid or illegal, such illegality shall not invalidate the whole of this Section 5.4 of the Agreement, but, rather, the Agreement shall be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly. In furtherance of and not in limitation of the foregoing, the Optionee expressly agrees that should the duration of or geographical extent of, or business activities covered by, any provision of this Agreement be in excess of that which is valid or enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities that may validly or enforceably be covered. The Optionee acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement shall be construed in a manner that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. This Section 5.4 of the Agreement does not replace and is in addition to any other agreements the Optionee may have with the Company or any of its Subsidiaries on the matters addressed herein. 4 6. SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other provision of the Plan or this Agreement, the Company will not be required to issue, and the Optionee may not sell, assign, transfer or otherwise dispose of, any Option Shares, unless (a) there is in effect with respect to the Option Shares a registration statement under the Securities Act of 1933, as amended, and any applicable state or foreign securities laws or an exemption from such registration, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing Option Shares, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions. 7. WITHHOLDING TAXES. The Company is entitled to (a) withhold and deduct from future wages of the Optionee (or from other amounts that may be due and owing to the Optionee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the Option, including, without limitation, the grant or exercise of the Option or a disqualifying disposition of any Option Shares, or (b) require the Optionee promptly to remit the amount of such withholding to the Company before acting on the Optionee's notice of exercise of the Option. In the event that the Company is unable to withhold such amounts, for whatever reason, the Optionee agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law. 8. ADJUSTMENTS. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Optionee, will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) subject to, and the exercise price of, the Option. 9. CERTAIN DEFINITIONS. For purposes of this Agreement, the following additional definitions will apply: (a) "Benefit Plan" means any formal or informal plan, program or other arrangement heretofore or hereafter adopted by the Company or any Subsidiary for the direct or indirect provision of compensation to the Optionee (including groups or classes of participants or beneficiaries of which the Optionee is a member), whether or not such compensation is deferred, is in the form of cash or other property or rights, or is in the form of a benefit to or for the Optionee. (b) "Cause" will have the meaning set forth in any employment or other agreement or policy applicable to the Optionee or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, theft, embezzlement or injury or attempted injury, in 5 each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any breach of duty, habitual neglect of duty or unreasonable job performance, or (iv) any material breach of any employment, service, confidentiality or noncompete agreement entered into with the Company or any Subsidiary. (c) "Change of Control" will have the meaning set forth in the Plan plus such other event or transaction as the Board shall determine constitutes a Change of Control, or such other meaning as may be adopted by the Committee from time to time in its sole discretion. 10. SUBJECT TO PLAN. The Option and the Option Shares granted and issued pursuant to this Agreement have been granted and issued under, and are subject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and the Optionee, by execution of this Agreement, acknowledges having received a copy of the Plan. The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail. 11. MISCELLANEOUS. 11.1 BINDING EFFECT. This Agreement will be binding upon the heirs, executors, administrators and successors of the parties to this Agreement. 11.2 GOVERNING LAW. This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Delaware, without regard to conflicts of laws provisions. 11.3 ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire agreement and understanding of the parties to this Agreement with respect to the grant and exercise of the Option and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the grant and exercise of the Option and the administration of the Plan. 11.4 AMENDMENT AND WAIVER. Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled only by a written instrument executed by the parties to this Agreement or, in the case of a waiver, by the party waiving compliance. The parties to this Agreement have executed this Agreement effective the day and year first above written. CERIDIAN CORPORATION By ---------------------------------- Its --------------------------------- 6 By execution of this Agreement, OPTIONEE the Optionee acknowledges having received a copy of the Plan. ------------------------------------------ (Signature) ------------------------------------------ (Name and Address) ------------------------------------------ ------------------------------------------ Social Security Number: ------------------- 7 EX-10.09 8 EX-10.09 EXHIBIT 10.09 NON-QUALIFIED STOCK OPTION AGREEMENT (Performance and Time Based Stock Option) THIS AGREEMENT is entered into and effective as of October 20, 1999 (the "Date of Grant"), by and between Ceridian Corporation (the "Company") and __________________________ (the "Optionee"). A. The Company has adopted the Ceridian Corporation 1999 Stock Incentive Plan (as may be amended or supplemented, the "Plan") authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the "Committee"), to grant stock options to employees of the Company and its Subsidiaries (as defined in the Plan). B. The Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of the Company pursuant to the Plan. Accordingly, the parties agree as follows: 1. GRANT OF OPTION. The Company hereby grants to the Optionee the right, privilege and option (the "Option") to purchase [TOTAL NUMBER] shares (the "Option Shares") of the Company's common stock, $0.50 par value (the "Common Stock"), according to the terms and subject to the conditions hereinafter set forth and as set forth in the Plan. The Option is comprised of two components: [NUMBER] of the Option Shares will become exercisable as provided in Section 3.1(a) of this Agreement and are referred to as "Time-Based Option Shares," and [NUMBER] of the Option Shares will become exercisable as provided in Section 3.1(b) of this Agreement and are referred to as "Performance-Based Option Shares." The Option granted hereunder shall not be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. OPTION EXERCISE PRICE. The per share price to be paid by Optionee in the event of an exercise of the Option will be $19.9375. 3. DURATION OF OPTION AND TIME OF EXERCISE. 3.1 INITIAL PERIOD OF EXERCISABILITY. (a) TIME-BASED OPTION SHARES. Except as provided in Sections 3.2 and 3.3 hereof, the Option shall become exercisable with respect to one-third of the Time Based Option Shares on each of the first, second and third anniversaries of the Date of Grant. (b) PERFORMANCE BASED OPTION SHARES. Except as provided in Sections 3.2 and 3.3 hereof, the Option shall become exercisable with respect to all of the Performance Based Option Shares on February 15, 2002 if: (i) the average closing price of a share of Common Stock as reported on the New York Stock Exchange Composite Tape for any 20 consecutive trading days during the Performance Period is greater than $26.15; (ii) the performance measure set forth above in Section 3.1(b)(i) is not satisfied and the Company's rank for Total Return to Shareholders among S&P 500 Companies during the Performance Period exceeds the 60th percentile; or (iii) October 20, 2005, if neither of the above mentioned performance measures in this Section 3.1(b) are satisfied. (c) The foregoing rights to exercise the Option will be cumulative with respect to the Option Shares becoming exercisable on such dates set forth in this Section 3.1, but in no event will the Option be exercisable after, and the Option will become void and expire as to all unexercised Option Shares at, 5:00 p.m. (Minneapolis time) on tenth anniversary of the Date of Grant (the "Time of Option Termination"). 3.2 TERMINATION OF EMPLOYMENT. (a) TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event the Optionee's employment with the Company and all Subsidiaries is terminated by reason of death, Disability (as defined in the Plan) or Retirement (as defined in the Plan), the Option will become immediately exercisable in full with respect to all of the Time-Based Option Shares, and will become immediately exercisable in full with respect to all of the Performance-Based Option Shares if the stock price performance condition specified in Section 3.1(b)(i) of this Agreement was satisfied prior to the date of such termination. To the extent this Option is already exercisable at the time your employment terminates due to death, Disability or Retirement, or becomes exercisable as provided in this Section 3.2(a), the Option will remain exercisable until the Time of Option Termination. To the extent the stock price performance condition specified in Section 3.1(b)(i) of this Agreement was not satisfied prior to the date of termination by reason of death, Disability or Retirement, the Performance-Based Option Shares shall no longer be exercisable. (b) TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT. In the event that the Optionee's employment with the Company and all Subsidiaries is terminated for any reason other than death, Disability or Retirement, or the Optionee is in the employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Optionee continues in the employ of the Company or another Subsidiary), all rights of the Optionee under the Plan and this Agreement will immediately terminate without notice of any kind, and the Option will no longer be exercisable; provided, however, that, if such termination is due to any reason other than termination by the Company or any Subsidiary for Cause (as defined in Section 9 of this Agreement), the Option will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event after the Time of Option Termination). 3.3 CHANGE IN CONTROL. (a) IMPACT OF CHANGE IN CONTROL. If a Change in Control (as defined in Section 9 of this Agreement) of the Company occurs, and the Option has been outstanding for at least two months, the Option will become immediately exercisable in full and will remain exercisable until the Time of Option Termination, regardless of whether the Optionee remains in the employ of the Company or any Subsidiary, except that such accelerated exercisability shall be available with respect to the Performance-Based Option Shares only if the stock price performance condition specified in Section 3.1(b)(i) of this Agreement was satisfied prior to the date of the 2 Change of Control. In addition, if a Change in Control of the Company occurs, the Committee, in its sole discretion and without the consent of the Optionee, may determine that the Optionee will receive, with respect to some or all of the Option Shares, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the excess of the Fair Market Value (as defined in the Plan) of such Option Shares immediately prior to the effective date of such Change in Control of the Company over the option exercise price per share of the Option. (b) AUTHORITY TO MODIFY CHANGE OF CONTROL PROVISIONS. Prior to a Change of Control, the Optionee will have no rights under this Section 3.3, and the Committee will have the authority, in its sole discretion, to rescind, modify or amend this Section 3.3 without the consent of the Optionee. 4. MANNER OF OPTION EXERCISE. 4.1 NOTICE. This Option may be exercised by the Optionee in whole or in part from time to time, subject to the conditions contained in the Plan and in this Agreement, by delivery, in person, by facsimile or electronic transmission or through the mail, to the Company at its principal executive office in Minneapolis, Minnesota (Attention: Corporate Treasury), of a written notice of exercise. Such notice must be in a form satisfactory to the Committee, must identify the Option, must specify the number of Option Shares with respect to which the Option is being exercised, and must be signed by the person or persons so exercising the Option. Such notice must be accompanied by payment in full of the total exercise price for the Option Shares to be purchased. In the event that the Option is being exercised, as provided by the Plan and Section 3.2 of this Agreement, by any person or persons other than the Optionee, the notice must be accompanied by appropriate proof of right of such person or persons to exercise the Option. If the Optionee retains the Option Shares purchased, as soon as practicable after the effective exercise of the Option, the Optionee will be recorded on the stock transfer books of the Company as the owner of the Option Shares purchased, and the Company will deliver to the Optionee one or more duly issued stock certificates evidencing such ownership. 4.2 PAYMENT. At the time of exercise of the Option, the Optionee must pay the total exercise price of the Option Shares to be purchased entirely in cash (including a check, bank draft or money order, payable to the order of the Company); provided, however, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payment to be made, in whole or in part, by tender of a full recourse promissory note, a Broker Exercise Notice or Previously Acquired Shares (as such terms are defined in the Plan), or by a combination of such methods. In the event the Optionee is permitted to pay the total purchase price of the Option in whole or in part with Previously Acquired Shares, the value of such shares will be equal to their Fair Market Value on the date of exercise of the Option and delivery of any such Previously Acquired Shares may be made through delivery of a written attestation of ownership if permitted by the Committee. 5. RIGHTS AND RESTRICTIONS OF OPTIONEE; TRANSFERABILITY. 5.1 EMPLOYMENT. Nothing in this Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment of the Optionee at any time, nor confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary at any particular position or rate of pay or for any particular period of time. 5.2 RIGHTS AS A STOCKHOLDER. The Optionee will have no rights as a stockholder unless and until all conditions to the effective exercise of the Option (including, without limitation, the conditions set forth in Sections 4 and 6 of this Agreement) have been satisfied and the Optionee has become the 3 holder of record of such shares. No adjustment will be made for dividends or distributions with respect to the Option Shares as to which there is a record date preceding the date the Optionee becomes the holder of record of such Option Shares, except as may otherwise be provided in the Plan or determined by the Committee in its sole discretion. 5.3 RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of the Optionee in the Option prior to exercise may be assigned or transferred, or subjected to any lien, during the lifetime of the Optionee, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. The Optionee will, however, be entitled to designate a beneficiary to receive the Option upon such Optionee's death in the manner provided by the Plan, and, in the event of the Optionee's death, exercise of the Option (to the extent permitted pursuant to Section 3.2(a) of this Agreement) may be made by the Optionee's designated beneficiary. 5.4 RESTRICTIONS REGARDING EMPLOYMENT. (a) The Optionee agrees that he or she will not take any Adverse Actions (as defined below) against the Company or any Subsidiary at any time during the period that the Option is or may yet become exercisable in whole or in part or at any time before one year following the Optionee's termination of employment with the Company or any Subsidiary, whichever is later (the "Restricted Period"). The Optionee acknowledges that damages which may arise from a breach of this Section 5.4 may be impossible to ascertain or prove with certainty. Notwithstanding anything in this Agreement or the Plan to the contrary, in the event that the Company determines in its sole discretion that the Optionee has taken Adverse Actions against the Company or any Subsidiary at any time during the Restricted Period, in addition to other legal remedies which may be available, (i) the Company will be entitled to an immediate injunction from a court of competent jurisdiction to end such Adverse Action, without further proof of damage, (ii) the Committee will have the authority in its sole discretion to terminate immediately all rights of the Optionee under the Plan and this Agreement without notice of any kind, and (iii) the Committee will have the authority in its sole discretion to rescind the exercise of all or any portion of the Option to the extent that such exercise occurred within six months prior to the date the Optionee first commences any such Adverse Actions and require the Optionee to disgorge any profits (however defined by the Committee) realized by the Optionee relating to such exercised portion of the Option or any Option Shares issued or issuable upon such exercise. Such disgorged profits paid to the Company must be made in cash (including check, bank draft or money order) or, with the Committee's consent, shares of Common Stock with a Fair Market Value on the date of payment equal to the amount of such payment. The Company will be entitled to withhold and deduct from future wages of the Optionee (or from other amounts that may be due and owing to the Optionee from the Company or a Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligation. (b) For purposes of this Agreement, an "Adverse Action" will mean any of the following: (i) engaging in any commercial activity in competition with any part of the business of the Company or any Subsidiary as conducted during the Restricted Period for which the Optionee has or had access to trade secrets and/or confidential information; (ii) diverting or attempting to divert from the Company or any Subsidiary any business of any kind, including, without limitation, interference with any business relationships with suppliers, customers, licensees, licensors, clients or contractors; (iii) making, or causing or attempting to cause any other person or entity to make, any statement, either written or oral, or convey any information 4 about the Company or any Subsidiary that is disparaging or that in any way reflects negatively on the Company or any Subsidiary; or (iv) engaging in any other activity that is hostile, contrary or harmful to the interests of the Company or any Subsidiary, including, without limitation, influencing or advising any person who is employed by or in the service of the Company or any Subsidiary to leave such employment or service to compete with the Company or any Subsidiary or to enter into the employment or service of any actual or prospective competitor of the Company or any Subsidiary, influencing or advising any competitor of the Company or any Subsidiary to employ to otherwise engage the services of any person who is employed by or in the service of the Company or any Subsidiary, or improperly disclosing or otherwise misusing any trade secrets or confidential information regarding the Company or any Subsidiary. (c) Should any provision of this Section 5.4 of the Agreement be held invalid or illegal, such illegality shall not invalidate the whole of this Section 5.4 of the Agreement, but, rather, the Agreement shall be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly. In furtherance of and not in limitation of the foregoing, the Optionee expressly agrees that should the duration of or geographical extent of, or business activities covered by, any provision of this Agreement be in excess of that which is valid or enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities that may validly or enforceably be covered. The Optionee acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement shall be construed in a manner that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. This Section 5.4 of the Agreement does not replace and is in addition to any other agreements the Optionee may have with the Company or any of its Subsidiaries on the matters addressed herein. 6. SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other provision of the Plan or this Agreement, the Company will not be required to issue, and the Optionee may not sell, assign, transfer or otherwise dispose of, any Option Shares, unless (a) there is in effect with respect to the Option Shares a registration statement under the Securities Act of 1933, as amended, and any applicable state or foreign securities laws or an exemption from such registration, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing Option Shares, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions. 7. WITHHOLDING TAXES. The Company is entitled to (a) withhold and deduct from future wages of the Optionee (or from other amounts that may be due and owing to the Optionee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the Option, including, without limitation, the grant or exercise of the Option or a disqualifying disposition of any Option Shares, or (b) require the Optionee promptly to remit the amount of such withholding to the Company before acting on the Optionee's notice of exercise of the Option. In the event that the Company is unable to withhold such amounts, for whatever reason, the Optionee agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law. 5 8. ADJUSTMENTS. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Optionee, will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) subject to, and the exercise price of, the Option. 9. CERTAIN DEFINITIONS. For purposes of this Agreement, the following additional definitions will apply: (a) "Benefit Plan" means any formal or informal plan, program or other arrangement heretofore or hereafter adopted by the Company or any Subsidiary for the direct or indirect provision of compensation to the Optionee (including groups or classes of participants or beneficiaries of which the Optionee is a member), whether or not such compensation is deferred, is in the form of cash or other property or rights, or is in the form of a benefit to or for the Optionee. (b) "Cause" will have the meaning set forth in any employment or other agreement or policy applicable to the Optionee or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, theft, embezzlement or injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any breach of duty, habitual neglect of duty or unreasonable job performance, or (iv) any material breach of any employment, service, confidentiality or noncompete agreement entered into with the Company or any Subsidiary. (c) "Change of Control" will have the meaning set forth in the Plan plus such other event or transaction as the Board shall determine constitutes a Change of Control or such other meaning as may be adopted by the Committee from time to time in its sole discretion. (d) "Ending Price" means, with respect to any S&P 500 Company (including the Company), the average daily last reported sales price of a share of such company's common stock as reported in the WALL STREET JOURNAL during the period January 1, 2002 through January 31, 2002. (e) "Fair Market Value" (i) with respect to the Company has the same meaning as specified in Section 2.10 of the Plan, and (ii) with respect to any other S&P 500 Company means the last reported sales price of a share of such company's common stock on the date in question as reported in the WALL STREET JOURNAL. (f) "Performance Period" means the period October 20, 1999 through January 31, 2002. (g) "S&P 500 Companies" means the companies that comprise the Standard & Poors' 500 Stock Index as it existed on October 20, 1999, and which are still publicly traded on January 31, 2002. 6 (h) "Starting Price" means, with respect to any S&P 500 Company (including the Company), the average daily last reported sales price of a share of such company's common stock as reported in the WALL STREET JOURNAL during the period October 1, 1999 through October 20, 1999. (i) "Total Return to Shareholders" means, with respect to the Company or any other S&P 500 Company, the total return to a holder of the common stock of such company as a result of his or her ownership of such common stock during the Performance Period, such total return (i) to be expressed as a percentage of an assumed initial investment in such common stock on October 20, 1999 and (ii) to include both the appreciation in the per share price of such common stock during the Performance Period and the per share Fair Market Value of all dividends and distributions paid or distributed by such company with respect to such common stock during the Performance Period, assuming that all such dividends and distributions are reinvested in shares of such common stock at their Fair Market Value on the last trading day of the month in which the dividend or distribution is paid or distributed. For purposes of calculating Total Return to Shareholders for the Company or any other S&P 500 Company, the assumed initial investment in such company's common stock on October 20, 1999 shall be at the applicable Starting Price, and the value of a share of such company's common stock at the end of the Performance Period shall be the applicable Ending Price. 10. SUBJECT TO PLAN. The Option and the Option Shares granted and issued pursuant to this Agreement have been granted and issued under, and are subject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and the Optionee, by execution of this Agreement, acknowledges having received a copy of the Plan. The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail. 11. MISCELLANEOUS. 11.1 BINDING EFFECT. This Agreement will be binding upon the heirs, executors, administrators and successors of the parties to this Agreement. 11.2 GOVERNING LAW. This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Delaware, without regard to conflicts of laws provisions. 11.3 ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire agreement and understanding of the parties to this Agreement with respect to the grant and exercise of the Option and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the grant and exercise of the Option and the administration of the Plan. 11.4 AMENDMENT AND WAIVER. Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled only by a written instrument executed by the parties to this Agreement or, in the case of a waiver, by the party waiving compliance. 7 The parties to this Agreement have executed this Agreement effective the day and year first above written. CERIDIAN CORPORATION By -------------------------------------- Its ----------------------------------- By execution of this Agreement, OPTIONEE the Optionee acknowledges having received a copy of the Plan. ---------------------------------------- (Signature) ---------------------------------------- (Name and Address) ---------------------------------------- ---------------------------------------- Social Security Number: ----------------- Version: 11-12-1999 8 EX-12.01 9 EX-12.01 Exhibit 12.01 CERIDIAN CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

1999 1998 1997 1996 1995 (DOLLARS IN MILLIONS) Earnings before income taxes and other items (1) $ 238.4 $ 229.7 $ (77.1) $ 196.2 $ 116.2 Less undistributed earnings and non-guaranteed losses from less than 50% owned affiliates included above - - - - - ------------------------------------------------------------- Total earnings before income taxes and other items 238.4 229.7 (77.1) 196.2 116.2 Add: Interest expense 24.7 4.3 12.1 10.6 30.6 Interest portion of rentals (2) 13.8 12.1 14.0 13.8 14.0 ------------------------------------------------------------- Adjusted earnings before income taxes and other items $ 276.9 $ 246.1 $ (51.0) $ 220.6 $ 160.8 ------------------------------------------------------------- ------------------------------------------------------------- Interest expense $ 24.7 $ 4.3 $ 12.1 $ 10.6 $ 30.6 Interest capitalized 1.7 - - - - Interest portion of rentals (2) 13.8 12.1 14.0 13.8 14.0 ------------------------------------------------------------- Total fixed charges $ 40.2 $ 16.4 $ 26.1 $ 24.4 $ 44.6 ------------------------------------------------------------- ------------------------------------------------------------- Ratio of earnings to fixed charges 6.89x 15.01x 9.04x 3.61x Deficiency $ (77.1)

(1) Results include continuing and discontinued operations. (2) Interest component assumed to be one-third of rental expense. EX-13.01 10 EX-13.01 Exhibit 13.01

SELECTED FIVE-YEAR DATA (Dollars in millions, except per share data) - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------------- REVENUE $1,342.3 $1,162.1 $1,074.8 $ 942.6 $ 823.5 - --------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations (1) $ 148.9 $ 164.4 $ 35.4 $ 135.5 $ 59.2 Gain and earnings from discontinued operations (2) -- 25.4 437.0 46.4 38.3 Extraordinary loss (3) -- -- -- -- (38.9) ------------ ------------ ------------- ------------ ------------- Net earnings $ 148.9 $ 189.8 $ 472.4 $ 181.9 $ 58.6 ------------ ------------ ------------- ------------ ------------- ------------ ------------ ------------- ------------ ------------- - --------------------------------------------------------------------------------------------------------------------------------- EARNINGS PER COMMON SHARE (4) BASIC Continuing operations $ 1.03 $ 1.14 $ 0.23 $ 0.90 $ 0.35 Net earnings $ 1.03 $ 1.32 $ 3.01 $ 1.24 $ 0.34 DILUTED Continuing operations $ 1.01 $ 1.11 $ 0.22 $ 0.84 $ 0.37 Net earnings $ 1.01 $ 1.29 $ 2.96 $ 1.12 $ 0.37 SHARES USED IN CALCULATIONS (IN THOUSANDS) Basic 144,524 144,070 156,835 135,841 132,269 Diluted 147,964 147,597 159,481 161,938 159,473 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA Total assets $2,059.9 $1,289.7 $1,243.3 $1,016.6 $ 905.6 Debt obligations $ 611.3 $ 54.5 $ 3.0 $ 138.2 $ 201.5 Stockholders' equity $ 842.7 $ 650.6 $ 588.3 $ 346.3 $ 150.0 - --------------------------------------------------------------------------------------------------------------------------------- EQUITY (DEFICIT) PER COMMON SHARE (5) $ 5.82 $ 4.53 $ 3.98 $ 2.17 $ (0.64) Common shares outstanding at end of year (in thousands) 144,734 143,514 147,884 159,537 134,555 - --------------------------------------------------------------------------------------------------------------------------------- NUMBER OF EMPLOYEES AT END OF YEAR 10,900 9,600 8,000 7,700 7,100 - ---------------------------------------------------------------------------------------------------------------------------------

(1) Includes 1998 unusual gains of $24.3; 1997 FAS 109 income tax benefit of $175.0; 1997 unusual losses of $307.6, as described in Notes B and D; and 1995 pooling expenses of $29.7. (2) Includes gain from the December 1997 sale of Computing Devices International and earnings from its operations prior to the sale as described in Note B. (3) Relates to the early retirement of debt. (4) All share and per share amounts reflect a 2-for-1 stock split in the form of a 100% stock dividend announced on January 20, 1999 and effective for holders of record on February 10, 1999. For further information on the calculation of earnings per share, see Note A. (5) At December 31, 1995, computed by reducing stockholders' equity by the liquidation value of outstanding preferred stock of $236.0 and dividing by the number of outstanding common shares. Assuming that the outstanding convertible preferred stock was converted to common stock, the equity per common share would have been $0.97 at December 31, 1995. THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE STATEMENTS REGARDING CERIDIAN CORPORATION CONTAINED IN THIS REPORT THAT ARE NOT HISTORICAL IN NATURE, PARTICULARLY THOSE THAT UTILIZE TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "LIKELY," "EXPECTS," "ANTICIPATES," "ESTIMATES," "BELIEVES," OR "PLANS," OR COMPARABLE TERMINOLOGY, ARE FORWARD-LOOKING STATEMENTS BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS, AND ENTAIL VARIOUS RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS KNOWN TO CERIDIAN THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE IDENTIFIED AND DISCUSSED IN THE MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SECTION OF THIS ANNUAL REPORT UNDER THE CAPTION "CAUTIONARY FACTORS THAT COULD AFFECT FUTURE RESULTS." Inside Front Cover of the Ceridian Annual Report EX-13.02 11 EX-13.02 EXHIBIT 13.02 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS

- ------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Years ended December 31, - ------------------------------------------------------------------------------------------------------------- 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Revenue $1,342.3 $1,162.1 $1,074.8 - ------------------------------------------------------------------------------------------------------------- Net earnings $ 148.9 $ 189.8 $ 472.4 - ------------------------------------------------------------------------------------------------------------- Earnings from continuing operations $ 148.9 $ 164.4 $ 35.4 - ------------------------------------------------------------------------------------------------------------- Pro forma net earnings $ 148.9 $ 140.1 $ 123.9 - ------------------------------------------------------------------------------------------------------------- Diluted shares used in calculations (in thousands) 147,964 147,597 159,481 - ------------------------------------------------------------------------------------------------------------- Net earnings per diluted share $ 1.01 $ 1.29 $ 2.96 - ------------------------------------------------------------------------------------------------------------- Earnings from continuing operations per diluted share $ 1.01 $ 1.11 $ 0.22 - ------------------------------------------------------------------------------------------------------------- Pro forma diluted earnings per share $ 1.01 $ 0.95 $ 0.78 - ------------------------------------------------------------------------------------------------------------- Pro forma cash earnings per share $ 1.23 $ 1.06 $ 0.88 - -------------------------------------------------------------------------------------------------------------

All share and per share figures reflect a stock split announced on January 20, 1999 for holders of record on February 10, 1999 and distributed in the form of a 100% stock dividend on February 26, 1999. Net earnings include earnings from discontinued operations of $25.4 million, or $.18 per diluted share in 1998 and $437.0 million, or $2.74 per diluted share in 1997, representing the gain from the sale and results of operations of Computing Devices International ("CDI"), which was sold on December 31, 1997. The comparison of Ceridian's earnings from continuing operations is significantly affected by a number of unusual events. In 1998, Ceridian recognized unusual gains of $24.3 million in the fourth quarter consisting of a tax benefit of $18.5 million related to the difference between the tax and financial reporting basis in a subsidiary sold in that quarter and a gain of $5.8 million ($9.2 million before tax) primarily from the sale of land not used in the business. In 1997, Ceridian recognized a $175.0 million tax benefit from Ceridian's fourth quarter recognition under FAS 109 of the future tax benefits of its net operating loss carryforwards and future tax deductions. Also in 1997, Ceridian incurred unusual charges of $144.6 million in the fourth quarter, primarily as a result of asset write-offs; $150.0 million in the third quarter, due to the termination of a payroll software development project; and $13.0 million in the first quarter, due to settlement of certain litigation. These unusual gains and losses are further described in Note B, SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS, and Note D, INCOME TAXES, to the consolidated financial statements. In an effort to facilitate comparisons between earnings from continuing operations, Ceridian has utilized certain pro forma adjustments to calculate revised earnings figures for its continuing operations for 1998 and 1997. The most significant of these pro forma adjustments include (i) eliminating the 1998 and 1997 unusual events described above, (ii) tax effecting 1997 pre-tax earnings at an assumed rate of 37% and (iii) assuming that CDI was sold at the beginning of 1997 for net proceeds approximately equal to the difference between CDI's revenue for that year and the approximately $100 million of CDI cash in Canada, and that those net proceeds were invested at 5.5% per annum. In the calculation of cash earnings per share, cash earnings are determined by adding back to net earnings the amount of amortization expense for the period, net of income taxes, that relates to values assigned to goodwill and other intangibles arising from the acquisition of businesses. Then cash earnings are divided by diluted shares outstanding for that period. Ceridian refers to cash earnings per share because some commentators have suggested that investors may find such a measurement useful in assessing operating performance, particularly for services companies that utilize the purchase method of recording acquisitions. Cash earnings per share does not represent a measure of cash flow from operations, as defined by generally accepted accounting principles. Cash earnings per share should not be considered a substitute either for earnings per share as an indicator of Ceridian's operating performance or for cash flow as a measure of Ceridian's liquidity. Ceridian's determination and presentation of cash earnings per share may not be comparable to similarly titled measures reported by other companies. [END OF PAGE 8 OF THE CERIDIAN ANNUAL REPORT] 1999 COMPARED TO 1998

- --------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS COMPARISONS ON A PRO FORMA BASIS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) - --------------------------------------------------------------------------------------------------------- Amount Inc (Dec) % of Revenue - --------------------------------------------------------------------------------------------------------- 1999 1998 $ % 1999 1998 - --------------------------------------------------------------------------------------------------------- Revenue $1,342.3 $1,162.1 180.2 15.5 100.0 100.0 - --------------------------------------------------------------------------------------------------------- Cost of revenue 630.5 551.5 79.0 14.3 47.0 47.5 - --------------------------------------------------------------------------------------------------------- SG&A expense 379.6 316.0 63.6 20.2 28.3 27.2 - --------------------------------------------------------------------------------------------------------- R&D expense 74.4 77.8 (3.4) (4.5) 5.5 6.7 - --------------------------------------------------------------------------------------------------------- Other expense (income) 1.1 2.4 (1.3) NC 0.1 0.2 - --------------------------------------------------------------------------------------------------------- Total costs 1,085.6 947.7 137.9 14.6 80.9 81.5 - --------------------------------------------------------------------------------------------------------- EBIT 256.7 214.4 42.3 19.7 19.1 18.5 - --------------------------------------------------------------------------------------------------------- Interest income (expense), net (18.3) 6.1 (24.4) NC (1.4) 0.5 - --------------------------------------------------------------------------------------------------------- Income taxes 89.5 80.4 9.1 11.2 6.7 6.9 - --------------------------------------------------------------------------------------------------------- Net earnings $ 148.9 $ 140.1 8.8 6.3 11.1 12.1 - --------------------------------------------------------------------------------------------------------- Diluted EPS $ 1.01 $ 0.95 0.06 6.3 - --------------------------------------------------------------------------------------------------------- Cash EPS $ 1.23 $ 1.06 0.17 16.0 - ---------------------------------------------------------------------------------------------------------

Net earnings for 1999 were $148.9 million, or $1.01 per diluted share, on revenue of $1,342.3 million. Cash earnings per share during 1999 were $1.23. 1998 pro forma earnings were $140.1 million, or $ .95 per diluted share, on revenue of $1,162.1 million and 1998 pro forma cash earnings per share were $1.06. On January 25, 2000, Ceridian announced that it will be taking certain actions to improve customer service and the quality of operations in the U.S. payroll business. As a result of some of these actions, Ceridian expects to take $35 million to $50 million of special charges during the first quarter of 2000. Earnings per share in 2000, without regard to these charges, are expected be flat to modestly up as compared to 1999, a year in which Ceridian reported net earnings of $148.9 million, or $1.01 per diluted share. These results include the acquisition of ABR Information Services, Inc. ("ABR"), now known as Ceridian Benefits Services, which was dilutive to earnings since June 1999. Further information about this acquisition appears below and in the accompanying notes to the consolidated financial statements, particularly Note J, INVESTING ACTIVITY. CONSOLIDATED RESULTS Each of Ceridian's business segments reported increased revenue and earnings before interest and taxes ("EBIT"). Revenue growth from acquisitions more than offset the effect of business dispositions, and the net revenue growth from these activities contributed about two-thirds of the total revenue increase. Lower than expected customer retention in the U.S. payroll and certain other human resources businesses and lower yields on tax filing balances adversely affected the revenue comparison. Costs directly related to revenue increased somewhat less than revenue, largely as a result of the integration of acquired businesses into existing operations. Selling, general and administrative expense ("SG&A") increased, due principally to the acquisitions of ABR in June 1999 and LifeWorks (the work-life services business of Work/Family Directions, Inc.) in November 1998. Research and development ("R&D") decreased in total and as a percentage of revenue as a result of the disposition of Resumix in August 1998 and declining expenditures on Year 2000 remediation of Ceridian's internal systems beginning in the third quarter of 1999. Interest income fell from $10.4 million to $6.4 million as a result of lower cash balances. Interest expense increased from $4.3 million to $24.7 million as a result of the debt incurred for the ABR acquisition in June 1999. Including the pro forma adjustments to 1998 results described above, the effective rate for the income tax provision increased from 36.5% to 37.5%, due to the non-deductibility of goodwill arising from the ABR acquisition. [END OF PAGE 9 OF THE CERIDIAN ANNUAL REPORT] BUSINESS SEGMENT RESULTS

- --------------------------------------------------------------------------------------------- SEGMENT COMPARISONS ON A PRO FORMA BASIS (DOLLARS IN MILLIONS) - --------------------------------------------------------------------------------------------- Amount Inc (Dec) % of Revenue - --------------------------------------------------------------------------------------------- 1999 1998 $ % 1999 1998 - --------------------------------------------------------------------------------------------- REVENUE - --------------------------------------------------------------------------------------------- HRS $ 828.0 $ 700.3 127.7 18.2 61.7 60.3 - --------------------------------------------------------------------------------------------- Comdata 298.9 267.3 31.6 11.8 22.3 23.0 - --------------------------------------------------------------------------------------------- Arbitron 215.4 194.5 20.9 10.7 16.0 16.7 - --------------------------------------------------------------------------------------------- Total $1,342.3 $1,162.1 180.2 15.5 100.0 100.0 - --------------------------------------------------------------------------------------------- EBIT - --------------------------------------------------------------------------------------------- HRS $ 113.2 $ 100.6 12.6 12.6 13.7 14.4 - --------------------------------------------------------------------------------------------- Comdata 72.2 52.4 19.8 37.7 24.2 19.6 - --------------------------------------------------------------------------------------------- Arbitron 71.3 61.4 9.9 16.0 33.1 31.6 - --------------------------------------------------------------------------------------------- Total $ 256.7 $ 214.4 42.3 19.7 19.1 18.5 - ---------------------------------------------------------------------------------------------

HUMAN RESOURCE SERVICES ("HRS") The revenue contributions of businesses acquired during 1999 and 1998, notably the LifeWorks work-life services business in November 1998 and ABR in June 1999, more than offset the revenue loss from the dispositions of Resumix in August 1998 and Tesseract at the end of 1998. These acquisitions and the acquisitions of two Canadian payroll businesses during the first quarter of 1998, net of the dispositions, contributed about two-thirds of the revenue increase. The increase in revenue was adversely affected by the decisions of certain large customers to delay payroll system installations as a result of the Year 2000 event. Lower yields on tax filing balances and lower than expected customer retention in the U.S. payroll and certain other human resources businesses, along with the effect of exchange rate changes on the Canadian dollar, adversely affected revenue growth. Increases in sales of software, payroll services, consulting services and employee assistance programs contributed to the revenue increase as did price increases in payroll services early in 1999 and 1998. In consideration of its customer retention goals for 2000, Ceridian expects to forego any across-the-board U.S. payroll services price increase in 2000. Costs and expenses increased largely due to acquisitions, Year 2000 efforts to remediate customers' software (net of recoveries), and training and implementation efforts associated with the Source 500 product and new internal operating systems. COMDATA Revenue increased primarily as a result of the acquisition of a majority interest in Stored Value Systems, Inc. ("SVS") in the first quarter of 1999, increased sales of product and software upgrades and growth in the fleet services (local fueling) business. The impact of the acquisition of SVS was particularly significant in the fourth quarter of 1999, due to the seasonal nature of retail debit card sales. The sale of a telephone debit card business in the second quarter of 1999 and the disposition of the gaming services business in January 1998 reduced 1999 revenue in comparison to 1998. The integration of NTS accounts into the Comdata transaction processing system reduced costs and expenses through elimination of redundant processes. Selling costs decreased in both comparisons primarily due to the conclusion early in the third quarter of 1998 of a customer acquisition program for the fleet services business. Increased Year 2000 costs and increases in provisions for fleet services bad debts reduced the benefit of these cost reductions. ARBITRON The revenue comparison benefited from the acquisition of Tapscan in May 1998. Without regard to the Tapscan acquisition, revenue increased due largely to price escalators in multi-year customer contracts, increased software product and report sales, and an increased number of ratings subscribers. Cost synergies with Tapscan improved gross margin performance while other costs remained consistent with or below the level of revenue growth. [END OF PAGE 10 OF THE CERIDIAN ANNUAL REPORT] 1998 COMPARED TO 1997 CONSOLIDATED RESULTS

- --------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS COMPARISONS ON A PRO FORMA BASIS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Amount Inc (Dec) % of Revenue - --------------------------------------------------------------------------------------------------------- 1998 1997 $ % 1998 1997 - --------------------------------------------------------------------------------------------------------- Revenue $1,162.1 $1,074.8 87.3 8.1 100.0 100.0 - --------------------------------------------------------------------------------------------------------- Cost of revenue 551.5 527.6 23.9 4.5 47.5 49.1 - --------------------------------------------------------------------------------------------------------- SG&A expense 316.0 307.9 8.1 2.6 27.2 28.7 - --------------------------------------------------------------------------------------------------------- R&D expense 77.8 59.6 18.2 30.5 6.7 5.5 - --------------------------------------------------------------------------------------------------------- Other expense (income) 2.4 1.7 0.7 NC 0.2 0.2 - --------------------------------------------------------------------------------------------------------- Total costs 947.7 896.8 50.9 5.7 81.5 83.4 - --------------------------------------------------------------------------------------------------------- EBIT 214.4 178.0 36.4 20.5 18.5 16.6 - --------------------------------------------------------------------------------------------------------- Interest income (expense), net 6.1 18.6 (12.5) NC 0.5 1.7 - --------------------------------------------------------------------------------------------------------- Income taxes 80.4 72.7 7.7 10.6 6.9 6.8 - --------------------------------------------------------------------------------------------------------- Net earnings $ 140.1 $ 123.9 16.2 13.1 12.1 11.5 - --------------------------------------------------------------------------------------------------------- Diluted EPS $ 0.95 $ 0.78 0.17 21.8 - ---------------------------------------------------------------------------------------------------------

BUSINESS SEGMENT RESULTS

- --------------------------------------------------------------------------------------------- SEGMENT COMPARISONS ON A PRO FORMA BASIS (DOLLARS IN MILLIONS) - --------------------------------------------------------------------------------------------- Amount Inc (Dec) % of Revenue - --------------------------------------------------------------------------------------------- 1998 1997 $ % 1998 1997 - --------------------------------------------------------------------------------------------- REVENUE - --------------------------------------------------------------------------------------------- HRS $ 700.3 $ 578.6 121.7 21.0 60.3 53.8 - --------------------------------------------------------------------------------------------- Comdata 267.3 331.0 (63.7) (19.3) 23.0 30.8 - --------------------------------------------------------------------------------------------- Arbitron 194.5 165.2 29.3 17.8 16.7 15.4 - --------------------------------------------------------------------------------------------- Total $1,162.1 $1,074.8 87.3 8.1 100.0 100.0 - --------------------------------------------------------------------------------------------- EBIT - --------------------------------------------------------------------------------------------- HRS $ 100.6 $ 68.1 32.5 47.7 14.4 11.8 - --------------------------------------------------------------------------------------------- Comdata 52.4 57.2 (4.8) (8.3) 19.6 17.3 - --------------------------------------------------------------------------------------------- Arbitron 61.4 52.7 8.7 16.5 31.6 31.9 - --------------------------------------------------------------------------------------------- Total $ 214.4 $ 178.0 36.4 20.5 18.5 16.6 - ---------------------------------------------------------------------------------------------

HUMAN RESOURCE SERVICES HRS revenue grew by 21.0%, which, after adjustment for the net effect of acquisitions and dispositions, represented internal revenue growth of 12.3%. The most significant acquisitions were the first quarter 1998 purchases of two payroll processing businesses in Canada and the fourth quarter 1998 purchase of the global work-life services business from Work/Family Directions, Inc. The most significant disposition was the sale of Resumix, Inc. in the third quarter of 1998. Details on these and other investing transactions are presented in the accompanying Note J, INVESTING ACTIVITY, to the consolidated financial statements. The internal revenue growth largely reflected a revised pricing structure for payroll services, employment growth experienced by Ceridian's payroll and tax filing customers, the sale of add-on services to existing customers and growth of employee assistance services. Revenue growth was restrained somewhat by implementation on January 1, 1998 of IRS electronic funds transfer regulations that reduced by one day the period of time certain tax filing deposits may be held. As a result, the average balance of collected but unremitted payroll tax funds in the U.S. was down 4.1% from the 1997 level. After eliminating the 1997 and partial year 1998 results of Resumix, the improvement in the relationship of cost of revenue and revenue in HRS largely reflected the revenue growth attributable to a revised pricing structure for payroll services, cost reductions and productivity initiatives in the payroll business and generally increased economies of scale. The HRS improvement in general and administrative expenses was largely due to staff reductions. HRS R&D expenses increased as a percent of revenue reflecting development efforts directed toward new applications, enhancements to existing applications, quality assurance programs and a portion of the costs for Year 2000 readiness. Unusual losses of $223.5 million in 1997, related to the termination of a payroll software development project and other asset write-offs and reported as "Other expense (income)," are not included in the tables above. [END OF PAGE 11 OF THE CERIDIAN ANNUAL REPORT] COMDATA The January 1998 exchange of Comdata's gaming services business for the NTS transportation services business and cash significantly affected the amount and the mix of Comdata's revenues. Overall, Comdata revenue declined by 19.3%, reflecting the $127.4 million decline in gaming revenues from 1997 to 1998. Transportation services revenues increased by 32.2%, primarily reflecting the increased transportation revenues from the NTS acquisition and internal growth. Major factors contributing to internal growth included cross-selling products on the Comchek-Registered Trademark- card, increases in customer accounts and revenue from local fueling, an increase in funds transfer transactions and increased sales of fuel desk island automation systems and telecommunications services and products. The improvement in the relationship of cost of revenue and revenue at Comdata resulted in large part from the disposition of the gaming services business and also benefited from revenue growth and economies resulting from the integration of the NTS business. These improvements were offset in part by an increase in the provision for bad debts, primarily related to the expansion of the local fueling business. SG&A expenses declined as a percentage of revenue as a reduction in the ratio of general and administrative expenses to revenue exceeded the increase in the ratio of selling expense to revenue. The increase in the selling expense to revenue ratio for Comdata reflected customer acquisition expense during the first half of 1998 in connection with local fueling services. The decrease in Comdata's general and administrative expense to revenue ratio was primarily attributable to the sale of gaming services and the treatment of proceeds from the temporary provision of processing services to the purchaser of that business as a reduction of administrative expense. Unusual losses of $41.0 million in 1997, related to asset write-offs and reported as "Other expense (income)," are not included in the tables above. ARBITRON Arbitron revenue increased by 17.8%, which, after adjustment for acquisitions, represented internal revenue growth of 9.6%. The major acquisitions that affected these comparisons were the November 1997 acquisition of Continental Research and the May 1998 acquisition of the radio station, advertiser/agency and international assets of Tapscan, Inc. Arbitron's revenue growth also reflected price escalators in multi-year customer contracts, a high customer contract renewal rate, increased sales of analytical software and product and media usage reports and an increased number of subscribers for ratings services. The relationship of cost of revenue and revenue for Arbitron remained at the same level as the previous year. Unusual losses of $5.0 million in 1997, related to asset write-offs and reported as "Other expense (income)," are not included in the tables above. FINANCIAL CONDITION

- ------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS) Years ended December 31, - ------------------------------------------------------------------------------------------------------------- 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Operating activities $ 197.7 $ 163.5 $ 114.6 - ------------------------------------------------------------------------------------------------------------- Investing activities (812.1) (245.5) 484.7 - ------------------------------------------------------------------------------------------------------------- Financing activities 572.0 (84.2) (402.4) - ------------------------------------------------------------------------------------------------------------- Net cash flows provided (used) $ (42.4) $(166.2) $ 196.9 - ------------------------------------------------------------------------------------------------------------- Cash and equivalents at end of year $ 59.4 $ 101.8 $ 268.0 - -------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------- RECONCILIATION OF EARNINGS TO CASH INFLOWS (OUTFLOWS) FROM OPERATING ACTIVITIES - ------------------------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS) Years ended December 31, - ------------------------------------------------------------------------------------------------------------- 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Earnings from continuing operations $ 148.9 $ 164.4 $ 35.4 - ------------------------------------------------------------------------------------------------------------- Provision for deferred income taxes 87.1 58.1 (175.0) - ------------------------------------------------------------------------------------------------------------- Depreciation and amortization 77.4 51.2 58.4 - ------------------------------------------------------------------------------------------------------------- Impairment loss from asset write-offs -- -- 204.4 - ------------------------------------------------------------------------------------------------------------- Restructure reserves utilized and other reconciling items 0.9 (3.3) (23.7) - ------------------------------------------------------------------------------------------------------------- Operating cash flows from earnings 314.3 270.4 99.5 - ------------------------------------------------------------------------------------------------------------- Operating cash flows from working capital activities (116.6) (106.9) 15.1 - ------------------------------------------------------------------------------------------------------------- Cash flows from operating activities $ 197.7 $ 163.5 $ 114.6 - -------------------------------------------------------------------------------------------------------------

[END OF PAGE 12 OF THE CERIDIAN ANNUAL REPORT] Cash flows from operating activities in 1999 and 1998 benefited from the reduction of income taxes payable for those years due to the utilization of U.S. net operating loss carryforwards and future tax deductions. Earnings from continuing operations for 1997 included a noncash $175.0 million tax benefit from Ceridian's fourth quarter recognition under FAS 109 of the future tax benefits of its net operating loss carryforwards and future tax deductions and noncash charges for asset write-offs of $204.4 million. Operating cash flows from working capital activities reflect increases in receivables of $67.2 million in 1999, $33.1 million in 1998 and $54.4 million in 1997. Operating cash flows from working capital activities in 1998 also reflect payments of tax and other accrued liabilities of $67.1 million, and in 1997 include increases in accrued liabilities of $69.6 million, primarily related to unusual losses in the fourth quarter of 1997. Cash flows from investing activities during 1999 principally involved the acquisitions of ABR in June 1999 for $681.5 million and a majority interest in SVS in February 1999 for $20.3 million as described in the accompanying Note J, INVESTING ACTIVITY, to the consolidated financial statements. Capital expenditures amounted to $107.2 million during 1999, primarily for a new Ceridian headquarters building, renovation of an office facility in St. Petersburg, Fla. by Ceridian Benefits Services and hardware and software to be used in internal financial systems. Total expenditures for the headquarters building totaled $27.1 million at December 31, 1999, including $24.6 million incurred in 1999. The projected capitalized cost, including furnishings and interest, to prepare the building for occupancy by June 2000 is $40.8 million. The renovation of an office facility, which will house some of Ceridian Benefits Services operations, has resulted in renovation expenditures of $10.4 million since Ceridian acquired ABR and $25.7 million in total as of December 31, 1999. It is expected that the total renovation expenditures will be approximately $30 million when completed in the first half of 2000. Investing outflows during 1998 principally involved the acquisitions of the payroll services businesses of two Canadian banks for a total cash payment of $140.7 million in the first quarter and the work-life services business of Work/Family Directions, Inc. for a cash payment of $77.5 million in November. Investing inflows in 1998 principally involved Comdata's exchange of its gaming services business for First Data Corporation's NTS transportation services business and the sales of Ceridian's Resumix and Tesseract operations. During 1997, investing outflows included seven acquisitions that resulted in total cash payments of $30.0 million. Investing inflows in 1997 related to the sale of the Computing Devices International division. These and other 1998 and 1997 investing transactions are further described in the accompanying Note J, INVESTING ACTIVITY, to the consolidated financial statements. Capital expenditures for 1998 amounted to $63.1 million, including $46.2 million for tangible property and $16.9 million for software. Capital expenditures for 1997 amounted to $82.0 million, including $44.2 million for tangible property and $37.8 million for software. Cash flows from financing activities during 1999 primarily involved financing arrangements related to the acquisition of ABR as described in the accompanying Note H, FINANCING, to the consolidated financial statements. Proceeds from stock option exercises and employee stock plan purchases provided $24.2 million of financing inflows during 1999. Ceridian repurchased 235,518 shares of its common stock at an average price of $21.86 per share during the third and fourth quarters of 1999, resulting in financing outflows of $5.1 million. Financing inflows during 1998 resulted primarily from financing arrangements related to the acquisition of the Canadian payroll services businesses as described in the accompanying Note H, FINANCING, to the consolidated financial statements. Proceeds from stock option exercises and employee stock plan purchases provided $41.0 million of financing inflows during 1998. Repurchases of 6,746,284 Ceridian shares at an average price of $24.42 in 1998 resulted in financing outflows of $182.0 million, including payment of $17.2 million in settlement of 1997 repurchases. Financing outflows in 1997 resulted primarily from repurchases of 15.2 million Ceridian shares at an average price of $19.58 per share for a total of $279.8 million, not including the $17.2 million settled in 1998. Proceeds from stock option exercises and employee stock plan purchases provided $21.7 million of financing inflows during 1997. During 1997, Ceridian made net payments of $144.3 million on its outstanding debt, including repaying all amounts then outstanding under its domestic revolving credit facility and related supplemental short-term borrowings used to finance stock repurchases. [END OF PAGE 13 OF THE CERIDIAN ANNUAL REPORT] Ceridian remains in compliance with all financial covenant tests in its credit agreements and met the fixed charge coverage test of 2.75 times at 10.4 times and the debt-to-capitalization test with a margin of $240.2 million as of December 31, 1999. Assuming first quarter 2000 special charges of $50 million (the upper end of the range announced on January 25, 2000) and interest charges at the current quarterly rate, Ceridian expects that these and all other covenant tests would remain in compliance. Ceridian's expenditures for capital assets and software presently planned for 2000 total approximately $95.8 million with an estimated allocation of $68.0 million to HRS, $9.9 million to Comdata, $4.8 million to Arbitron and $13.1 million to corporate center operations. These planned expenditures include the costs of completing the renovation and construction of facilities described above. Ceridian also plans to continue to grow its business through strategic acquisitions. Ceridian expects to meet its liquidity needs from existing cash balances, cash flow from operations and borrowings under existing credit facilities. YEAR 2000 MATTERS During 1999, Ceridian completed the process of preparing for the Year 2000 date change. This process involved identifying and remediating date recognition problems in computer systems, software and other operating equipment; working with customers, vendors and other third parties to address their Year 2000 issues; and formulating contingency plans to address potential risks in the event of Year 2000 failures. As a result of Ceridian's Year 2000 efforts, to date Ceridian has not experienced any material incident or difficulty related to the Year 2000 event. In addition, Ceridian has not received notice from its customers that they experienced any material incident or related difficulty related to Ceridian's products and services as a result of the Year 2000 event. As a precaution, however, we will continue to monitor all business processes, including our interaction with customers, vendors and other third parties, throughout the remainder of 2000 to address any issues related to the Year 2000 date change and to ensure all processes continue to function properly. Year 2000 costs, which were expensed as incurred, amounted to $20.5 million in 1999. Project-to-date Year 2000 costs amounted to $38.1 million. Year 2000 costs are net of costs recovered or anticipated to be recovered from customers that were assisted by us with their Year 2000 remediation efforts. In addition, total Year 2000 capitalizable replacement costs amounted to $4.5 million. Final project costs of approximately $2.2 million are expected to be incurred in 2000 for ongoing monitoring and support activities. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Ceridian's market risk exposure is primarily interest rate risk related to revenue derived from customer payroll and tax filing deposits. This risk exposure is partially offset by interest expense on floating rate debt obligations. Interest income paid to Ceridian from trusts holding client assets varies as a function of short-term U.S. and Canadian interest rates. Ceridian uses interest rate collars to hedge the risk of falling interest rates. The table below indicates the hypothetical change in Ceridian's after-tax interest income, net of interest expense, over a one-year period due to an immediate and sustained change in the annual average interest rate. The base scenarios utilize the Federal funds rate of 5.50% and 4.75% at December 31, 1999 and 1998, respectively.

- ------------------------------------------ ----------------------------- PERCENT CHANGE IN INTEREST RATES HYPOTHETICAL CHANGE IN NET EXPRESSED IN BASIS POINTS INTEREST INCOME FROM BASE SCENARIO (IN MILLIONS OF DOLLARS) 1999 1998 ---- ---- 300 Rise 7.7 20.8 200 Rise 6.7 14.6 100 Rise 4.4 6.4 50 Rise 2.5 2.6 25 Rise 1.4 1.0 Base Scenario 25 Decline (1.2) (1.0) 50 Decline (2.2) (2.0) 100 Decline (2.7) (3.9) 200 Decline (2.9) (7.8) 300 Decline (3.1) (11.7) - ------------------------------------------ -------------- --------------

[END OF PAGE 14 OF THE CERIDIAN ANNUAL REPORT] Computations in the table above are based on assumptions about the amounts of funds held in client trusts and the relative levels of short-term market interest rates within U.S. and Canadian markets and should not be relied on as precise indicators of future expected results. Included in the computations are the effects of interest rate changes on income and expense related to all short-term and floating rate assets and liabilities owned or issued by Ceridian or its subsidiaries, including interest rate collar contracts. Compared to 1998, Ceridian reduced exposure to interest rates by increasing its interest rate collars to cover a higher percentage of expected interest income, and by increasing the use of fixed rate investments of funds held for customers. See also the sections entitled "Payroll and Tax Filing Services" in Note A, ACCOUNTING POLICIES, and "Interest Rate Collars" in Note K, COMMITMENTS AND CONTINGENCIES, to the consolidated financial statements. CAUTIONARY FACTORS THAT COULD AFFECT FUTURE RESULTS Our future results of operations and the forward-looking statements contained in this Annual Report, in other of our filings with the Securities and Exchange Commission, in our press releases and in other publications, and made by our management, are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to us that could cause such material differences are discussed in the following paragraphs. IMPLEMENTATION AND SUCCESS OF PLANS TO IMPROVE PERFORMANCE OF U.S. PAYROLL BUSINESS. In January 2000, we announced initiatives to invest in and improve the performance of our U.S. payroll business. These initiatives include: - - Transitioning small business customers with up to 200 employees to Powerpay-TM-, our new Internet payroll product - - Improving our customer service model - - Changes in our pricing strategy - - Continuing product enhancement - - Investments in Six Sigma - - Consolidation of payroll processing centers We cannot assure you that our efforts and the amount we invest in this process will be sufficient to improve the financial performance of our U.S. payroll business in 2000 and beyond. If these initiatives fail or the level of investment needs to be increased, the result would have a material adverse effect on our business, operating results and financial condition. GOVERNMENT REGULATION CHANGES ON TIMING OF REMITTANCE AND INTEREST RATE CHANGES AND INVESTMENT INCOME FROM CUSTOMER DEPOSITS. Our payroll and tax filing business in the United States and Canada derives significant revenue and earnings from the investment of customer deposits. Customer deposits are temporarily held and invested before being remitted to tax filing authorities or the customer's employees. We receive this investment income in lieu of additional fees that would otherwise be charged to these customers. During 1999, the average yield on this investment was 5.6%. Changes in governmental regulations on the timing of remittances may reduce the period of time we are allowed to hold such remittances and may adversely affect our revenue and earnings from this source. If governmental regulations change in this fashion, we would seek to require customers who permit us to retain earnings on their deposits to pay us additional fees in lieu of this lost investment income. In addition, changes in interest rates will affect our revenue and earnings from this source. Interest rate changes are difficult to predict and could be significant. We have sought to lessen the impact of interest rate decreases by entering into a series of interest rate collar transactions (see Note K, COMMITMENTS AND CONTINGENCIES, and the "Quantitative and Qualitative Disclosures About Market Risk" above). We cannot assure you that we will continue to be able to obtain collars or obtain them on favorable terms, or to what extent any decrease in investment income would be offset by the use of these collars. If we are unable to secure collars on favorable terms and interest rates decrease, our financial results would be adversely affected. [END OF PAGE 15 OF THE CERIDIAN ANNUAL REPORT] ABILITY TO INCREASE REVENUE FROM CROSS-SELLING EFFORTS AND NEW PRODUCTS. We attribute a portion of our anticipated future revenue growth in each of our business segments to: - - The continued selling of additional products and services to our existing customer base - - The planned introduction of new or enhanced product and service offerings - - The selling of our products and services to customers among our various business groups How successful we are in these efforts will depend on a variety of factors, including: - - Product and service selection - - Effective sales and marketing efforts - - Level of market acceptance and the avoidance of difficulties or delays in development or introduction We cannot assure you that we will achieve our revenue growth objectives from cross-selling efforts and new products. The inability to cross sell our products or develop new products would have an adverse effect on our business. ABILITY TO IMPROVE OPERATING MARGINS IN HUMAN RESOURCE SERVICES (HRS). Our ability to improve profit margins in our HRS businesses will depend on factors that include the degree to which and the speed with which we are able to increase operational efficiencies and reduce operating costs in those businesses (see "Implementation and Success of Plans to Improve Performance of U.S. Payroll Business" above), and the level of customer retention in those businesses (see "Customer Retention" below). Delays or difficulties in implementing process improvements (such as those designed to reduce printing, telecommunication and customer service costs, or installing new products and services and in consolidating various functions) could adversely affect the timing or effectiveness of cost reduction and margin improvement efforts. CUSTOMER RETENTION. Customer retention is an important factor in the amount and predictability of revenue and profits in each of our businesses. Customer retention is dependent on a number of factors, including: - - Customer satisfaction - - Offerings by competitors - - Our customer service levels - - Price In providing certain services, particularly payroll processing and tax filing services, we incur installation and conversion costs in connection with new customers that must be recovered before the contractual relationship provides incremental profit. The longer we are able to retain a customer, the more profitable that contract is likely to be to us. EFFECTING SYSTEM UPGRADES AND CONVERSIONS. We are in the process of transitioning to new data processing systems and/or software in several of our business units, including systems that process customer data and internal management information systems. The successful implementation of these new systems is critical to the effective delivery of products and services and the efficient operation of our businesses. Problems or delays with the installation or initial operation of the new systems could disrupt or increase costs in connection with the delivery of services and with operations planning, financial reporting and management. DEFERRALS IN INSTALLATIONS RELATED TO THE YEAR 2000 EVENT. In the second half of 1999, we experienced deferrals in new product installations in HRS as a result of our customers' reaction to the Year 2000 event. The deferral of installations from 1999 into the first half of 2000 will negatively impact our revenue in 2000. We cannot assure you of the timing of the installations of deferred product. [END OF PAGE 16 OF THE CERIDIAN ANNUAL REPORT] CONSOLIDATION IN RADIO BROADCASTING INDUSTRY. The recent consolidation in the radio broadcasting industry could put pressure on the pricing of Arbitron's radio ratings service, from which Arbitron derives a substantial majority of its total revenue. While Arbitron has experienced some success in offsetting the revenue impact of any concessions by providing ratings to additional stations within a radio group and by providing additional software and other services, we cannot assure you as to the degree to which Arbitron will be able to continue to do so. ABILITY TO ADAPT TO CHANGING TECHNOLOGY. As a provider of information management and data processing services, we must adapt and respond to technological advances offered by competitors and technological requirements of customers in order to maintain and improve upon our competitive position. We cannot assure you that new products and product enhancements can be developed and released within the projected time frames and within targeted costs. Significant delays, difficulties or added costs in introducing new products or enhancements, either through internal development, acquisitions or cooperative relationships with other companies, could have a material adverse effect on the market acceptance of our products and services and the results of operations of our businesses generally. ACQUISITION RISKS. We expect that we will continue to make acquisitions of, investments in and strategic alliances with complementary businesses, products and technologies to enable us to add products and services for our core customer base and for adjacent markets, and to expand each of our businesses geographically. However, implementation of this strategy entails a number of risks, including: - - Inaccurate assessment of undisclosed liabilities - - Entry into markets in which we may have limited or no experience - - Diversion of management's attention from our core businesses - - Potential loss of key employees or customers of the acquired businesses - - Difficulties in assimilating the operations and products of an acquired business or in realizing projected efficiencies and cost savings - - Increase in our indebtedness and a limitation in our ability to access additional capital when needed Integration of acquisitions and obtaining anticipated revenue synergies or cost reductions are also a risk in many acquisitions. Also, if we must utilize purchase accounting for acquisitions, and given the financial characteristics of information services businesses, it may be difficult for us to avoid having acquisitions that are dilutive to earnings per share. COMPETITIVE CONDITIONS. Because the markets we serve are large and attractive, new competitors could decide to enter these markets, and thereby intensify the highly competitive conditions that already exist. These new entrants could offer new technologies (see "Ability to Adapt to Changing Technology" above) or a different service model, or could treat the services provided by one of our businesses as one component of a larger product/service offering. These developments could enable new competitors to offer similar products at reduced prices. Any of these or similar developments could have a material adverse impact on our business and results of operations. LIABILITY AS A PORTABILITY ADMINISTRATOR. As a result of our acquisition of ABR Information Services, Inc., now known as Ceridian Benefits Services, we are subject to potential legal liability as a provider of portability compliance services. As a provider of COBRA (Consolidated Omnibus Budget Reconciliation Act) compliance services, Ceridian Benefits Services is subject to excise taxes for noncompliance with certain provisions of COBRA. In addition to the excise tax liability that may be imposed on Ceridian Benefits Services, substantial excise taxes may be imposed under COBRA on Ceridian Benefits Services' customers. Under Ceridian Benefits Services' service agreements with its customers, Ceridian Benefits Services assumes financial responsibility for the payment of such taxes assessed against its customers arising out of Ceridian Benefits Services' failure to comply with COBRA, unless such taxes are attributable to the customer's failure to comply with COBRA or with the terms of its agreement with Ceridian Benefits Services. In addition to liability for excise taxes for noncompliance with [END OF PAGE 17 OF THE CERIDIAN ANNUAL REPORT] COBRA, Ceridian Benefits Services accepts financial responsibility for certain liabilities incurred by its customers that are attributable to Ceridian Benefits Services' failure to comply with COBRA or to fulfill the terms of its obligations to its customers under its agreements. These liabilities could, in certain cases, be substantial. The imposition of such liability on us as a result of the acquisition of Ceridian Benefits Services in excess of any available insurance coverage could harm our business and adversely affect our operating results. As a provider of HIPAA (Health Insurance Portability and Accountability Act of 1996) compliance and administration services, Ceridian Benefits Services is subject to ERISA penalties for noncompliance with certain provisions of HIPAA. Under Ceridian Benefits Services' service agreements with its customers, Ceridian Benefits Services assumes financial responsibility for the payment of penalties assessed against its customers arising out of Ceridian Benefits Services' failure to comply with HIPAA, unless such penalties are attributable to the customer's failure to comply with HIPAA or with the terms of its agreement with Ceridian Benefits Services. These liabilities could, in certain cases, be substantial. The imposition of such liability on us as a result of the acquisition of Ceridian Benefits Services in excess of any available insurance coverage could harm our business and adversely affect our operating results. CHANGES IN GOVERNMENTAL REGULATIONS. Changes in governmental regulations, and in particular, the extent and type of benefits that employers are required to or may choose to provide employees, and the amount and type of federal or state taxes, may adversely affect our revenue and earnings. Changes in governmental regulations are difficult to predict and could be significant. OTHER FACTORS. Trade, monetary and fiscal policies, and political and economic conditions may substantially change, with corresponding impacts on the industries which we serve, particularly more economically sensitive industries such as trucking. These changes could also affect employment levels, with a corresponding impact on our payroll processing and tax filing businesses. Our future operating results may also be adversely affected by adverse judgments, settlements, unanticipated costs or other effects of legal and administrative proceedings now pending or that may be instituted in the future. [END OF PAGE 18 OF THE CERIDIAN ANNUAL REPORT] EX-13.03 12 EX-13.03 Exhibit 13.03 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders of Ceridian Corporation: We have audited the accompanying consolidated balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ceridian Corporation and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ KPMG LLP Minneapolis, Minnesota January 25, 2000 From Page 19 of the Ceridian Annual Report

CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share data) - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------- Revenue $ 1,342.3 $1,162.1 $1,074.8 Costs and Expenses Cost of revenue 630.5 551.5 527.6 Selling, general and administrative 379.6 316.0 308.0 Research and development 74.4 77.8 59.6 Other expense (income) 1.1 (6.8) 309.3 ------------- ------------- -------------- Total costs and expenses 1,085.6 938.5 1,204.5 ------------- ------------- -------------- EARNINGS (LOSS) BEFORE INTEREST AND TAXES 256.7 223.6 (129.7) - ---------------------------------------------------------------------------------------------------------------- Interest income 6.4 10.4 2.3 Interest expense (24.7) (4.3) (11.2) ------------- ------------- -------------- EARNINGS (LOSS) BEFORE INCOME TAXES 238.4 229.7 (138.6) Income tax provision (benefit) 89.5 65.3 (174.0) ------------- ------------- -------------- EARNINGS FROM CONTINUING OPERATIONS 148.9 164.4 35.4 - ---------------------------------------------------------------------------------------------------------------- DISCONTINUED OPERATIONS Gain on sale -- 25.4 386.3 Earnings from operations -- -- 50.7 ------------- ------------- -------------- NET EARNINGS $ 148.9 $ 189.8 $ 472.4 ============= ============= ============== BASIC EARNINGS PER SHARE Continuing operations $ 1.03 $ 1.14 $ 0.23 Net earnings $ 1.03 $ 1.32 $ 3.01 DILUTED EARNINGS PER SHARE Continuing operations $ 1.01 $ 1.11 $ 0.22 Net earnings $ 1.01 $ 1.29 $ 2.96 SHARES USED IN CALCULATIONS (IN THOUSANDS) Weighted average shares (basic) 144,524 144,070 156,835 Dilutive securities 3,440 3,527 2,646 ------------- ------------- -------------- Weighted average shares (diluted) 147,964 147,597 159,481 ============= ============= ============== - ----------------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements. From Page 20 of the Ceridian Annual Report

CONSOLIDATED BALANCE SHEETS (Dollars in millions, except per share data) - ------------------------------------------------------------------------------------------------------------------------ December 31, ------------------------------------------ 1999 1998 ---------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and equivalents $ 59.4 $ 101.8 Short-term investments 22.0 -- Trade and other receivables Trade, less allowance of $19.5 and $21.7 415.8 343.4 Other 44.6 41.1 ------------------ -------------- Total 460.4 384.5 Current portion of deferred income taxes 78.7 127.8 Other current assets 24.8 19.6 ------------------ -------------- Total current assets 645.3 633.7 ---------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net 192.8 91.3 Goodwill and other intangibles, net 1,047.2 377.5 Software and development costs, net 48.3 26.1 Prepaid pension cost 118.3 103.4 Deferred income taxes, less current portion 4.1 53.4 Other noncurrent assets 3.9 4.3 ---------------------------------------------------------------------------------------------------------------- Total assets $ 2,059.9 $ 1,289.7 ================== ============== ---------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt and current portion of long-term obligations $ 0.2 $ 0.3 Accounts payable 47.5 65.0 Drafts and customer funds payable 136.9 111.0 Customer advances 14.6 13.6 Deferred income 34.5 25.4 Accrued taxes 74.8 76.2 Employee compensation and benefits 69.5 74.4 Other accrued expenses 73.7 70.8 ------------------ -------------- Total current liabilities 451.7 436.7 ---------------------------------------------------------------------------------------------------------------- Long-term obligations, less current portion 611.1 54.2 Deferred income taxes 10.3 3.6 Restructure reserves, less current portion 26.8 29.0 Employee benefit plans 77.7 74.1 Deferred income and other noncurrent liabilities 39.6 41.5 ---------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Common Stock, $.50 par, authorized 500,000,000 shares, issued 161,685,596 80.8 80.8 Additional paid-in capital 1,126.2 1,110.5 Retained earnings (deficit) 12.1 (136.8) Treasury common stock, 16,951,228 and 18,171,620 shares (364.6) (390.8) Accumulated other comprehensive income (11.8) (13.1) ------------------ -------------- Total stockholders' equity 842.7 650.6 ---------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 2,059.9 $ 1,289.7 ================== ============== ----------------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements. From Page 21 of the Ceridian Annual Report

CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions, except per share data) ----------------------------------------------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------------- 1999 1998 1997 -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 148.9 $ 189.8 $ 472.4 Adjustments to reconcile net earnings to net cash provided by operating activities: Earnings from discontinued operations -- -- (50.7) Gain on sale of discontinued operations -- (25.4) (386.3) Deferred income tax provision (benefit) 87.1 58.1 (175.0) Impairment loss from asset write-offs -- -- 204.4 Depreciation and amortization 77.4 51.2 58.4 Restructure reserves utilized (2.3) (2.9) (21.1) Other 3.2 (0.4) (2.6) Decrease (Increase) in trade and other receivables (67.2) (33.1) (54.4) Increase (Decrease) in accounts payable 0.2 (11.2) 7.0 Increase (Decrease) in drafts and customer funds payable (7.8) (0.9) (26.5) Increase (Decrease) in employee compensation and benefits (4.7) 8.8 8.0 Increase (Decrease) in accrued taxes (9.8) (21.3) 10.4 Increase (Decrease) in other current assets and liabilities (27.3) (49.2) 70.6 -------------- ------------- ------------ Net cash provided by operating activities 197.7 163.5 114.6 -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Expended for property, plant and equipment (77.7) (46.2) (44.2) Expended for software and development costs (29.5) (16.9) (37.8) Proceeds from sales of businesses and assets 7.9 50.5 596.7 Proceeds from sales of short-term investments 3.2 -- -- Expended for business acquisitions, less cash acquired (716.0) (232.9) (30.0) -------------- ------------- ------------ Net cash provided by (used for) investing activities (812.1) (245.5) 484.7 -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit and overdrafts, net 108.4 57.2 (133.1) Borrowings of other debt 444.8 -- -- Repayment of other debt (0.3) (0.4) (11.2) Repurchase of common stock (5.1) (182.0) (279.8) Proceeds from exercise of stock options and other 24.2 41.0 21.7 -------------- ------------- ------------ Net cash provided by (used for) financing activities 572.0 (84.2) (402.4) -------------------------------------------------------------------------------------------------------------------- NET CASH FLOWS PROVIDED (USED) (42.4) (166.2) 196.9 Cash and equivalents at beginning of year 101.8 268.0 71.1 -------------- ------------- ------------ Cash and equivalents at end of year $ 59.4 $ 101.8 $ 268.0 ============== ============= ============ --------------------------------------------------------------------------------------------------------------------

Years Ended December 31, ------------------------------------------------- INTEREST AND INCOME TAXES PAID (REFUNDED) 1999 1998 1997 -------------------------------------------------------------------------------------------------------------------- Interest paid $ 21.0 $ 4.2 $ 11.5 Income taxes paid $ 9.4 $ 17.6 $ 2.9 Income taxes refunded $ (0.5) $ (0.2) $ (0.1) --------------------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements. From Page 22 of the Ceridian Annual Report

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in millions, except per share data) - ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------- Amount Shares -------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------- ---------------------------------------------- COMMON SHARES ISSUED Beginning balance $ 80.8 $ 80.8 $ 79.8 161,685,596 161,685,596 159,579,254 Exercises of stock options -- -- 0.2 -- -- 345,904 Restricted stock awards, net -- -- -- -- -- 6,400 Employee stock purchase plans -- -- -- -- -- 123,114 Acquisitions -- -- 0.8 -- -- 1,630,924 ------------------------------------- ---------------------------------------------- Ending balance - issued $ 80.8 $ 80.8 $ 80.8 161,685,596 161,685,596 161,685,596 - ---------------------------------------------------------------------------------- ---------------------------------------------- TREASURY STOCK - COMMON SHARES Beginning balance $ (390.8) $ (271.0) $ (0.4) (18,171,620) (13,801,852) (42,392) Repurchases (5.1) (164.8) (297.0) (235,518) (6,746,284) (15,172,302) Exercises of stock options 27.2 57.8 21.7 1,265,599 2,804,050 1,148,452 Restricted stock awards, net (1.0) (17.1) (6.3) (32,524) (630,522) (345,250) Employee stock purchase plans 5.1 4.3 6.6 239,369 202,988 355,224 Acquisitions -- -- 4.4 (16,534) -- 254,416 ------------------------------------- ---------------------------------------------- Ending balance - treasury $ (364.6) $ (390.8) $ (271.0) (16,951,228) (18,171,620) (13,801,852) - ---------------------------------------------------------------------------------- ---------------------------------------------- COMMON SHARES OUTSTANDING 144,734,368 143,513,976 147,883,744 - ---------------------------------------------------------------------------------- ============================================== ADDITIONAL PAID-IN CAPITAL Beginning balance $ 1,110.5 $ 1,112.6 $ 1,071.5 Exercises of stock options (8.3) (21.3) (8.0) Tax benefit from stock options 10.2 13.3 28.6 Restricted stock awards, net 1.8 5.6 8.9 Employee stock purchase plans 0.5 0.3 0.9 Acquisitions 11.5 -- 10.7 ------------------------------------- ------------------------------------------------ Ending balance $ 1,126.2 $ 1,110.5 $ 1,112.6 COMPREHENSIVE INCOME - ---------------------------------------------------------------------------------- ------------------------------------------------ RETAINED EARNINGS (DEFICIT) 1999 1998 1997 ---------------------------------------------- Beginning balance $ (136.8) $ (326.6) $ (798.7) Net earnings 148.9 189.8 472.4 $ 148.9 $ 189.8 $ 472.4 Acquisitions by pooling -- -- (0.3) ------------------------------------- Ending balance $ 12.1 $ (136.8) $ (326.6) - ---------------------------------------------------------------------------------- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) FOREIGN CURRENCY TRANSLATION Beginning balance $ (3.6) $ 2.0 $ 0.4 Rate changes, net 0.4 (5.6) 0.1 0.4 (5.6) 0.1 Disposition of investment -- -- 1.5 -- -- 1.5 ------------------------------------- Ending balance (3.2) (3.6) 2.0 ------------------------------------- PENSION LIABILITY ADJUSTMENT Beginning balance $ (9.5) $ (9.5) $ (6.3) Pension liability change 0.9 -- (3.2) 0.9 -- (3.2) ------------------------------------- Ending balance (8.6) (9.5) (9.5) ------------------------------------- Total ending balance $ (11.8) $ (13.1) $ (7.5) ------------------------------------- ---------------------------------------------- TOTAL STOCKHOLDERS' EQUITY $ 842.7 $ 650.6 $ 588.3 $ 150.2 $ 184.2 $ 470.8 ===================================== ==============================================

- ------------------------------------------------------------------------------- See notes to consolidated financial statements. - ------------------------------------------------------------------------------- From Page 23 of the Ceridian Annual Report INDEX TO NOTES 24 A. Accounting Policies 27 B. Supplementary Data to Statements of Operations 28 C. Segment Data 30 D. Income Taxes 31 E. Capital Assets 32 F. Retirement Plans 34 G. Stock Plans 36 H. Financing 37 I. Leasing 38 J. Investing Activity 39 K. Commitments and Contingencies 40 L. Legal Matters A. ACCOUNTING POLICIES BASIS OF CONSOLIDATION The consolidated financial statements of Ceridian Corporation ("Ceridian") include the accounts of all majority owned subsidiaries. As further discussed in Note B, Computing Devices International ("CDI"), a division of Ceridian sold in December 1997, is presented as a discontinued operation. Investments in other affiliated companies where Ceridian has significant influence are accounted for by the equity method. Other investments are accounted for by the cost method. All material intercompany transactions have been eliminated from the consolidated financial statements. NEW ACCOUNTING PRONOUNCEMENTS FAS 133, "Accounting for Derivative Instruments and Hedging Activities," (as amended by FAS 137 with respect to the effective date) will be effective for Ceridian in January 2001. FAS 133 requires all derivatives to be recognized as assets or liabilities on the balance sheet and measured at fair value on a mark-to-market basis. This applies whether the derivatives are stand-alone instruments, such as forward currency exchange contracts and interest rate swaps or collars, or embedded derivatives, such as call options contained in convertible debt investments. Along with the derivatives, the underlying hedged items are also to be marked-to-market on an ongoing basis. These market value adjustments are to be included either in net earnings or loss in the statement of operations or in other comprehensive income (and accumulated in stockholders' equity), depending on the nature of the transaction. Ceridian is currently reviewing the potential impact of this accounting standard. In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes certain of the SEC staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. Aspects of SAB 101 relevant to Ceridian primarily concern the timing of the recognition of revenue and certain expenses related to arrangements that involve the receipt of nonrefundable, up-front fees. SAB 101 requires that in particular situations the nonrefundable fees and certain associated costs be recognized over the contractual term or average life of the underlying arrangement. SAB 101 will be effective for Ceridian in the first quarter of 2000. Ceridian does not expect SAB 101 to have a material impact on its financial condition or results of operations. STOCK-BASED COMPENSATION Ceridian accounts for stock-based compensation under APB Opinion No. 25 and related interpretations. Therefore, compensation expense is not recorded with respect to Ceridian's fixed stock option and employee stock purchase plans, and compensation expense for performance-based restricted stock awards is recorded based on the stock price at time of vesting or estimated future vesting. Ceridian also reports under the disclosure-only provisions of FAS 123, "Accounting for Stock-Based Compensation." USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. From Page 24 of the Ceridian Annual Report CHANGES IN PRESENTATION Certain prior year amounts have been reclassified to conform to the current year's presentation. CASH AND SHORT-TERM INVESTMENTS Investments which are readily convertible to cash within three months of purchase are classified in the balance sheet as cash equivalents. Investments, if any, with longer maturities are considered available-for-sale under FAS 115 and reported in the balance sheet as short-term investments. At December 31, 1999, short-term investments of $22.0 consisted of marketable securities, primarily issued by U.S. government agencies. These securities are reported at cost, which approximates fair value. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost and depreciated for financial statement purposes using straight-line and accelerated methods at rates based on the estimated lives of the assets, which are generally as follows: - --------------------------- ----------- Buildings 40 years Building improvements 5-15 years Machinery and equipment 3-8 years Computer equipment 3-6 years - --------------------------- ----------- Repairs and maintenance are expensed as incurred. Gains or losses on dispositions are included in results of operations. Interest capitalized in 1999 of $1.7 related to the construction of a new headquarters facility in Bloomington, Minn. and the renovation of an office facility in St. Petersburg, Fla. that will house certain benefits services operations. EARNINGS PER SHARE Basic earnings per share represents earnings divided by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share represents earnings divided by the sum of the weighted average number of common shares outstanding plus shares derived from potentially dilutive securities. For Ceridian, potentially dilutive securities includes "in the money" fixed stock options outstanding. The numbers of shares added for stock options is determined by the treasury stock method, which assumes exercise of these options and the use of any proceeds to repurchase a portion of these shares at the average market price for the period. The option shares excluded from the calculation of potentially dilutive securities because the exercise price exceeded the average market price were 849,000 in 1999, 341,000 in 1998 and 5,492,000 in 1997. GOODWILL AND OTHER INTANGIBLES Goodwill, which represents the excess purchase price over the fair value of net assets of businesses acquired, is assigned to operating units based on the benefits derived from the acquisition and amortized on a straight-line basis over the expected periods to be benefited, ranging up to 40 years. Other intangible assets represents amounts assigned to intangible assets at the time of a purchase acquisition and includes such items as customer lists and bases, technology, covenants not to compete, tradenames, workforce-in-place and other rights. Such costs are amortized on a straight-line basis over periods ranging up to 30 years. Recorded amounts are regularly reviewed and recoverability assessed. The review considers factors such as whether the amortization of the goodwill and other intangible assets for each operating unit over its remaining life can be recovered through forecasted undiscounted cash flows. SOFTWARE AND DEVELOPMENT COSTS Ceridian capitalizes purchased software that is ready for service and development costs for marketable software incurred from the time the preliminary project stage is completed until the software is ready for use. Under the provisions of SOP 98-1, Ceridian capitalizes costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and Ceridian management has authorized further funding for the project which it deems probable of completion and use for the function intended. Capitalized internal-use software costs include only (1) external direct costs of materials and services consumed in developing or obtaining the software, (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project, and (3) interest costs incurred, when material, while From Page 25 of the Ceridian Annual Report developing the software. Capitalization of such costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose. Research and development costs and other computer software maintenance costs related to software development are expensed as incurred. Software development costs are amortized using the straight-line method over a range of three to seven years, but not exceeding the expected life of the product. The carrying value of software and development costs is regularly reviewed by Ceridian, and a loss is recognized when the value of estimated undiscounted cash flow benefit related to the asset falls below the unamortized cost. INCOME TAXES The provision for income taxes is based on income recognized for financial statement purposes and includes the effects of temporary differences between such income and that recognized for tax return purposes. Ceridian and its eligible subsidiaries file a consolidated U.S. federal income tax return. Certain subsidiaries which are consolidated for financial reporting are not eligible to be included in the consolidated U.S. federal income tax return and separate provisions for income taxes have been determined for these entities. Except for selective dividends, Ceridian intends to reinvest the unremitted earnings of its non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S. income taxes was required on such earnings during the three years ended December 31, 1999. REVENUE RECOGNITION Services revenue is recognized when the services are performed and billable, except for certain services provided by Ceridian's Comdata subsidiary, Comdata Network, Inc., and revenue from payroll and tax filing services described below. Revenue from Comdata funds transfer and regulatory permit services consists of the transaction fees charged to customers. Such revenue does not include the costs of goods and services for which funds are advanced by Comdata (e.g., fuel purchased, permit provided or face amount of the Comchek purchased and cashed). However, Comdata pays the issuing agent (e.g., truck stop or state agency) for the full cost of the goods and services provided and, accordingly, bills the customer for such cost as well as the transaction fee. As a result, Ceridian's accounts receivable includes both the cost of the goods and services purchased and the transaction fees. Ceridian's drafts and customer funds payable includes the amount due to the issuing agent for the cost of the goods and services. Revenue is recognized for the amount of the transaction fee at the time the goods and services are purchased. PAYROLL AND TAX FILING SERVICES In connection with its U.S. payroll tax filing services, Ceridian collects funds for payment of taxes due, holds such funds in trust until payment is due, remits the funds to the appropriate taxing authority, files federal, state and local tax returns, handles related regulatory correspondence and amendments, and selectively absorbs regulatory charges for certain penalties and interest. For such services, Ceridian derives its payroll tax filing revenue from fees charged and from investment income it receives on tax filing deposits temporarily held pending remittance on behalf of customers to taxing authorities. The trust invests primarily in high quality collateralized short-term investments or top tier commercial paper. The trust also invests in U.S. Treasury and Agency securities, AAA rated asset-backed securities and corporate securities rated A3/A- or better. The aggregate amount of collected but unremitted funds varies significantly during the year and averaged $1,353.3 in 1999, $1,320.1 in 1998 and $1,376.1 in 1997. The amounts of such funds at December 31, 1999 and 1998, were $1,619.2 and $2,142.2, respectively. Ceridian handles payroll as well as tax filing funds for its Canadian customers. Ceridian collects funds for payment to clients' employees and tax authorities and holds these funds in trust until remitted. The Canadian trust invests in securities issued by the government and provinces of Canada, highly rated Canadian banks and corporations, asset backed trusts and mortgages. Ceridian earns income from the trust and fees for services similar to those provided in the U.S. The aggregate balances in U.S. dollars for the Canadian trust as of December 31, 1999 and 1998, respectively, were $652.5 and $562.8, with average outstanding balances during those years of $436.3 and $397.1. TRANSLATION OF FOREIGN CURRENCIES Local currencies have been determined to be functional currencies for Ceridian's international operations. Foreign currency balance sheets are translated at the end-of-period exchange rates and earnings statements at the average exchange rates for each period. The resulting translation gains or losses are described as "foreign currency translation" and reported in "other comprehensive income (loss)" in the accompanying Statements of Stockholders' Equity. Gains and losses from translation of assets and liabilities denominated in other than the functional currency of the operation are recorded in results of operations as "other expense (income)." From Page 26 of the Ceridian Annual Report B. SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS UNUSUAL CHARGES (GAINS) On January 25, 2000, Ceridian announced that it will be taking certain actions to improve the operations of its U.S. payroll business. It is expected that specific plans for these actions will be completed by the end of the first quarter of 2000 and result in special charges of $35.0 to $50.0 in that quarter. The 1998 unusual gains of $9.2 ($5.8 after tax) are related primarily to the sale in fourth quarter of land not used in operations. The 1997 unusual charges included $13.0 in first quarter in connection with a litigation settlement, $150.0 in third quarter in connection with the termination of a payroll processing software development project, and $144.6 in fourth quarter, due principally to asset write-offs. The largest portion of these charges related to an aggregate impairment loss from asset write-offs of $204.4. The payments of liabilities incurred in connection with the termination of the software development project largely related to severance, contract termination penalties, unused facilities and incremental costs to convert beta customers to the ongoing system as originally anticipated under the project termination plan.

- ------------------------------------------------------------------------------------------------ Years Ended December 31, ------------------------------------ OTHER EXPENSE (INCOME) 1999 1998 1997 - ------------------------------------------------------------------------------------------------ Foreign currency translation expense (income) $ 0.4 $ 0.1 $ 0.1 Loss (Gain) on sale of assets (3.6) (0.3) 0.3 Unusual charges (gains) - (9.2) 307.6 Minority interest and equity in operations of affiliates 6.0 3.0 3.9 Other expense (income) (1.7) (0.4) (2.6) ------------ ----------------------- Total $ 1.1 $ (6.8) $ 309.3 ============ ============ ========== - -------------------------------------------------------------------------------------------------

The asset write-offs of $87.5 in fourth quarter 1997 included $64.8 of goodwill and other intangible assets, $11.7 of hardware and software in Comdata, and a $11.0 loss on the sale of Comdata's gaming services business, which sale closed in January 1998. In accordance with the original plans of action initiated, payments applied against fourth quarter 1997 accrued liabilities included planned expenditures related to excess facilities and severance costs, contract negotiation costs and costs associated with legal and administrative proceedings involving Ceridian. DISCONTINUED OPERATIONS On December 31, 1997, Ceridian sold substantially all of the net assets of CDI, which comprised its defense electronics segment. As a result, the gain from this sale, along with the financial position, results of operations and cash flows of CDI are separately presented as discontinued operations and eliminated from continuing operations amounts in the accompanying consolidated financial statements and notes. The gain at the time of sale amounted to $386.3 or $2.42 per diluted share ($2.46 per basic share). The gain was increased by $25.4 or $0.18 per diluted or basic share in fourth quarter 1998, due to a reduction of estimated accruals related to this sale. The earnings from CDI operations were $0.32 per diluted or basic share in 1997.

- ---------------------------------------------------------------------------------- Litigation Payroll Software Other 1997 UNUSUAL CHARGES Settlement Project Termination Charges - ---------------------------------------------------------------------------------- Initial charge $ 13.0 $ 150.0 $144.6 Impairment loss from asset - (116.9) (87.5) write-offs Payments/Utilization: 1997 (13.0) (19.6) (8.2) 1998 - (5.7) (15.4) 1999 - (7.3) (13.4) -------- --------- -------- Remaining balance $ - $ 0.5 $ 20.1 ======== ========= ======== - ----------------------------------------------------------------------------------

From Page 27 of the Ceridian Annual Report C. SEGMENT DATA Ceridian operates in the information services industry principally in the U.S. and provides products and services to the human resources, transportation and media information markets. Its business segments include Human Resource Services, Comdata and Arbitron. These businesses collect, manage and analyze data and process transactions on behalf of customers, report information resulting from such activities to customers, and provide customers with related software applications and services. The technology-based products and services of these businesses are typically provided through long-term customer relationships that result in a high level of recurring revenue. The business segments are distinguished primarily by reference to the markets served and the nature of the services provided. Selected business segment information is provided in an accompanying table. Human Resource Services offers a broad range of services and software designed to help employers more effectively manage their work forces and information that is integral to human resource processes. These products and services include transaction-oriented administrative services and software products, primarily in areas such as payroll processing and tax filing, as well as management support software and services in areas such as benefits administration, qualified plan administration, skills management, regulatory compliance, employee training, work-life effectiveness and employee assistance programs. Revenue from payroll and tax filing services also includes investment income earned by Ceridian from deposits temporarily held pending remittance on behalf of customers to taxing authorities and customers' employees. These activities are conducted primarily in the U.S. and, to a lesser extent, through subsidiaries in the United Kingdom ("UK") and, beginning in 1998, Canada.

- ------------------------------------ ----------- ----------- ----------- GEOGRAPHIC DATA 1999 1998 1997 - ------------------------------------ ----------- ----------- ----------- U.S. OPERATIONS Revenue $1,187.0 $1,034.0 $1,029.3 Property, plant and equipment 181.4 82.3 74.9 - ------------------------------------ ----------- ----------- ----------- NON-U.S. OPERATIONS Revenue $ 155.3 $ 128.1 $ 45.5 Property, plant and equipment 11.4 9.0 4.7 - ------------------------------------ ----------- ----------- -----------

Comdata provides transaction processing and decision support services to the transportation industry, primarily trucking companies, truck stops and truck drivers, in both the long haul and local markets in the U.S. These services primarily involve the use of a proprietary funds transfer card which facilitates truck driver transactions and provides transaction control and trip information for trucking firms. Additionally, Comdata provides assistance in obtaining regulatory permits and other compliance services, driver relations services, local fueling services and discounted telecommunications services in its markets. In 1999, Comdata established its Payment Services division for extending Comdata's products and services to customers outside the transportation industry. Arbitron provides media and marketing information (primarily radio audience measurement) to broadcasters, advertising agencies, advertisers and, through a joint venture, newspaper and magazine publishers and TV broadcasters. Arbitron also provides software applications that give customers access to Arbitron's database and, through a joint venture, measurement data concerning consumer retail behavior and media usage. These activities are conducted primarily in the U.S. and, to a lesser extent, in the UK. The Other segment includes the unallocated amounts related to corporate center operations. The assets of corporate center operations include cash and equivalents as well as deferred income tax and pension assets. Ceridian measures business segment results by reference to earnings before interest and taxes ("EBIT"), adjusted for unusual gains and losses. In 1998, adjustments included unusual gains related primarily to the disposition of land not used in the business. In 1997, adjustments included charges of $13.0 for a litigation settlement, $150.0 for termination of a payroll software development project and $144.6 due principally to goodwill and other asset write-offs. Expenses incurred by corporate center operations are charged or allocated to the business segments. Revenue from sales between business segments is not material. The operations of Ceridian are conducted primarily in the U.S and revenue from sales between U.S. and non-U.S. entities is not material. Non-U.S. operations in Canada and the UK relate largely to the Human Resource Services segment. Geographic data for or at the end of each of the last three years, presented above, is determined by reference to the location of operation. From Page 28 of the Ceridian Annual Report

- -------------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------------------------- BUSINESS SEGMENTS Years Ended December 31, ---------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------------------------- HUMAN RESOURCE SERVICES Revenue $ 828.0 $ 700.3 $ 578.6 EBIT before unusual charges and gains $ 113.2 $ 100.6 $ 68.1 Unusual (charges) gains -- -- (223.5) -------------- ------------- --------------- EBIT $ 113.2 $ 100.6 $ (155.4) Total assets $ 1,296.4 $ 471.5 $ 229.5 Depreciation and amortization $ 63.5 $ 40.0 $ 43.0 Expended for property, plant and equipment $ 37.8 $ 35.8 $ 24.3 - -------------------------------------------------------------------------------------------------- COMDATA Revenue $ 298.9 $ 267.3 $ 331.0 EBIT before unusual charges and gains $ 72.2 $ 52.4 $ 57.2 Unusual (charges) gains -- -- (41.0) -------------- ------------- --------------- EBIT $ 72.2 $ 52.4 $ 16.2 Total assets $ 468.4 $ 398.6 $ 434.1 Depreciation and amortization $ 15.6 $ 13.4 $ 17.0 Expended for property, plant and equipment $ 11.7 $ 6.7 $ 18.1 - -------------------------------------------------------------------------------------------------- ARBITRON Revenue $ 215.4 $ 194.5 $ 165.2 EBIT before unusual charges and gains $ 71.3 $ 61.4 $ 52.7 Unusual (charges) gains -- -- (5.0) -------------- ------------- --------------- EBIT $ 71.3 $ 61.4 $ 47.7 Total assets $ 65.4 $ 66.8 $ 49.7 Depreciation and amortization $ 5.2 $ 4.7 $ 3.9 Expended for property, plant and equipment $ 2.4 $ 1.2 $ 1.2 - -------------------------------------------------------------------------------------------------- OTHER Revenue $ -- $ -- $ -- EBIT before unusual charges and gains $ -- $ -- $ -- Unusual (charges) gains -- 9.2 (38.2) -------------- ------------- --------------- EBIT $ -- $ 9.2 $ (38.2) Total assets $ 229.7 $ 352.8 $ 530.0 Depreciation and amortization $ (6.9) $ (6.9) $ (5.5) Expended for property, plant and equipment $ 25.8 $ 2.5 $ 0.6 - -------------------------------------------------------------------------------------------------- TOTAL CERIDIAN Revenue $ 1,342.3 $ 1,162.1 $ 1,074.8 EBIT before unusual charges and gains $ 256.7 $ 214.4 $ 178.0 Unusual (charges) gains -- 9.2 (307.7) -------------- ------------- --------------- EBIT $ 256.7 $ 223.6 $ (129.7) Total assets $ 2,059.9 $ 1,289.7 $ 1,243.3 Depreciation and amortization $ 77.4 $ 51.2 $ 58.4 Expended for property, plant and equipment $ 77.7 $ 46.2 $ 44.2 - --------------------------------------------------------------------------------------------------

From Page 29 of the Ceridian Annual Report - -------------------------------------------------------------------------------- D. INCOME TAXES Ceridian has U.S. net operating loss carryforwards of $216.2 and future tax deductions of $108.2, which will be available to offset regular taxable U.S. income during the carryforward period (through 2014). The tax benefits of these items are reflected in the accompanying table of deferred tax asset and deferred tax liability. If not used, these carryforwards will begin to expire in 2005. In 1998, Ceridian realized a tax benefit of $18.5 related to the difference between its tax and financial reporting basis in a subsidiary that was disposed of during fourth quarter. Under tax sharing agreements existing at the time of the disposition of certain former operations of Ceridian, Ceridian remains subject to income tax audits in various jurisdictions for the years 1985-1992. Ceridian considers its tax accruals adequate to cover any U.S. and international tax deficiencies not recoverable through deductions in future years.

- --------------------------------------------------------------------------------- COMPONENTS OF EARNINGS AND TAXES FROM 1999 1998 1997 CONTINUING OPERATIONS - --------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES U.S. $ 225.8 $ 218.5 $ (134.1) International 12.6 11.2 (4.5) ----------- ----------- ----------- Total $ 238.4 $ 229.7 $ (138.6) =========== =========== ============ INCOME TAX PROVISION (BENEFIT) Current U.S. $ -- $ 4.2 $ -- State and other 2.4 3.0 1.0 ----------- ----------- ------------ 2.4 7.2 1.0 ----------- ----------- ------------ Deferred U.S. 79.9 54.2 32.8 U.S. valuation reserve benefit -- -- (207.8) State and other 7.2 3.9 -- ----------- ----------- ------------ 87.1 58.1 (175.0) ----------- ----------- ------------ Total $ 89.5 $ 65.3 $ (174.0) - --------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------

- --------------------------------------------------------------------------------- EFFECTIVE RATE RECONCILIATION 1999 1998 1997 - --------------------------------------------------------------------------------- U.S. statutory rate 35% 35% 35% ----------- ----------- ------------ Income tax provision (benefit) at U.S. statutory rate $ 83.5 $ 80.4 $ (48.5) State income taxes, net 3.1 1.4 1.0 Goodwill 6.4 3.1 44.7 Benefit of net operating loss -- -- (175.0) carryforwards Benefit from sale of subsidiary -- (18.5) -- Other (3.5) (1.1) 3.8 - --------------------------------------------------------------------------------- Income tax provision (benefit) $ 89.5 $ 65.3 $ (174.0) =========== =========== ============ - ---------------------------------------------------------------------------------

- --------------------------------------------------------------------------------- TAX EFFECT OF ITEMS THAT COMPRISE A SIGNIFICANT PORTION OF THE NET DEFERRED TAX ASSET AND DEFERRED TAX LIABILITY - --------------------------------------------------------------------------------- December 31, --------------------------------- 1999 1998 - --------------------------------------------------------------------------------- DEFERRED TAX ASSET Net operating loss carryforwards $ 75.7 $ 120.5 Restructuring and other accruals 56.2 66.9 Other 19.0 17.7 --------------- -------------- Total 150.9 205.1 --------------- -------------- DEFERRED TAX LIABILITY Employment related accruals (25.9) (21.1) Intangibles (29.1) -- Other (13.1) (2.8) --------------- -------------- Total (68.1) (23.9) --------------- -------------- NET DEFERRED TAX ASSET $ 82.8 $ 181.2 =============== ============== NET DEFERRED TAX ASSET (U.S.) Current portion $ 78.7 $ 127.8 Noncurrent portion 4.1 53.4 --------------- -------------- Total $ 82.8 $ 181.2 =============== ============== - --------------------------------------------------------------------------------- DEFERRED TAX LIABILITY International $ 10.5 $ 3.6 Non-consolidated U.S. subsidiaries 1.4 -- --------------- -------------- Total $ 11.9 $ 3.6 =============== ============== Current portion $ 1.6 $ -- Noncurrent portion 10.3 3.6 --------------- -------------- Total $ 11.9 $ 3.6 =============== ==============

From Page 30 of the Ceridian Annual Report E. CAPITAL ASSETS

(Dollars in millions, except per share data) - ------------------------------------------------------------------------------------------------- December 31, - ------------------------------------------------------------------------------------------------- 1999 1998 - ------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land $ 14.8 $ 1.2 Machinery and equipment 233.9 189.8 Buildings and improvements 65.3 42.1 Construction in progress 54.7 4.0 ------------- ------------- 368.7 237.1 Accumulated depreciation (175.9) (145.8) ------------- ------------- Property, plant and equipment, net $ 192.8 $ 91.3 ============= ============= - ------------------------------------------------------------------------------------------------- GOODWILL AND OTHER INTANGIBLES Goodwill $ 973.4 $ 358.4 Accumulated amortization (63.9) (36.4) ------------- ------------- Goodwill, net 909.5 322.0 ------------- ------------- Other intangible assets 164.5 77.0 Accumulated amortization (26.8) (21.5) ------------- ------------- Other intangible assets, net 137.7 55.5 ------------- ------------- Goodwill and other intangible assets, net 1,047.2 377.5 ============= ============= - ------------------------------------------------------------------------------------------------- SOFTWARE AND DEVELOPMENT COSTS Purchased software $ 33.9 $ 31.9 Software development costs 45.7 24.5 ------------- ------------- 79.6 56.4 Accumulated amortization (31.3) (30.3) ------------- ------------- Software and development costs, net $ 48.3 $ 26.1 ============= ============= - -------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------------------ DEPRECIATION AND AMORTIZATION 1999 1998 1997 - ------------------------------------------------------------------------------------------------- Depreciation and amortization of property, plant and equipment $ 38.4 $ 32.2 $ 33.3 Amortization of goodwill 27.5 12.0 13.5 Amortization of other intangibles 11.8 10.1 7.6 Amortization of software and development costs 7.6 4.8 10.6 Pension credit (7.9) (7.9) (6.6) ---------- ------------- ------------- Total $ 77.4 $ 51.2 $ 58.4 ========== ============= ============= - -------------------------------------------------------------------------------------------------

From Page 31 of the Ceridian Annual Report F. RETIREMENT PLANS PENSION BENEFITS Ceridian maintains a defined benefit pension plan for U.S. employees that closed to new participants effective January 1, 1995. Assets of the plan consist principally of equity securities, U.S. government securities, and other fixed income obligations and do not include securities issued by Ceridian. Benefits under the plan are calculated on maximum or career average earnings and years of participation in the plan. Employees participate in this plan by means of salary reduction contributions. Certain former employees are inactive participants in the plan. Retirement plan funding amounts are based on independent consulting actuaries' determination of the Employee Retirement Income Security Act of 1974 funding requirements. The funded status of the plan at September 30, 1999 and 1998 measurement dates and changes in funded status for the annual periods then ended are shown in the accompanying tables, along with the net periodic pension cost and assumptions used in calculations for each of the last three years. Ceridian also sponsors a nonqualified supplemental retirement plan. The projected benefit obligations at September 30, 1999 and 1998 for this plan were $23.2 and $23.5, respectively, and the net periodic pension cost was $3.0 for 1999, $2.8 for 1998 and $2.3 for 1997. The related intangible asset amounts included in prepaid pension cost were $1.5 at December 31, 1999 and $2.0 at December 31, 1998. At December 31, 1999, prepaid pension cost also included $7.5 held in Rabbi trusts for certain beneficiaries of this plan. The costs recognized by Ceridian with respect to its defined contribution retirement plans were $7.9 in 1999, $8.9 in 1998 and $6.7 in 1997.

- --------------------------------------------------------------------------------- FUNDED STATUS OF DEFINED BENEFIT September 30, ---------------------------- RETIREMENT PLAN AT MEASUREMENT DATE 1999 1998 - --------------------------------------------------------------------------------- CHANGE IN PROJECTED BENEFIT OBLIGATION DURING THE PERIOD At beginning of period $ 567.7 $ 542.7 Service cost 2.6 2.0 Interest cost 39.7 42.1 Actuarial (gain) loss (11.9) 27.1 Benefits paid (44.0) (46.2) ------------- -------------- At end of period $ 554.1 $ 567.7 ------------- -------------- CHANGE IN FAIR VALUE OF PLAN ASSETS DURING THE PERIOD At beginning of period $ 552.5 $ 620.3 Actual return on plan assets 67.8 (21.6) Benefits paid (44.0) (46.2) ------------- -------------- At end of period $ 576.3 $ 552.5 ------------- -------------- FUNDED STATUS OF PLAN $ 22.2 $ (15.2) Unrecognized net loss 78.1 105.8 Unrecognized prior service cost 9.0 12.5 Unrecognized net transition asset -- (1.7) ------------- -------------- Net pension asset recognized in the consolidated balance sheet $ 109.3 $ 101.4 ============= ============== - ---------------------------------------------------------------------------------

ASSUMPTIONS USED IN CALCULATIONS 1999 1998 1997 - ------------------------------------------------------ -------- -------- -------- Discount rate 7.50% 7.00% 7.75% Rate of compensation increase 4.00% 4.00% 4.50% Expected return on plan assets 9.50% 9.50% 9.50% - ------------------------------------------------------ -------- -------- --------

- --------------------------------------------------------------------------------- NET PERIODIC PENSION COST (CREDIT) 1999 1998 1997 - --------------------------------------------------------------------------------- Service cost $ 2.6 $ 2.0 $ 1.7 Interest cost 39.7 42.1 42.5 Expected return on plan assets (54.9) (53.8) (53.1) Net amortization and deferral 4.7 1.8 2.3 ----------------------------- Total $ (7.9) $ (7.9) $ (6.6) ======== ======== ======== - ---------------------------------------------------------------------------------

From Page 32 of the Ceridian Annual Report POSTRETIREMENT BENEFITS Ceridian provides health care and life insurance benefits for eligible retired employees, including individuals who retired from operations of Ceridian that were subsequently sold or discontinued. Ceridian sponsors several health care plans in the U.S. for both pre- and post-age 65 retirees. Company contributions to these plans differ for various groups of retirees and future retirees. Employees hired on or after January 1, 1992 may enroll at retirement in company-sponsored plans with no company subsidy. Employees hired before and retiring after that date may enroll in plans that subsidize pre-age 65 coverage only. Employees who retired prior to 1992 are subject to various cost-sharing policies depending on when retirement began and eligibility for Medicare. This is a closed group. Most retirees outside the United States are covered by governmental health care programs, and Ceridian's cost is not significant. The following tables present the amounts and changes in the aggregate benefit obligation at the beginning and end of and for each of the last two measurement periods and the components of net periodic postretirement benefit cost for the plans for the last three years. For 1999, the measurement date was changed from December 31 to September 30 without any material impact on amounts presented. Ceridian does not prefund these costs.

- --------------------------------------------- FUNDED STATUS OF POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE PLANS - --------------------------------------------- 1999 1998 -------- -------- CHANGE IN BENEFIT OBLIGATION At beginning of period $44.6 $44.9 Service cost 0.1 0.1 Interest cost 3.0 3.0 Participant contributions 1.1 1.6 Actuarial loss (gain) (4.1) 0.1 Benefits paid (2.9) (5.1) ------------------- At end of period $41.8 $44.6 ------------------- CHANGE IN PLAN ASSETS At beginning of period $ -- $ -- Company contributions 1.8 3.5 Participant contributions 1.1 1.6 Benefits paid (2.9) (5.1) ------------------- At end of period $ -- $ -- ------------------- FUNDED STATUS OF PLAN Benefit obligation, net $41.8 $44.6 Unrecognized actuarial loss 10.4 6.5 ------------------- At end of period $52.2 $51.1 ===== ===== - --------------------------------------------- Current portion $ 6.0 $ 6.0 Noncurrent portion 46.2 45.1 ------------------- Total $52.2 $51.1 ===== ===== - ---------------------------------------------

- --------------------------------------------------- NET PERIODIC POSTRETIREMENT BENEFIT COST - --------------------------------------------------- 1999 1998 1997 ------ ------ ----- Service cost $ 0.1 $ 0.1 $ 0.2 Interest cost 3.0 3.0 3.6 Actuarial gain amortization (0.2) (0.2) (0.1) Other -- 0.4 (0.6) - --------------------------------------------------- Net periodic benefit cost $ 2.9 $ 3.3 $ 3.1 ====== ======= ===== - ---------------------------------------------------

The assumed health care cost trend rate used in measuring the benefit obligation is 9% for pre-age 65 and 5.75% for post-age 65 in 1999, with pre-age 65 rates declining at a rate of 1% per year to an ultimate rate of 5.75% in 2003. A one percent increase in this rate would increase the benefit obligation at September 30, 1999 by $2.5 and the aggregate service and interest cost for the 1999 measurement period by $0.2. A one percent decrease in this rate would decrease the benefit obligation at September 30, 1999 by $2.2 and the aggregate service and interest cost for the 1999 measurement period by $0.2. The weighted average discount rates used in determining the benefit obligation at the measurement dates were 7.5% for 1999 and 7.0% for 1998. From Page 33 of the Ceridian Annual Report G. STOCK PLANS During the three-year period ended December 31, 1999, Ceridian provided stock-based compensation plans for directors, officers, other employees, consultants and independent contractors. The 1996 Director Performance Incentive Plan authorizes the issuance of up to 250,000 shares in connection with awards of stock options and non-performance restricted stock to non-employee directors of Ceridian. An annual grant of a non-qualified stock option to purchase 4,000 shares (3,000 shares before 1998) is made to each eligible director with such grants becoming fully exercisable six months after the date of grant. The exercise price of the options is the fair market value of the underlying stock at the date of grant, and the options expire in ten years. A one-time award of non-performance restricted shares is made to each non-employee director when the director first joins the Board with restrictions on transfer that will ordinarily lapse annually over a five-year period. The number of shares awarded will have a fair market value equal to two and one-half times (four times before 1998) the then current annual retainer paid to non-employee directors. Additionally, one-half of the annual retainer for each non-employee director is also provided in the form of restricted stock. The restrictions on transfer of the retainer restricted stock awards will lapse at the conclusion of the director's service. The 1999 Stock Incentive Plan ("1999 SIP") authorizes the issuance until February 2, 2009 of up to 12,695,048 common shares, which includes remaining shares that were authorized and available for grant under the 1993 Long-Term Incentive Plan, as amended ("1993 LTIP"), in connection with awards of stock options, restricted stock awards and performance unit awards to eligible

----------------------------------------------------------------------------------------------------- Weighted- Average STOCK PLANS Exercise Option Available Price Price Per Share Outstanding Exercisable for Grant of Options ----------------------------------------------------------------------------------------------------- At December 31, 1996 $0.89 -$26.13 10,603,124 3,688,900 3,335,042 $15.28 ----------------------------------------------------------------------------------------------------- Authorized 6,000,000 Granted 15.32 - 22.38 4,505,500 (4,505,500) 20.13 Became exercisable 1.33 - 26.13 2,938,656 Exercised 1.33 - 22.38 (1,494,356) (1,494,356) 9.08 Canceled 1.33 - 25.38 (1,353,580) (70,420) 1,262,382 21.13 Expired 8.08 (13,494) (13,494) 8.08 ESPP purchases (478,338) Restricted stock, net 338,850 Performance units forfeited 12,000 ----------------------------------------------------------------------------------------------------- At December 31, 1997 $0.89 -$26.13 12,247,194 5,049,286 5,964,436 $17.18 ----------------------------------------------------------------------------------------------------- Authorized 3,006,000 Granted 18.63 - 33.16 5,109,000 (5,109,000) 27.42 Became exercisable 4.43 - 28.10 2,200,162 13.00 Exercised 0.89 - 26.13 (2,804,050) (2,804,050) Canceled 6.47 - 33.16 (1,058,196) (82,194) 980,448 20.68 Expired 5.92 (2,280) (2,280) (360,062) 5.92 ESPP purchases (202,988) Restricted stock, net 630,522 Performance units forfeited 8,000 ----------------------------------------------------------------------------------------------------- At December 31, 1998 $3.09 - $33.16 13,491,668 4,360,924 4,917,356 $21.65 ----------------------------------------------------------------------------------------------------- AUTHORIZED 12,695,048 ABR CONVERSION 5.08 - 42.64 844,393 428,335 GRANTED 19.94 - 38.97 3,891,970 (3,891,970) 22.73 BECAME EXERCISABLE 6.47 - 34.58 3,038,429 EXERCISED 3.76 - 29.00 (1,265,599) (1,265,599) 14.98 CANCELED 6.47 - 36.78 (1,031,166) (70,019) 932,488 25.36 EXPIRED 7.65 (1,860) (1,860) (2,695,048) 7.65 ESPP PURCHASES (239,073) UK PLAN PURCHASES (296) RESTRICTED STOCK, NET 37,864 PERFORMANCE UNITS FORFEITED 14,660 ----------------------------------------------------------------------------------------------------- AT DECEMBER 31, 1999 $3.09 - $42.64 15,929,406 6,490,210 11,771,029 $22.26 ----------------------------------------------------------------------------------------------------- COMMON SHARES RESERVED FOR FUTURE ISSUANCE AT DECEMBER 31, 1999 WERE 27,700,435. -----------------------------------------------------------------------------------------------------

participants in the 1999 SIP. Eligible participants in the 1999 SIP include all employees of Ceridian and any non-employee director, consultant and independent contractor of Ceridian. The 1993 LTIP and the 1994 Stock Option Plan ("1994 SOP"), which provided awards of stock options and restricted stock to executive officers and other key employees of Ceridian, expired on December 31, 1999 and December 31, 1998, respectively. Stock options awarded under the 1999 SIP and its predecessor plans generally vest annually either over a three-year period or on a specific date if certain performance criteria are satisfied, have 10-year terms and have an exercise price that may not be less than the fair market value of the underlying stock at the date of grant. Options that remain outstanding under the 1993 LTIP, the 1994 SOP and other predecessor plans are subject to similar terms as the 1999 SIP. The 1999 SIP gives discretion to the Compensation and Human Resources Committee (the committee of the Board of Directors of Ceridian that administers the 1999 SIP) to determine the effect that a change of control of Ceridian will have upon awards made under that plan. The vesting of stock option awards granted in 1999 under the 1999 SIP will accelerate upon a change of control of Ceridian. The predecessor employee plans also provide for the accelerated exercisability of options and the accelerated lapse of transfer restrictions on restricted stock if a participant's employment terminates for specified reasons within two years of a change of control of Ceridian. From Page 34 of the Ceridian Annual Report Another 844,393 authorized shares were added to outstanding options as a result of the conversion of certain options held by optionees in certain plans of ABR Information Services, Inc. ("ABR") when ABR was acquired by Ceridian in mid-1999. With the exception of options held by certain key executives, the converted options vested upon the acquisition of ABR, but otherwise remain under the same terms and conditions as the original grants, which included an option price at not less than fair market value at date of grant, vesting at 25% of grant annually and expiration ten years after date of original grant. During 1998, Ceridian reserved 1,000,000 common shares for a new stock-based compensation plan ("UK Plan") for certain employees in its operations in the United Kingdom. The Employee Stock Purchase Plan ("ESPP"), as amended in 1998 to authorize an additional 2,000,000 shares, provides for the issuance of up to 3,000,000 shares of newly issued or treasury common stock of Ceridian to eligible employees. The purchase price of the stock to ESPP participants is 85% of the lesser of the fair market value on either the first day or the last day of the applicable three-month offering period. As reported in Note A, Ceridian adopted the disclosure-only provisions of FAS 123 and continues to account for stock-based compensation as in prior years. Therefore, no expense is recorded with respect to Ceridian's stock option or employee stock purchase plans, and compensation expense (credit) of $0.9 in 1999, $(3.3) in 1998 and $(2.4) in 1997 were included in continuing operations in connection with restricted stock awards.

STOCK OPTION INFORMATION AS OF DECEMBER 31, 1999 - --------------------------------------------------------------------------------------- Options Outstanding Options Exercisable ---------------------------------------- -------------------------- Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Number Contractual Exercise Number Exercise Prices Outstanding Life Price Exercisable Price - ----------------- ------------ ------------- ----------- ------------ ------------ $ 3.09 - $19.94 2,193,257 5.12 $12.21 1,809,937 $11.09 $19.95 - $21.00 5,453,195 8.74 $20.09 1,639,771 $20.38 $21.01 - $26.60 3,520,563 7.47 $23.26 1,747,989 $23.55 $26.61 - $27.69 3,175,484 8.80 $27.38 739,839 $27.38 $27.70 - $42.64 1,586,907 8.24 $31.14 552,674 $32.33 - ------------------------------------------------------------------------------------- $ 3.09 - $42.64 15,929,406 7.92 $22.26 6,490,210 $20.46 - -------------------------------------------------------------------------------------

- --------------------------------------------- ----------- -------------- ------------ PRO FORMA EFFECT OF FAIR VALUE ACCOUNTING 1999 1998 1997 - --------------------------------------------- ----------- -------------- ------------ Net earnings as reported $148.9 $189.8 $472.4 Pro forma net earnings $129.9 $175.7 $462.6 Diluted earnings per share as reported $1.01 $1.29 $2.96 Pro forma diluted earnings per share $0.88 $1.19 $2.90 - --------------------------------------------- ----------- -------------- ------------ WEIGHTED-AVERAGE ASSUMPTIONS Expected lives in years 4-8 4-8 4-8 Expected volatility 37.4% 34.5% 32.7% Expected dividend rate -- -- -- Risk-free interest rate 6.3% 4.8% 5.3% - --------------------------------------------- ----------- -------------- ------------

- ----------------------------------------------------------------------- -- --- --- -- WEIGHTED AVERAGE FAIR VALUES OF GRANTS, AWARDS AND PURCHASES - ----------------------------------------------------------------------- -- --- --- -- 1999 1998 1997 SHARES FAIR VALUE SHARES FAIR VALUE SHARES FAIR VALUE ---------- ----------- ---------- ---------- --------- ---------- Stock options 3,891,970 $7.97 5,109,000 $8.82 4,505,500 $6.90 ESPP 239,073 $5.16 202,988 $1.08 478,338 $2.40 - ------------------ ---------- ----------- ---------- ---------- ---------- ---------

The following disclosure, including referenced tables, is provided with respect to the provisions of FAS 123. Ceridian employs the Black-Scholes option pricing model for determining the fair value of stock option grants, restricted stock awards and ESPP purchases, as presented in an accompanying table. Weighted average exercise prices for stock option activity and options outstanding at December 31, 1999, 1998 and 1997 are included in the Stock Plans table on the previous page. Further information on outstanding and exercisable stock options by exercise price range as of the end of the current year is disclosed in an accompanying table. Ceridian is required to report the pro forma effect on net earnings and earnings per share that would have resulted if the fair value method of accounting for stock-based compensation issued in those years had been adopted. The application of the fair value method would have resulted in the determination of compensation cost for grants of stock options and purchases under the ESPP and would have eliminated from the related compensation cost the revaluation to market price of unvested awards of restricted stock. Such compensation cost would then be allocated to the related period of service. The results of this calculation and the assumptions used appear in the accompanying pro forma table. From Page 35 of the Ceridian Annual Report H. FINANCING On June 10, 1999, Ceridian completed a Rule 144A senior notes offering with registration rights and a face amount of $450.0, which was sold through initial purchasers led by Banc of America Securities LLC. Pursuant to the terms of this private debt offering, Ceridian registered like senior notes with the SEC on a Form S-4 that was declared effective on September 20, 1999. Holders of $445.0 of the privately held notes subsequently exchanged their holdings for registered senior notes. Ceridian applied the private debt offering net proceeds of $445.6 to the payment of a $450.0 short-term loan with Bank of America National Trust and Savings Association. Those proceeds, along with Ceridian funds and an advance of $210.0 on Ceridian's $250.0 domestic revolving credit agreement at an average interest rate of 5.7% per annum, provided funding for the acquisition of ABR. The original issue discount of $4.4, recorded as an offset to senior notes, and capitalizable issue costs of $0.8, recorded as other noncurrent assets, will be amortized to interest expense over the term of the senior notes. The senior notes have a five-year term, a coupon interest rate of 7.25% per annum payable semiannually beginning December 1, 1999, and mature on June 1, 2004. Based on quoted market prices for the same or similar securities or current rates offered to Ceridian for debt of the same maturities, the estimated fair value of the senior notes at December 31, 1999 was $436.5. At December 31, 1999, the amount of advances outstanding under a $250.0 domestic revolving credit facility, arranged with a commercial bank syndicate in July 1997, amounted to $125.0, along with $3.5 of letters of credit. No amount of advances was outstanding at December 31, 1998. The domestic credit facility is unsecured and has a

- ----------------------------------------------------------------------------- DECEMBER 31, -------------------------- DEBT OBLIGATIONS 1999 1998 - ----------------------------------------------------------------------------- Revolving credit agreements and overdrafts $ 163.7 $ 53.9 Senior notes, net of discount 446.1 -- Other long-term debt obligations 1.5 0.6 ----------- ------------- Total debt obligations 611.3 54.5 Less short-term debt and current portions of long-term debt 0.2 0.3 ----------- ------------- Long-term obligations, less current portions $ 611.1 $ 54.2 =========== ============= - -----------------------------------------------------------------------------

- ----------------------------------------------------------------------------- AGGREGATE AMOUNTS OF MATURITIES AT DECEMBER 31, 1999 - ----------------------------------------------------------------------------- 2000 2001 2002 2003 2004 Total ------------------------------------------------------- Revolving credit $ -- $ -- $ 163.7 $ -- $ -- $ 163.7 Senior notes -- -- -- -- 446.1 446.1 Other 0.2 0.2 -- 1.1 -- 1.5 ------- ------ ------- -------- ------- --------- Total $ 0.2 $ 0.2 $ 163.7 $ 1.1 $ 446.1 $ 611.3 ======= ====== ======= ======== ======= ========= - -----------------------------------------------------------------------------

final maturity of July 31, 2002. The full amount of the credit facility may be utilized for revolving loans and up to $75.0 of the credit facility may be used to obtain standby letters of credit. The pricing of the credit facility for both loans and letters of credit is determined based on Ceridian's senior unsecured debt ratings. Under the terms of the credit facility, Ceridian's consolidated debt must not exceed its stockholders' equity as of the end of any fiscal quarter, and the ratio of Ceridian's EBIT to interest expense on a rolling four quarter basis must be at least 2.75 to 1. The credit facility also limits liens, subsidiary debt, contingent obligations, operating leases, minority equity investments and divestitures. At December 31, 1999, Ceridian was in compliance with all covenants contained in the credit facility. During first quarter 1998 and in connection with the purchases of two payroll services businesses in Canada, Ceridian entered into two revolving credit arrangements which expire on July 31, 2002 with Canadian banks through a Canadian subsidiary. The initial borrowings amounted to $70.4 in the aggregate, carry interest rates of approximately 5.5% per annum and had aggregate outstanding balances at December 31, 1999 and 1998 of $38.7 and $53.9, respectively. No additional advances have been drawn against the Canadian credit arrangements since the initial borrowings. Other borrowing activities during 1999 and 1998 primarily involved small revolving credit or overdraft credit lines of subsidiaries. From Page 36 of the Ceridian Annual Report I. LEASING Ceridian conducts a substantial portion of its operations in leased facilities. Most of these leases contain renewal options and require payments for taxes, insurance and maintenance. Ceridian remains secondarily liable for future rental obligations related to assigned leases totaling $7.7 at December 31, 1999. Ceridian does not anticipate any material non-performance by the assignees of these leases. Virtually all leasing arrangements for equipment and facilities are operating leases and the rental payments under these leases are charged to operations as incurred. The amounts in the accompanying tables do not include assigned leases or obligations recorded as liabilities. The amounts of rental expense and sublease income for each of the three years ended December 31, 1999 appear in the Rental Expense table.

- --------------------------------------------- RENTAL EXPENSE 1999 1998 1997 - --------------------------------------------- Rental expense $43.2 $38.6 $38.8 Sublease rental income (1.8) (2.27) (1.7) ----- ----- ---- Net rental expense $41.4 $36.4 $37.1 ===== ===== ==== - ----------------------------------------------

Future minimum noncancelable lease payments on operating leases existing at December 31, 1999, and which have an initial term of more than one year, are described in the Future Minimum Lease Payments table.

- ----------------------------------------- FUTURE MINIMUM LEASE PAYMENTS - ----------------------------------------- 2000 $42.1 2001 36.5 2002 28.5 2003 21.2 2004 15.6 Thereafter 44.8 - -----------------------------------------

From Page 37 of the Ceridian Annual Report J. INVESTING ACTIVITY As of June 7, 1999, Ceridian acquired ABR Information Services, Inc. ("ABR"), now known as Ceridian Benefits Services, as a result of a tender offer for all outstanding shares of ABR common stock at a price of $25.50 per share in cash and a subsequent merger on July 22, 1999. ABR provided comprehensive benefits administration, payroll and human resource services to employers of all sizes. The purchase price of $751.8 included $720.9 for tendered shares, $12.7 for ABR shares converted to the right to receive $25.50 per share and $6.7 for Ceridian direct acquisition costs. The purchase price also included the exchange of Ceridian stock options valued at $11.5 for any unexercised ABR stock options outstanding. The value assigned to the net assets of ABR that were acquired by Ceridian amounted to $62.7, and the total goodwill and other intangibles of $689.1 is being amortized on average over a 30-year period. The allocation of purchase price resulted in the recording of acquired assets and liabilities listed in the table below. Property, plant and equipment of $66.2 included $15.6 of construction in progress related to an ABR office facility in St. Petersburg, Fla.

- ------------------------------------- ALLOCATION OF ABR PURCHASE PRICE - ------------------------------------- Cash and equivalents $ 77.4 Short-term investments 25.3 Receivables 12.5 Other current assets 1.4 Property, plant and equipment 66.2 Goodwill 602.1 Other intangibles 87.0 Customer funds payable (26.7) Accrued acquisition costs (18.9) Deferred income taxes (26.5) Other liabilities (48.0) -------- Total purchase cost $ 751.8 ======== - -------------------------------------

- ------------------------------------------------------------------- December 31, PRO FORMA INFORMATION (UNAUDITED) 1999 1998 - ------------------------------------------------------------------- Pro forma revenue $1,400.4 $ 1,245.5 Pro forma earnings from continuing operations $ 134.7 $ 111.5 Diluted shares used in calculations (in thousands) 147,964 147,597 Pro forma diluted earnings per share $ 0.91 $ 0.76 Historical diluted earnings per share as reported $ 1.01 $ 1.11 - -------------------------------------------------------------------

The 1999 net investing cash outflows related to the ABR acquisition, after reduction for cash and equivalents acquired of $77.4, amounted to $681.5. These outflows included payments of $720.9 for shares tendered in June, $12.7 deposited in July for the remaining shares, and payments of $6.4 for Ceridian direct acquisition costs and $18.9 for ABR liabilities directly related to the acquisition. The directly related ABR liabilities assumed included payments during 1999 of $11.4 paid in July to buy out vested ABR stock options and $7.5 for investment consulting fees. The above unaudited pro forma information presents the results of operations of Ceridian for the twelve-month periods ended December 31, 1999 and 1998 as if the acquisition of ABR had taken place on January 1, 1998. ABR earnings for the 1998 period included a $11.0 write-off of purchased in-process research and development and a $13.8 software write-off. During first quarter 1999, Comdata acquired a majority interest in Stored Value Systems, Inc. ("SVS"). Comdata has the option to purchase the remainder of SVS in 2000. The acquisition required payments by Comdata of $7.3 to SVS to retire an amount due to its former parent company and $13.0 to other investors. Revenue of SVS was approximately $15.0 in 1998. During first quarter 1998, Ceridian, through a Canadian subsidiary, acquired the payroll services businesses of two Canadian banks for a total cash payment of $140.7 of which $70.4 was borrowed from the sellers. The acquisitions resulted in the recording of $123.5 of goodwill. Pre-acquisition revenue for these operations was approximately $65.0 in 1997. Substantially all of the 1998 revenue for these businesses was reported in Ceridian's revenue. In November 1998, Ceridian acquired the work-life services business of Work/Family Directions, Inc., which had estimated pre-acquisition revenue of approximately $52.0 in 1998 and $57.0 in 1997. The acquisition resulted in a cash payment of $77.5 and the recording of $66.5 of goodwill. In May 1998, Ceridian purchased certain assets of Tapscan, Inc., which, along with other minor purchase acquisitions made during 1998, resulted in cash payments totaling $14.7, deferred payment obligations of $3.0 and goodwill of $13.6. In January 1998, Comdata exchanged its gaming services business for First Data Corporation's NTS transportation services business and $50.5 in cash. The net cash inflow from the exchange was $30.1 and the net reduction in goodwill was $44.1. During the year, Ceridian sold its Resumix and Tesseract operations, along with other smaller businesses and assets. The aggregate net cash proceeds from these sales were $19.4 with no material gain or loss. During 1997, Ceridian sold CDI as further described in Note B. Also during 1997, Ceridian acquired or invested in seven small businesses. The aggregate consideration for these acquisitions and investments consisted of $30.0 in cash, assumption of $8.6 of debt and 1,885,340 shares of Ceridian's common stock. Goodwill recorded for these transactions was $40.2. From Page 38 of the Ceridian Annual Report K. COMMITMENTS AND CONTINGENCIES COMMITMENTS In 1995, Comdata extended its contract arrangements with IBM Global Services for substantially all data processing functions for a term of ten years. Under the terms of the agreement as amended, the minimum monthly fee was $1.4 in 1997, $1.6 in 1998 and $1.8 in 1999 and thereafter. The expenses incurred under these contract arrangements were $23.1 in 1999, $20.8 in 1998 and $17.6 in 1997. Cancellation of the agreement for convenience in 2000 would require payment of a termination fee of $7.5. Under a Telecommunications Services Agreement with WilTel, Comdata has agreed to purchase a minimum of $1.1 of such services each month until January 2003. Comdata is able to terminate its minimum purchase commitment at such time as it has purchased an aggregate of $45.0 in services under the Agreement. Cancellation of the Agreement for convenience would result in a cancellation charge equal to 12.5% of the average monthly revenue during the last 12 months times the number of full months remaining in the term of such Agreement. Purchases charged to expense under the Agreement and its predecessors amounted to $14.5 in 1999, $17.1 in 1998 and $20.3 in 1997. INTEREST RATE COLLARS During 1999, Ceridian maintained in effect an average notional amount of collars of $991.3 for the purpose of hedging interest rate risk on invested customer deposits held in its U.S. tax filing and Canadian payroll trusts. The counterparties to these arrangements are commercial banks with debt ratings of A or better. Under current accounting standards, neither the collar arrangements nor the related trust investments and offsetting liability to customers are reflected in Ceridian's balance sheets. These arrangements, which do not require collateral, require the banks to pay Ceridian the amount by which a certain index of short-term interest rates falls below a specified floor strike level. Alternatively, when that index exceeds a specified cap strike level, Ceridian is required to pay out the excess above the cap strike level. At December 31, 1999, Ceridian had fourteen collar transactions in effect with an aggregate notional amount of $1,069.2, remaining terms of 5 to 53 months, floor strike levels ranging from 4.75% to 6.0% (averaging 5.22%) and cap strike levels ranging from 5.6% to 8.18% (averaging 6.78%). The risk of accounting loss through non-performance by the counterparties under any of these arrangements is considered negligible. From Page 39 of the Ceridian Annual Report L. LEGAL MATTERS Ceridian and its subsidiaries are involved in a number of judicial and administrative proceedings considered normal in the nature of its current and past operations, including employment-related disputes, contract disputes, government proceedings, customer disputes and tort claims. In some proceedings, the claimant seeks damages as well as other relief, which, if granted, would require substantial expenditures on the part of Ceridian or its subsidiaries. Some of these matters raise difficult and complex factual and legal issues, and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular action, and the jurisdiction, forum and law under which each action is proceeding. Because of this complexity, final disposition of some of these proceedings may not occur for several years. As such, Ceridian is not always able to estimate the amount of its possible future liabilities related to these matters. There can be no certainty that Ceridian may not ultimately incur charges in excess of presently or future established accruals or insurance coverage. Although occasional adverse decisions (or settlements) may occur, it is the opinion of management that the final disposition of these proceedings will not, considering the merits of the claims and established reserves, have a material adverse effect on Ceridian. SECURITIES LITIGATION SETTLEMENT In 1997, Ceridian and ten of its current and former executive officers were named as defendants in the consolidated class action complaint filed by five Ceridian shareholders in U.S. District Court in Minnesota. The lawsuit arose out of Ceridian's announcement, on August 26, 1997, that it had decided to terminate further development of its CII payroll processing software system. The named plaintiffs, who purport to act on behalf of a class of purchasers of Ceridian common stock during the period from January 23, 1996 to August 26, 1997, alleged in their consolidated complaint that the defendants provided false and misleading information regarding the development of the CII system and the impact that system would have on Ceridian's future operations, concealed problems with the development of the CII system and improperly capitalized the costs of the CII development effort, thereby overstating Ceridian's financial results during the development period. On March 31, 1999, the U.S. District Court dismissed the suit, but permitted the plaintiffs to file an amended complaint. The plaintiffs filed an amended consolidated complaint dated May 28, 1999. On January 3, 2000, the U.S. District Court preliminarily approved a settlement of this litigation. A hearing with the U.S. District Court to finalize the settlement is scheduled for March 21, 2000. Ceridian and the individual defendants deny any wrongdoing or liability related to the lawsuit, but have concluded that further conduct of the litigation would be expensive and protracted. It is the opinion of management that the proposed settlement of $5 million plus up to $175,000 in administrative costs, a portion of which will be covered by insurance, will not have a material adverse effect on Ceridian's financial position or results of operations. From Page 40 of the Ceridian Annual Report EX-13.04 13 EX-13.04 Exhibit 13.04

SUPPLEMENTARY QUARTERLY DATA (Unaudited) (Dollars in millions, except per share data) - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ 4TH 3RD 2ND 1ST 4th 3rd 2nd 1st QUARTER QUARTER QUARTER QUARTER Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ Revenue $ 361.4 $ 337.3 $ 322.2 $ 321.4 $ 309.6 $ 286.1 $ 284.1 $ 282.3 Costs and Expenses Cost of revenue 174.8 159.6 151.3 144.8 150.4 137.2 135.0 128.9 Selling, general and administrative 98.7 94.8 93.5 92.6 78.5 77.7 79.3 80.5 Research and development 19.9 17.4 18.5 18.6 20.0 20.1 20.3 17.4 Other expense (income) (1) -- (0.6) 1.1 0.6 (9.2) 0.6 1.2 0.6 --------------------------------------------------------------------------------------------- Total costs and expenses 293.4 271.2 264.4 256.6 239.7 235.6 235.8 227.4 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE INTEREST AND TAXES 68.0 66.1 57.8 64.8 69.9 50.5 48.3 54.9 Interest income 1.1 1.5 2.1 1.7 2.5 2.7 2.5 2.7 Interest expense (10.1) (10.5) (3.2) (0.9) (1.0) (1.1) (1.5) (0.7) - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE INCOME TAXES 59.0 57.1 56.7 65.6 71.4 52.1 49.3 56.9 Income tax provision (2) 22.5 22.2 21.0 23.8 7.3 18.9 18.0 21.1 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS FROM CONTINUING OPERATIONS 36.5 34.9 35.7 41.8 64.1 33.2 31.3 35.8 Discontinued operations (3) Gain on sale -- -- -- -- 25.4 -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET EARNINGS $ 36.5 $ 34.9 $ 35.7 $ 41.8 $ 89.5 $ 33.2 $ 31.3 $ 35.8 ======= ======= ======= ======= ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS PER SHARE (4)(5) BASIC Continuing operations $ 0.25 $ 0.24 $ 0.25 $ 0.29 $ 0.45 $ 0.23 $ 0.22 $ 0.25 Net earnings $ 0.25 $ 0.24 $ 0.25 $ 0.29 $ 0.62 $ 0.23 $ 0.22 $ 0.25 DILUTED Continuing operations $ 0.25 $ 0.24 $ 0.24 $ 0.28 $ 0.44 $ 0.23 $ 0.21 $ 0.24 Net earnings $ 0.25 $ 0.24 $ 0.24 $ 0.28 $ 0.61 $ 0.23 $ 0.21 $ 0.24 SHARES USED IN CALCULATIONS (5) (IN THOUSANDS) Weighted average shares (basic) 144,676 144,743 144,590 144,086 143,234 144,020 144,931 144,110 Dilutive securities 1,082 2,673 4,265 5,025 3,920 3,500 3,670 3,085 Weighted average shares (diluted) 145,758 147,416 148,855 149,111 147,154 147,520 148,601 147,195 - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK-PER SHARE Market price ranges (5)(6) High 24 33 1/4 38 1/16 40 1/2 36 32 1/4 30 7/8 27 13/16 Low 16 5/8 24 3/4 30 7/16 33 1/4 24 24 1/4 25 5/16 21 3/4 No cash dividends have been declared on common stock during the periods presented. - ------------------------------------------------------------------------------------------------------------------------------------

(1) Includes fourth quarter 1998 unusual gains of $9.2 as described in Note B. (2) For information on a fourth quarter 1998 unusual tax benefit, see Note D. (3) For information on discontinued operations, see Note B. (4) For information on the calculation of earnings per share, see Note A. (5) Reflects a 2-for-1 stock split in the form of a 100% stock dividend announced January 20, 1999 and effective for holders of record on February 10, 1999. (6) From the New York Stock Exchange - Composite Transactions Listing. - -------------------------------------------------------------------------------- Page 41 of the Ceridian Annual Report EX-21.01 14 EX-21.01 EXHIBIT 21.01 CERIDIAN CORPORATION SUBSIDIARIES FEBRUARY 29, 2000

STATE OR OTHER JURISDICTION SUBSIDIARIES AND THEIR AFFILIATES: OF INCORPORATION - ---------------------------------- ------------------ ABR Information Services, Inc Florida ABR Employer Services, Inc. Florida ABR Properties, Inc. Florida BMC Consultants, Inc. Colorado Ceridian Benefits Services, Inc. Florida (f/k/a ABR Benefits Services, Inc. Ceridian Retirement Plan Services, Inc. Florida (f/k/a ABR Retirement Plan Services, Inc.) Charing Company, Inc. Wisconsin Chowning, Ltd. Wisconsin The Barrington Group Wisconsin Matthews, Malone & Associates, Ltd. Arizona MidAtlantic 401(K) Services, Inc. Virginia Western Pension Service Corporation California Ceridian Investors Advisors, Inc. Florida (f/k/a ABR Investment Advisors, Inc.) Ceridian Canada Holdings, Inc. Delaware Ceridian Canada Ltd. Canada Ceridian Performance Partners Ltd. Canada Ceridian Holdings U.K. Limited United Kingdom Centre-file Limited (f/k/a Datacarrer Limited) United Kingdom CSW Research Limited United Kingdom Ceridian Performance Partners Limited United Kingdom (f/k/a Letterallied Limited) Usertech UK Limited United Kingdom Ceridian Infotech (India) Private Limited India Ceridian Tax Service, Inc. California Comdata Network, Inc. Maryland Comdata Network Inc. of California California Comdata Telecommunications Services, Inc. Delaware International Automated Energy Systems, Inc. Florida Permicom Permits Services, Inc. Canada Stored Value Systems, Inc. Delaware Partnership Group, Inc., The Pennsylvania POWERPAY.COM INC. New Jersey (f/k/a Ceridian Small Business Solutions, Inc.) Scarborough Research (General Partnership) Delaware User Technology Services Inc. New York

Certain subsidiaries, which in the aggregate would not constitute a significant subsidiary, are omitted from this listing. EX-23.01 15 EX-23.01 EXHIBIT 23.01 CONSENT OF INDEPENDENT AUDITORS The Board of Directors of Ceridian Corporation: We consent to incorporation by reference in Registration Statements Nos. 33-49601, 33-61551, 33-34035, 2-97570, 33-56833, 33-54379, 33-56325, 33-62319, 33-64913, 333-01793, 333-01887, 333-03661, 333-28069, 333-58143, 333-58145, 333-66643, 333-50757, 333-83455 and 333-89565 on Form S-8 of Ceridian Corporation of our reports dated January 25, 2000. Such reports relate to the consolidated financial statements and related financial statement schedule of Ceridian Corporation and subsidiaries as of December 31, 1999 and 1998 and for each of the years in the three-year period ended December 31, 1999 and are included or incorporated by reference in the 1999 Annual Report on Form 10-K of Ceridian Corporation. /s/ KPMG LLP Minneapolis, Minnesota March 23, 2000 EX-24.01 16 EX-24.01 EXHIBIT 24.01 POWER OF ATTORNEY The undersigned, a Director of Ceridian Corporation (the "Company"), a Delaware corporation, does hereby make, nominate and appoint JOHN R. EICKHOFF and GARY M. NELSON, and each of them, to be my attorney-in-fact for three months from the date hereof, with full power and authority to execute for and on behalf of the undersigned the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended; provided that such Form 10-K is first reviewed by the Audit Committee of the Board of Directors of the Company and by my attorney-in-fact, and his name, when thus signed, shall have the same force and effect as though I had manually signed such Form 10-K. I have signed this Power of Attorney as of February 4, 2000. /s/ Bruce R. Bond ------------------------------- Bruce R. Bond /s/ William J. Cadogan ------------------------------- William J. Cadogan /s/ Nicholas D. Chabraja ------------------------------- Nicholas D. Chabraja /s/ Ruth M. Davis ------------------------------- Ruth M. Davis /s/ Robert H. Ewald ------------------------------- Robert H. Ewald /s/ Richard G. Lareau ------------------------------- Richard G. Lareau /s/ Ronald T. LeMay ------------------------------- Ronald T. LeMay /s/ George R. Lewis ------------------------------- George R. Lewis /s/ Lawrence Perlman ------------------------------- Lawrence Perlman /s/ Ronald L. Turner ------------------------------- Ronald L. Turner /s/ Carole J. Uhrich ------------------------------- Carole J. Uhrich /s/ Paul S. Walsh ------------------------------- Paul S. Walsh EX-27.01 17 EX-27.01

<ARTICLE> 5 <MULTIPLIER> 1,000 <PERIOD-TYPE> YEAR <FISCAL-YEAR-END> DEC-31-1999 <PERIOD-END> DEC-31-1999 <CASH> 59,400 <SECURITIES> 22,000 <RECEIVABLES> 479,900 <ALLOWANCES> 19,500 <INVENTORY> 0 <CURRENT-ASSETS> 645,300 <PP&E> 368,700 <DEPRECIATION> 175,900 <TOTAL-ASSETS> 2,059,900 <CURRENT-LIABILITIES> 451,700 <BONDS> 611,100 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <COMMON> 80,800 <OTHER-SE> 761,900 <TOTAL-LIABILITY-AND-EQUITY> 2,059,900 <SALES> 0 <TOTAL-REVENUES> 1,342,300 <CGS> 0 <TOTAL-COSTS> 630,500 <OTHER-EXPENSES> 1,100 <LOSS-PROVISION> 0 <INTEREST-EXPENSE> 24,700 <INCOME-PRETAX> 238,400 <INCOME-TAX> 89,500 <INCOME-CONTINUING> 148,900 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 148,900 <EPS-BASIC> 1.03 <EPS-DILUTED> 1.01

-----END PRIVACY-ENHANCED MESSAGE-----

EX-10.04

                                                                   EXHIBIT 10.04


                                CERIDIAN CORPORATION

                           EXECUTIVE EMPLOYMENT AGREEMENT

PARTIES

                   CERIDIAN CORPORATION (A DELAWARE CORPORATION)
                               8100 34TH AVENUE SOUTH
                         MINNEAPOLIS, MINNESOTA 55425-1640

                                        AND

                                 STEPHEN B. MORRIS
                                   ("EXECUTIVE")


DATE:     OCTOBER 1, 1999

RECITALS

A.     Ceridian wishes to obtain the services of Executive for the duration of
       this Agreement, and Executive wishes to provide his or her services for
       such period.

B.     Ceridian desires reasonable protection of Ceridian's Confidential
       Information (as defined below).

C.     Ceridian desires assurance that Executive will not compete with Ceridian,
       engage in recruitment of Ceridian's employees or make disparaging
       statements about Ceridian after termination of employment, and Executive
       is willing to refrain from such competition, recruitment and
       disparagement.

D.     Executive desires to be assured of a minimum Base Salary (as defined
       below) from Ceridian for Executive's services for the term of this
       Agreement (unless terminated earlier pursuant to the terms of this
       Agreement).

E.     It is expressly recognized by the parties that Executive's acceptance of,
       and continuance in, Executive's position with Ceridian and agreement to
       be bound by the terms of this Agreement represents a substantial
       commitment to Ceridian in terms of Executive's personal and professional
       career and a foregoing of present and future career options by Executive,
       for all of which Ceridian receives substantial value.

F.     The parties recognize that a Change of Control (as defined below) may
       result in material alteration or diminishment of Executive's position and
       responsibilities and substantially

                                       1


       frustrate the purpose of Executive's commitment to Ceridian and
       forebearance of career options.

G.     The parties recognize that in light of the above-described commitment and
       forebearance of career options, it is essential that, for the benefit of
       Ceridian and its stockholders, provision be made for a Change of Control
       Termination (as defined below) in order to enable Executive to accept and
       effectively continue in Executive's position in the face of inherently
       disruptive circumstances arising from the possibility of a Change of
       Control of the Parent Corporation (as defined below), although no such
       change is now contemplated or foreseen.

H.     The parties wish to replace any and all prior agreements and undertakings
       with respect to Executive's employment and Change of Control occurrences
       and compensation.

NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:


                                     ARTICLE I

                                    DEFINITIONS

1.01   "BASE SALARY" shall mean regular cash compensation paid on a periodic
       basis exclusive of benefits, bonuses or incentive payments.

1.02   "BOARD" shall mean the Board of Directors of Parent Corporation.

1.03   "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
       provided in Article VIII and Section 9.02 of Article IX,

       (a)    any Subsidiary (as that term is defined in Section 1.07); and

       (b)    any successor in interest by way of consolidation, operation of
              law, merger or otherwise.

1.04   "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian
       which is not generally available to or used by others, or the utility or
       value of which is not generally known or recognized as standard practice,
       whether or not the underlying details are in the public domain,
       including:

       (a)    information or material relating to Ceridian and its business as
              conducted or anticipated to be conducted; business plans;
              operations; past, current or anticipated software, products or
              services; customers or prospective customers; or

                                       2


              research, engineering, development, manufacturing, purchasing,
              accounting, or marketing activities;

       (b)    information or material relating to Ceridian's inventions,
              improvements, discoveries, "know-how," technological developments,
              or unpublished writings or other works of authorship, or to the
              materials, apparatus, processes, formulae, plans or methods used
              in the development, manufacture or marketing of Ceridian's
              software, products or services;

       (c)    information on or material relating to Ceridian which when
              received is marked as "proprietary," "private," or "confidential;"

       (d)    trade secrets of Ceridian;

       (e)    software of Ceridian in various stages of development, including
              computer programs in source code and binary code form, software
              designs, specifications, programming aids (including "library
              subroutines" and productivity tools), programming languages,
              interfaces, visual displays, technical documentation, user
              manuals, data files and databases of Ceridian; and

       (f)    any similar information of the type described above which Ceridian
              obtained from another party and which Ceridian treats as or
              designates as being proprietary, private or confidential, whether
              or not owned or developed by Ceridian.

       Notwithstanding the foregoing, "Confidential Information" does not
       include any information which is properly published or in the public
       domain; provided, however, that information which is published by or with
       the aid of Executive outside the scope of employment or contrary to the
       requirements of this Agreement will not be considered to have been
       properly published, and therefore will not be in the public domain for
       purposes of this Agreement.

1.05   "DISABILITY" shall mean the inability of Executive to perform his or her
       duties under this Agreement because of illness or incapacity for a
       continuous period of six months.

1.06   "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
       otherwise provided in Article VIII and Section 9.02 of Article IX, any
       successor in interest by way of consolidation, operation of law, merger
       or otherwise.  "Parent Corporation" shall not include any Subsidiary.

1.07   "SUBSIDIARY" shall mean:  (a) any corporation at least a majority of
       whose securities having ordinary voting power for the election of
       directors (other than securities having such power only by reason of the
       occurrence of a contingency) is at the time owned by Parent Corporation
       and/or one or more Subsidiaries; and (b) any division or business unit
       (or portion thereof) of Parent Corporation or a corporation described in
       clause (a) of this Section 1.07.

                                       3


                                     ARTICLE II

                            EMPLOYMENT, DUTIES AND TERM

2.01   EMPLOYMENT.  Upon the terms and conditions set forth in this Agreement,
       Ceridian hereby employs Executive, and Executive accepts such employment.

2.02   DUTIES.  Executive shall devote his or her full-time and best efforts to
       Ceridian and to fulfilling the duties of his or her position which shall
       include such duties as may from time to time be assigned him or her by
       Ceridian, provided that such duties are reasonably consistent with
       Executive's education, experience and background.  Executive shall comply
       with Ceridian's policies and procedures to the extent they are not
       inconsistent with this Agreement in which case the provisions of this
       Agreement prevail.

2.03   TERM.  Subject to the provisions of Articles IV, VII, and VIII, this
       Agreement and Executive's employment shall continue until the later of:
       (a) OCTOBER 1, 2001; and (b) two years after a Change of Control which
       occurs prior to OCTOBER 1, 2001 ("Initial Term").  Upon expiration of the
       Initial Term and subject to the provisions of Articles IV, VII and VIII,
       this Agreement and Executive's employment shall be automatically extended
       for successive two year periods.


                                    ARTICLE III

                             COMPENSATION AND EXPENSES

3.01   BASE SALARY.  For all services rendered under this Agreement during the
       term of this Agreement, Ceridian shall pay Executive a minimum Base
       Salary at the annual rate currently being paid or, if Executive is not
       currently in Ceridian's employ, at the annual rate specified in the
       written offer of employment.  If Executive's salary is increased from
       time to time during the term of this Agreement, the increased amount
       shall be the Base Salary for the remainder of the term.

3.02   BONUS AND INCENTIVE.  Bonus or incentive compensation shall be at the
       sole discretion of Ceridian.  Except as otherwise provided in Article
       VII, Ceridian shall have the right, in accordance with their terms, to
       alter, amend or eliminate any bonus or incentive plans, or Executive's
       participation therein, without compensation to Executive.

3.03   BUSINESS EXPENSES.  Ceridian shall, consistent with its policies in
       effect from time to time, bear all ordinary and necessary business
       expenses incurred by Executive in performing his or her duties as an
       employee of Ceridian, provided that Executive accounts promptly for such
       expenses to Ceridian in the manner prescribed from time to time by
       Ceridian.

                                       4


                                     ARTICLE IV

                                 EARLY TERMINATION

4.01   EARLY TERMINATION.  This Article shall not apply to a Change of Control
       Termination which is governed solely by the provisions of Article VII,
       and does not alter the respective continuing obligations of the parties
       pursuant to Articles V, VI, and IX.

4.02   TERMINATION FOR CAUSE.  Ceridian may terminate this Agreement and
       Executive's employment immediately for cause.  For the purpose hereof
       "cause" means:

       (a)    fraud;

       (b)    misrepresentation;

       (c)    theft or embezzlement of Ceridian assets;

       (d)    intentional violations of law involving moral turpitude;

       (e)    failure to follow Ceridian's conduct and ethics policies; and/or

       (f)    the continued failure by Executive to satisfactorily perform his
              or her duties as reasonably assigned to Executive pursuant to
              Section 2.02 of Article II of this Agreement for a period of 60
              days after a written demand for such satisfactory performance
              which specifically identifies the manner in which it is alleged
              Executive has not satisfactorily performed such duties.

       In the event of termination for cause pursuant to this Section 4.02,
       Executive shall be paid at the usual rate of Executive's annual Base
       Salary through the date of termination specified in any written notice of
       termination.

4.03   TERMINATION WITHOUT CAUSE.  Either Executive or Ceridian may terminate
       this Agreement and Executive's employment without cause on at least 75
       days' written notice.  In the event of termination of this Agreement and
       of Executive's employment pursuant to this Section 4.03, compensation
       shall be paid as follows:

       (a)    if the notice of termination is given by Executive, Executive
              shall be paid at the usual rate of his or her annual Base Salary
              through the 75 day notice period;

       (b)    if the notice of termination is given by Ceridian, (1) Executive
              shall be paid at the usual rate of his or her annual Base Salary
              through the 75 day notice period, however, Ceridian shall have the
              option of making termination of the Agreement and Executive's
              employment effective immediately upon notice in which case
              Executive shall be paid a lump sum representing the value of 75
              days worth of salary; and (2) Executive shall receive, starting
              within 15 days after the end of the

                                       5


              75 day notice period, one year's Base Salary payable, at the
              sole discretion of Ceridian, in either the form of a lump sum
              payment or on a regular payroll period basis.  In addition,
              Executive shall receive the bonus, if any, to which Executive
              would otherwise have become entitled under all applicable
              Ceridian bonus plans in effect at the time of termination of
              this Agreement had Executive remained continuously employed for
              the full fiscal year in which termination occurred and
              continued to perform his or her duties in the same manner as
              they were performed immediately prior to termination,
              multiplied by a fraction, the numerator of which shall be the
              number of whole months Executive was employed in the year in
              which termination occurred and the denominator of which is 12.
              This bonus amount shall be paid within 15 days after the date
              such bonus would have been paid had Executive remained employed
              for the full fiscal year.  In addition, Ceridian shall provide
              or make arrangements for reasonable outplacement services for
              Executive based on his or her level within Ceridian.

       (c)    In the event that termination occurs pursuant to Section 4.03(b),
              in addition to the payments specified therein, Ceridian shall pay
              to Executive an amount equal to one year's Base Salary payable, at
              the sole discretion of Ceridian, in either the form of a lump sum
              payment or on a regular payroll period basis, provided Executive
              executes a release, similar to that attached as Exhibit A, of all
              claims against Ceridian.

4.04   TERMINATION IN THE EVENT OF DEATH OR DISABILITY.  This Agreement and
       Executive's employment shall terminate in the event of death or
       disability of Executive.

       (a)    In the event of Executive's death, Ceridian shall pay an amount
              equal to 12 months of Base Salary at the rate in effect at the
              time of Executive's death plus the amount Executive would have
              received in annual incentive plan bonus for the year in which the
              death occurs had "target" goals been achieved.  Such amount shall
              be paid (1) to the beneficiary or beneficiaries designated in
              writing to Ceridian by Executive, (2) in the absence of such
              designation to the surviving spouse, or (3) if there is no
              surviving spouse, or such surviving spouse disclaims all or any
              part, then the full amount, or such disclaimed portion, shall be
              paid to the executor, administrator or other personal
              representative of Executive's estate.  The amount shall be paid as
              a lump sum as soon as practicable following Ceridian's receipt of
              notice of Executive's death.  All such payments shall be in
              addition to any payments due pursuant to Section 4.04(c) below.

       (b)    In the event of Executive's disability, Base Salary shall be
              terminated as of the end of the month in which the last day of the
              six-month period of Executive's inability to perform his or her
              duties occurs.

       (c)    In the event of termination by reason of Executive's death or
              disability, Ceridian shall pay to Executive any amount equal to
              (1) the amount Executive would have received in annual incentive
              plan bonus for the year in which termination occurs

                                       6


              had "target" goals been achieved, multiplied by (2) a fraction,
              the numerator of which shall be the number of whole months
              Executive was employed in the year in which the death or
              disability occurred and the denominator of which is 12.  The
              amount payable pursuant to this Section 4.04(c) shall be paid
              within 15 days after the date such bonus would have been paid
              had Executive remained employed for the full fiscal year.

4.05   RETIREMENT.  Executive may terminate this Agreement and Executive's
       employment as a result of Executive decision to retire from Ceridian.
       Executive shall provide Ceridian with at least 75 days' written notice of
       the date upon which Executive intends to retire.  Executive shall be paid
       at the usual rate of his or her annual Base Salary through the date of
       retirement stipulated in the written notice.

4.06   ENTIRE TERMINATION PAYMENT.  The compensation provided for in this
       Article IV for early termination of this Agreement and termination
       pursuant to this Article IV shall constitute Executive's sole remedy for
       such termination.  Executive shall not be entitled to any other
       termination or severance payment which may be payable to Executive under
       any other agreement between Executive and Ceridian.


                                     ARTICLE V

                     CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT

5.01   CONFIDENTIALITY.  Executive will not, during the term or after the
       termination or expiration of this Agreement or his/her employment,
       publish, disclose, or utilize in any manner any Confidential Information
       obtained while employed by Ceridian. If Executive leaves the employ of
       Ceridian, Executive will not, without Ceridian's prior written consent,
       retain or take away any drawing, writing or other record in any form
       containing any Confidential Information.

5.02   BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian,
       Executive will engage in no activity or employment which may conflict
       with the interest of Ceridian, and will comply with Ceridian's policies
       and guidelines pertaining to business conduct and ethics.

5.03   DISCLOSURE.  Executive will disclose promptly in writing to Ceridian all
       inventions, discoveries, software, writings and other works of authorship
       which are conceived, made, discovered, or written jointly or singly on
       Ceridian time or on Executive's own time, providing the invention,
       improvement, discovery, software, writing or other work of authorship is
       capable of being used by Ceridian in the normal course of business, and
       all such inventions, improvements, discoveries, software, writings and
       other works of authorship shall belong solely to Ceridian.

                                       7


5.04   INSTRUMENTS OF ASSIGNMENT.  Executive will sign and execute all
       instruments of assignment and other papers to evidence vestiture of
       Executive's entire right, title and interest in such inventions,
       improvements, discoveries, software, writings or other works of
       authorship in Ceridian, at the request and the expense of Ceridian, and
       Executive will do all acts and sign all instruments of assignment and
       other papers Ceridian may reasonably request relating to applications for
       patents, patents, copyrights, and the enforcement and protection thereof.
       If Executive is needed, at any time, to give testimony, evidence, or
       opinions in any litigation or proceeding involving any patents or
       copyrights or applications for patents or copyrights, both domestic and
       foreign, relating to inventions, improvements, discoveries, software,
       writings or other works of authorship conceived, developed or reduced to
       practice by Executive, Executive agrees to do so, and if Executive leaves
       the employ of Ceridian, Ceridian shall pay Executive at a rate mutually
       agreeable to Executive and Ceridian, plus reasonable traveling or other
       expenses.

5.05   INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME.  The two immediately
       preceding sections entitled "Disclosure" and "Instruments of Assignment"
       do not apply to inventions in which a Ceridian claim of any rights will
       create a violation of Chapter 181 Minnesota Statutes, Section 181.78,
       reproduced below and constituting the written notification of its
       Subdivision 3.

       181.78 Agreements; terms relating to inventions

       Subdivision 1.

       Any provision in an employment agreement which provides that an employee
       shall assign or offer to assign any of the employee's rights in an
       invention to the employer shall not apply to an invention for which no
       equipment, supplies, facility or trade secret information of the employer
       was used and which was developed entirely on the employee's own time, and
       (1) which does not relate (a) directly to the business of the employer or
       (b) to the employer's actual or demonstrably anticipated research or
       development, or (2) which does not result from any work performed by the
       employee for the employer.  Any provision which purports to apply to such
       an invention is to that extent against the public policy of this state
       and is to that extent void and unenforceable.

       Subdivision 2.

       No employer shall require a provision made void and unenforceable by
       subdivision 1 as a condition of employment or continuing employment.

       Subdivision 3.

       IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A
       PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE
       EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN


                                       8



       EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE AGREEMENT IS MADE,
       PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES
       NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY
       OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS
       DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT
       RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE
       EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT,
       OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE
       FOR THE EMPLOYER.

5.06   EXECUTIVE'S DECLARATION. Executive has no inventions, data bases,
       improvements, discoveries, software, writings or other works of
       authorship useful to Ceridian in the normal course of business, which
       were conceived, made or written prior to the date of this Agreement and
       which are excluded from this Agreement.

5.07   SURVIVAL.  The obligations of this Article V shall survive the expiration
       or termination of this Agreement and Executive's employment.


                                     ARTICLE VI

              NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT

6.01   GENERAL.  The parties hereto recognize and agree that (a) Executive is a
       senior executive of Ceridian and is a key executive of Ceridian, (b)
       Executive has received, and will in the future receive, substantial
       amounts of Confidential Information, (c) Ceridian's business is conducted
       on a worldwide basis, and (d) provision for non-competition,
       non-recruitment and non-disparagement obligations by Executive is
       critical to Ceridian's continued economic well-being and protection of
       Ceridian's Confidential Information.  In light of these considerations,
       this Article VI sets forth the terms and conditions of Executive's
       obligations of non-competition, non-recruitment and non-disparagement
       subsequent to the termination of this Agreement and/or Executive's
       employment for any reason.

6.02   NON-COMPETITION.

       (a)    Unless the obligation is waived or limited by Ceridian in
              accordance with subsection (b) of this Section 6.02, Executive
              agrees that for a period of two years following termination of
              employment for any reason ("Non-Compete Period"), Executive will
              not directly or indirectly, alone or as a partner, officer,
              director, shareholder or employee of any other firm or entity,
              engage in any commercial activity in competition with any part of
              Ceridian's business as conducted as of the date of such
              termination of employment or with any part of Ceridian's
              contemplated business with respect to which Executive has
              Confidential Information.  For purposes of this subsection (a),
              "shareholder" shall not include


                                       9



              beneficial ownership of less than five percent (5%) of the
              combined voting power of all issued and outstanding voting
              securities of a publicly held corporation whose stock is traded
              on a major stock exchange.  Also for purposes of this
              subsection (a), "Ceridian's business" shall include business
              conducted by Ceridian or its affiliates and any partnership or
              joint venture in which Ceridian or its affiliates is a partner
              or joint venturer; provided that, "affiliate" as used in this
              sentence shall not include any corporation in which Ceridian
              has ownership of less than fifteen percent (15%) of the voting
              stock.

       (b)    At its sole option Ceridian may, by written notice to Executive at
              any time within the Non-Compete Period, waive or limit the time
              and/or geographic area in which Executive cannot engage in
              competitive activity.

       (c)    During the Non-Compete Period, prior to accepting employment with
              or agreeing to provide consulting services to, any firm or entity
              which offers competitive products or services, Executive shall
              give 30 days prior written notice to Ceridian.  Such written
              notice shall describe the firm and the employment or consulting
              services to be rendered to the firm or entity, and shall include a
              copy of the written offer of employment or engagement of
              consulting services.  Ceridian's failure to respond or object to
              such notice shall not in any way constitute acquiescence or waiver
              of Ceridian's rights under this Article VI.

       (d)    In the event Executive has provided notice to Ceridian pursuant to
              subsection (c) of this Section 6.02 and has not accepted
              employment with or agreed to provide consulting services to, any
              firm or entity directly as a result of his or her non-competition
              obligation pursuant to this Section 6.02, Ceridian shall pay
              Executive an amount equal to the usual rate of Executive's Base
              Salary in effect at the time of termination on a regular payroll
              period basis until the end of the Non-Compete Period.  There shall
              be credited against Ceridian's obligation to make such payments
              any other payments made by Ceridian to Executive pursuant to
              Article IV of this Agreement.  In the event that Ceridian elects,
              pursuant to subsection (b) of this Section 6.02, to waive all or
              any portion of the non-competition obligation set forth in
              subsection (a) hereof, no payment shall be required by Ceridian
              with respect to the portion of the Non-Compete Period which has
              been waived.

       (e)    In the event Executive fails to provide notice to Ceridian
              pursuant to subsection (c) of this Section 6.02 and/or in anyway
              violates its non-competition obligation pursuant to Section 6.02,
              Ceridian may enforce all of its rights and remedies provided to it
              under this Agreement, in law and in equity, and Executive shall be
              deemed to have expressly waived any rights he or she may have had
              to payments under subsection (d) of this Section 6.02.

6.03   NON-RECRUITMENT.  For a period of two years following termination of
       employment for any reason, Executive will not initiate or actively
       participate in any other employer's recruitment or hiring of Ceridian
       employees.  This provision shall not preclude Executive


                                       10



       from responding to a request (other than by Executive's employer) for a
       reference with respect to an individual's employment qualifications.

6.04   NON-DISPARAGEMENT.  Executive will not, during the term or after the
       termination or expiration of this Agreement or Executive's employment,
       make disparaging statements, in any form, about Ceridian, its officers,
       directors, agents, employees, products or services which Executive knows,
       or has reason to believe, are false or misleading.

6.05   SURVIVAL.  The obligations of this Article VI shall survive the
       expiration or termination of this Agreement and Executive's employment.


                                    ARTICLE VII

                                 CHANGE OF CONTROL

7.01   DEFINITIONS.  For purposes of this Article VII, the following definitions
       shall be applied:

       (a)    "BENEFIT PLAN" means any formal or informal plan, program or other
              arrangement heretofore or hereafter adopted by Ceridian for the
              direct or indirect provision of compensation to Executive
              (including groups or classes of participants or beneficiaries of
              which Executive is a member), whether or not such compensation is
              deferred, is in the form of cash or other property or rights, or
              is in the form of a benefit to or for Executive.

       (b)    "CHANGE OF CONTROL" shall mean any of the following events:

                     (1)    a merger or consolidation to which Parent
                            Corporation is a party if the individuals and
                            entities who were stockholders of Parent Corporation
                            immediately prior to the effective date of such
                            merger or consolidation have beneficial ownership
                            (as defined in Rule 13d-3 under the Securities
                            Exchange Act of 1934) of less than fifty percent
                            (50%) of the total combined voting power for
                            election of directors of the surviving corporation
                            immediately following the effective date of such
                            merger or consolidation; or

                     (2)    the direct or indirect beneficial ownership (as
                            defined in Rule 13d-3 under the Securities Exchange
                            Act of 1934) in the aggregate of securities of
                            Parent Corporation representing twenty-five percent
                            (25%) or more of the total combined voting power of
                            Parent Corporation's then issued and outstanding
                            securities by any person or entity, or group of
                            associated persons or entities acting in concert;
                            provided, however, that for purposes of hereof, the
                            following acquisitions shall not constitute a Change
                            of Control: (A) any acquisition by Parent
                            Corporation, or (B) any acquisition by any


                                       11



                            employee benefit plan (or related trust) sponsored
                            or maintained by Parent Corporation or any
                            corporation controlled by Parent Corporation; or

                     (3)    the sale of the properties and assets of Parent
                            Corporation, substantially as an entirety, to any
                            person or entity which is not a wholly-owned
                            subsidiary of Parent Corporation; or

                     (4)    the stockholders of Parent Corporation approve any
                            plan or proposal for the liquidation of Parent
                            Corporation; or

                     (5)    a change in the composition of the Board at any time
                            during any consecutive 24 month period such that the
                            "Continuity Directors" cease for any reason to
                            constitute at least a seventy percent (70%) majority
                            of the Board.  For purposes of this clause,
                            "Continuity Directors" means those members of the
                            Board who either (A) were directors at the beginning
                            of such consecutive 24 month period, or (B) were
                            elected by, or on the nomination or recommendation
                            of, at least a two-thirds (2/3) majority of the
                            then-existing Board; or

                     (6)    such other event or transaction as the Board shall
                            determine constitutes a Change of Control.

       (c)    "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
       (including any transfer of property) in the nature of compensation, to or
       for the benefit of Executive under this Agreement or any Other Agreement
       or Benefit Plan, which is considered to be contingent on a Change of
       Control for purposes of Section 280G of the Code.

       (d)    "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
       either of the following events occurring within two years after a Change
       of Control:

                     (1)    Termination of Executive's employment by Ceridian
                            for any reason other than (A) fraud, (B)
                            misrepresentation, (C) theft or embezzlement of
                            Ceridian assets, (D) intentional violations of law
                            involving moral turpitude, (E) failure to follow
                            Ceridian's conduct and ethics policies, or (F)
                            continuing failure by Executive to satisfactorily
                            perform his or her duties as reasonably assigned to
                            Executive pursuant to Section 2.02 of Article II of
                            this Agreement for a period of 60 days after a
                            written demand for such satisfactory performance
                            which specifically identifies the manner in which it
                            is alleged Executive has not satisfactorily
                            performed such duties; or

                     (2)    Termination of employment with Ceridian by Executive
                            pursuant to Section 7.02 of this Article VII.


                                       12



              A Change of Control Termination by Executive shall not, however,
              include termination by reason of death or Disability.

       (e)    "CODE" means the Internal Revenue Code of 1986, as amended.  Any
       reference to a section of the Code shall include the corresponding
       section of such Code as from time to time amended.

       (f)    "GOOD REASON" means a good faith determination by Executive, in
       Executive's sole and absolute judgment, that any one or more of the
       following events has occurred, without Executive's express written
       consent, after a Change of Control:

                     (1)    A change in Executive's reporting responsibilities,
                            titles or offices as in effect immediately prior to
                            the Change of Control, or any removal of Executive
                            from, or any failure to re-elect Executive to, any
                            of such positions, which has the effect of
                            materially diminishing Executive's responsibility or
                            authority;

                     (2)    A reduction by Ceridian in Executive's Base Salary
                            as in effect immediately prior to the Change of
                            Control or as the same may be increased from time to
                            time thereafter;

                     (3)    Ceridian requiring Executive to be based anywhere
                            other than within 25 miles of Executive's job
                            location at the time of the Change of Control;

                     (4)    Without replacement by plans, programs, or
                            arrangements which, taken as a whole, provide
                            benefits to Executive at least reasonably comparable
                            to those discontinued or adversely affected, (A) the
                            failure by Ceridian to continue in effect, within
                            its maximum stated term, any pension, bonus,
                            incentive, stock ownership, purchase, option, life
                            insurance, health, accident, disability, or any
                            other employee compensation or benefit plan, program
                            or arrangement, in which Executive is participating
                            immediately prior to a Change of Control; or (B) the
                            taking of any action by Ceridian that would
                            materially adversely affect Executive's
                            participation or materially reduce Executive's
                            benefits under any of such plans, programs or
                            arrangements;

                     (5)    The failure by Ceridian to provide office space,
                            furniture, and secretarial support at least
                            comparable to that provided Executive immediately
                            prior to the Change of Control or the taking of any
                            similar action by Ceridian that would materially
                            adversely affect the working conditions in or under
                            which Executive performs his or her employment
                            duties;


                                       13



                     (6)    If Executive's primary employment duties are with a
                            Subsidiary, the sale, merger, contribution, transfer
                            or any other transaction in conjunction with which
                            Parent Corporation's ownership interest in such
                            Subsidiary decreases below the level specified in
                            Section 1.07 of Article I unless (A) this Agreement
                            is assigned to the purchaser/transferee with the
                            provisions of Article VII in full force and effect
                            and operative as if a Change of Control has occurred
                            with respect to the purchaser/transferee as Parent
                            Corporation immediately after the purchase/transfer
                            becomes effective, and (B) such purchaser/transferee
                            has a creditworthiness reasonably equivalent to
                            Parent Corporation's; or

                     (7)    Any material breach of this Agreement by Ceridian.

       (g)    "OTHER AGREEMENTS" means any agreement, contract or understanding
       heretofore or hereafter entered into between Executive and Ceridian for
       the direct or indirect provision of compensation to Executive.

7.02   CHANGE OF CONTROL TERMINATION RIGHT.  For a period of two years following
       a Change of Control that occurred during the term of this Agreement,
       Executive shall have the right, at any time and within Executive's sole
       discretion, to terminate employment with Ceridian for Good Reason.  Such
       termination shall be accomplished by, and effective upon, Executive
       giving written notice to Ceridian of Executive's decision to terminate.
       Except as otherwise expressly provided in this Agreement, upon the
       exercise of said right, all obligations and duties of Executive under
       this Agreement shall be of no further force and effect.

7.03   CHANGE OF CONTROL TERMINATION PAYMENT.   In the event of a Change of
       Control Termination that occurred during the term of this Agreement,
       then, and without further action by the Board, Compensation Committee or
       otherwise, Ceridian shall, within five days of such termination, make a
       lump sum payment to Executive in an amount equal to three times the sum
       of (a) 12 months of Base Salary at the rate in effect at the time of
       Executive's termination, (b) the bonus, if any, that Executive would have
       received under all applicable Ceridian bonus plans for the year in which
       the termination occurs had "superior" goals been achieved, and (c) the
       annual perquisite cash adder Executive would have received in the year in
       which the termination occurs.  In addition, in the event of a Change of
       Control Termination that occurred during the term of this Agreement,
       Ceridian shall credit Executive with three additional years of age and
       service under the Ceridian Corporation Retirement Plan.  Neither the
       payments or age and service credits made pursuant to this Section 7.03
       nor any other compensation to be provided to Executive by Ceridian
       pursuant to this Agreement or any other agreement or Benefit Plan which
       may be considered Change of Control Compensation shall be subject to any
       limitation on Change of Control Compensation which may otherwise be
       expressed in any such agreement or Benefit Plan.


                                       14



7.04   TAX REIMBURSEMENT.

       (a)    Anything in this Agreement to the contrary notwithstanding, in the
              event it shall be determined that any payments or distributions by
              Ceridian to or for the benefit of Executive (whether paid or
              payable or distributed or distributable pursuant to the terms of
              this Agreement or otherwise, but determined without regard to any
              payments required under this Section 7.04) (collectively, the
              "Payments") would be subject to the excise tax imposed by Section
              4999 of the Code or any interest or penalties are incurred by
              Executive with respect to such excise tax (such excise tax,
              together with any such interest and penalties, are hereinafter
              collectively referred to as the "Excise Tax"), then Executive
              shall be entitled to receive an additional payment (a "Gross-Up
              Payment") in an amount such that, after payment by Executive of
              all taxes (and any interest or penalties imposed with respect to
              such taxes), including any income taxes and Excise Tax imposed
              upon the Gross-Up Payment, Executive retains an amount of the
              Gross-Up Payment equal to the Excise Tax imposed upon the
              Payments.

       (b)    Subject to the provisions of Section 7.04(d), all determinations
              required to be made under this Section 7.04, including whether and
              when a Gross-Up Payment is required and the amount such Gross-Up
              Payment and the assumptions to be utilized in arriving at such
              determination, shall be made by Ceridian's external auditors (the
              "Accounting Firm"), which shall provide detailed supporting
              calculations both to Ceridian and Executive within 15 business
              days of the receipt of notice from Executive that there has been a
              Payment, or such earlier time as is requested by Ceridian.  In the
              event that the Accounting Firm is serving as accountant or auditor
              for the individual, entity or group effecting the Change of
              Control, Executive shall appoint another nationally recognized
              accounting firm to make the determinations required hereunder
              (which accounting firm shall then be referred to as the
              "Accounting Firm" hereunder).  All fees and expenses of the
              Accounting Firm shall be borne solely by Ceridian.  Any Gross-Up
              Payment, as determined pursuant to this Section 7.04, shall be
              paid by Ceridian to Executive within five days of the receipt of
              the Accounting Firm's determination.  Any determination by the
              Accounting Firm shall be binding upon Ceridian and Executive.

       (c)    As a result of uncertainty in the application of Section 4999 of
              the Code at the time of the initial determination by the
              Accounting Firm hereunder, it is possible that Gross-Up Payments
              which should have been made by Ceridian will not have been made
              ("Underpayment"), consistent with the calculations required to be
              made hereunder.  In the event that Ceridian exhausts its remedies
              pursuant to Section 7.04(d) and Executive thereafter is required
              to make a payment of any additional Excise Tax, the Accounting
              Firm shall determine the amount of the Underpayment that has
              occurred and any such Underpayment shall be promptly paid by
              Ceridian to or for the benefit of Executive.

                                       15


       (d)    Executive shall notify Ceridian in writing of any claim by the
              Internal Revenue Service that, if successful, would require the
              payment by Ceridian of any Gross-Up Payment.  Such notification
              shall be given as soon as practicable but no later than ten
              business days after Executive knows of such claim and shall
              apprise Ceridian of the nature of such claim and the date on which
              such claim is requested to be paid.  Executive shall not pay such
              claim prior to the expiration of the thirty-day period following
              the date on which it gives such notice to Ceridian (or such
              shorter period ending on the date that any payment of taxes with
              respect to such claim is due).  If Ceridian notifies Executive in
              writing prior to the expiration of such period that it desires to
              contest such claim, Executive shall:

                            (i)    give Ceridian any information reasonably
                                   requested by Ceridian relating to such claim;

                            (ii)   take such action in connection with
                                   contesting such claim as Ceridian shall
                                   reasonably request in writing from time to
                                   time, including accepting legal
                                   representation with respect to such claim by
                                   an attorney reasonably selected by Ceridian;

                            (iii)  cooperate with Ceridian in good faith in
                                   order to effectively contest such claim; and

                            (iv)   permit Ceridian to participate in any
                                   proceedings relating to such claim;

              provided, however, that Ceridian shall bear and pay directly all
              costs and expenses (including additional interest and penalties)
              incurred in connection with such contest and shall indemnify and
              hold Executive harmless, on an after-tax basis, for any Excise Tax
              or income tax (including interest and penalties with respect
              thereto) imposed as a result of such representation and payment of
              costs and expenses.  Without limitation on the foregoing
              provisions of this Section 7.04(d), Ceridian shall control all
              proceedings taken in connection with such contest and, at its sole
              option, may pursue or forego any and all administrative appeals,
              proceedings, hearings and conferences with the taxing authority in
              respect of such claim and may, at its sole option, either direct
              Executive to pay the tax claimed and sue for a refund or contest
              the claim in any permissible manner, and Executive agrees to
              prosecute such contest to a determination before any
              administrative tribunal, in a court of initial jurisdiction and in
              one or more appellate courts, as Ceridian shall determine;
              provided further, however, that if Ceridian directs Executive to
              pay such claim and sue for a refund, Ceridian shall advance the
              amount of such payment to Executive on an interest-free basis and
              shall indemnify and hold Executive harmless, on an after-tax
              basis, from any

                                       16


              Excise Tax or income tax (including interest or penalties with
              respect thereto) imposed with respect to such advance or with
              respect to any imputed income with respect to such advance; and
              provided further that any extension of the statute of
              limitations relating to payment of taxes for the taxable year
              of Executive with respect to which such contested amount is
              claimed to be due is limited solely to such contested amount.
              Furthermore, Ceridian's control of the contest shall be limited
              to issues with respect to which a Gross-Up Payment would be
              payable hereunder and Executive shall be entitled to settle or
              contest, as the case may be, any other issue raised by the
              Internal Revenue Service or any other taxing authority.

       (e)    If, after the receipt by Executive of an amount advanced by
              Ceridian pursuant to Section 7.04(d), Executive becomes entitled
              to receive any refund with respect to such claim, Executive shall
              (subject to Ceridian's complying with the requirements of Section
              7.04(d)) promptly pay to Ceridian the amount of such refund
              (together with any interest paid or credited thereon after taxes
              applicable thereto).  If, after the receipt by Executive of an
              amount advanced by Ceridian pursuant to Section 7.04(d), a
              determination is made that Executive shall not be entitled to any
              refund with respect to such claim and Ceridian does not notify
              Executive in writing of its intent to contest such denial of
              refund prior to the expiration of thirty days after such
              determination, then such advance shall be forgiven and shall not
              be required to be repaid and the amount of such advance shall
              offset, to the extent thereof, the amount of Gross-Up Payment
              required to be paid.

7.05   INTEREST.  In the event Ceridian does not make timely payment in full of
       the Change of Control Termination payment described in Section 7.03,
       Executive shall be entitled to receive interest on any unpaid amount at
       the lower of:  (a) the prime rate of interest (or such comparable index
       as may be adopted) established from time to time by the Bank of America
       National Trust and Savings Association, New York, New York or its
       successor in interest; or (b) the maximum rate permitted under Section
       280G(d)(4) of the Internal Revenue Code.

7.06   ATTORNEYS' FEES.  In the event Executive incurs any legal expense to
       enforce or defend his or her rights under this Article VII of this
       Agreement, or to recover damages for breach thereof, Executive shall be
       entitled to recover from Ceridian any expenses for attorneys' fees and
       disbursements incurred.

7.07   BENEFITS CONTINUATION.  In the event of a Change of Control Termination,
       Executive (and anyone entitled to claim under or through Executive)
       shall, until age 65, be entitled to receive from Ceridian the same or
       equivalent health, dental, accidental death and dismemberment, short and
       long-term disability, life insurance coverages, and all other insurance
       policies and health and welfare benefits programs, policies or
       arrangements, at the same levels and coverages as Executive was receiving
       on the day immediately prior to

                                       17


       the Change of Control at a cost not to exceed the amount Executive
       would continue to pay had he/she continued to be an active employee of
       Ceridian.  To the extent that election of continuation of any of such
       coverages, programs, policies, or arrangements is made available to
       employees terminating at age 55 with 15 or more years of service,
       Executive shall be required to pay no more for continuation than is
       required of such employees on the day immediately prior to the Change
       of Control.  If no such continuation program is available, Executive
       shall be required to pay no more than he/she paid as an active
       employee, or if provided by Ceridian at no cost to employees on the
       day immediately prior to the Change of Control, they shall continue to
       be made available to Executive on this basis.

                                    ARTICLE VIII

                            CHANGE OF SUBSIDIARY STATUS

In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any reason
Parent Corporation's ownership interest in any such Subsidiary falls below the
level specified in Section 1.07, (b) Executive's primary employment duties are
with the Subsidiary at the time of the occurrence of such event, and (c)
Executive does not, in conjunction therewith, transfer employment directly to
Parent Corporation or another Subsidiary, then:

       (1)    If Executive gives his or her written consent to the assignment of
              this Agreement to such Subsidiary, or to the purchaser or new
              majority interest holder of such Subsidiary, (and such assignment
              is accepted) this Agreement shall remain in full force and effect
              between Executive and the assignee, except that the provisions of
              Article VII of this Agreement shall become null and void;

       (2)    If such assignment is not accepted by the Subsidiary or purchaser,
              then this Agreement shall be deemed to have been terminated by
              Ceridian without cause pursuant to Section 4.03 of Article IV; and

       (3)    In all other cases, this Agreement shall be deemed terminated for
              cause pursuant to Section 4.02 of Article IV.


                                     ARTICLE IX

                                 GENERAL PROVISIONS

9.01   NO ADEQUATE REMEDY.  The parties declare that it is impossible to measure
       in money the damages which will accrue to either party by reason of a
       failure to perform any of the obligations under this Agreement and
       therefore injunctive relief is appropriate.  Therefore, if either party
       shall institute any action or proceeding to enforce the provisions

                                       18


       hereof, such party against whom such action or proceeding is brought
       hereby waives the claim or defense that such party has an adequate remedy
       at law, and such party shall not urge in any such action or proceeding
       the claim or defense that such party has an adequate remedy at law.

9.02   SUCCESSORS AND ASSIGNS.  Except as otherwise provided in Article VIII,
       this Agreement shall be binding upon and inure to the benefit of the
       successors and assigns of Parent Corporation and each Subsidiary, whether
       by way of merger, consolidation, operation of law, assignment, purchase
       or other acquisition of substantially all of the assets or business of
       Ceridian, and any such successor or assign shall absolutely and
       unconditionally assume all of Ceridian's obligations hereunder.

9.03   NOTICES.  All notices, requests and demands given to or made pursuant
       hereto shall, except as otherwise specified herein, be in writing and be
       delivered or mailed to any such party at its address:

       (a)    Ceridian Corporation
              8100 34th Avenue South
              Minneapolis, Minnesota 55425-1640
              Attention:  Office of General Counsel

       (b)    In the case of Executive shall be:

              At the address listed on the last page of this Agreement.

              Either party may, by notice hereunder, designate a changed
              address.  Any notice, if mailed properly addressed, postage
              prepaid, registered or certified mail, shall be deemed dispatched
              on the registered date or that stamped on the certified mail
              receipt, and shall be deemed received within the second business
              day thereafter or when it is actually received, whichever is
              sooner.

9.04   CAPTIONS.  The various headings or captions in this Agreement are for
       convenience only and shall not affect the meaning or interpretation of
       this Agreement.

9.05   GOVERNING LAW.  The validity, construction and performance of this
       Agreement shall be governed by the laws of the State of Minnesota and any
       and every legal proceeding arising out of or in connection with this
       Agreement shall be brought in the appropriate courts of the State of
       Minnesota, each of the parties hereby consenting to the exclusive
       jurisdiction of said courts for this purpose.  The parties hereto
       expressly recognize and agree that the implementation of this Governing
       Law provision is essential in light of the fact that Parent Corporation's
       corporate headquarters and its principal executive offices are located
       within the State of Minnesota, and there is a critical need for
       uniformity in the interpretation and enforcement of the employment
       agreements between Ceridian and its senior executives.

                                       19


9.06   CONSTRUCTION.  Wherever possible, each provision of this Agreement shall
       be interpreted in such manner as to be effective and valid under
       applicable law, but if any provision of this Agreement shall be
       prohibited by or invalid under applicable law, such provision shall be
       ineffective only to the extent of such prohibition or invalidity without
       invalidating the remainder of such provision or the remaining provisions
       of this Agreement.

9.07   WAIVERS.  No failure on the part of either party to exercise, and no
       delay in exercising, any right or remedy hereunder shall operate as a
       waiver thereof; nor shall any single or partial exercise of any right or
       remedy hereunder preclude any other or further exercise thereof or the
       exercise of any other right or remedy granted hereby or by any related
       document or by law.

9.08   MODIFICATION.  Any changes or amendments to this Agreement must be in
       writing and signed by both parties.

9.09   ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement and
       understanding between the parties hereto in reference to all the matters
       herein agreed upon.  This Agreement replaces in full all prior employment
       agreements or understandings of the parties hereto, and any and all such
       prior agreements or understandings are hereby rescinded by mutual
       agreement.

IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.


EXECUTIVE                               CERIDIAN CORPORATION


/s/Stephen B. Morris                    By:     /s/Gary M. Nelson
                                        Title:  Vice President, General Counsel
                                                And Secretary
Address:


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


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

                                       20


                                 AMENDMENT NO. 1 TO
                           EXECUTIVE EMPLOYMENT AGREEMENT


This Amendment, dated as of October 20, 1999, amends certain provisions of the
Executive Employment Agreement ("Agreement"), dated as of October 1, 1999,
between Ceridian Corporation and STEVEN B. MORRIS ("Executive").  Unless
otherwise defined herein, capitalized terms used in this Amendment have the
meanings given to them in the Agreement.  In consideration of you continuing in
your employment with Ceridian for the remaining term of the Agreement, and the
mutual promises and obligations contained in the Agreement as modified by this
Amendment, Executive and Ceridian agree to amend the Agreement as follows:

1.     Section 4.02(f) of the Agreement shall be amended in its entirety to read
       as follows:

       "(f)   the continued failure by Executive to attempt in good faith to
              perform his or her duties as reasonably assigned to Executive
              pursuant to Section 2.02 of Article II of this Agreement for a
              period of 60 days after a written demand for such performance
              which specifically identifies the manner in which it is alleged
              Executive has not attempted in good faith to perform such duties."

2.     Section 7.01(d)(1) of the Agreement shall be amended in its entirety to
       read as follows:

       "(1)   Termination of Executive's employment by Ceridian for any reason
              other than (A) fraud, (B) misrepresentation, (C) theft or
              embezzlement of Ceridian assets, (D) intentional violations of law
              involving moral turpitude, or (E) failure to follow Ceridian's
              conduct and ethics policies; or"

3.     Section 7.03 of the Agreement shall be amended in its entirety to read as
       follows:

       "7.03  CHANGE OF CONTROL TERMINATION PAYMENT.

       (a)    In the event of a Change of Control Termination that occurred
              during the term of this Agreement, then, and without further
              action by the Board, Compensation Committee or otherwise, Ceridian
              shall, within five days of such termination, make a lump sum
              payment to Executive in an amount equal to three times the sum of
              (i) 12 months of Base Salary at the rate in effect at the time of
              Executive's termination, (ii) the bonus, if any, that Executive
              would have received under all applicable Ceridian bonus plans for
              the year in which the termination occurs had "superior" goals been
              achieved, and (iii) the annual perquisite cash adder Executive
              would have received in the year in which the termination occurs.

       (b)    In addition to the payments made pursuant to Section 7.03(a)
              hereof, in the event the Change of Control Termination that
              occurred during the term of this Agreement, then, and without
              further action by the Board, Compensation Committee or otherwise,
              Ceridian shall provide to Executive a pension supplement
              equivalent to the difference, if any, between:  (i) the monthly
              benefits to which Executive would have been entitled under the
              defined benefit



              pension plan or plans in which Executive participates
              immediately prior to the Change of Control Termination which
              includes an additional three years of age and service; and (ii)
              the amount to which Executive is, in fact, entitled under such
              defined benefit pension plan or plans.

       (c)    Neither the payments made or the pension supplement provided
              pursuant to this Section 7.03 nor any other compensation to be
              provided to Executive by Ceridian pursuant to this Agreement or
              any other agreement or Benefit Plan which may be considered Change
              of Control Compensation shall be subject to any limitation on
              Change of Control Compensation which may otherwise be expressed in
              any such agreement or Benefit Plan."

4.     The first sentence of Section 7.04(d) of the Agreement shall be amended
       in its entirety to read as follows:

       "Executive shall notify Ceridian in writing of any claim by the Internal
       Revenue Service or any other taxing authority that, if successful, would
       require the payment by Ceridian of any Gross-Up Payment."

5.     This Amendment is governed by, and shall be construed in accordance with,
       the laws of the State of Minnesota.

6.     Except as herein expressly amended, the Agreement is ratified and
       confirmed in all respects and shall remain in full force and effect in
       accordance with its terms.

7.     This Amendment may be executed in two or more counterparts, each of which
       shall be deemed an original, but all of which together shall constitute
       one and the same instrument.

Ceridian and Executive have caused this Amendment to be duly executed and
delivered, and this Amendment shall be effective, as of the date first written
above.  Following the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement," "hereunder," "herein," "hereof," or words of like
import shall mean and be a reference to the Agreement as amended by this
Amendment.

EXECUTIVE                               CERIDIAN CORPORATION


/s/Stephen B. Morris                    By:    /s/Gary M. Nelson
                                        Title:  Vice President, General Counsel
                                                and Secretary
Address:


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


                                       2

EX-10.05

                                                                   EXHIBIT 10.05


                                CERIDIAN CORPORATION

                           EXECUTIVE EMPLOYMENT AGREEMENT

PARTIES

                   CERIDIAN CORPORATION (A DELAWARE CORPORATION)
                               8100 34TH AVENUE SOUTH
                         MINNEAPOLIS, MINNESOTA 55425-1640

                                        AND

                                 JOHN R. EICKHOFF
                                   ("EXECUTIVE")


DATE:     OCTOBER 1, 1999

RECITALS

A.     Ceridian wishes to obtain the services of Executive for the duration of
       this Agreement, and Executive wishes to provide his or her services for
       such period.

B.     Ceridian desires reasonable protection of Ceridian's Confidential
       Information (as defined below).

C.     Ceridian desires assurance that Executive will not compete with Ceridian,
       engage in recruitment of Ceridian's employees or make disparaging
       statements about Ceridian after termination of employment, and Executive
       is willing to refrain from such competition, recruitment and
       disparagement.

D.     Executive desires to be assured of a minimum Base Salary (as defined
       below) from Ceridian for Executive's services for the term of this
       Agreement (unless terminated earlier pursuant to the terms of this
       Agreement).

E.     It is expressly recognized by the parties that Executive's acceptance of,
       and continuance in, Executive's position with Ceridian and agreement to
       be bound by the terms of this Agreement represents a substantial
       commitment to Ceridian in terms of Executive's personal and professional
       career and a foregoing of present and future career options by Executive,
       for all of which Ceridian receives substantial value.

F.     The parties recognize that a Change of Control (as defined below) may
       result in material alteration or diminishment of Executive's position and
       responsibilities and substantially

                                       1


       frustrate the purpose of Executive's commitment to Ceridian and
       forebearance of career options.

G.     The parties recognize that in light of the above-described commitment and
       forebearance of career options, it is essential that, for the benefit of
       Ceridian and its stockholders, provision be made for a Change of Control
       Termination (as defined below) in order to enable Executive to accept and
       effectively continue in Executive's position in the face of inherently
       disruptive circumstances arising from the possibility of a Change of
       Control of the Parent Corporation (as defined below), although no such
       change is now contemplated or foreseen.

H.     The parties wish to replace any and all prior agreements and undertakings
       with respect to Executive's employment and Change of Control occurrences
       and compensation.

NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:


                                     ARTICLE I

                                    DEFINITIONS

1.01   "BASE SALARY" shall mean regular cash compensation paid on a periodic
       basis exclusive of benefits, bonuses or incentive payments.

1.02   "BOARD" shall mean the Board of Directors of Parent Corporation.

1.03   "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
       provided in Article VIII and Section 9.02 of Article IX,

       (a)    any Subsidiary (as that term is defined in Section 1.07); and

       (b)    any successor in interest by way of consolidation, operation of
              law, merger or otherwise.

1.04   "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian
       which is not generally available to or used by others, or the utility or
       value of which is not generally known or recognized as standard practice,
       whether or not the underlying details are in the public domain,
       including:

       (a)    information or material relating to Ceridian and its business as
              conducted or anticipated to be conducted; business plans;
              operations; past, current or anticipated software, products or
              services; customers or prospective customers; or

                                       2


              research, engineering, development, manufacturing, purchasing,
              accounting, or marketing activities;

       (b)    information or material relating to Ceridian's inventions,
              improvements, discoveries, "know-how," technological developments,
              or unpublished writings or other works of authorship, or to the
              materials, apparatus, processes, formulae, plans or methods used
              in the development, manufacture or marketing of Ceridian's
              software, products or services;

       (c)    information on or material relating to Ceridian which when
              received is marked as "proprietary," "private," or "confidential;"

       (d)    trade secrets of Ceridian;

       (e)    software of Ceridian in various stages of development, including
              computer programs in source code and binary code form, software
              designs, specifications, programming aids (including "library
              subroutines" and productivity tools), programming languages,
              interfaces, visual displays, technical documentation, user
              manuals, data files and databases of Ceridian; and

       (f)    any similar information of the type described above which Ceridian
              obtained from another party and which Ceridian treats as or
              designates as being proprietary, private or confidential, whether
              or not owned or developed by Ceridian.

       Notwithstanding the foregoing, "Confidential Information" does not
       include any information which is properly published or in the public
       domain; provided, however, that information which is published by or with
       the aid of Executive outside the scope of employment or contrary to the
       requirements of this Agreement will not be considered to have been
       properly published, and therefore will not be in the public domain for
       purposes of this Agreement.

1.05   "DISABILITY" shall mean the inability of Executive to perform his or her
       duties under this Agreement because of illness or incapacity for a
       continuous period of six months.

1.06   "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
       otherwise provided in Article VIII and Section 9.02 of Article IX, any
       successor in interest by way of consolidation, operation of law, merger
       or otherwise.  "Parent Corporation" shall not include any Subsidiary.

1.07   "SUBSIDIARY" shall mean:  (a) any corporation at least a majority of
       whose securities having ordinary voting power for the election of
       directors (other than securities having such power only by reason of the
       occurrence of a contingency) is at the time owned by Parent Corporation
       and/or one or more Subsidiaries; and (b) any division or business unit
       (or portion thereof) of Parent Corporation or a corporation described in
       clause (a) of this Section 1.07.

                                       3


                                     ARTICLE II

                            EMPLOYMENT, DUTIES AND TERM

2.01   EMPLOYMENT.  Upon the terms and conditions set forth in this Agreement,
       Ceridian hereby employs Executive, and Executive accepts such employment.

2.02   DUTIES.  Executive shall devote his or her full-time and best efforts to
       Ceridian and to fulfilling the duties of his or her position which shall
       include such duties as may from time to time be assigned him or her by
       Ceridian, provided that such duties are reasonably consistent with
       Executive's education, experience and background.  Executive shall comply
       with Ceridian's policies and procedures to the extent they are not
       inconsistent with this Agreement in which case the provisions of this
       Agreement prevail.

2.03   TERM.  Subject to the provisions of Articles IV, VII, and VIII, this
       Agreement and Executive's employment shall continue until the later of:
       (a) December 31, 2001; and (b) two years after a Change of Control which
       occurs prior to December 31, 2001 ("Initial Term").


                                    ARTICLE III

                             COMPENSATION AND EXPENSES

3.01   BASE SALARY.  For all services rendered under this Agreement during the
       term of this Agreement, Ceridian shall pay Executive a minimum Base
       Salary at the annual rate currently being paid or, if Executive is not
       currently in Ceridian's employ, at the annual rate specified in the
       written offer of employment.  If Executive's salary is increased from
       time to time during the term of this Agreement, the increased amount
       shall be the Base Salary for the remainder of the term.

3.02   BONUS AND INCENTIVE.  Bonus or incentive compensation shall be at the
       sole discretion of Ceridian.  Except as otherwise provided in Article
       VII, Ceridian shall have the right, in accordance with their terms, to
       alter, amend or eliminate any bonus or incentive plans, or Executive's
       participation therein, without compensation to Executive.

3.03   BUSINESS EXPENSES.  Ceridian shall, consistent with its policies in
       effect from time to time, bear all ordinary and necessary business
       expenses incurred by Executive in performing his or her duties as an
       employee of Ceridian, provided that Executive accounts promptly for such
       expenses to Ceridian in the manner prescribed from time to time by
       Ceridian.

                                       4


                                     ARTICLE IV

                                 EARLY TERMINATION

4.01   EARLY TERMINATION.  This Article shall not apply to a Change of Control
       Termination which is governed solely by the provisions of Article VII,
       and does not alter the respective continuing obligations of the parties
       pursuant to Articles V, VI, and IX.

4.02   TERMINATION FOR CAUSE.  Ceridian may terminate this Agreement and
       Executive's employment immediately for cause.  For the purpose hereof
       "cause" means:

       (a)    fraud;

       (b)    misrepresentation;

       (c)    theft or embezzlement of Ceridian assets;

       (d)    intentional violations of law involving moral turpitude;

       (e)    failure to follow Ceridian's conduct and ethics policies; and/or

       (f)    the continued failure by Executive to attempt in good faith to
              perform his or her duties as reasonably assigned to Executive
              pursuant to Section 2.02 of Article II of this Agreement for a
              period of 60 days after a written demand for such performance
              which specifically identifies the manner in which it is alleged
              Executive has not attempted in good faith to perform such duties.

       In the event of termination for cause pursuant to this Section 4.02,
       Executive shall be paid at the usual rate of Executive's annual Base
       Salary through the date of termination specified in any written notice of
       termination.

4.03   TERMINATION WITHOUT CAUSE.  Either Executive or Ceridian may terminate
       this Agreement and Executive's employment without cause on at least 75
       days' written notice.  In the event of termination of this Agreement and
       of Executive's employment pursuant to this Section 4.03, compensation
       shall be paid as follows:

       (a)    if the notice of termination is given by Executive, Executive
              shall be paid at the usual rate of his or her annual Base Salary
              through the 75 day notice period;

       (b)    if the notice of termination is given by Ceridian, (1) Executive
              shall be paid at the usual rate of his or her annual Base Salary
              through the 75 day notice period, however, Ceridian shall have the
              option of making termination of the Agreement and Executive's
              employment effective immediately upon notice in which case
              Executive shall be paid a lump sum representing the value of 75
              days worth of salary; and (2) Executive shall receive, starting
              within 15 days after the end of the

                                       5


              75 day notice period, one year's Base Salary payable, at the
              sole discretion of Ceridian, in either the form of a lump sum
              payment or on a regular payroll period basis.  In addition,
              Executive shall receive the bonus, if any, to which Executive
              would otherwise have become entitled under all applicable
              Ceridian bonus plans in effect at the time of termination of
              this Agreement had Executive remained continuously employed for
              the full fiscal year in which termination occurred and
              continued to perform his or her duties in the same manner as
              they were performed immediately prior to termination,
              multiplied by a fraction, the numerator of which shall be the
              number of whole months Executive was employed in the year in
              which termination occurred and the denominator of which is 12.
              This bonus amount shall be paid within 15 days after the date
              such bonus would have been paid had Executive remained employed
              for the full fiscal year.  In addition, Ceridian shall provide
              or make arrangements for reasonable outplacement services for
              Executive based on his or her level within Ceridian.

       (c)    In the event that termination occurs pursuant to Section 4.03(b),
              in addition to the payments specified therein, Ceridian shall pay
              to Executive an amount equal to one year's Base Salary payable, at
              the sole discretion of Ceridian, in either the form of a lump sum
              payment or on a regular payroll period basis, provided Executive
              executes a release, similar to that attached as Exhibit A, of all
              claims against Ceridian.

4.04   TERMINATION IN THE EVENT OF DEATH OR DISABILITY.  This Agreement shall
       terminate in the event of death or disability of Executive.

       (a)    In the event of Executive's death, Ceridian shall pay an amount
              equal to 12 months of Base Salary at the rate in effect at the
              time of Executive's death plus the amount Executive would have
              received in annual incentive plan bonus for the year in which the
              death occurs had "target" goals been achieved.  Such amount shall
              be paid (1) to the beneficiary or beneficiaries designated in
              writing to Ceridian by Executive, (2) in the absence of such
              designation to the surviving spouse, or (3) if there is no
              surviving spouse, or such surviving spouse disclaims all or any
              part, then the full amount, or such disclaimed portion, shall be
              paid to the executor, administrator or other personal
              representative of Executive's estate.  The amount shall be paid as
              a lump sum as soon as practicable following Ceridian's receipt of
              notice of Executive's death.  All such payments shall be in
              addition to any payments due pursuant to Section 4.04(c) below.

       (b)    In the event of Executive's disability, Base Salary shall be
              terminated as of the end of the month in which the last day of the
              six-month period of Executive's inability to perform his or her
              duties occurs.

       (c)    In the event of termination by reason of Executive's death or
              disability, Ceridian shall pay to Executive any amount equal to
              (1) the amount Executive would have received in annual incentive
              plan bonus for the year in which termination occurs

                                       6


              had "target" goals been achieved, multiplied by (2) a fraction,
              the numerator of which shall be the number of whole months
              Executive was employed in the year in which the death or
              disability occurred and the denominator of which is 12.  The
              amount payable pursuant to this Section 4.04(c) shall be paid
              within 15 days after the date such bonus would have been paid
              had Executive remained employed for the full fiscal year.

4.05   RETIREMENT.  Executive may terminate this Agreement and Executive's
       employment as a result of Executive decision to retire from Ceridian.
       Executive shall provide Ceridian with at least 75 days' written notice of
       the date upon which Executive intends to retire.  Executive shall be paid
       at the usual rate of his or her annual Base Salary through the date of
       retirement stipulated in the written notice.

4.06   PENSION SUPPLEMENT.  If Ceridian terminates Executive's employment
       without cause prior to Executive's 65th birthday, Ceridian shall provide
       to Executive, out of its general assets, a monthly supplemental
       retirement benefit in an amount equal to the actuarial equivalent of the
       difference, if any between:

       (a)    the monthly benefit to which Executive would have been entitled
              under the defined benefit pension plan or plans in which he or she
              participated immediately prior to his or her termination of
              employment if the amount of payment to which Executive is entitled
              under Section 4.03(b)(2) were taken into account for purposes of
              determining his or her "final average pay" or similar term (as
              then defined under the terms of such plan or plans) for either (1)
              the year in which Executive's termination of employment occurred;
              or (2) the prior full year, whichever provides the highest total
              final average pay; and

       (b)    the amount to which Executive is, in fact, entitled under such
              plan or plans.

       The benefit calculated under this Section 4.06 shall be paid at the same
       time and in the same form as the benefit under the plans with respect to
       which such calculation is made.

4.07   ENTIRE TERMINATION PAYMENT.  The compensation provided for in this
       Article IV for early termination of this Agreement and termination
       pursuant to this Article IV shall constitute Executive's sole remedy for
       such termination.  Executive shall not be entitled to any other
       termination or severance payment which may be payable to Executive under
       any other agreement between Executive and Ceridian.


                                     ARTICLE V

                     CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT

5.01   CONFIDENTIALITY.  Executive will not, during the term or after the
       termination or expiration of this Agreement or his/her employment,
       publish, disclose, or utilize in any

                                       7


       manner any Confidential Information obtained while employed by
       Ceridian. If Executive leaves the employ of Ceridian, Executive will
       not, without Ceridian's prior written consent, retain or take away any
       drawing, writing or other record in any form containing any
       Confidential Information.

5.02   BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian,
       Executive will engage in no activity or employment which may conflict
       with the interest of Ceridian, and will comply with Ceridian's policies
       and guidelines pertaining to business conduct and ethics.

5.03   DISCLOSURE.  Executive will disclose promptly in writing to Ceridian all
       inventions, discoveries, software, writings and other works of authorship
       which are conceived, made, discovered, or written jointly or singly on
       Ceridian time or on Executive's own time, providing the invention,
       improvement, discovery, software, writing or other work of authorship is
       capable of being used by Ceridian in the normal course of business, and
       all such inventions, improvements, discoveries, software, writings and
       other works of authorship shall belong solely to Ceridian.

5.04   INSTRUMENTS OF ASSIGNMENT.  Executive will sign and execute all
       instruments of assignment and other papers to evidence vestiture of
       Executive's entire right, title and interest in such inventions,
       improvements, discoveries, software, writings or other works of
       authorship in Ceridian, at the request and the expense of Ceridian, and
       Executive will do all acts and sign all instruments of assignment and
       other papers Ceridian may reasonably request relating to applications for
       patents, patents, copyrights, and the enforcement and protection thereof.
       If Executive is needed, at any time, to give testimony, evidence, or
       opinions in any litigation or proceeding involving any patents or
       copyrights or applications for patents or copyrights, both domestic and
       foreign, relating to inventions, improvements, discoveries, software,
       writings or other works of authorship conceived, developed or reduced to
       practice by Executive, Executive agrees to do so, and if Executive leaves
       the employ of Ceridian, Ceridian shall pay Executive at a rate mutually
       agreeable to Executive and Ceridian, plus reasonable traveling or other
       expenses.

5.05   INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME.  The two immediately
       preceding sections entitled "Disclosure" and "Instruments of Assignment"
       do not apply to inventions in which a Ceridian claim of any rights will
       create a violation of Chapter 181 Minnesota Statutes, Section 181.78,
       reproduced below and constituting the written notification of its
       Subdivision 3.

       181.78 Agreements; terms relating to inventions

       Subdivision 1.

       Any provision in an employment agreement which provides that an employee
       shall assign or offer to assign any of the employee's rights in an
       invention to the employer shall not

                                       8


       apply to an invention for which no equipment, supplies, facility or
       trade secret information of the employer was used and which was
       developed entirely on the employee's own time, and (1) which does not
       relate (a) directly to the business of the employer or (b) to the
       employer's actual or demonstrably anticipated research or development,
       or (2) which does not result from any work performed by the employee
       for the employer.  Any provision which purports to apply to such an
       invention is to that extent against the public policy of this state
       and is to that extent void and unenforceable.

       Subdivision 2.

       No employer shall require a provision made void and unenforceable by
       subdivision 1 as a condition of employment or continuing employment.

       Subdivision 3.

       IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A
       PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE
       EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN EMPLOYER, THE EMPLOYER MUST
       ALSO, AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION
       TO THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR
       WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE
       EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN
       TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE
       EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED
       RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES NOT RESULT FROM ANY WORK
       PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.

5.06   EXECUTIVE'S DECLARATION. Executive has no inventions, data bases,
       improvements, discoveries, software, writings or other works of
       authorship useful to Ceridian in the normal course of business, which
       were conceived, made or written prior to the date of this Agreement and
       which are excluded from this Agreement.

5.07   SURVIVAL.  The obligations of this Article V shall survive the expiration
       or termination of this Agreement and Executive's employment.


                                     ARTICLE VI

              NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT

6.01   GENERAL.  The parties hereto recognize and agree that (a) Executive is a
       senior executive of Ceridian and is a key executive of Ceridian, (b)
       Executive has received, and will in the future receive, substantial
       amounts of Confidential Information, (c) Ceridian's business is

                                        9


       conducted on a worldwide basis, and (d) provision for non-competition,
       non-recruitment and non-disparagement obligations by Executive is
       critical to Ceridian's continued economic well-being and protection of
       Ceridian's Confidential Information.  In light of these
       considerations, this Article VI sets forth the terms and conditions of
       Executive's obligations of non-competition, non-recruitment and
       non-disparagement subsequent to the termination of this Agreement
       and/or Executive's employment for any reason.

6.02   NON-COMPETITION.

       (a)    Unless the obligation is waived or limited by Ceridian in
              accordance with subsection (b) of this Section 6.02, Executive
              agrees that for a period of two years following termination of
              employment for any reason ("Non-Compete Period"), Executive will
              not directly or indirectly, alone or as a partner, officer,
              director, shareholder or employee of any other firm or entity,
              engage in any commercial activity in competition with any part of
              Ceridian's business as conducted as of the date of such
              termination of employment or with any part of Ceridian's
              contemplated business with respect to which Executive has
              Confidential Information.  For purposes of this subsection (a),
              "shareholder" shall not include beneficial ownership of less than
              five percent (5%) of the combined voting power of all issued and
              outstanding voting securities of a publicly held corporation whose
              stock is traded on a major stock exchange.  Also for purposes of
              this subsection (a), "Ceridian's business" shall include business
              conducted by Ceridian or its affiliates and any partnership or
              joint venture in which Ceridian or its affiliates is a partner or
              joint venturer; provided that, "affiliate" as used in this
              sentence shall not include any corporation in which Ceridian has
              ownership of less than fifteen percent (15%) of the voting stock.

       (b)    At its sole option Ceridian may, by written notice to Executive at
              any time within the Non-Compete Period, waive or limit the time
              and/or geographic area in which Executive cannot engage in
              competitive activity.

       (c)    During the Non-Compete Period, prior to accepting employment with
              or agreeing to provide consulting services to, any firm or entity
              which offers competitive products or services, Executive shall
              give 30 days prior written notice to Ceridian.  Such written
              notice shall describe the firm and the employment or consulting
              services to be rendered to the firm or entity, and shall include a
              copy of the written offer of employment or engagement of
              consulting services.  Ceridian's failure to respond or object to
              such notice shall not in any way constitute acquiescence or waiver
              of Ceridian's rights under this Article VI.

       (d)    In the event Executive has provided notice to Ceridian pursuant to
              subsection (c) of this Section 6.02 and has not accepted
              employment with or agreed to provide consulting services to, any
              firm or entity directly as a result of his or her non-competition
              obligation pursuant to this Section 6.02, Ceridian shall pay
              Executive an amount equal to the usual rate of Executive's Base
              Salary in effect at the time

                                       10


              of termination on a regular payroll period basis until the end of
              the Non-Compete Period.  There shall be credited against
              Ceridian's obligation to make such payments any other payments
              made by Ceridian to Executive pursuant to Article IV of this
              Agreement.  In the event that Ceridian elects, pursuant to
              subsection (b) of this Section 6.02, to waive all or any portion
              of the non-competition obligation set forth in subsection (a)
              hereof, no payment shall be required by Ceridian with respect to
              the portion of the Non-Compete Period which has been waived.

       (e)    In the event Executive fails to provide notice to Ceridian
              pursuant to subsection (c) of this Section 6.02 and/or in anyway
              violates its non-competition obligation pursuant to Section 6.02,
              Ceridian may enforce all of its rights and remedies provided to it
              under this Agreement, in law and in equity, and Executive shall be
              deemed to have expressly waived any rights he or she may have had
              to payments under subsection (d) of this Section 6.02.

6.03   NON-RECRUITMENT.  For a period of two years following termination of
       employment for any reason, Executive will not initiate or actively
       participate in any other employer's recruitment or hiring of Ceridian
       employees.  This provision shall not preclude Executive from responding
       to a request (other than by Executive's employer) for a reference with
       respect to an individual's employment qualifications.

6.04   NON-DISPARAGEMENT.  Executive will not, during the term or after the
       termination or expiration of this Agreement or Executive's employment,
       make disparaging statements, in any form, about Ceridian, its officers,
       directors, agents, employees, products or services which Executive knows,
       or has reason to believe, are false or misleading.

6.05   SURVIVAL.  The obligations of this Article VI shall survive the
       expiration or termination of this Agreement and Executive's employment.


                                    ARTICLE VII

                                 CHANGE OF CONTROL

7.01   DEFINITIONS.  For purposes of this Article VII, the following definitions
       shall be applied:

       (a)    "BENEFIT PLAN" means any formal or informal plan, program or other
              arrangement heretofore or hereafter adopted by Ceridian for the
              direct or indirect provision of compensation to Executive
              (including groups or classes of participants or beneficiaries of
              which Executive is a member), whether or not such compensation is
              deferred, is in the form of cash or other property or rights, or
              is in the form of a benefit to or for Executive.

       (b)    "CHANGE OF CONTROL" shall mean any of the following events:

                                       11


                     (1)    a merger or consolidation to which Parent
                            Corporation is a party if the individuals and
                            entities who were stockholders of Parent Corporation
                            immediately prior to the effective date of such
                            merger or consolidation have beneficial ownership
                            (as defined in Rule 13d-3 under the Securities
                            Exchange Act of 1934) of less than fifty percent
                            (50%) of the total combined voting power for
                            election of directors of the surviving corporation
                            immediately following the effective date of such
                            merger or consolidation; or

                     (2)    the direct or indirect beneficial ownership (as
                            defined in Rule 13d-3 under the Securities Exchange
                            Act of 1934) in the aggregate of securities of
                            Parent Corporation representing twenty-five percent
                            (25%) or more of the total combined voting power of
                            Parent Corporation's then issued and outstanding
                            securities by any person or entity, or group of
                            associated persons or entities acting in concert;
                            provided, however, that for purposes of hereof, the
                            following acquisitions shall not constitute a Change
                            of Control: (A) any acquisition by Parent
                            Corporation, or (B) any acquisition by any employee
                            benefit plan (or related trust) sponsored or
                            maintained by Parent Corporation or any corporation
                            controlled by Parent Corporation; or

                     (3)    the sale of the properties and assets of Parent
                            Corporation, substantially as an entirety, to any
                            person or entity which is not a wholly-owned
                            subsidiary of Parent Corporation; or

                     (4)    the stockholders of Parent Corporation approve any
                            plan or proposal for the liquidation of Parent
                            Corporation; or

                     (5)    a change in the composition of the Board at any time
                            during any consecutive 24 month period such that the
                            "Continuity Directors" cease for any reason to
                            constitute at least a seventy percent (70%) majority
                            of the Board.  For purposes of this clause,
                            "Continuity Directors" means those members of the
                            Board who either (A) were directors at the beginning
                            of such consecutive 24 month period, or (B) were
                            elected by, or on the nomination or recommendation
                            of, at least a two-thirds (2/3) majority of the
                            then-existing Board; or

                     (6)    such other event or transaction as the Board shall
                            determine constitutes a Change of Control.

       (c)    "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
       (including any transfer of property) in the nature of compensation, to or
       for the benefit of Executive under this Agreement or any Other Agreement
       or Benefit Plan, which is considered to be contingent on a Change of
       Control for purposes of Section 280G of the Code.

                                       12


       (d)    "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
       either of the following events occurring within two years after a Change
       of Control:

                     (1)    Termination of Executive's employment by Ceridian
                            for any reason other than (A) fraud, (B)
                            misrepresentation, (C) theft or embezzlement of
                            Ceridian assets, (D) intentional violations of law
                            involving moral turpitude, or (E) failure to follow
                            Ceridian's conduct and ethics policies; or

                     (2)    Termination of employment with Ceridian by Executive
                            pursuant to Section 7.02 of this Article VII.

              A Change of Control Termination by Executive shall not, however,
              include termination by reason of death or Disability.

       (e)    "CODE" means the Internal Revenue Code of 1986, as amended.  Any
       reference to a section of the Code shall include the corresponding
       section of such Code as from time to time amended.

       (f)    "GOOD REASON" means a good faith determination by Executive, in
       Executive's sole and absolute judgment, that any one or more of the
       following events has occurred, without Executive's express written
       consent, after a Change of Control:

                     (1)    A change in Executive's reporting responsibilities,
                            titles or offices as in effect immediately prior to
                            the Change of Control, or any removal of Executive
                            from, or any failure to re-elect Executive to, any
                            of such positions, which has the effect of
                            materially diminishing Executive's responsibility or
                            authority;

                     (2)    A reduction by Ceridian in Executive's Base Salary
                            as in effect immediately prior to the Change of
                            Control or as the same may be increased from time to
                            time thereafter;

                     (3)    Ceridian requiring Executive to be based anywhere
                            other than within 25 miles of Executive's job
                            location at the time of the Change of Control;

                     (4)    Without replacement by plans, programs, or
                            arrangements which, taken as a whole, provide
                            benefits to Executive at least reasonably comparable
                            to those discontinued or adversely affected, (A) the
                            failure by Ceridian to continue in effect, within
                            its maximum stated term, any pension, bonus,
                            incentive, stock ownership, purchase, option, life
                            insurance, health, accident, disability, or any
                            other employee compensation or benefit plan, program
                            or arrangement,

                                       13


                            in which Executive is participating immediately
                            prior to a Change of Control; or (B) the taking
                            of any action by Ceridian that would materially
                            adversely affect Executive's participation or
                            materially reduce Executive's benefits under any
                            of such plans, programs or arrangements;

                     (5)    The failure by Ceridian to provide office space,
                            furniture, and secretarial support at least
                            comparable to that provided Executive immediately
                            prior to the Change of Control or the taking of any
                            similar action by Ceridian that would materially
                            adversely affect the working conditions in or under
                            which Executive performs his or her employment
                            duties;

                     (6)    If Executive's primary employment duties are with a
                            Subsidiary, the sale, merger, contribution, transfer
                            or any other transaction in conjunction with which
                            Parent Corporation's ownership interest in such
                            Subsidiary decreases below the level specified in
                            Section 1.07 of Article I unless (A) this Agreement
                            is assigned to the purchaser/transferee with the
                            provisions of Article VII in full force and effect
                            and operative as if a Change of Control has occurred
                            with respect to the purchaser/transferee as Parent
                            Corporation immediately after the purchase/transfer
                            becomes effective, and (B) such purchaser/transferee
                            has a creditworthiness reasonably equivalent to
                            Parent Corporation's; or

                     (7)    Any material breach of this Agreement by Ceridian.

       (g)    "OTHER AGREEMENTS" means any agreement, contract or understanding
       heretofore or hereafter entered into between Executive and Ceridian for
       the direct or indirect provision of compensation to Executive.

7.02   CHANGE OF CONTROL TERMINATION RIGHT.  For a period of two years following
       a Change of Control that occurred during the term of this Agreement,
       Executive shall have the right, at any time and within Executive's sole
       discretion, to terminate employment with Ceridian for Good Reason.  Such
       termination shall be accomplished by, and effective upon, Executive
       giving written notice to Ceridian of Executive's decision to terminate.
       Except as otherwise expressly provided in this Agreement, upon the
       exercise of said right, all obligations and duties of Executive under
       this Agreement shall be of no further force and effect.

7.03   CHANGE OF CONTROL TERMINATION PAYMENT.

       (a)    In the event of a Change of Control Termination that occurred
              during the term of this Agreement, then, and without further
              action by the Board, Compensation Committee or otherwise, Ceridian
              shall, within five days of such termination,

                                       14


              make a lump sum payment to Executive in an amount equal to
              three times the sum of (i) 12 months of Base Salary at the rate
              in effect at the time of Executive's termination, (ii) the
              bonus, if any, that Executive would have received under all
              applicable Ceridian bonus plans for the year in which the
              termination occurs had "superior" goals been achieved, and
              (iii) the annual perquisite cash adder Executive would have
              received in the year in which the termination occurs.

       (b)    In addition to the payments made pursuant to Section 7.03(a)
              hereof, in the event the Change of Control Termination that
              occurred during the term of this Agreement, then, and without
              further action by the Board, Compensation Committee or otherwise,
              Ceridian shall provide to Executive a pension supplement
              equivalent to the difference, if any, between:  (i) the monthly
              benefits to which Executive would have been entitled under the
              defined benefit pension plan or plans in which Executive
              participates immediately prior to the Change of Control
              Termination which includes an additional three years of age and
              service; and (ii) the amount to which Executive is, in fact,
              entitled under such defined benefit pension plan or plans.

       (c)    Neither the payments made or the pension supplement provided
              pursuant to this Section 7.03 nor any other compensation to be
              provided to Executive by Ceridian pursuant to this Agreement or
              any other agreement or Benefit Plan which may be considered Change
              of Control Compensation shall be subject to any limitation on
              Change of Control Compensation which may otherwise be expressed in
              any such agreement or Benefit Plan.

7.04   TAX REIMBURSEMENT.

       (a)    Anything in this Agreement to the contrary notwithstanding, in the
              event it shall be determined that any payments or distributions by
              Ceridian to or for the benefit of Executive (whether paid or
              payable or distributed or distributable pursuant to the terms of
              this Agreement or otherwise, but determined without regard to any
              payments required under this Section 7.04) (collectively, the
              "Payments") would be subject to the excise tax imposed by Section
              4999 of the Code or any interest or penalties are incurred by
              Executive with respect to such excise tax (such excise tax,
              together with any such interest and penalties, are hereinafter
              collectively referred to as the "Excise Tax"), then Executive
              shall be entitled to receive an additional payment (a "Gross-Up
              Payment") in an amount such that, after payment by Executive of
              all taxes (and any interest or penalties imposed with respect to
              such taxes), including any income taxes and Excise Tax imposed
              upon the Gross-Up Payment, Executive retains an amount of the
              Gross-Up Payment equal to the Excise Tax imposed upon the
              Payments.

       (b)    Subject to the provisions of Section 7.04(d), all determinations
              required to be made under this Section 7.04, including whether and
              when a Gross-Up Payment is

                                       15


              required and the amount such Gross-Up Payment and the
              assumptions to be utilized in arriving at such determination,
              shall be made by Ceridian's external auditors (the "Accounting
              Firm"), which shall provide detailed supporting calculations
              both to Ceridian and Executive within 15 business days of the
              receipt of notice from Executive that there has been a Payment,
              or such earlier time as is requested by Ceridian.  In the event
              that the Accounting Firm is serving as accountant or auditor
              for the individual, entity or group effecting the Change of
              Control, Executive shall appoint another nationally recognized
              accounting firm to make the determinations required hereunder
              (which accounting firm shall then be referred to as the
              "Accounting Firm" hereunder).  All fees and expenses of the
              Accounting Firm shall be borne solely by Ceridian.  Any
              Gross-Up Payment, as determined pursuant to this Section 7.04,
              shall be paid by Ceridian to Executive within five days of the
              receipt of the Accounting Firm's determination.  Any
              determination by the Accounting Firm shall be binding upon
              Ceridian and Executive.

       (c)    As a result of uncertainty in the application of Section 4999 of
              the Code at the time of the initial determination by the
              Accounting Firm hereunder, it is possible that Gross-Up Payments
              which should have been made by Ceridian will not have been made
              ("Underpayment"), consistent with the calculations required to be
              made hereunder.  In the event that Ceridian exhausts its remedies
              pursuant to Section 7.04(d) and Executive thereafter is required
              to make a payment of any additional Excise Tax, the Accounting
              Firm shall determine the amount of the Underpayment that has
              occurred and any such Underpayment shall be promptly paid by
              Ceridian to or for the benefit of Executive.

       (d)    Executive shall notify Ceridian in writing of any claim by the
              Internal Revenue Service or any other taxing authority that, if
              successful, would require the payment by Ceridian of any Gross-Up
              Payment.  Such notification shall be given as soon as practicable
              but no later than ten business days after Executive knows of such
              claim and shall apprise Ceridian of the nature of such claim and
              the date on which such claim is requested to be paid.  Executive
              shall not pay such claim prior to the expiration of the thirty-day
              period following the date on which it gives such notice to
              Ceridian (or such shorter period ending on the date that any
              payment of taxes with respect to such claim is due).  If Ceridian
              notifies Executive in writing prior to the expiration of such
              period that it desires to contest such claim, Executive shall:

                            (i)    give Ceridian any information reasonably
                                   requested by Ceridian relating to such claim;

                            (ii)   take such action in connection with
                                   contesting such claim as Ceridian shall
                                   reasonably request in writing from time to
                                   time, including accepting legal
                                   representation with respect

                                       16


                                   to such claim by an attorney reasonably
                                   selected by Ceridian;

                            (iii)  cooperate with Ceridian in good faith in
                                   order to effectively contest such claim; and

                            (iv)   permit Ceridian to participate in any
                                   proceedings relating to such claim;

              provided, however, that Ceridian shall bear and pay directly all
              costs and expenses (including additional interest and penalties)
              incurred in connection with such contest and shall indemnify and
              hold Executive harmless, on an after-tax basis, for any Excise Tax
              or income tax (including interest and penalties with respect
              thereto) imposed as a result of such representation and payment of
              costs and expenses.  Without limitation on the foregoing
              provisions of this Section 7.04(d), Ceridian shall control all
              proceedings taken in connection with such contest and, at its sole
              option, may pursue or forego any and all administrative appeals,
              proceedings, hearings and conferences with the taxing authority in
              respect of such claim and may, at its sole option, either direct
              Executive to pay the tax claimed and sue for a refund or contest
              the claim in any permissible manner, and Executive agrees to
              prosecute such contest to a determination before any
              administrative tribunal, in a court of initial jurisdiction and in
              one or more appellate courts, as Ceridian shall determine;
              provided further, however, that if Ceridian directs Executive to
              pay such claim and sue for a refund, Ceridian shall advance the
              amount of such payment to Executive on an interest-free basis and
              shall indemnify and hold Executive harmless, on an after-tax
              basis, from any Excise Tax or income tax (including interest or
              penalties with respect thereto) imposed with respect to such
              advance or with respect to any imputed income with respect to such
              advance; and provided further that any extension of the statute of
              limitations relating to payment of taxes for the taxable year of
              Executive with respect to which such contested amount is claimed
              to be due is limited solely to such contested amount.
              Furthermore, Ceridian's control of the contest shall be limited to
              issues with respect to which a Gross-Up Payment would be payable
              hereunder and Executive shall be entitled to settle or contest, as
              the case may be, any other issue raised by the Internal Revenue
              Service or any other taxing authority.

       (e)    If, after the receipt by Executive of an amount advanced by
              Ceridian pursuant to Section 7.04(d), Executive becomes entitled
              to receive any refund with respect to such claim, Executive shall
              (subject to Ceridian's complying with the requirements of Section
              7.04(d)) promptly pay to Ceridian the amount of such refund
              (together with any interest paid or credited thereon after taxes
              applicable thereto).  If, after the receipt by Executive of an
              amount advanced by Ceridian pursuant to Section 7.04(d), a
              determination is made that Executive shall not be

                                       17


              entitled to any refund with respect to such claim and Ceridian
              does not notify Executive in writing of its intent to contest
              such denial of refund prior to the expiration of thirty days
              after such determination, then such advance shall be forgiven
              and shall not be required to be repaid and the amount of such
              advance shall offset, to the extent thereof, the amount of
              Gross-Up Payment required to be paid.

7.05   INTEREST.  In the event Ceridian does not make timely payment in full of
       the Change of Control Termination payment described in Section 7.03,
       Executive shall be entitled to receive interest on any unpaid amount at
       the lower of:  (a) the prime rate of interest (or such comparable index
       as may be adopted) established from time to time by the Bank of America
       National Trust and Savings Association, New York, New York or its
       successor in interest; or (b) the maximum rate permitted under Section
       280G(d)(4) of the Internal Revenue Code.

7.06   ATTORNEYS' FEES.  In the event Executive incurs any legal expense to
       enforce or defend his or her rights under this Article VII of this
       Agreement, or to recover damages for breach thereof, Executive shall be
       entitled to recover from Ceridian any expenses for attorneys' fees and
       disbursements incurred.

7.07   BENEFITS CONTINUATION.  In the event of a Change of Control Termination,
       Executive (and anyone entitled to claim under or through Executive)
       shall, until age 65, be entitled to receive from Ceridian the same or
       equivalent health, dental, accidental death and dismemberment, short and
       long-term disability, life insurance coverages, and all other insurance
       policies and health and welfare benefits programs, policies or
       arrangements, at the same levels and coverages as Executive was receiving
       on the day immediately prior to the Change of Control at a cost not to
       exceed the amount Executive would continue to pay had he/she continued to
       be an active employee of Ceridian.  To the extent that election of
       continuation of any of such coverages, programs, policies, or
       arrangements is made available to employees terminating at age 55 with 15
       or more years of service, Executive shall be required to pay no more for
       continuation than is required of such employees on the day immediately
       prior to the Change of Control.  If no such continuation program is
       available, Executive shall be required to pay no more than he/she paid as
       an active employee, or if provided by Ceridian at no cost to employees on
       the day immediately prior to the Change of Control, they shall continue
       to be made available to Executive on this basis.


                                    ARTICLE VIII

                            CHANGE OF SUBSIDIARY STATUS

In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any reason
Parent Corporation's ownership interest in any such Subsidiary falls below the
level specified in Section 1.07, (b) Executive's primary

                                       18


employment duties are with the Subsidiary at the time of the occurrence of
such event, and (c) Executive does not, in conjunction therewith, transfer
employment directly to Parent Corporation or another Subsidiary, then:

       (1)    If Executive gives his or her written consent to the assignment of
              this Agreement to such Subsidiary, or to the purchaser or new
              majority interest holder of such Subsidiary, (and such assignment
              is accepted) this Agreement shall remain in full force and effect
              between Executive and the assignee, except that the provisions of
              Article VII of this Agreement shall become null and void;

       (2)    If such assignment is not accepted by the Subsidiary or purchaser,
              then this Agreement shall be deemed to have been terminated by
              Ceridian without cause pursuant to Section 4.03 of Article IV; and

       (3)    In all other cases, this Agreement shall be deemed terminated for
              cause pursuant to Section 4.02 of Article IV.


                                     ARTICLE IX

                                 GENERAL PROVISIONS

9.01   NO ADEQUATE REMEDY.  The parties declare that it is impossible to measure
       in money the damages which will accrue to either party by reason of a
       failure to perform any of the obligations under this Agreement and
       therefore injunctive relief is appropriate.  Therefore, if either party
       shall institute any action or proceeding to enforce the provisions
       hereof, such party against whom such action or proceeding is brought
       hereby waives the claim or defense that such party has an adequate remedy
       at law, and such party shall not urge in any such action or proceeding
       the claim or defense that such party has an adequate remedy at law.

9.02   SUCCESSORS AND ASSIGNS.  Except as otherwise provided in Article VIII,
       this Agreement shall be binding upon and inure to the benefit of the
       successors and assigns of Parent Corporation and each Subsidiary, whether
       by way of merger, consolidation, operation of law, assignment, purchase
       or other acquisition of substantially all of the assets or business of
       Ceridian, and any such successor or assign shall absolutely and
       unconditionally assume all of Ceridian's obligations hereunder.

9.03   NOTICES.  All notices, requests and demands given to or made pursuant
       hereto shall, except as otherwise specified herein, be in writing and be
       delivered or mailed to any such party at its address:

       (a)    Ceridian Corporation
              8100 34th Avenue South
              Minneapolis, Minnesota 55425-1640

                                       19


              Attention:  Office of General Counsel

       (b)    In the case of Executive shall be:

              At the address listed on the last page of this Agreement.

              Either party may, by notice hereunder, designate a changed
              address.  Any notice, if mailed properly addressed, postage
              prepaid, registered or certified mail, shall be deemed dispatched
              on the registered date or that stamped on the certified mail
              receipt, and shall be deemed received within the second business
              day thereafter or when it is actually received, whichever is
              sooner.

9.04   CAPTIONS.  The various headings or captions in this Agreement are for
       convenience only and shall not affect the meaning or interpretation of
       this Agreement.

9.05   GOVERNING LAW.  The validity, construction and performance of this
       Agreement shall be governed by the laws of the State of Minnesota and any
       and every legal proceeding arising out of or in connection with this
       Agreement shall be brought in the appropriate courts of the State of
       Minnesota, each of the parties hereby consenting to the exclusive
       jurisdiction of said courts for this purpose.  The parties hereto
       expressly recognize and agree that the implementation of this Governing
       Law provision is essential in light of the fact that Parent Corporation's
       corporate headquarters and its principal executive offices are located
       within the State of Minnesota, and there is a critical need for
       uniformity in the interpretation and enforcement of the employment
       agreements between Ceridian and its senior executives.

9.06   CONSTRUCTION.  Wherever possible, each provision of this Agreement shall
       be interpreted in such manner as to be effective and valid under
       applicable law, but if any provision of this Agreement shall be
       prohibited by or invalid under applicable law, such provision shall be
       ineffective only to the extent of such prohibition or invalidity without
       invalidating the remainder of such provision or the remaining provisions
       of this Agreement.

9.07   WAIVERS.  No failure on the part of either party to exercise, and no
       delay in exercising, any right or remedy hereunder shall operate as a
       waiver thereof; nor shall any single or partial exercise of any right or
       remedy hereunder preclude any other or further exercise thereof or the
       exercise of any other right or remedy granted hereby or by any related
       document or by law.

9.08   MODIFICATION.  Any changes or amendments to this Agreement must be in
       writing and signed by both parties.


9.09   ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement and
       understanding between the parties hereto in reference to all the matters
       herein agreed upon.  This Agreement replaces in full all prior employment
       agreements or understandings of the

                                       20


       parties hereto, and any and all such prior agreements or
       understandings are hereby rescinded by mutual agreement.

IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.


EXECUTIVE                               CERIDIAN CORPORATION


/s/J. R. Eickhoff                       By:     /s/Gary M. Nelson
                                        Title:  Vice President, General Counsel

Address:


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


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





                                       21

EX-10.06

                                                                   EXHIBIT 10.06

                                CERIDIAN CORPORATION

                           EXECUTIVE EMPLOYMENT AGREEMENT

PARTIES

                   CERIDIAN CORPORATION (A DELAWARE CORPORATION)
                               8100 34TH AVENUE SOUTH
                         MINNEAPOLIS, MINNESOTA 55425-1640

                                        AND

                                  TONY G. HOLCOMBE
                                   ("EXECUTIVE")


DATE:     OCTOBER 1, 1999

RECITALS

A.     Ceridian wishes to obtain the services of Executive for the duration of
       this Agreement, and Executive wishes to provide his or her services for
       such period.

B.     Ceridian desires reasonable protection of Ceridian's Confidential
       Information (as defined below).

C.     Ceridian desires assurance that Executive will not compete with Ceridian,
       engage in recruitment of Ceridian's employees or make disparaging
       statements about Ceridian after termination of employment, and Executive
       is willing to refrain from such competition, recruitment and
       disparagement.

D.     Executive desires to be assured of a minimum Base Salary (as defined
       below) from Ceridian for Executive's services for the term of this
       Agreement (unless terminated earlier pursuant to the terms of this
       Agreement).

E.     It is expressly recognized by the parties that Executive's acceptance of,
       and continuance in, Executive's position with Ceridian and agreement to
       be bound by the terms of this Agreement represents a substantial
       commitment to Ceridian in terms of Executive's personal and professional
       career and a foregoing of present and future career options by Executive,
       for all of which Ceridian receives substantial value.

F.     The parties recognize that a Change of Control (as defined below) may
       result in material alteration or diminishment of Executive's position and
       responsibilities and substantially





       frustrate the purpose of Executive's commitment to Ceridian and
       forebearance of career options.

G.     The parties recognize that in light of the above-described commitment and
       forebearance of career options, it is essential that, for the benefit of
       Ceridian and its stockholders, provision be made for a Change of Control
       Termination (as defined below) in order to enable Executive to accept and
       effectively continue in Executive's position in the face of inherently
       disruptive circumstances arising from the possibility of a Change of
       Control of the Parent Corporation (as defined below), although no such
       change is now contemplated or foreseen.

H.     The parties wish to replace any and all prior agreements and undertakings
       with respect to Executive's employment and Change of Control occurrences
       and compensation.

NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:


                                     ARTICLE I

                                    DEFINITIONS

1.01   "BASE SALARY" shall mean regular cash compensation paid on a periodic
       basis exclusive of benefits, bonuses or incentive payments.

1.02   "BOARD" shall mean the Board of Directors of Parent Corporation.

1.03   "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
       provided in Article VIII and Section 9.02 of Article IX,

       (a)    any Subsidiary (as that term is defined in Section 1.07); and

       (b)    any successor in interest by way of consolidation, operation of
              law, merger or otherwise.

1.04   "CONFIDENTIAL INFORMATION" shall mean information or material of Ceridian
       which is not generally available to or used by others, or the utility or
       value of which is not generally known or recognized as standard practice,
       whether or not the underlying details are in the public domain,
       including:

       (a)    information or material relating to Ceridian and its business as
              conducted or anticipated to be conducted; business plans;
              operations; past, current or anticipated software, products or
              services; customers or prospective customers; or


                                        2





              research, engineering, development, manufacturing, purchasing,
              accounting, or marketing activities;

       (b)    information or material relating to Ceridian's inventions,
              improvements, discoveries, "know-how," technological developments,
              or unpublished writings or other works of authorship, or to the
              materials, apparatus, processes, formulae, plans or methods used
              in the development, manufacture or marketing of Ceridian's
              software, products or services;

       (c)    information on or material relating to Ceridian which when
              received is marked as "proprietary," "private," or "confidential;"

       (d)    trade secrets of Ceridian;

       (e)    software of Ceridian in various stages of development, including
              computer programs in source code and binary code form, software
              designs, specifications, programming aids (including "library
              subroutines" and productivity tools), programming languages,
              interfaces, visual displays, technical documentation, user
              manuals, data files and databases of Ceridian; and

       (f)    any similar information of the type described above which Ceridian
              obtained from another party and which Ceridian treats as or
              designates as being proprietary, private or confidential, whether
              or not owned or developed by Ceridian.

       Notwithstanding the foregoing, "Confidential Information" does not
       include any information which is properly published or in the public
       domain; provided, however, that information which is published by or with
       the aid of Executive outside the scope of employment or contrary to the
       requirements of this Agreement will not be considered to have been
       properly published, and therefore will not be in the public domain for
       purposes of this Agreement.

1.05   "DISABILITY" shall mean the inability of Executive to perform his or her
       duties under this Agreement because of illness or incapacity for a
       continuous period of six months.

1.06   "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
       otherwise provided in Article VIII and Section 9.02 of Article IX, any
       successor in interest by way of consolidation, operation of law, merger
       or otherwise.  "Parent Corporation" shall not include any Subsidiary.

1.07   "SUBSIDIARY" shall mean:  (a) any corporation at least a majority of
       whose securities having ordinary voting power for the election of
       directors (other than securities having such power only by reason of the
       occurrence of a contingency) is at the time owned by Parent Corporation
       and/or one or more Subsidiaries; and (b) any division or business unit
       (or portion thereof) of Parent Corporation or a corporation described in
       clause (a) of this Section 1.07.


                                        3






                                     ARTICLE II

                            EMPLOYMENT, DUTIES AND TERM

2.01   EMPLOYMENT.  Upon the terms and conditions set forth in this Agreement,
       Ceridian hereby employs Executive, and Executive accepts such employment.

2.02   DUTIES.  Executive shall devote his or her full-time and best efforts to
       Ceridian and to fulfilling the duties of his or her position which shall
       include such duties as may from time to time be assigned him or her by
       Ceridian, provided that such duties are reasonably consistent with
       Executive's education, experience and background.  Executive shall comply
       with Ceridian's policies and procedures to the extent they are not
       inconsistent with this Agreement in which case the provisions of this
       Agreement prevail.

2.03   TERM.  Subject to the provisions of Articles IV, VII, and VIII, this
       Agreement and Executive's employment shall continue until the later of:
       (a) OCTOBER 1, 2001; and (b) two years after a Change of Control which
       occurs prior to OCTOBER 1, 2001 ("Initial Term").  Upon expiration of the
       Initial Term and subject to the provisions of Articles IV, VII and VIII,
       this Agreement and Executive's employment shall be automatically extended
       for successive two year periods.


                                    ARTICLE III

                             COMPENSATION AND EXPENSES

3.01   BASE SALARY.  For all services rendered under this Agreement during the
       term of this Agreement, Ceridian shall pay Executive a minimum Base
       Salary at the annual rate currently being paid or, if Executive is not
       currently in Ceridian's employ, at the annual rate specified in the
       written offer of employment.  If Executive's salary is increased from
       time to time during the term of this Agreement, the increased amount
       shall be the Base Salary for the remainder of the term.

3.02   BONUS AND INCENTIVE.  Bonus or incentive compensation shall be at the
       sole discretion of Ceridian.  Except as otherwise provided in Article
       VII, Ceridian shall have the right, in accordance with their terms, to
       alter, amend or eliminate any bonus or incentive plans, or Executive's
       participation therein, without compensation to Executive.

3.03   BUSINESS EXPENSES.  Ceridian shall, consistent with its policies in
       effect from time to time, bear all ordinary and necessary business
       expenses incurred by Executive in performing his or her duties as an
       employee of Ceridian, provided that Executive accounts promptly for such
       expenses to Ceridian in the manner prescribed from time to time by
       Ceridian.


                                        4





                                     ARTICLE IV

                                 EARLY TERMINATION

4.01   EARLY TERMINATION.  This Article shall not apply to a Change of Control
       Termination which is governed solely by the provisions of Article VII,
       and does not alter the respective continuing obligations of the parties
       pursuant to Articles V, VI, and IX.

4.02   TERMINATION FOR CAUSE.  Ceridian may terminate this Agreement and
       Executive's employment immediately for cause.  For the purpose hereof
       "cause" means:

       (a)    fraud;

       (b)    misrepresentation;

       (c)    theft or embezzlement of Ceridian assets;

       (d)    intentional violations of law involving moral turpitude;

       (e)    failure to follow Ceridian's conduct and ethics policies; and/or

       (f)    the continued failure by Executive to satisfactorily perform his
              or her duties as reasonably assigned to Executive pursuant to
              Section 2.02 of Article II of this Agreement for a period of 60
              days after a written demand for such satisfactory performance
              which specifically identifies the manner in which it is alleged
              Executive has not satisfactorily performed such duties.

       In the event of termination for cause pursuant to this Section 4.02,
       Executive shall be paid at the usual rate of Executive's annual Base
       Salary through the date of termination specified in any written notice of
       termination.

4.03   TERMINATION WITHOUT CAUSE.  Either Executive or Ceridian may terminate
       this Agreement and Executive's employment without cause on at least 75
       days' written notice.  In the event of termination of this Agreement and
       of Executive's employment pursuant to this Section 4.03, compensation
       shall be paid as follows:

       (a)    if the notice of termination is given by Executive, Executive
              shall be paid at the usual rate of his or her annual Base Salary
              through the 75 day notice period;

       (b)    if the notice of termination is given by Ceridian, (1) Executive
              shall be paid at the usual rate of his or her annual Base Salary
              through the 75 day notice period, however, Ceridian shall have the
              option of making termination of the Agreement and Executive's
              employment effective immediately upon notice in which case
              Executive shall be paid a lump sum representing the value of 75
              days worth of salary; and (2) Executive shall receive, starting
              within 15 days after the end of the


                                        5





              75 day notice period, one year's Base Salary payable, at the
              sole discretion of Ceridian, in either the form of a lump sum
              payment or on a regular payroll period basis.  In addition,
              Executive shall receive the bonus, if any, to which Executive
              would otherwise have become entitled under all applicable
              Ceridian bonus plans in effect at the time of termination of
              this Agreement had Executive remained continuously employed for
              the full fiscal year in which termination occurred and
              continued to perform his or her duties in the same manner as
              they were performed immediately prior to termination,
              multiplied by a fraction, the numerator of which shall be the
              number of whole months Executive was employed in the year in
              which termination occurred and the denominator of which is 12.
              This bonus amount shall be paid within 15 days after the date
              such bonus would have been paid had Executive remained employed
              for the full fiscal year.  In addition, Ceridian shall provide
              or make arrangements for reasonable outplacement services for
              Executive based on his or her level within Ceridian.

       (c)    In the event that termination occurs pursuant to Section 4.03(b),
              in addition to the payments specified therein, Ceridian shall pay
              to Executive an amount equal to one year's Base Salary payable, at
              the sole discretion of Ceridian, in either the form of a lump sum
              payment or on a regular payroll period basis, provided Executive
              executes a release, similar to that attached as Exhibit A, of all
              claims against Ceridian.

4.04   TERMINATION IN THE EVENT OF DEATH OR DISABILITY.  This Agreement and
       Executive's employment shall terminate in the event of death or
       disability of Executive.

       (a)    In the event of Executive's death, Ceridian shall pay an amount
              equal to 12 months of Base Salary at the rate in effect at the
              time of Executive's death plus the amount Executive would have
              received in annual incentive plan bonus for the year in which the
              death occurs had "target" goals been achieved.  Such amount shall
              be paid (1) to the beneficiary or beneficiaries designated in
              writing to Ceridian by Executive, (2) in the absence of such
              designation to the surviving spouse, or (3) if there is no
              surviving spouse, or such surviving spouse disclaims all or any
              part, then the full amount, or such disclaimed portion, shall be
              paid to the executor, administrator or other personal
              representative of Executive's estate.  The amount shall be paid as
              a lump sum as soon as practicable following Ceridian's receipt of
              notice of Executive's death.  All such payments shall be in
              addition to any payments due pursuant to Section 4.04(c) below.

       (b)    In the event of Executive's disability, Base Salary shall be
              terminated as of the end of the month in which the last day of the
              six-month period of Executive's inability to perform his or her
              duties occurs.

       (c)    In the event of termination by reason of Executive's death or
              disability, Ceridian shall pay to Executive any amount equal to
              (1) the amount Executive would have received in annual incentive
              plan bonus for the year in which termination occurs


                                        6





              had "target" goals been achieved, multiplied by (2) a fraction,
              the numerator of which shall be the number of whole months
              Executive was employed in the year in which the death or
              disability occurred and the denominator of which is 12.  The
              amount payable pursuant to this Section 4.04(c) shall be paid
              within 15 days after the date such bonus would have been paid
              had Executive remained employed for the full fiscal year.

4.05   RETIREMENT.  Executive may terminate this Agreement and Executive's
       employment as a result of Executive decision to retire from Ceridian.
       Executive shall provide Ceridian with at least 75 days' written notice of
       the date upon which Executive intends to retire.  Executive shall be paid
       at the usual rate of his or her annual Base Salary through the date of
       retirement stipulated in the written notice.

4.06   ENTIRE TERMINATION PAYMENT.  The compensation provided for in this
       Article IV for early termination of this Agreement and termination
       pursuant to this Article IV shall constitute Executive's sole remedy for
       such termination.  Executive shall not be entitled to any other
       termination or severance payment which may be payable to Executive under
       any other agreement between Executive and Ceridian.


                                     ARTICLE V

                     CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT

5.01   CONFIDENTIALITY.  Executive will not, during the term or after the
       termination or expiration of this Agreement or his/her employment,
       publish, disclose, or utilize in any manner any Confidential Information
       obtained while employed by Ceridian. If Executive leaves the employ of
       Ceridian, Executive will not, without Ceridian's prior written consent,
       retain or take away any drawing, writing or other record in any form
       containing any Confidential Information.

5.02   BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian,
       Executive will engage in no activity or employment which may conflict
       with the interest of Ceridian, and will comply with Ceridian's policies
       and guidelines pertaining to business conduct and ethics.

5.03   DISCLOSURE.  Executive will disclose promptly in writing to Ceridian all
       inventions, discoveries, software, writings and other works of authorship
       which are conceived, made, discovered, or written jointly or singly on
       Ceridian time or on Executive's own time, providing the invention,
       improvement, discovery, software, writing or other work of authorship is
       capable of being used by Ceridian in the normal course of business, and
       all such inventions, improvements, discoveries, software, writings and
       other works of authorship shall belong solely to Ceridian.


                                        7



5.04   INSTRUMENTS OF ASSIGNMENT.  Executive will sign and execute all
       instruments of assignment and other papers to evidence vestiture of
       Executive's entire right, title and interest in such inventions,
       improvements, discoveries, software, writings or other works of
       authorship in Ceridian, at the request and the expense of Ceridian, and
       Executive will do all acts and sign all instruments of assignment and
       other papers Ceridian may reasonably request relating to applications for
       patents, patents, copyrights, and the enforcement and protection thereof.
       If Executive is needed, at any time, to give testimony, evidence, or
       opinions in any litigation or proceeding involving any patents or
       copyrights or applications for patents or copyrights, both domestic and
       foreign, relating to inventions, improvements, discoveries, software,
       writings or other works of authorship conceived, developed or reduced to
       practice by Executive, Executive agrees to do so, and if Executive leaves
       the employ of Ceridian, Ceridian shall pay Executive at a rate mutually
       agreeable to Executive and Ceridian, plus reasonable traveling or other
       expenses.

5.05   INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME.  The two immediately
       preceding sections entitled "Disclosure" and "Instruments of Assignment"
       do not apply to inventions in which a Ceridian claim of any rights will
       create a violation of Chapter 181 Minnesota Statutes, Section 181.78,
       reproduced below and constituting the written notification of its
       Subdivision 3.

       181.78 Agreements; terms relating to inventions

       Subdivision 1.

       Any provision in an employment agreement which provides that an employee
       shall assign or offer to assign any of the employee's rights in an
       invention to the employer shall not apply to an invention for which no
       equipment, supplies, facility or trade secret information of the employer
       was used and which was developed entirely on the employee's own time, and
       (1) which does not relate (a) directly to the business of the employer or
       (b) to the employer's actual or demonstrably anticipated research or
       development, or (2) which does not result from any work performed by the
       employee for the employer.  Any provision which purports to apply to such
       an invention is to that extent against the public policy of this state
       and is to that extent void and unenforceable.

       Subdivision 2.

       No employer shall require a provision made void and unenforceable by
       subdivision 1 as a condition of employment or continuing employment.

       Subdivision 3.

       IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A
       PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF THE
       EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN


                                        8





       EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE AGREEMENT IS MADE,
       PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES
       NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY
       OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS
       DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT
       RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE
       EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT,
       OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE
       FOR THE EMPLOYER.

5.06   EXECUTIVE'S DECLARATION. Executive has no inventions, data bases,
       improvements, discoveries, software, writings or other works of
       authorship useful to Ceridian in the normal course of business, which
       were conceived, made or written prior to the date of this Agreement and
       which are excluded from this Agreement.

5.07   SURVIVAL.  The obligations of this Article V shall survive the expiration
       or termination of this Agreement and Executive's employment.


                                     ARTICLE VI

              NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT

6.01   GENERAL.  The parties hereto recognize and agree that (a) Executive is
       a senior executive of Ceridian and is a key executive of Ceridian, (b)
       Executive has received, and will in the future receive, substantial
       amounts of Confidential Information, (c) Ceridian's business is
       conducted on a worldwide basis, and (d) provision for non-competition,
       non-recruitment and non-disparagement obligations by Executive is
       critical to Ceridian's continued economic well-being and protection of
       Ceridian's Confidential Information.  In light of these
       considerations, this Article VI sets forth the terms and conditions of
       Executive's obligations of non-competition, non-recruitment and
       non-disparagement subsequent to the termination of this Agreement
       and/or Executive's employment for any reason.

6.02   NON-COMPETITION.

       (a)    Unless the obligation is waived or limited by Ceridian in
              accordance with subsection (b) of this Section 6.02, Executive
              agrees that for a period of two years following termination of
              employment for any reason ("Non-Compete Period"), Executive will
              not directly or indirectly, alone or as a partner, officer,
              director, shareholder or employee of any other firm or entity,
              engage in any commercial activity in competition with any part of
              Ceridian's business as conducted as of the date of such
              termination of employment or with any part of Ceridian's
              contemplated business with respect to which Executive has
              Confidential Information.  For purposes of this subsection (a),
              "shareholder" shall not include


                                        9





              beneficial ownership of less than five percent (5%) of the
              combined voting power of all issued and outstanding voting
              securities of a publicly held corporation whose stock is traded
              on a major stock exchange.  Also for purposes of this
              subsection (a), "Ceridian's business" shall include business
              conducted by Ceridian or its affiliates and any partnership or
              joint venture in which Ceridian or its affiliates is a partner
              or joint venturer; provided that, "affiliate" as used in this
              sentence shall not include any corporation in which Ceridian
              has ownership of less than fifteen percent (15%) of the voting
              stock.

       (b)    At its sole option Ceridian may, by written notice to Executive at
              any time within the Non-Compete Period, waive or limit the time
              and/or geographic area in which Executive cannot engage in
              competitive activity.

       (c)    During the Non-Compete Period, prior to accepting employment with
              or agreeing to provide consulting services to, any firm or entity
              which offers competitive products or services, Executive shall
              give 30 days prior written notice to Ceridian.  Such written
              notice shall describe the firm and the employment or consulting
              services to be rendered to the firm or entity, and shall include a
              copy of the written offer of employment or engagement of
              consulting services.  Ceridian's failure to respond or object to
              such notice shall not in any way constitute acquiescence or waiver
              of Ceridian's rights under this Article VI.

       (d)    In the event Executive has provided notice to Ceridian pursuant to
              subsection (c) of this Section 6.02 and has not accepted
              employment with or agreed to provide consulting services to, any
              firm or entity directly as a result of his or her non-competition
              obligation pursuant to this Section 6.02, Ceridian shall pay
              Executive an amount equal to the usual rate of Executive's Base
              Salary in effect at the time of termination on a regular payroll
              period basis until the end of the Non-Compete Period.  There shall
              be credited against Ceridian's obligation to make such payments
              any other payments made by Ceridian to Executive pursuant to
              Article IV of this Agreement.  In the event that Ceridian elects,
              pursuant to subsection (b) of this Section 6.02, to waive all or
              any portion of the non-competition obligation set forth in
              subsection (a) hereof, no payment shall be required by Ceridian
              with respect to the portion of the Non-Compete Period which has
              been waived.

       (e)    In the event Executive fails to provide notice to Ceridian
              pursuant to subsection (c) of this Section 6.02 and/or in anyway
              violates its non-competition obligation pursuant to Section 6.02,
              Ceridian may enforce all of its rights and remedies provided to it
              under this Agreement, in law and in equity, and Executive shall be
              deemed to have expressly waived any rights he or she may have had
              to payments under subsection (d) of this Section 6.02.

6.03   NON-RECRUITMENT.  For a period of two years following termination of
       employment for any reason, Executive will not initiate or actively
       participate in any other employer's recruitment or hiring of Ceridian
       employees.  This provision shall not preclude Executive


                                        10





       from responding to a request (other than by Executive's employer) for
       a reference with respect to an individual's employment qualifications.

6.04   NON-DISPARAGEMENT.  Executive will not, during the term or after the
       termination or expiration of this Agreement or Executive's employment,
       make disparaging statements, in any form, about Ceridian, its officers,
       directors, agents, employees, products or services which Executive knows,
       or has reason to believe, are false or misleading.

6.05   SURVIVAL.  The obligations of this Article VI shall survive the
       expiration or termination of this Agreement and Executive's employment.


                                    ARTICLE VII

                                 CHANGE OF CONTROL

7.01   DEFINITIONS.  For purposes of this Article VII, the following definitions
       shall be applied:

       (a)    "BENEFIT PLAN" means any formal or informal plan, program or other
              arrangement heretofore or hereafter adopted by Ceridian for the
              direct or indirect provision of compensation to Executive
              (including groups or classes of participants or beneficiaries of
              which Executive is a member), whether or not such compensation is
              deferred, is in the form of cash or other property or rights, or
              is in the form of a benefit to or for Executive.

       (b)    "CHANGE OF CONTROL" shall mean any of the following events:

                     (1)    a merger or consolidation to which Parent
                            Corporation is a party if the individuals and
                            entities who were stockholders of Parent Corporation
                            immediately prior to the effective date of such
                            merger or consolidation have beneficial ownership
                            (as defined in Rule 13d-3 under the Securities
                            Exchange Act of 1934) of less than fifty percent
                            (50%) of the total combined voting power for
                            election of directors of the surviving corporation
                            immediately following the effective date of such
                            merger or consolidation; or

                     (2)    the direct or indirect beneficial ownership (as
                            defined in Rule 13d-3 under the Securities Exchange
                            Act of 1934) in the aggregate of securities of
                            Parent Corporation representing twenty-five percent
                            (25%) or more of the total combined voting power of
                            Parent Corporation's then issued and outstanding
                            securities by any person or entity, or group of
                            associated persons or entities acting in concert;
                            provided, however, that for purposes of hereof, the
                            following acquisitions shall not constitute a Change
                            of Control: (A) any acquisition by Parent
                            Corporation, or (B) any acquisition by any

                                        11




                            employee benefit plan (or related trust)
                            sponsored or maintained by Parent Corporation or
                            any corporation controlled by Parent Corporation;
                            or

                     (3)    the sale of the properties and assets of Parent
                            Corporation, substantially as an entirety, to any
                            person or entity which is not a wholly-owned
                            subsidiary of Parent Corporation; or

                     (4)    the stockholders of Parent Corporation approve any
                            plan or proposal for the liquidation of Parent
                            Corporation; or

                     (5)    a change in the composition of the Board at any time
                            during any consecutive 24 month period such that the
                            "Continuity Directors" cease for any reason to
                            constitute at least a seventy percent (70%) majority
                            of the Board.  For purposes of this clause,
                            "Continuity Directors" means those members of the
                            Board who either (A) were directors at the beginning
                            of such consecutive 24 month period, or (B) were
                            elected by, or on the nomination or recommendation
                            of, at least a two-thirds (2/3) majority of the
                            then-existing Board; or

                     (6)    such other event or transaction as the Board shall
                            determine constitutes a Change of Control.

       (c)    "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
       (including any transfer of property) in the nature of compensation, to or
       for the benefit of Executive under this Agreement or any Other Agreement
       or Benefit Plan, which is considered to be contingent on a Change of
       Control for purposes of Section 280G of the Code.

       (d)    "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
       either of the following events occurring within two years after a Change
       of Control:

                     (1)    Termination of Executive's employment by Ceridian
                            for any reason other than (A) fraud, (B)
                            misrepresentation, (C) theft or embezzlement of
                            Ceridian assets, (D) intentional violations of law
                            involving moral turpitude, (E) failure to follow
                            Ceridian's conduct and ethics policies, or (F)
                            continuing failure by Executive to satisfactorily
                            perform his or her duties as reasonably assigned to
                            Executive pursuant to Section 2.02 of Article II of
                            this Agreement for a period of 60 days after a
                            written demand for such satisfactory performance
                            which specifically identifies the manner in which it
                            is alleged Executive has not satisfactorily
                            performed such duties; or

                     (2)    Termination of employment with Ceridian by Executive
                            pursuant to Section 7.02 of this Article VII.

                                        12





              A Change of Control Termination by Executive shall not, however,
              include termination by reason of death or Disability.

       (e)    "CODE" means the Internal Revenue Code of 1986, as amended.  Any
       reference to a section of the Code shall include the corresponding
       section of such Code as from time to time amended.

       (f)    "GOOD REASON" means a good faith determination by Executive, in
       Executive's sole and absolute judgment, that any one or more of the
       following events has occurred, without Executive's express written
       consent, after a Change of Control:

                     (1)    A change in Executive's reporting responsibilities,
                            titles or offices as in effect immediately prior to
                            the Change of Control, or any removal of Executive
                            from, or any failure to re-elect Executive to, any
                            of such positions, which has the effect of
                            materially diminishing Executive's responsibility or
                            authority;

                     (2)    A reduction by Ceridian in Executive's Base Salary
                            as in effect immediately prior to the Change of
                            Control or as the same may be increased from time to
                            time thereafter;

                     (3)    Ceridian requiring Executive to be based anywhere
                            other than within 25 miles of Executive's job
                            location at the time of the Change of Control;

                     (4)    Without replacement by plans, programs, or
                            arrangements which, taken as a whole, provide
                            benefits to Executive at least reasonably comparable
                            to those discontinued or adversely affected, (A) the
                            failure by Ceridian to continue in effect, within
                            its maximum stated term, any pension, bonus,
                            incentive, stock ownership, purchase, option, life
                            insurance, health, accident, disability, or any
                            other employee compensation or benefit plan, program
                            or arrangement, in which Executive is participating
                            immediately prior to a Change of Control; or (B) the
                            taking of any action by Ceridian that would
                            materially adversely affect Executive's
                            participation or materially reduce Executive's
                            benefits under any of such plans, programs or
                            arrangements;

                     (5)    The failure by Ceridian to provide office space,
                            furniture, and secretarial support at least
                            comparable to that provided Executive immediately
                            prior to the Change of Control or the taking of any
                            similar action by Ceridian that would materially
                            adversely affect the working conditions in or under
                            which Executive performs his or her employment
                            duties;

                                        13





                     (6)    If Executive's primary employment duties are with a
                            Subsidiary, the sale, merger, contribution, transfer
                            or any other transaction in conjunction with which
                            Parent Corporation's ownership interest in such
                            Subsidiary decreases below the level specified in
                            Section 1.07 of Article I unless (A) this Agreement
                            is assigned to the purchaser/transferee with the
                            provisions of Article VII in full force and effect
                            and operative as if a Change of Control has occurred
                            with respect to the purchaser/transferee as Parent
                            Corporation immediately after the purchase/transfer
                            becomes effective, and (B) such purchaser/transferee
                            has a creditworthiness reasonably equivalent to
                            Parent Corporation's; or

                     (7)    Any material breach of this Agreement by Ceridian.

       (g)    "OTHER AGREEMENTS" means any agreement, contract or understanding
       heretofore or hereafter entered into between Executive and Ceridian for
       the direct or indirect provision of compensation to Executive.

7.02   CHANGE OF CONTROL TERMINATION RIGHT.  For a period of two years following
       a Change of Control that occurred during the term of this Agreement,
       Executive shall have the right, at any time and within Executive's sole
       discretion, to terminate employment with Ceridian for Good Reason.  Such
       termination shall be accomplished by, and effective upon, Executive
       giving written notice to Ceridian of Executive's decision to terminate.
       Except as otherwise expressly provided in this Agreement, upon the
       exercise of said right, all obligations and duties of Executive under
       this Agreement shall be of no further force and effect.

7.03   CHANGE OF CONTROL TERMINATION PAYMENT.  In the event of a Change of
       Control Termination that occurred during the term of this Agreement,
       then, and without further action by the Board, Compensation Committee or
       otherwise, Ceridian shall, within five days of such termination, make a
       lump sum payment to Executive in an amount equal to three times the sum
       of (a) 12 months of Base Salary at the rate in effect at the time of
       Executive's termination, (b) the bonus, if any, that Executive would have
       received under all applicable Ceridian bonus plans for the year in which
       the termination occurs had "superior" goals been achieved, (c) the annual
       perquisite cash adder Executive would have received in the year in which
       the termination occurs, and (d) the highest annual aggregate amount of
       basic and performance matching contributions made by Ceridian on behalf
       of Executive into the Ceridian Corporation Savings and Investment Plan
       (401(k) Plan) over the last three fiscal years prior to termination of
       Executive.  Neither the payments made to Executive pursuant to this
       Section 7.03 nor any other compensation to be provided to Executive by
       Ceridian pursuant to this Agreement or any other agreement or Benefit
       Plan which may be considered Change of Control Compensation shall be
       subject to any limitation on Change of Control Compensation which may
       otherwise be expressed in any such agreement or Benefit Plan.


                                        14


7.04   TAX REIMBURSEMENT.

       (a)    Anything in this Agreement to the contrary notwithstanding, in the
              event it shall be determined that any payments or distributions by
              Ceridian to or for the benefit of Executive (whether paid or
              payable or distributed or distributable pursuant to the terms of
              this Agreement or otherwise, but determined without regard to any
              payments required under this Section 7.04) (collectively, the
              "Payments") would be subject to the excise tax imposed by Section
              4999 of the Code or any interest or penalties are incurred by
              Executive with respect to such excise tax (such excise tax,
              together with any such interest and penalties, are hereinafter
              collectively referred to as the "Excise Tax"), then Executive
              shall be entitled to receive an additional payment (a "Gross-Up
              Payment") in an amount such that, after payment by Executive of
              all taxes (and any interest or penalties imposed with respect to
              such taxes), including any income taxes and Excise Tax imposed
              upon the Gross-Up Payment, Executive retains an amount of the
              Gross-Up Payment equal to the Excise Tax imposed upon the
              Payments.

       (b)    Subject to the provisions of Section 7.04(d), all determinations
              required to be made under this Section 7.04, including whether and
              when a Gross-Up Payment is required and the amount such Gross-Up
              Payment and the assumptions to be utilized in arriving at such
              determination, shall be made by Ceridian's external auditors (the
              "Accounting Firm"), which shall provide detailed supporting
              calculations both to Ceridian and Executive within 15 business
              days of the receipt of notice from Executive that there has been a
              Payment, or such earlier time as is requested by Ceridian.  In the
              event that the Accounting Firm is serving as accountant or auditor
              for the individual, entity or group effecting the Change of
              Control, Executive shall appoint another nationally recognized
              accounting firm to make the determinations required hereunder
              (which accounting firm shall then be referred to as the
              "Accounting Firm" hereunder).  All fees and expenses of the
              Accounting Firm shall be borne solely by Ceridian.  Any Gross-Up
              Payment, as determined pursuant to this Section 7.04, shall be
              paid by Ceridian to Executive within five days of the receipt of
              the Accounting Firm's determination.  Any determination by the
              Accounting Firm shall be binding upon Ceridian and Executive.

       (c)    As a result of uncertainty in the application of Section 4999 of
              the Code at the time of the initial determination by the
              Accounting Firm hereunder, it is possible that Gross-Up Payments
              which should have been made by Ceridian will not have been made
              ("Underpayment"), consistent with the calculations required to be
              made hereunder.  In the event that Ceridian exhausts its remedies
              pursuant to Section 7.04(d) and Executive thereafter is required
              to make a payment of any additional Excise Tax, the Accounting
              Firm shall determine the amount of the Underpayment that has
              occurred and any such Underpayment shall be promptly paid by
              Ceridian to or for the benefit of Executive.

                                        15






       (d)    Executive shall notify Ceridian in writing of any claim by the
              Internal Revenue Service that, if successful, would require the
              payment by Ceridian of any Gross-Up Payment.  Such notification
              shall be given as soon as practicable but no later than ten
              business days after Executive knows of such claim and shall
              apprise Ceridian of the nature of such claim and the date on which
              such claim is requested to be paid.  Executive shall not pay such
              claim prior to the expiration of the thirty-day period following
              the date on which it gives such notice to Ceridian (or such
              shorter period ending on the date that any payment of taxes with
              respect to such claim is due).  If Ceridian notifies Executive in
              writing prior to the expiration of such period that it desires to
              contest such claim, Executive shall:

                            (i)    give Ceridian any information reasonably
                                   requested by Ceridian relating to such claim;

                            (ii)   take such action in connection with
                                   contesting such claim as Ceridian shall
                                   reasonably request in writing from time to
                                   time, including accepting legal
                                   representation with respect to such claim by
                                   an attorney reasonably selected by Ceridian;

                            (iii)  cooperate with Ceridian in good faith in
                                   order to effectively contest such claim; and

                            (iv)   permit Ceridian to participate in any
                                   proceedings relating to such claim;

              provided, however, that Ceridian shall bear and pay directly all
              costs and expenses (including additional interest and penalties)
              incurred in connection with such contest and shall indemnify and
              hold Executive harmless, on an after-tax basis, for any Excise Tax
              or income tax (including interest and penalties with respect
              thereto) imposed as a result of such representation and payment of
              costs and expenses.  Without limitation on the foregoing
              provisions of this Section 7.04(d), Ceridian shall control all
              proceedings taken in connection with such contest and, at its sole
              option, may pursue or forego any and all administrative appeals,
              proceedings, hearings and conferences with the taxing authority in
              respect of such claim and may, at its sole option, either direct
              Executive to pay the tax claimed and sue for a refund or contest
              the claim in any permissible manner, and Executive agrees to
              prosecute such contest to a determination before any
              administrative tribunal, in a court of initial jurisdiction and in
              one or more appellate courts, as Ceridian shall determine;
              provided further, however, that if Ceridian directs Executive to
              pay such claim and sue for a refund, Ceridian shall advance the
              amount of such payment to Executive on an interest-free basis and
              shall indemnify and hold Executive harmless, on an after-tax
              basis, from any

                                        16





              Excise Tax or income tax (including interest or penalties with
              respect thereto) imposed with respect to such advance or with
              respect to any imputed income with respect to such advance; and
              provided further that any extension of the statute of
              limitations relating to payment of taxes for the taxable year
              of Executive with respect to which such contested amount is
              claimed to be due is limited solely to such contested amount.
              Furthermore, Ceridian's control of the contest shall be limited
              to issues with respect to which a Gross-Up Payment would be
              payable hereunder and Executive shall be entitled to settle or
              contest, as the case may be, any other issue raised by the
              Internal Revenue Service or any other taxing authority.

       (e)    If, after the receipt by Executive of an amount advanced by
              Ceridian pursuant to Section 7.04(d), Executive becomes entitled
              to receive any refund with respect to such claim, Executive shall
              (subject to Ceridian's complying with the requirements of Section
              7.04(d)) promptly pay to Ceridian the amount of such refund
              (together with any interest paid or credited thereon after taxes
              applicable thereto).  If, after the receipt by Executive of an
              amount advanced by Ceridian pursuant to Section 7.04(d), a
              determination is made that Executive shall not be entitled to any
              refund with respect to such claim and Ceridian does not notify
              Executive in writing of its intent to contest such denial of
              refund prior to the expiration of thirty days after such
              determination, then such advance shall be forgiven and shall not
              be required to be repaid and the amount of such advance shall
              offset, to the extent thereof, the amount of Gross-Up Payment
              required to be paid.

7.05   INTEREST.  In the event Ceridian does not make timely payment in full of
       the Change of Control Termination payment described in Section 7.03,
       Executive shall be entitled to receive interest on any unpaid amount at
       the lower of:  (a) the prime rate of interest (or such comparable index
       as may be adopted) established from time to time by the Bank of America
       National Trust and Savings Association, New York, New York or its
       successor in interest; or (b) the maximum rate permitted under Section
       280G(d)(4) of the Internal Revenue Code.

7.06   ATTORNEYS' FEES.  In the event Executive incurs any legal expense to
       enforce or defend his or her rights under this Article VII of this
       Agreement, or to recover damages for breach thereof, Executive shall be
       entitled to recover from Ceridian any expenses for attorneys' fees and
       disbursements incurred.

7.07   BENEFITS CONTINUATION.  In the event of a Change of Control Termination,
       Executive (and anyone entitled to claim under or through Executive)
       shall, until age 65, be entitled to receive from Ceridian the same or
       equivalent health, dental, accidental death and dismemberment, short and
       long-term disability, life insurance coverages, and all other insurance
       policies and health and welfare benefits programs, policies or
       arrangements, at the same levels and coverages as Executive was receiving
       on the day immediately prior to


                                        17





       the Change of Control at a cost not to exceed the amount Executive
       would continue to pay had he/she continued to be an active employee of
       Ceridian.  To the extent that election of continuation of any of such
       coverages, programs, policies, or arrangements is made available to
       employees terminating at age 55 with 15 or more years of service,
       Executive shall be required to pay no more for continuation than is
       required of such employees on the day immediately prior to the Change
       of Control.  If no such continuation program is available, Executive
       shall be required to pay no more than he/she paid as an active
       employee, or if provided by Ceridian at no cost to employees on the
       day immediately prior to the Change of Control, they shall continue to
       be made available to Executive on this basis.

                                    ARTICLE VIII

                            CHANGE OF SUBSIDIARY STATUS

In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any reason
Parent Corporation's ownership interest in any such Subsidiary falls below the
level specified in Section 1.07, (b) Executive's primary employment duties are
with the Subsidiary at the time of the occurrence of such event, and (c)
Executive does not, in conjunction therewith, transfer employment directly to
Parent Corporation or another Subsidiary, then:

       (1)    If Executive gives his or her written consent to the assignment of
              this Agreement to such Subsidiary, or to the purchaser or new
              majority interest holder of such Subsidiary, (and such assignment
              is accepted) this Agreement shall remain in full force and effect
              between Executive and the assignee, except that the provisions of
              Article VII of this Agreement shall become null and void;

       (2)    If such assignment is not accepted by the Subsidiary or purchaser,
              then this Agreement shall be deemed to have been terminated by
              Ceridian without cause pursuant to Section 4.03 of Article IV; and

       (3)    In all other cases, this Agreement shall be deemed terminated for
              cause pursuant to Section 4.02 of Article IV.


                                     ARTICLE IX

                                 GENERAL PROVISIONS

9.01   NO ADEQUATE REMEDY.  The parties declare that it is impossible to measure
       in money the damages which will accrue to either party by reason of a
       failure to perform any of the obligations under this Agreement and
       therefore injunctive relief is appropriate.  Therefore, if either party
       shall institute any action or proceeding to enforce the provisions

                                        18





       hereof, such party against whom such action or proceeding is brought
       hereby waives the claim or defense that such party has an adequate remedy
       at law, and such party shall not urge in any such action or proceeding
       the claim or defense that such party has an adequate remedy at law.

9.02   SUCCESSORS AND ASSIGNS.  Except as otherwise provided in Article VIII,
       this Agreement shall be binding upon and inure to the benefit of the
       successors and assigns of Parent Corporation and each Subsidiary, whether
       by way of merger, consolidation, operation of law, assignment, purchase
       or other acquisition of substantially all of the assets or business of
       Ceridian, and any such successor or assign shall absolutely and
       unconditionally assume all of Ceridian's obligations hereunder.

9.03   NOTICES.  All notices, requests and demands given to or made pursuant
       hereto shall, except as otherwise specified herein, be in writing and be
       delivered or mailed to any such party at its address:

       (a)    Ceridian Corporation
              8100 34th Avenue South
              Minneapolis, Minnesota 55425-1640
              Attention:  Office of General Counsel

       (b)    In the case of Executive shall be:

              At the address listed on the last page of this Agreement.

              Either party may, by notice hereunder, designate a changed
              address.  Any notice, if mailed properly addressed, postage
              prepaid, registered or certified mail, shall be deemed dispatched
              on the registered date or that stamped on the certified mail
              receipt, and shall be deemed received within the second business
              day thereafter or when it is actually received, whichever is
              sooner.

9.04   CAPTIONS.  The various headings or captions in this Agreement are for
       convenience only and shall not affect the meaning or interpretation of
       this Agreement.

9.05   GOVERNING LAW.  The validity, construction and performance of this
       Agreement shall be governed by the laws of the State of Minnesota and any
       and every legal proceeding arising out of or in connection with this
       Agreement shall be brought in the appropriate courts of the State of
       Minnesota, each of the parties hereby consenting to the exclusive
       jurisdiction of said courts for this purpose.  The parties hereto
       expressly recognize and agree that the implementation of this Governing
       Law provision is essential in light of the fact that Parent Corporation's
       corporate headquarters and its principal executive offices are located
       within the State of Minnesota, and there is a critical need for
       uniformity in the interpretation and enforcement of the employment
       agreements between Ceridian and its senior executives.

                                        19





9.06   CONSTRUCTION.  Wherever possible, each provision of this Agreement shall
       be interpreted in such manner as to be effective and valid under
       applicable law, but if any provision of this Agreement shall be
       prohibited by or invalid under applicable law, such provision shall be
       ineffective only to the extent of such prohibition or invalidity without
       invalidating the remainder of such provision or the remaining provisions
       of this Agreement.

9.07   WAIVERS.  No failure on the part of either party to exercise, and no
       delay in exercising, any right or remedy hereunder shall operate as a
       waiver thereof; nor shall any single or partial exercise of any right or
       remedy hereunder preclude any other or further exercise thereof or the
       exercise of any other right or remedy granted hereby or by any related
       document or by law.

9.08   MODIFICATION.  Any changes or amendments to this Agreement must be in
       writing and signed by both parties.


9.09   ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement and
       understanding between the parties hereto in reference to all the matters
       herein agreed upon.  This Agreement replaces in full all prior employment
       agreements or understandings of the parties hereto, and any and all such
       prior agreements or understandings are hereby rescinded by mutual
       agreement.

IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

EXECUTIVE                          CERIDIAN CORPORATION


/s/Tony G. Holcombe                By:    /s/Gary M. Nelson
                                   Title: Vice President, General Counsel
                                            and Secretary

Address:


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


                                        20






                                 AMENDMENT NO. 1 TO
                           EXECUTIVE EMPLOYMENT AGREEMENT

This Amendment, dated as of October 20, 1999, amends certain provisions of the
Executive Employment Agreement ("Agreement"), dated as of October 1, 1999,
between Ceridian Corporation and TONY G. HOLCOMBE ("Executive").  Unless
otherwise defined herein, capitalized terms used in this Amendment have the
meanings given to them in the Agreement.  In consideration of you continuing in
your employment with Ceridian for the remaining term of the Agreement, and the
mutual promises and obligations contained in the Agreement as modified by this
Amendment, Executive and Ceridian agree to amend the Agreement as follows:

1.     Section 4.02(f) of the Agreement shall be amended in its entirety to read
       as follows:

       "(f)   the continued failure by Executive to attempt in good faith to
              perform his or her duties as reasonably assigned to Executive
              pursuant to Section 2.02 of Article II of this Agreement for a
              period of 60 days after a written demand for such performance
              which specifically identifies the manner in which it is alleged
              Executive has not attempted in good faith to perform such duties."

2.     Section 7.01(d)(1) of the Agreement shall be amended in its entirety to
       read as follows:

       "(1)   Termination of Executive's employment by Ceridian for any reason
              other than (A) fraud, (B) misrepresentation, (C) theft or
              embezzlement of Ceridian assets, (D) intentional violations of law
              involving moral turpitude, or (E) failure to follow Ceridian's
              conduct and ethics policies; or"

3.     The first sentence of Section 7.04(d) of the Agreement shall be amended
       in its entirety to read as follows:

       "Executive shall notify Ceridian in writing of any claim by the Internal
       Revenue Service or any other taxing authority that, if successful, would
       require the payment by Ceridian of any Gross-Up Payment."

4.     This Amendment is governed by, and shall be construed in accordance with,
       the laws of the State of Minnesota.

5.     Except as herein expressly amended, the Agreement is ratified and
       confirmed in all respects and shall remain in full force and effect in
       accordance with its terms.

6.     This Amendment may be executed in two or more counterparts, each of which
       shall be deemed an original, but all of which together shall constitute
       one and the same instrument.

Ceridian and Executive have caused this Amendment to be duly executed and
delivered, and this Amendment shall be effective, as of the date first written
above.  Following the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement," "hereunder," "herein," "hereof," or words of like
import shall mean and be a reference to the Agreement as amended by this
Amendment.

EXECUTIVE                          CERIDIAN CORPORATION


/s/Tony G. Holcombe                By:  /s/Gary M. Nelson
                                   Title:  Vice President, General Counsel
                                             and Secretary

Address:

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

EX-10.08

                                                                   EXHIBIT 10.08


                         NON-QUALIFIED STOCK OPTION AGREEMENT
                             (Time-Based Stock Option)

       THIS AGREEMENT is entered into and effective as of ____________ (the
"Date of Grant"), by and between Ceridian Corporation (the "Company") and
__________________________ (the "Optionee").

       A.     The Company has adopted the Ceridian Corporation 1999 Stock
Incentive Plan (as may be amended or supplemented, the "Plan") authorizing the
Board of Directors of the Company, or a committee as provided for in the Plan
(the Board or such a committee to be referred to as the "Committee"), to grant
stock options to employees of the Company and its Subsidiaries (as defined in
the Plan).

       B.     The Company desires to give the Optionee an inducement to acquire
a proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Optionee an option to purchase
shares of common stock of the Company pursuant to the Plan.

       Accordingly, the parties agree as follows:

1.     GRANT OF OPTION.

       The Company hereby grants to the Optionee the right, privilege and option
(the "Option") to purchase                               shares (the "Option
Shares") of the Company's common stock, $0.50 par value (the "Common Stock"),
according to the terms and subject to the conditions hereinafter set forth and
as set forth in the Plan.  The Option granted hereunder shall not be an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").


2.     OPTION EXERCISE PRICE.

       The per share price to be paid by Optionee in the event of an exercise of
the Option will be $___________.


3.     DURATION OF OPTION AND TIME OF EXERCISE.

       3.1    INITIAL PERIOD OF EXERCISABILITY.  Except as provided in Sections
3.2 and 3.3 hereof, the Option shall become exercisable with respect to
one-third of the Option Shares on each of the first, second and third
anniversaries of the Date of Grant.  The foregoing rights to exercise the
Option will be cumulative with respect to the Option Shares becoming
exercisable on each such date, but in no event will the Option be exercisable
after, and the Option will become void and expire as to all unexercised
Option Shares at, 5:00 p.m. (Minneapolis time) on tenth anniversary of the
Date of Grant (the "Time of Option Termination").

       3.2    TERMINATION OF EMPLOYMENT.

              (a)    TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT.  In the
       event the Optionee's employment with the Company and all Subsidiaries is
       terminated by reason of death, Disability


       (as defined in the Plan) or Retirement (as defined in the Plan), the
       Option will become immediately exercisable in full and remain
       exercisable until the Time of Option Termination.


              (b)    TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR
       RETIREMENT.  In the event that the Optionee's employment with the
       Company and all Subsidiaries is terminated for any reason other than
       death, Disability or Retirement, or the Optionee is in the employ of a
       Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company
       (unless the Optionee continues in the employ of the Company or another
       Subsidiary), all rights of the Optionee under the Plan and this
       Agreement will immediately terminate without notice of any kind, and
       the Option will no longer be exercisable; provided, however, that, if
       such termination is due to any reason other than termination by the
       Company or any Subsidiary for Cause (as defined in Section 9 of this
       Agreement), the Option will remain exercisable to the extent
       exercisable as of such termination for a period of three months after
       such termination (but in no event after the Time of Option
       Termination).

       3.3    CHANGE IN CONTROL.

              (a)    IMPACT OF CHANGE IN CONTROL.  If a Change in Control (as
       defined in Section 9 of this Agreement) of the Company occurs, and the
       Option has been outstanding for at least two months, the Option will
       become immediately exercisable in full and will remain exercisable until
       the Time of Option Termination, regardless of whether the Optionee
       remains in the employ of the Company or any Subsidiary.  In addition, if
       a Change in Control of the Company occurs, the Committee, in its sole
       discretion and without the consent of the Optionee, may determine that
       the Optionee will receive, with respect to some or all of the Option
       Shares, as of the effective date of any such Change in Control of the
       Company, cash in an amount equal to the excess of the Fair Market Value
       (as defined in the Plan) of such Option Shares immediately prior to the
       effective date of such Change in Control of the Company over the option
       exercise price per share of the Option.

              (b)    AUTHORITY TO MODIFY CHANGE OF CONTROL PROVISIONS.  Prior to
       a Change of Control, the Optionee will have no rights under this
       Section 3.3, and the Committee will have the authority, in its sole
       discretion, to rescind, modify or amend this Section 3.3 without the
       consent of the Optionee.

4.     MANNER OF OPTION EXERCISE.

       4.1    NOTICE.  This Option may be exercised by the Optionee in whole or
in part from time to time, subject to the conditions contained in the Plan and
in this Agreement, by delivery, in person, by facsimile or electronic
transmission or through the mail, to the Company at its principal executive
office in Minneapolis, Minnesota (Attention:  Corporate Treasury), of a written
notice of exercise.  Such notice must be in a form satisfactory to the
Committee, must identify the Option, must specify the number of Option Shares
with respect to which the Option is being exercised, and must be signed by the
person or persons so exercising the Option.  Such notice must be accompanied by
payment in full of the total exercise price for the Option Shares to be
purchased.  In the event that the Option is being exercised, as provided by the
Plan and Section 3.2 of this Agreement, by any person or persons other than the
Optionee, the notice must be accompanied by appropriate proof of right of such
person or persons to exercise the Option.  If the Optionee retains the Option
Shares purchased, as soon as practicable after the effective exercise of the
Option, the Optionee will be recorded on the stock transfer books of the


                                       2


Company as the owner of the Option Shares purchased, and the Company will
deliver to the Optionee one or more duly issued stock certificates evidencing
such ownership.

       4.2    PAYMENT.  At the time of exercise of the Option, the Optionee must
pay the total exercise price of the Option Shares to be purchased entirely in
cash (including a check, bank draft or money order, payable to the order of the
Company); provided, however, that the Committee, in its sole discretion and upon
terms and conditions established by the Committee, may allow such payment to be
made, in whole or in part, by tender of a full recourse promissory note, a
Broker Exercise Notice or Previously Acquired Shares (as such terms are defined
in the Plan), or by a combination of such methods.  In the event the Optionee is
permitted to pay the total purchase price of the Option in whole or in part with
Previously Acquired Shares, the value of such shares will be equal to their Fair
Market Value on the date of exercise of the Option and delivery of any such
Previously Acquired Shares may be made through delivery of a written attestation
of ownership if permitted by the Committee.

5.     RIGHTS AND RESTRICTIONS OF OPTIONEE; TRANSFERABILITY.

       5.1    EMPLOYMENT.  Nothing in this Agreement will interfere with or
limit in any way the right of the Company or any Subsidiary to terminate the
employment of the Optionee at any time, nor confer upon the Optionee any right
to continue in the employ of the Company or any Subsidiary at any particular
position or rate of pay or for any particular period of time.

       5.2    RIGHTS AS A STOCKHOLDER.  The Optionee will have no rights as a
stockholder unless and until all conditions to the effective exercise of the
Option (including, without limitation, the conditions set forth in Sections 4
and 6 of this Agreement) have been satisfied and the Optionee has become the
holder of record of such shares.  No adjustment will be made for dividends or
distributions with respect to the Option Shares as to which there is a record
date preceding the date the Optionee becomes the holder of record of such Option
Shares, except as may otherwise be provided in the Plan or determined by the
Committee in its sole discretion.

       5.3    RESTRICTIONS ON TRANSFER.  Except pursuant to testamentary will or
the laws of descent and distribution or as otherwise expressly permitted by the
Plan, no right or interest of the Optionee in the Option prior to exercise may
be assigned or transferred, or subjected to any lien, during the lifetime of the
Optionee, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise.  The Optionee will, however, be entitled to
designate a beneficiary to receive the Option upon such Optionee's death in the
manner provided by the Plan, and, in the event of the Optionee's death, exercise
of the Option (to the extent permitted pursuant to Section 3.2(a) of this
Agreement) may be made by the Optionee's designated beneficiary.

       5.4    RESTRICTIONS REGARDING EMPLOYMENT.

              (a)    The Optionee agrees that he or she will not take any
       Adverse Actions (as defined below) against the Company or any Subsidiary
       at any time during the period that the Option is or may yet become
       exercisable in whole or in part or at any time before one year following
       the Optionee's termination of employment with the Company or any
       Subsidiary, whichever is later (the "Restricted Period").  The Optionee
       acknowledges that damages which may arise from a breach of this Section
       5.4 may be impossible to ascertain or prove with certainty.
       Notwithstanding anything in this Agreement or the Plan to the contrary,
       in the event that the Company determines in its sole discretion that the
       Optionee has taken Adverse Actions against the Company or any Subsidiary
       at any time during the Restricted Period, in addition to other legal
       remedies which may be available, (i) the Company will be entitled to an
       immediate


                                       3


       injunction from a court of competent jurisdiction to end such Adverse
       Action, without further proof of damage, (ii) the Committee will have
       the authority in its sole discretion to terminate immediately all
       rights of the Optionee under the Plan and this Agreement without
       notice of any kind, and (iii) the Committee will have the authority in
       its sole discretion to rescind the exercise of all or any portion of
       the Option to the extent that such exercise occurred within six months
       prior to the date the Optionee first commences any such Adverse
       Actions and require the Optionee to disgorge any profits (however
       defined by the Committee) realized by the Optionee relating to such
       exercised portion of the Option or any Option Shares issued or
       issuable upon such exercise.  Such disgorged profits paid to the
       Company must be made in cash (including check, bank draft or money
       order) or, with the Committee's consent, shares of Common Stock with a
       Fair Market Value on the date of payment equal to the amount of such
       payment.  The Company will be entitled to withhold and deduct from
       future wages of the Optionee (or from other amounts that may be due
       and owing to the Optionee from the Company or a Subsidiary) or make
       other arrangements for the collection of all amounts necessary to
       satisfy such payment obligation.

              (b)    For purposes of this Agreement, an "Adverse Action" will
       mean any of the following:  (i) engaging in any commercial activity in
       competition with any part of the business of the Company or any
       Subsidiary as conducted during the Restricted Period for which the
       Optionee has or had access to trade secrets and/or confidential
       information; (ii) diverting or attempting to divert from the Company or
       any Subsidiary any business of any kind, including, without limitation,
       interference with any business relationships with suppliers, customers,
       licensees, licensors, clients or contractors; (iii) making, or causing or
       attempting to cause any other person or entity to make, any statement,
       either written or oral, or convey any information about the Company or
       any Subsidiary that is disparaging or that in any way reflects negatively
       on the Company or any Subsidiary; or (iv) engaging in any other activity
       that is hostile, contrary or harmful to the interests of the Company or
       any Subsidiary, including, without limitation, influencing or advising
       any person who is employed by or in the service of the Company or any
       Subsidiary to leave such employment or service to compete with the
       Company or any Subsidiary or to enter into the employment or service of
       any actual or prospective competitor of the Company or any Subsidiary,
       influencing or advising any competitor of the Company or any Subsidiary
       to employ to otherwise engage the services of any person who is employed
       by or in the service of the Company or any Subsidiary, or improperly
       disclosing or otherwise misusing any trade secrets or confidential
       information regarding the Company or any Subsidiary.

              (c)    Should any provision of this Section 5.4 of the Agreement
       be held invalid or illegal, such illegality shall not invalidate the
       whole of this Section 5.4 of the Agreement, but, rather, the Agreement
       shall be construed as if it did not contain the illegal part or narrowed
       to permit its enforcement, and the rights and obligations of the parties
       shall be construed and enforced accordingly. In furtherance of and not in
       limitation of the foregoing, the Optionee expressly agrees that should
       the duration of or geographical extent of, or business activities covered
       by, any provision of this Agreement be in excess of that which is valid
       or enforceable under applicable law, then such provision shall be
       construed to cover only that duration, extent or activities that may
       validly or enforceably be covered.  The Optionee acknowledges the
       uncertainty of the law in this respect and expressly stipulates that this
       Agreement shall be construed in a manner that renders its provisions
       valid and enforceable to the maximum extent (not exceeding its express
       terms) possible under applicable law.  This Section 5.4 of the Agreement
       does not replace and is in addition to any other agreements the Optionee
       may have with the Company or any of its Subsidiaries on the matters
       addressed herein.


                                       4


6.     SECURITIES LAW AND OTHER RESTRICTIONS.

       Notwithstanding any other provision of the Plan or this Agreement, the
Company will not be required to issue, and the Optionee may not sell, assign,
transfer or otherwise dispose of, any Option Shares, unless (a) there is in
effect with respect to the Option Shares a registration statement under the
Securities Act of 1933, as amended, and any applicable state or foreign
securities laws or an exemption from such registration, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee, in its sole discretion, deems necessary or advisable.  The
Company may condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing Option Shares, as may be deemed
necessary or advisable by the Company in order to comply with such securities
law or other restrictions.

7.     WITHHOLDING TAXES.

       The Company is entitled to (a) withhold and deduct from future wages of
the Optionee (or from other amounts that may be due and owing to the Optionee
from the Company), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any federal, state or local withholding
and employment-related tax requirements attributable to the Option, including,
without limitation, the grant or exercise of the Option or a disqualifying
disposition of any Option Shares, or (b) require the Optionee promptly to remit
the amount of such withholding to the Company before acting on the Optionee's
notice of exercise of the Option.  In the event that the Company is unable to
withhold such amounts, for whatever reason, the Optionee agrees to pay to the
Company an amount equal to the amount the Company would otherwise be required to
withhold under federal, state or local law.

8.     ADJUSTMENTS.

       In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or extraordinary dividend
(including a spin-off), or any other change in the corporate structure or shares
of the Company, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of the
Optionee, will make appropriate adjustment (which determination will be
conclusive) as to the number and kind of securities or other property (including
cash) subject to, and the exercise price of, the Option.

9.     CERTAIN DEFINITIONS.  For purposes of this Agreement, the following
additional definitions will apply:

              (a)    "Benefit Plan" means any formal or informal plan, program
       or other arrangement heretofore or hereafter adopted by the Company or
       any Subsidiary for the direct or indirect provision of compensation to
       the Optionee (including groups or classes of participants or
       beneficiaries of which the Optionee is a member), whether or not such
       compensation is deferred, is in the form of cash or other property or
       rights, or is in the form of a benefit to or for the Optionee.

              (b)    "Cause" will have the meaning set forth in any employment
       or other agreement or policy applicable to the Optionee or, if no such
       agreement or policy exists, will mean (i) dishonesty, fraud,
       misrepresentation, theft, embezzlement or injury or attempted injury, in


                                       5


       each case related to the Company or any Subsidiary, (ii) any unlawful or
       criminal activity of a serious nature, (iii) any breach of duty, habitual
       neglect of duty or unreasonable job performance, or (iv) any material
       breach of any employment, service, confidentiality or noncompete
       agreement entered into with the Company or any Subsidiary.

              (c)    "Change of Control" will have the meaning set forth in the
       Plan plus such other event or transaction as the Board shall determine
       constitutes a Change of Control, or such other meaning as may be adopted
       by the Committee from time to time in its sole discretion.

10.    SUBJECT TO PLAN.

       The Option and the Option Shares granted and issued pursuant to this
Agreement have been granted and issued under, and are subject to the terms of,
the Plan.  The terms of the Plan are incorporated by reference in this Agreement
in their entirety, and the Optionee, by execution of this Agreement,
acknowledges having received a copy of the Plan.  The provisions of this
Agreement will be interpreted as to be consistent with the Plan, and any
ambiguities in this Agreement will be interpreted by reference to the Plan.  In
the event that any provision of this Agreement is inconsistent with the terms of
the Plan, the terms of the Plan will prevail.

11.    MISCELLANEOUS.

       11.1   BINDING EFFECT.  This Agreement will be binding upon the heirs,
executors, administrators and successors of the parties to this Agreement.

       11.2   GOVERNING LAW.  This Agreement and all rights and obligations
under this Agreement will be construed in accordance with the Plan and governed
by the laws of the State of Delaware, without regard to conflicts of laws
provisions.

       11.3   ENTIRE AGREEMENT.  This Agreement and the Plan set forth the
entire agreement and understanding of the parties to this Agreement with respect
to the grant and exercise of the Option and the administration of the Plan and
supersede all prior agreements, arrangements, plans and understandings relating
to the grant and exercise of the Option and the administration of the Plan.

       11.4   AMENDMENT AND WAIVER.  Other than as provided in the Plan, this
Agreement may be amended, waived, modified or canceled only by a written
instrument executed by the parties to this Agreement or, in the case of a
waiver, by the party waiving compliance.

       The parties to this Agreement have executed this Agreement effective the
day and year first above written.


                                          CERIDIAN CORPORATION


                                          By
                                            ----------------------------------

                                          Its
                                             ---------------------------------


                                       6


By execution of this Agreement,       OPTIONEE
the Optionee acknowledges having
received a copy of the Plan.

                                      ------------------------------------------
                                      (Signature)

                                      ------------------------------------------
                                      (Name and Address)

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

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

                                      Social Security Number:
                                                             -------------------


                                       7

EX-10.09

                                                                   EXHIBIT 10.09


                         NON-QUALIFIED STOCK OPTION AGREEMENT
                     (Performance and Time Based Stock Option)

       THIS AGREEMENT is entered into and effective as of October 20, 1999
(the "Date of Grant"), by and between Ceridian Corporation (the "Company")
and __________________________ (the "Optionee").

       A.     The Company has adopted the Ceridian Corporation 1999 Stock
Incentive Plan (as may be amended or supplemented, the "Plan") authorizing
the Board of Directors of the Company, or a committee as provided for in the
Plan (the Board or such a committee to be referred to as the "Committee"), to
grant stock options to employees of the Company and its Subsidiaries (as
defined in the Plan).

       B.     The Company desires to give the Optionee an inducement to
acquire a proprietary interest in the Company and an added incentive to
advance the interests of the Company by granting to the Optionee an option to
purchase shares of common stock of the Company pursuant to the Plan.

       Accordingly, the parties agree as follows:

1.     GRANT OF OPTION.

       The Company hereby grants to the Optionee the right, privilege and
option (the "Option") to purchase     [TOTAL NUMBER]    shares (the "Option
Shares") of the Company's common stock, $0.50 par value (the "Common Stock"),
according to the terms and subject to the conditions hereinafter set forth
and as set forth in the Plan.  The Option is comprised of two components:
[NUMBER]    of the Option Shares will become exercisable as provided in
Section 3.1(a) of this Agreement and are referred to as "Time-Based Option
Shares," and  [NUMBER] of the Option Shares will become exercisable as
provided in Section 3.1(b) of this Agreement and are referred to as
"Performance-Based Option Shares."  The Option granted hereunder shall not be
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").

2.     OPTION EXERCISE PRICE.

       The per share price to be paid by Optionee in the event of an exercise
of the Option will be $19.9375.

3.     DURATION OF OPTION AND TIME OF EXERCISE.

       3.1    INITIAL PERIOD OF EXERCISABILITY.

              (a)    TIME-BASED OPTION SHARES.  Except as provided in Sections
       3.2 and 3.3 hereof, the Option shall become exercisable with respect to
       one-third of the Time Based Option Shares on each of the first, second
       and third anniversaries of the Date of Grant.

              (b)    PERFORMANCE BASED OPTION SHARES.  Except as provided in
       Sections 3.2 and 3.3 hereof, the Option shall become exercisable with
       respect to all of the Performance Based Option Shares on February 15,
       2002 if: (i) the average closing price of a share of Common Stock as



       reported on the New York Stock Exchange Composite Tape for any 20
       consecutive trading days during the Performance Period is greater than
       $26.15; (ii) the performance measure set forth above in Section
       3.1(b)(i) is not satisfied and the Company's rank for Total Return to
       Shareholders among S&P 500 Companies during the Performance Period
       exceeds the 60th percentile; or (iii) October 20, 2005, if neither of
       the above mentioned performance measures in this Section 3.1(b) are
       satisfied.

              (c)    The foregoing rights to exercise the Option will be
       cumulative with respect to the Option Shares becoming exercisable on such
       dates set forth in this Section 3.1, but in no event will the Option be
       exercisable after, and the Option will become void and expire as to all
       unexercised Option Shares at, 5:00 p.m. (Minneapolis time) on tenth
       anniversary of the Date of Grant (the "Time of Option Termination").

       3.2    TERMINATION OF EMPLOYMENT.

              (a)    TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT.  In the
       event the Optionee's employment with the Company and all Subsidiaries is
       terminated by reason of death, Disability (as defined in the Plan) or
       Retirement (as defined in the Plan), the Option will become immediately
       exercisable in full with respect to all of the Time-Based Option Shares,
       and will become immediately exercisable in full with respect to all of
       the Performance-Based Option Shares if the stock price performance
       condition specified in Section 3.1(b)(i) of this Agreement was satisfied
       prior to the date of such termination.  To the extent this Option is
       already exercisable at the time your employment terminates due to death,
       Disability or Retirement, or becomes exercisable as provided in this
       Section 3.2(a), the Option will remain exercisable until the Time of
       Option Termination.  To the extent the stock price performance condition
       specified in Section 3.1(b)(i) of this Agreement was not satisfied prior
       to the date of termination by reason of death, Disability or Retirement,
       the Performance-Based Option Shares shall no longer be exercisable.

              (b)    TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR
       RETIREMENT.  In the event that the Optionee's employment with the Company
       and all Subsidiaries is terminated for any reason other than death,
       Disability or Retirement, or the Optionee is in the employ of a
       Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company
       (unless the Optionee continues in the employ of the Company or another
       Subsidiary), all rights of the Optionee under the Plan and this Agreement
       will immediately terminate without notice of any kind, and the Option
       will no longer be exercisable; provided, however, that, if such
       termination is due to any reason other than termination by the Company or
       any Subsidiary for Cause (as defined in Section 9 of this Agreement), the
       Option will remain exercisable to the extent exercisable as of such
       termination for a period of three months after such termination (but in
       no event after the Time of Option Termination).

       3.3    CHANGE IN CONTROL.

              (a)    IMPACT OF CHANGE IN CONTROL.  If a Change in Control (as
       defined in Section 9 of this Agreement) of the Company occurs, and the
       Option has been outstanding for at least two months, the Option will
       become immediately exercisable in full and will remain exercisable until
       the Time of Option Termination, regardless of whether the Optionee
       remains in the employ of the Company or any Subsidiary, except that such
       accelerated exercisability shall be available with respect to the
       Performance-Based Option Shares only if the stock price performance
       condition specified in Section 3.1(b)(i) of this Agreement was satisfied
       prior to the date of the

                                       2


       Change of Control.  In addition, if a Change in Control of the Company
       occurs, the Committee, in its sole discretion and without the consent
       of the Optionee, may determine that the Optionee will receive, with
       respect to some or all of the Option Shares, as of the effective date
       of any such Change in Control of the Company, cash in an amount equal
       to the excess of the Fair Market Value (as defined in the Plan) of
       such Option Shares immediately prior to the effective date of such
       Change in Control of the Company over the option exercise price per
       share of the Option.

              (b)    AUTHORITY TO MODIFY CHANGE OF CONTROL PROVISIONS.  Prior to
       a Change of Control, the Optionee will have no rights under this
       Section 3.3, and the Committee will have the authority, in its sole
       discretion, to rescind, modify or amend this Section 3.3 without the
       consent of the Optionee.

4.     MANNER OF OPTION EXERCISE.

       4.1    NOTICE.  This Option may be exercised by the Optionee in whole
or in part from time to time, subject to the conditions contained in the Plan
and in this Agreement, by delivery, in person, by facsimile or electronic
transmission or through the mail, to the Company at its principal executive
office in Minneapolis, Minnesota (Attention:  Corporate Treasury), of a
written notice of exercise.  Such notice must be in a form satisfactory to
the Committee, must identify the Option, must specify the number of Option
Shares with respect to which the Option is being exercised, and must be
signed by the person or persons so exercising the Option.  Such notice must
be accompanied by payment in full of the total exercise price for the Option
Shares to be purchased.  In the event that the Option is being exercised, as
provided by the Plan and Section 3.2 of this Agreement, by any person or
persons other than the Optionee, the notice must be accompanied by
appropriate proof of right of such person or persons to exercise the Option.
If the Optionee retains the Option Shares purchased, as soon as practicable
after the effective exercise of the Option, the Optionee will be recorded on
the stock transfer books of the Company as the owner of the Option Shares
purchased, and the Company will deliver to the Optionee one or more duly
issued stock certificates evidencing such ownership.

       4.2    PAYMENT.  At the time of exercise of the Option, the Optionee
must pay the total exercise price of the Option Shares to be purchased
entirely in cash (including a check, bank draft or money order, payable to
the order of the Company); provided, however, that the Committee, in its sole
discretion and upon terms and conditions established by the Committee, may
allow such payment to be made, in whole or in part, by tender of a full
recourse promissory note, a Broker Exercise Notice or Previously Acquired
Shares (as such terms are defined in the Plan), or by a combination of such
methods.  In the event the Optionee is permitted to pay the total purchase
price of the Option in whole or in part with Previously Acquired Shares, the
value of such shares will be equal to their Fair Market Value on the date of
exercise of the Option and delivery of any such Previously Acquired Shares
may be made through delivery of a written attestation of ownership if
permitted by the Committee.

5.     RIGHTS AND RESTRICTIONS OF OPTIONEE; TRANSFERABILITY.

       5.1    EMPLOYMENT.  Nothing in this Agreement will interfere with or
limit in any way the right of the Company or any Subsidiary to terminate the
employment of the Optionee at any time, nor confer upon the Optionee any
right to continue in the employ of the Company or any Subsidiary at any
particular position or rate of pay or for any particular period of time.

       5.2    RIGHTS AS A STOCKHOLDER.  The Optionee will have no rights as a
stockholder unless and until all conditions to the effective exercise of the
Option (including, without limitation, the conditions set forth in Sections 4
and 6 of this Agreement) have been satisfied and the Optionee has become the

                                       3


holder of record of such shares.  No adjustment will be made for dividends or
distributions with respect to the Option Shares as to which there is a record
date preceding the date the Optionee becomes the holder of record of such
Option Shares, except as may otherwise be provided in the Plan or determined
by the Committee in its sole discretion.

       5.3    RESTRICTIONS ON TRANSFER.  Except pursuant to testamentary will
or the laws of descent and distribution or as otherwise expressly permitted
by the Plan, no right or interest of the Optionee in the Option prior to
exercise may be assigned or transferred, or subjected to any lien, during the
lifetime of the Optionee, either voluntarily or involuntarily, directly or
indirectly, by operation of law or otherwise.  The Optionee will, however, be
entitled to designate a beneficiary to receive the Option upon such
Optionee's death in the manner provided by the Plan, and, in the event of the
Optionee's death, exercise of the Option (to the extent permitted pursuant to
Section 3.2(a) of this Agreement) may be made by the Optionee's designated
beneficiary.

       5.4    RESTRICTIONS REGARDING EMPLOYMENT.

              (a)    The Optionee agrees that he or she will not take any
       Adverse Actions (as defined below) against the Company or any Subsidiary
       at any time during the period that the Option is or may yet become
       exercisable in whole or in part or at any time before one year following
       the Optionee's termination of employment with the Company or any
       Subsidiary, whichever is later (the "Restricted Period").  The Optionee
       acknowledges that damages which may arise from a breach of this Section
       5.4 may be impossible to ascertain or prove with certainty.
       Notwithstanding anything in this Agreement or the Plan to the contrary,
       in the event that the Company determines in its sole discretion that the
       Optionee has taken Adverse Actions against the Company or any Subsidiary
       at any time during the Restricted Period, in addition to other legal
       remedies which may be available, (i) the Company will be entitled to an
       immediate injunction from a court of competent jurisdiction to end such
       Adverse Action, without further proof of damage, (ii) the Committee will
       have the authority in its sole discretion to terminate immediately all
       rights of the Optionee under the Plan and this Agreement without notice
       of any kind, and (iii) the Committee will have the authority in its sole
       discretion to rescind the exercise of all or any portion of the Option to
       the extent that such exercise occurred within six months prior to the
       date the Optionee first commences any such Adverse Actions and require
       the Optionee to disgorge any profits (however defined by the Committee)
       realized by the Optionee relating to such exercised portion of the Option
       or any Option Shares issued or issuable upon such exercise.  Such
       disgorged profits paid to the Company must be made in cash (including
       check, bank draft or money order) or, with the Committee's consent,
       shares of Common Stock with a Fair Market Value on the date of payment
       equal to the amount of such payment.  The Company will be entitled to
       withhold and deduct from future wages of the Optionee (or from other
       amounts that may be due and owing to the Optionee from the Company or a
       Subsidiary) or make other arrangements for the collection of all amounts
       necessary to satisfy such payment obligation.

              (b)    For purposes of this Agreement, an "Adverse Action" will
       mean any of the following:  (i) engaging in any commercial activity in
       competition with any part of the business of the Company or any
       Subsidiary as conducted during the Restricted Period for which the
       Optionee has or had access to trade secrets and/or confidential
       information; (ii) diverting or attempting to divert from the Company or
       any Subsidiary any business of any kind, including, without limitation,
       interference with any business relationships with suppliers, customers,
       licensees, licensors, clients or contractors; (iii) making, or causing or
       attempting to cause any other person or entity to make, any statement,
       either written or oral, or convey any information

                                       4


       about the Company or any Subsidiary that is disparaging or that in any
       way reflects negatively on the Company or any Subsidiary; or (iv)
       engaging in any other activity that is hostile, contrary or harmful to
       the interests of the Company or any Subsidiary, including, without
       limitation, influencing or advising any person who is employed by or
       in the service of the Company or any Subsidiary to leave such
       employment or service to compete with the Company or any Subsidiary or
       to enter into the employment or service of any actual or prospective
       competitor of the Company or any Subsidiary, influencing or advising
       any competitor of the Company or any Subsidiary to employ to otherwise
       engage the services of any person who is employed by or in the service
       of the Company or any Subsidiary, or improperly disclosing or
       otherwise misusing any trade secrets or confidential information
       regarding the Company or any Subsidiary.

              (c)    Should any provision of this Section 5.4 of the Agreement
       be held invalid or illegal, such illegality shall not invalidate the
       whole of this Section 5.4 of the Agreement, but, rather, the Agreement
       shall be construed as if it did not contain the illegal part or narrowed
       to permit its enforcement, and the rights and obligations of the parties
       shall be construed and enforced accordingly. In furtherance of and not in
       limitation of the foregoing, the Optionee expressly agrees that should
       the duration of or geographical extent of, or business activities covered
       by, any provision of this Agreement be in excess of that which is valid
       or enforceable under applicable law, then such provision shall be
       construed to cover only that duration, extent or activities that may
       validly or enforceably be covered.  The Optionee acknowledges the
       uncertainty of the law in this respect and expressly stipulates that this
       Agreement shall be construed in a manner that renders its provisions
       valid and enforceable to the maximum extent (not exceeding its express
       terms) possible under applicable law.  This Section 5.4 of the Agreement
       does not replace and is in addition to any other agreements the Optionee
       may have with the Company or any of its Subsidiaries on the matters
       addressed herein.

6.     SECURITIES LAW AND OTHER RESTRICTIONS.

       Notwithstanding any other provision of the Plan or this Agreement, the
Company will not be required to issue, and the Optionee may not sell, assign,
transfer or otherwise dispose of, any Option Shares, unless (a) there is in
effect with respect to the Option Shares a registration statement under the
Securities Act of 1933, as amended, and any applicable state or foreign
securities laws or an exemption from such registration, and (b) there has
been obtained any other consent, approval or permit from any other regulatory
body which the Committee, in its sole discretion, deems necessary or
advisable.  The Company may condition such issuance, sale or transfer upon
the receipt of any representations or agreements from the parties involved,
and the placement of any legends on certificates representing Option Shares,
as may be deemed necessary or advisable by the Company in order to comply
with such securities law or other restrictions.

7.     WITHHOLDING TAXES.

       The Company is entitled to (a) withhold and deduct from future wages
of the Optionee (or from other amounts that may be due and owing to the
Optionee from the Company), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any federal, state or local
withholding and employment-related tax requirements attributable to the
Option, including, without limitation, the grant or exercise of the Option or
a disqualifying disposition of any Option Shares, or (b) require the Optionee
promptly to remit the amount of such withholding to the Company before acting
on the Optionee's notice of exercise of the Option.  In the event that the
Company is unable to withhold such amounts, for whatever reason, the Optionee
agrees to pay to the Company an amount equal to the amount the Company would
otherwise be required to withhold under federal, state or local law.

                                       5


8.     ADJUSTMENTS.

       In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or extraordinary dividend
(including a spin-off), or any other change in the corporate structure or
shares of the Company, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of
the Optionee, will make appropriate adjustment (which determination will be
conclusive) as to the number and kind of securities or other property
(including cash) subject to, and the exercise price of, the Option.

9.     CERTAIN DEFINITIONS.  For purposes of this Agreement, the following
additional definitions will apply:

              (a)    "Benefit Plan" means any formal or informal plan, program
       or other arrangement heretofore or hereafter adopted by the Company or
       any Subsidiary for the direct or indirect provision of compensation to
       the Optionee (including groups or classes of participants or
       beneficiaries of which the Optionee is a member), whether or not such
       compensation is deferred, is in the form of cash or other property or
       rights, or is in the form of a benefit to or for the Optionee.

              (b)    "Cause" will have the meaning set forth in any employment
       or other agreement or policy applicable to the Optionee or, if no such
       agreement or policy exists, will mean (i) dishonesty, fraud,
       misrepresentation, theft, embezzlement or injury or attempted injury, in
       each case related to the Company or any Subsidiary, (ii) any unlawful or
       criminal activity of a serious nature, (iii) any breach of duty, habitual
       neglect of duty or unreasonable job performance, or (iv) any material
       breach of any employment, service, confidentiality or noncompete
       agreement entered into with the Company or any Subsidiary.

              (c)    "Change of Control" will have the meaning set forth in the
       Plan plus such other event or transaction as the Board shall determine
       constitutes a Change of Control or such other meaning as may be adopted
       by the Committee from time to time in its sole discretion.

              (d)    "Ending Price" means, with respect to any S&P 500 Company
       (including the Company), the average daily last reported sales price of a
       share of such company's common stock as reported in the WALL STREET
       JOURNAL during the period January 1, 2002 through January 31, 2002.

              (e)    "Fair Market Value" (i) with respect to the Company has the
       same meaning as specified in Section 2.10 of the Plan, and (ii) with
       respect to any other S&P 500 Company means the last reported sales price
       of a share of such company's common stock on the date in question as
       reported in the WALL STREET JOURNAL.

              (f)    "Performance Period" means the period October 20, 1999
       through January 31,  2002.

              (g)    "S&P 500 Companies" means the companies that comprise the
       Standard & Poors' 500 Stock Index as it existed on October 20, 1999, and
       which are still publicly traded on January 31, 2002.

                                       6


              (h)    "Starting Price" means, with respect to any S&P 500 Company
       (including the Company), the average daily last reported sales price of a
       share of such company's common stock as reported in the WALL STREET
       JOURNAL during the period October 1, 1999 through October 20, 1999.

              (i)    "Total Return to Shareholders" means, with respect to the
       Company or any other S&P 500 Company, the total return to a holder of the
       common stock of such company as a result of his or her ownership of such
       common stock during the Performance Period, such total return (i) to be
       expressed as a percentage of an assumed initial investment in such common
       stock on October 20, 1999 and (ii) to include both the appreciation in
       the per share price of such common stock during the Performance Period
       and the per share Fair Market Value of all dividends and distributions
       paid or distributed by such company with respect to such common stock
       during the Performance Period, assuming that all such dividends and
       distributions are reinvested in shares of such common stock at their Fair
       Market Value on the last trading day of the month in which the dividend
       or distribution is paid or distributed.  For purposes of calculating
       Total Return to Shareholders for the Company or any other S&P 500
       Company, the assumed initial investment in such company's common stock on
       October 20, 1999 shall be at the applicable Starting Price, and the value
       of a share of such company's common stock at the end of the Performance
       Period shall be the applicable Ending Price.

10.    SUBJECT TO PLAN.

       The Option and the Option Shares granted and issued pursuant to this
Agreement have been granted and issued under, and are subject to the terms
of, the Plan.  The terms of the Plan are incorporated by reference in this
Agreement in their entirety, and the Optionee, by execution of this
Agreement, acknowledges having received a copy of the Plan.  The provisions
of this Agreement will be interpreted as to be consistent with the Plan, and
any ambiguities in this Agreement will be interpreted by reference to the
Plan.  In the event that any provision of this Agreement is inconsistent with
the terms of the Plan, the terms of the Plan will prevail.

11.    MISCELLANEOUS.

       11.1   BINDING EFFECT.  This Agreement will be binding upon the heirs,
executors, administrators and successors of the parties to this Agreement.

       11.2   GOVERNING LAW.  This Agreement and all rights and obligations
under this Agreement will be construed in accordance with the Plan and
governed by the laws of the State of Delaware, without regard to conflicts of
laws provisions.

       11.3   ENTIRE AGREEMENT.  This Agreement and the Plan set forth the
entire agreement and understanding of the parties to this Agreement with
respect to the grant and exercise of the Option and the administration of the
Plan and supersede all prior agreements, arrangements, plans and
understandings relating to the grant and exercise of the Option and the
administration of the Plan.

       11.4   AMENDMENT AND WAIVER.  Other than as provided in the Plan, this
Agreement may be amended, waived, modified or canceled only by a written
instrument executed by the parties to this Agreement or, in the case of a
waiver, by the party waiving compliance.

                                       7


The parties to this Agreement have executed this Agreement effective the day
and year first above written.

                                       CERIDIAN CORPORATION


                                       By
                                         --------------------------------------
                                         Its
                                            -----------------------------------

By execution of this Agreement,        OPTIONEE
the Optionee acknowledges having
received a copy of the Plan.
                                       ----------------------------------------
                                                (Signature)

                                       ----------------------------------------
                                               (Name and Address)

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

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

                                       Social Security Number:
                                                              -----------------

Version: 11-12-1999

                                       8

EX-12.01

                                                                   Exhibit 12.01

CERIDIAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES



                                                                   1999         1998        1997        1996        1995
(DOLLARS IN MILLIONS)
                                                                                                    
Earnings before income taxes and other items (1)                   $ 238.4      $ 229.7     $ (77.1)    $ 196.2     $ 116.2
Less undistributed earnings and non-guaranteed
  losses from less than 50% owned affiliates
  included above                                                         -            -           -           -           -
                                                                -------------------------------------------------------------
Total earnings before income taxes and other items
                                                                     238.4        229.7       (77.1)      196.2       116.2
Add:
Interest expense                                                      24.7          4.3        12.1        10.6        30.6
Interest portion of rentals (2)                                       13.8         12.1        14.0        13.8        14.0
                                                                -------------------------------------------------------------
Adjusted earnings before income taxes and other items              $ 276.9      $ 246.1     $ (51.0)    $ 220.6     $ 160.8
                                                                -------------------------------------------------------------
                                                                -------------------------------------------------------------

Interest expense                                                    $ 24.7       $  4.3      $ 12.1      $ 10.6      $ 30.6
Interest capitalized                                                   1.7            -           -           -           -
Interest portion of rentals (2)                                       13.8         12.1        14.0        13.8        14.0
                                                                -------------------------------------------------------------
Total fixed charges                                                 $ 40.2       $ 16.4      $ 26.1      $ 24.4      $ 44.6
                                                                -------------------------------------------------------------
                                                                -------------------------------------------------------------

Ratio of earnings to fixed charges                                   6.89x       15.01x                   9.04x       3.61x
Deficiency                                                                                  $ (77.1)


(1) Results include continuing and discontinued operations.

(2) Interest component assumed to be one-third of rental expense.

EX-13.01

                                                                   Exhibit 13.01



SELECTED FIVE-YEAR DATA                                                          (Dollars in millions, except per share data)
- ---------------------------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------------------
                                                    1999             1998             1997             1996             1995
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
REVENUE                                            $1,342.3         $1,162.1         $1,074.8         $  942.6          $ 823.5
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations (1)            $  148.9         $  164.4         $   35.4         $  135.5          $  59.2
Gain and earnings from
   discontinued operations (2)                           --             25.4            437.0             46.4             38.3
Extraordinary loss (3)                                   --               --               --               --            (38.9)
                                                 ------------     ------------    -------------     ------------    -------------
Net earnings                                       $  148.9         $  189.8         $  472.4         $  181.9          $  58.6
                                                 ------------     ------------    -------------     ------------    -------------
                                                 ------------     ------------    -------------     ------------    -------------

- ---------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE (4)
  BASIC
      Continuing operations                        $   1.03         $   1.14          $  0.23         $   0.90          $  0.35
      Net earnings                                 $   1.03         $   1.32          $  3.01         $   1.24          $  0.34
  DILUTED
      Continuing operations                        $   1.01         $   1.11          $  0.22         $   0.84          $  0.37
      Net earnings                                 $   1.01         $   1.29          $  2.96         $   1.12          $  0.37
SHARES USED IN CALCULATIONS (IN THOUSANDS)
  Basic                                             144,524          144,070          156,835          135,841          132,269
  Diluted                                           147,964          147,597          159,481          161,938          159,473
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets                                       $2,059.9         $1,289.7         $1,243.3         $1,016.6          $ 905.6
Debt obligations                                   $  611.3         $   54.5         $    3.0         $  138.2          $ 201.5
Stockholders' equity                               $  842.7         $  650.6         $  588.3         $  346.3          $ 150.0
- ---------------------------------------------------------------------------------------------------------------------------------
EQUITY (DEFICIT) PER COMMON SHARE (5)              $   5.82         $   4.53         $   3.98         $   2.17          $ (0.64)
Common shares outstanding at end of
   year (in thousands)                              144,734          143,514          147,884          159,537          134,555
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF EMPLOYEES AT END OF YEAR                   10,900            9,600            8,000            7,700            7,100
- ---------------------------------------------------------------------------------------------------------------------------------


(1)  Includes 1998 unusual gains of $24.3; 1997 FAS 109 income tax benefit of
     $175.0; 1997 unusual losses of $307.6, as described in Notes B and D; and
     1995 pooling expenses of $29.7.
(2)  Includes gain from the December 1997 sale of Computing Devices
     International and earnings from its operations prior to the sale as
     described in Note B.
(3)  Relates to the early retirement of debt.
(4)  All share and per share amounts reflect a 2-for-1 stock split in the form
     of a 100% stock dividend announced on January 20, 1999 and effective for
     holders of record on February 10, 1999. For further information on the
     calculation of earnings per share, see Note A.
(5)  At December 31, 1995, computed by reducing stockholders' equity by the
     liquidation value of outstanding preferred stock of $236.0 and dividing by
     the number of outstanding common shares. Assuming that the outstanding
     convertible preferred stock was converted to common stock, the equity per
     common share would have been $0.97 at December 31, 1995.

         THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE
STATEMENTS REGARDING CERIDIAN CORPORATION CONTAINED IN THIS REPORT THAT ARE
NOT HISTORICAL IN NATURE, PARTICULARLY THOSE THAT UTILIZE TERMINOLOGY SUCH AS
"MAY," "WILL," "SHOULD," "LIKELY," "EXPECTS," "ANTICIPATES," "ESTIMATES,"
"BELIEVES," OR "PLANS," OR COMPARABLE TERMINOLOGY, ARE FORWARD-LOOKING
STATEMENTS BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS, AND ENTAIL VARIOUS
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS
KNOWN TO CERIDIAN THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE IDENTIFIED
AND DISCUSSED IN THE MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION SECTION OF THIS ANNUAL REPORT UNDER THE
CAPTION "CAUTIONARY FACTORS THAT COULD AFFECT FUTURE RESULTS."

              Inside Front Cover of the Ceridian Annual Report

EX-13.02

                                                                   EXHIBIT 13.02


MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

RESULTS OF OPERATIONS



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

CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)                             Years ended December 31,
- -------------------------------------------------------------------------------------------------------------
                                                                        1999            1998            1997
- -------------------------------------------------------------------------------------------------------------
                                                                                         
Revenue                                                             $1,342.3        $1,162.1        $1,074.8
- -------------------------------------------------------------------------------------------------------------
Net earnings                                                        $  148.9        $  189.8        $  472.4
- -------------------------------------------------------------------------------------------------------------
Earnings from continuing operations                                 $  148.9        $  164.4        $   35.4
- -------------------------------------------------------------------------------------------------------------
Pro forma net earnings                                              $  148.9        $  140.1        $  123.9
- -------------------------------------------------------------------------------------------------------------
Diluted shares used in calculations (in thousands)                   147,964         147,597         159,481
- -------------------------------------------------------------------------------------------------------------
Net earnings per diluted share                                      $   1.01        $   1.29        $   2.96
- -------------------------------------------------------------------------------------------------------------
Earnings from continuing operations per diluted share               $   1.01        $   1.11        $   0.22
- -------------------------------------------------------------------------------------------------------------
Pro forma diluted earnings per share                                $   1.01        $   0.95        $   0.78
- -------------------------------------------------------------------------------------------------------------
Pro forma cash earnings per share                                   $   1.23        $   1.06        $   0.88
- -------------------------------------------------------------------------------------------------------------



All share and per share figures reflect a stock split announced on
January 20, 1999 for holders of record on February 10, 1999 and distributed
in the form of a 100% stock dividend on February 26, 1999. Net earnings
include earnings from discontinued operations of $25.4 million, or $.18 per
diluted share in 1998 and $437.0 million, or $2.74 per diluted share in 1997,
representing the gain from the sale and results of operations of Computing
Devices International ("CDI"), which was sold on December 31, 1997.

The comparison of Ceridian's earnings from continuing operations is
significantly affected by a number of unusual events. In 1998, Ceridian
recognized unusual gains of $24.3 million in the fourth quarter consisting of
a tax benefit of $18.5 million related to the difference between the tax and
financial reporting basis in a subsidiary sold in that quarter and a gain of
$5.8 million ($9.2 million before tax) primarily from the sale of land not
used in the business. In 1997, Ceridian recognized a $175.0 million tax
benefit from Ceridian's fourth quarter recognition under FAS 109 of the
future tax benefits of its net operating loss carryforwards and future tax
deductions. Also in 1997, Ceridian incurred unusual charges of $144.6 million
in the fourth quarter, primarily as a result of asset write-offs;
$150.0 million in the third quarter, due to the termination of a payroll
software development project; and $13.0 million in the first quarter, due to
settlement of certain litigation. These unusual gains and losses are further
described in Note B, SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS, and Note
D, INCOME TAXES, to the consolidated financial statements.

In an effort to facilitate comparisons between earnings from continuing
operations, Ceridian has utilized certain pro forma adjustments to calculate
revised earnings figures for its continuing operations for 1998 and 1997. The
most significant of these pro forma adjustments include (i) eliminating the 1998
and 1997 unusual events described above, (ii) tax effecting 1997 pre-tax
earnings at an assumed rate of 37% and (iii) assuming that CDI was sold at the
beginning of 1997 for net proceeds approximately equal to the difference between
CDI's revenue for that year and the approximately $100 million of CDI cash in
Canada, and that those net proceeds were invested at 5.5% per annum.

In the calculation of cash earnings per share, cash earnings are determined by
adding back to net earnings the amount of amortization expense for the period,
net of income taxes, that relates to values assigned to goodwill and other
intangibles arising from the acquisition of businesses. Then cash earnings are
divided by diluted shares outstanding for that period. Ceridian refers to cash
earnings per share because some commentators have suggested that investors may
find such a measurement useful in assessing operating performance, particularly
for services companies that utilize the purchase method of recording
acquisitions. Cash earnings per share does not represent a measure of cash flow
from operations, as defined by generally accepted accounting principles. Cash
earnings per share should not be considered a substitute either for earnings per
share as an indicator of






Ceridian's operating performance or for cash flow as a measure of Ceridian's
liquidity. Ceridian's determination and presentation of cash earnings per
share may not be comparable to similarly titled measures reported by other
companies.

                  [END OF PAGE 8 OF THE CERIDIAN ANNUAL REPORT]


     1999 COMPARED TO 1998



- ---------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS COMPARISONS ON A PRO FORMA BASIS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
- ---------------------------------------------------------------------------------------------------------
                                                 Amount                 Inc (Dec)        % of Revenue
- ---------------------------------------------------------------------------------------------------------
                                            1999           1998        $         %      1999      1998
- ---------------------------------------------------------------------------------------------------------
                                                                                
Revenue                                   $1,342.3       $1,162.1     180.2     15.5    100.0     100.0
- ---------------------------------------------------------------------------------------------------------
Cost of revenue                              630.5          551.5      79.0     14.3     47.0      47.5
- ---------------------------------------------------------------------------------------------------------
SG&A expense                                 379.6          316.0      63.6     20.2     28.3      27.2
- ---------------------------------------------------------------------------------------------------------
R&D expense                                   74.4           77.8      (3.4)    (4.5)     5.5       6.7
- ---------------------------------------------------------------------------------------------------------
Other expense (income)                         1.1            2.4      (1.3)      NC      0.1       0.2
- ---------------------------------------------------------------------------------------------------------
Total costs                                1,085.6          947.7     137.9     14.6     80.9      81.5
- ---------------------------------------------------------------------------------------------------------
EBIT                                         256.7          214.4      42.3     19.7     19.1      18.5
- ---------------------------------------------------------------------------------------------------------
Interest income (expense), net               (18.3)           6.1     (24.4)      NC     (1.4)      0.5
- ---------------------------------------------------------------------------------------------------------
Income taxes                                  89.5           80.4       9.1     11.2      6.7       6.9
- ---------------------------------------------------------------------------------------------------------
Net earnings                              $  148.9       $  140.1       8.8      6.3     11.1      12.1
- ---------------------------------------------------------------------------------------------------------
Diluted EPS                               $   1.01       $   0.95       0.06     6.3
- ---------------------------------------------------------------------------------------------------------
Cash EPS                                  $   1.23       $   1.06       0.17    16.0
- ---------------------------------------------------------------------------------------------------------



         Net earnings for 1999 were $148.9 million, or $1.01 per diluted share,
on revenue of $1,342.3 million. Cash earnings per share during 1999 were $1.23.
1998 pro forma earnings were $140.1 million, or $ .95 per diluted share, on
revenue of $1,162.1 million and 1998 pro forma cash earnings per share were
$1.06.
         On January 25, 2000, Ceridian announced that it will be taking certain
actions to improve customer service and the quality of operations in the U.S.
payroll business. As a result of some of these actions, Ceridian expects to take
$35 million to $50 million of special charges during the first quarter of 2000.
Earnings per share in 2000, without regard to these charges, are expected be
flat to modestly up as compared to 1999, a year in which Ceridian reported net
earnings of $148.9 million, or $1.01 per diluted share. These results include
the acquisition of ABR Information Services, Inc. ("ABR"), now known as Ceridian
Benefits Services, which was dilutive to earnings since June 1999. Further
information about this acquisition appears below and in the accompanying notes
to the consolidated financial statements, particularly Note J, INVESTING
ACTIVITY.

CONSOLIDATED RESULTS

         Each of Ceridian's business segments reported increased revenue and
earnings before interest and taxes ("EBIT"). Revenue growth from acquisitions
more than offset the effect of business dispositions, and the net revenue growth
from these activities contributed about two-thirds of the total revenue
increase. Lower than expected customer retention in the U.S. payroll and certain
other human resources businesses and lower yields on tax filing balances
adversely affected the revenue comparison. Costs directly related to revenue
increased somewhat less than revenue, largely as a result of the integration of
acquired businesses into existing operations. Selling, general and
administrative expense ("SG&A") increased, due principally to the acquisitions
of ABR in June 1999 and LifeWorks (the work-life services business of
Work/Family Directions, Inc.) in November 1998. Research and development ("R&D")
decreased in total and as a percentage of revenue as a result of the disposition
of Resumix in August 1998 and declining expenditures on Year 2000 remediation of
Ceridian's internal systems beginning in the third quarter of 1999. Interest
income fell from $10.4 million to $6.4 million as a result of lower cash
balances. Interest expense increased from $4.3 million to $24.7 million as a
result of the debt incurred for the ABR acquisition in June 1999. Including the
pro forma adjustments to 1998 results





described above, the effective rate for the income tax provision increased
from 36.5% to 37.5%, due to the non-deductibility of goodwill arising from
the ABR acquisition.

                  [END OF PAGE 9 OF THE CERIDIAN ANNUAL REPORT]

BUSINESS SEGMENT RESULTS



- ---------------------------------------------------------------------------------------------
SEGMENT COMPARISONS ON A PRO FORMA BASIS
(DOLLARS IN MILLIONS)
- ---------------------------------------------------------------------------------------------
                                     Amount                 Inc (Dec)        % of Revenue
- ---------------------------------------------------------------------------------------------
                                1999           1998        $         %       1999     1998
- ---------------------------------------------------------------------------------------------
                                                                    
REVENUE
- ---------------------------------------------------------------------------------------------
HRS                            $  828.0       $  700.3    127.7      18.2      61.7     60.3
- ---------------------------------------------------------------------------------------------
Comdata                           298.9          267.3     31.6      11.8      22.3     23.0
- ---------------------------------------------------------------------------------------------
Arbitron                          215.4          194.5     20.9      10.7      16.0     16.7
- ---------------------------------------------------------------------------------------------
Total                          $1,342.3       $1,162.1    180.2      15.5     100.0    100.0
- ---------------------------------------------------------------------------------------------


EBIT
- ---------------------------------------------------------------------------------------------
HRS                            $  113.2       $  100.6     12.6      12.6      13.7     14.4
- ---------------------------------------------------------------------------------------------
Comdata                            72.2           52.4     19.8      37.7      24.2     19.6
- ---------------------------------------------------------------------------------------------
Arbitron                           71.3           61.4      9.9      16.0      33.1     31.6
- ---------------------------------------------------------------------------------------------
Total                          $  256.7       $  214.4     42.3      19.7      19.1     18.5
- ---------------------------------------------------------------------------------------------




     HUMAN RESOURCE SERVICES ("HRS")
     The revenue contributions of businesses acquired during 1999 and 1998,
notably the LifeWorks work-life services business in November 1998 and ABR in
June 1999, more than offset the revenue loss from the dispositions of Resumix in
August 1998 and Tesseract at the end of 1998. These acquisitions and the
acquisitions of two Canadian payroll businesses during the first quarter of
1998, net of the dispositions, contributed about two-thirds of the revenue
increase. The increase in revenue was adversely affected by the decisions of
certain large customers to delay payroll system installations as a result of the
Year 2000 event. Lower yields on tax filing balances and lower than expected
customer retention in the U.S. payroll and certain other human resources
businesses, along with the effect of exchange rate changes on the Canadian
dollar, adversely affected revenue growth. Increases in sales of software,
payroll services, consulting services and employee assistance programs
contributed to the revenue increase as did price increases in payroll services
early in 1999 and 1998. In consideration of its customer retention goals for
2000, Ceridian expects to forego any across-the-board U.S. payroll services
price increase in 2000. Costs and expenses increased largely due to
acquisitions, Year 2000 efforts to remediate customers' software (net of
recoveries), and training and implementation efforts associated with the Source
500 product and new internal operating systems.

     COMDATA
     Revenue increased primarily as a result of the acquisition of a majority
interest in Stored Value Systems, Inc. ("SVS") in the first quarter of 1999,
increased sales of product and software upgrades and growth in the fleet
services (local fueling) business. The impact of the acquisition of SVS was
particularly significant in the fourth quarter of 1999, due to the seasonal
nature of retail debit card sales. The sale of a telephone debit card business
in the second quarter of 1999 and the disposition of the gaming services
business in January 1998 reduced 1999 revenue in comparison to 1998. The
integration of NTS accounts into the Comdata transaction processing system
reduced costs and expenses through elimination of redundant processes. Selling
costs decreased in both comparisons primarily due to the conclusion early in the
third quarter of 1998 of a customer acquisition program for the fleet services
business. Increased Year 2000 costs and increases in provisions for fleet
services bad debts reduced the benefit of these cost reductions.







     ARBITRON
     The revenue comparison benefited from the acquisition of Tapscan in May
1998. Without regard to the Tapscan acquisition, revenue increased due largely
to price escalators in multi-year customer contracts, increased software product
and report sales, and an increased number of ratings subscribers. Cost synergies
with Tapscan improved gross margin performance while other costs remained
consistent with or below the level of revenue growth.

                 [END OF PAGE 10 OF THE CERIDIAN ANNUAL REPORT]



     1998 COMPARED TO 1997

CONSOLIDATED RESULTS



- ---------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS COMPARISONS ON A PRO FORMA BASIS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

                                                 Amount                 Inc (Dec)        % of Revenue
- ---------------------------------------------------------------------------------------------------------
                                            1998           1997        $         %      1998      1997
- ---------------------------------------------------------------------------------------------------------
                                                                                
Revenue                                   $1,162.1       $1,074.8      87.3      8.1    100.0     100.0
- ---------------------------------------------------------------------------------------------------------
Cost of revenue                              551.5          527.6      23.9      4.5     47.5      49.1
- ---------------------------------------------------------------------------------------------------------
SG&A expense                                 316.0          307.9       8.1      2.6     27.2      28.7
- ---------------------------------------------------------------------------------------------------------
R&D expense                                   77.8           59.6      18.2     30.5      6.7       5.5
- ---------------------------------------------------------------------------------------------------------
Other expense (income)                         2.4            1.7       0.7       NC      0.2       0.2
- ---------------------------------------------------------------------------------------------------------
Total costs                                  947.7          896.8      50.9      5.7     81.5      83.4
- ---------------------------------------------------------------------------------------------------------
EBIT                                         214.4          178.0      36.4     20.5     18.5      16.6
- ---------------------------------------------------------------------------------------------------------
Interest income (expense), net                 6.1           18.6     (12.5)      NC      0.5       1.7
- ---------------------------------------------------------------------------------------------------------
Income taxes                                  80.4           72.7       7.7     10.6      6.9       6.8
- ---------------------------------------------------------------------------------------------------------
Net earnings                              $  140.1       $  123.9      16.2     13.1     12.1      11.5
- ---------------------------------------------------------------------------------------------------------
Diluted EPS                               $   0.95       $   0.78       0.17    21.8
- ---------------------------------------------------------------------------------------------------------




BUSINESS SEGMENT RESULTS


- ---------------------------------------------------------------------------------------------
SEGMENT COMPARISONS ON A PRO FORMA BASIS       (DOLLARS IN MILLIONS)
- ---------------------------------------------------------------------------------------------
                                     Amount                 Inc (Dec)        % of Revenue
- ---------------------------------------------------------------------------------------------
                                1998           1997        $         %       1998     1997
- ---------------------------------------------------------------------------------------------
                                                                    
REVENUE
- ---------------------------------------------------------------------------------------------
HRS                            $  700.3       $  578.6    121.7     21.0       60.3    53.8
- ---------------------------------------------------------------------------------------------
Comdata                           267.3          331.0    (63.7)   (19.3)      23.0    30.8
- ---------------------------------------------------------------------------------------------
Arbitron                          194.5          165.2     29.3     17.8       16.7    15.4
- ---------------------------------------------------------------------------------------------
Total                          $1,162.1       $1,074.8     87.3      8.1      100.0   100.0
- ---------------------------------------------------------------------------------------------

EBIT
- ---------------------------------------------------------------------------------------------
HRS                            $  100.6       $   68.1     32.5      47.7      14.4     11.8
- ---------------------------------------------------------------------------------------------
Comdata                            52.4           57.2     (4.8)    (8.3)      19.6     17.3
- ---------------------------------------------------------------------------------------------
Arbitron                           61.4           52.7      8.7      16.5      31.6     31.9
- ---------------------------------------------------------------------------------------------
Total                          $  214.4       $  178.0     36.4      20.5      18.5     16.6
- ---------------------------------------------------------------------------------------------



     HUMAN RESOURCE SERVICES
     HRS revenue grew by 21.0%, which, after adjustment for the net effect of
acquisitions and dispositions, represented internal revenue growth of 12.3%. The
most significant acquisitions were the first quarter 1998 purchases of two
payroll processing businesses in Canada and the fourth quarter 1998 purchase of
the global work-life services business from Work/Family Directions, Inc. The
most significant disposition was the sale of Resumix, Inc. in the third quarter
of 1998. Details on these and other investing transactions are presented in the
accompanying Note J, INVESTING ACTIVITY, to the consolidated financial
statements. The internal revenue growth largely reflected a revised pricing
structure for payroll services, employment growth experienced by Ceridian's
payroll and tax filing customers, the sale of add-on services to existing
customers and growth of employee assistance services. Revenue growth was
restrained somewhat by implementation on January 1, 1998 of IRS electronic funds
transfer regulations that reduced by one day the period of time certain tax
filing deposits may be held. As a result, the average balance of collected but
unremitted payroll tax funds in the U.S. was down 4.1% from the 1997 level.
After eliminating the 1997 and partial year 1998 results of Resumix, the
improvement in the relationship of cost of revenue and revenue in HRS largely
reflected the revenue growth





attributable to a revised pricing structure for payroll services, cost
reductions and productivity initiatives in the payroll business and generally
increased economies of scale. The HRS improvement in general and
administrative expenses was largely due to staff reductions. HRS R&D expenses
increased as a percent of revenue reflecting development efforts directed
toward new applications, enhancements to existing applications, quality
assurance programs and a portion of the costs for Year 2000 readiness.
Unusual losses of $223.5 million in 1997, related to the termination of a
payroll software development project and other asset write-offs and reported
as "Other expense (income)," are not included in the tables above.

                 [END OF PAGE 11 OF THE CERIDIAN ANNUAL REPORT]

     COMDATA
     The January 1998 exchange of Comdata's gaming services business for the NTS
transportation services business and cash significantly affected the amount
and the mix of Comdata's revenues. Overall, Comdata revenue declined by
19.3%, reflecting the $127.4 million decline in gaming revenues from 1997 to
1998. Transportation services revenues increased by 32.2%, primarily
reflecting the increased transportation revenues from the NTS acquisition and
internal growth. Major factors contributing to internal growth included
cross-selling products on the Comchek-Registered Trademark- card, increases
in customer accounts and revenue from local fueling, an increase in funds
transfer transactions and increased sales of fuel desk island automation
systems and telecommunications services and products.      The improvement in
the relationship of cost of revenue and revenue at Comdata resulted in large
part from the disposition of the gaming services business and also benefited
from revenue growth and economies resulting from the integration of the NTS
business. These improvements were offset in part by an increase in the
provision for bad debts, primarily related to the expansion of the local
fueling business. SG&A expenses declined as a percentage of revenue as a
reduction in the ratio of general and administrative expenses to revenue
exceeded the increase in the ratio of selling expense to revenue. The
increase in the selling expense to revenue ratio for Comdata reflected
customer acquisition expense during the first half of 1998 in connection with
local fueling services. The decrease in Comdata's general and administrative
expense to revenue ratio was primarily attributable to the sale of gaming
services and the treatment of proceeds from the temporary provision of
processing services to the purchaser of that business as a reduction of
administrative expense. Unusual losses of $41.0 million in 1997, related to
asset write-offs and reported as "Other expense (income)," are not included
in the tables above.

     ARBITRON
     Arbitron revenue increased by 17.8%, which, after adjustment for
acquisitions, represented internal revenue growth of 9.6%. The major
acquisitions that affected these comparisons were the November 1997 acquisition
of Continental Research and the May 1998 acquisition of the radio station,
advertiser/agency and international assets of Tapscan, Inc. Arbitron's revenue
growth also reflected price escalators in multi-year customer contracts, a high
customer contract renewal rate, increased sales of analytical software and
product and media usage reports and an increased number of subscribers for
ratings services. The relationship of cost of revenue and revenue for Arbitron
remained at the same level as the previous year. Unusual losses of $5.0 million
in 1997, related to asset write-offs and reported as "Other expense (income),"
are not included in the tables above.








FINANCIAL CONDITION



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

CONSOLIDATED STATEMENTS OF CASH FLOWS HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)                                                    Years ended December 31,
- -------------------------------------------------------------------------------------------------------------
                                                                       1999            1998            1997
- -------------------------------------------------------------------------------------------------------------
                                                                                           
Operating activities                                                $ 197.7         $ 163.5         $ 114.6
- -------------------------------------------------------------------------------------------------------------
Investing activities                                                 (812.1)         (245.5)          484.7
- -------------------------------------------------------------------------------------------------------------
Financing activities                                                  572.0           (84.2)         (402.4)
- -------------------------------------------------------------------------------------------------------------
Net cash flows provided (used)                                      $ (42.4)        $(166.2)        $ 196.9
- -------------------------------------------------------------------------------------------------------------


Cash and equivalents at end of year                                 $  59.4         $ 101.8         $ 268.0
- -------------------------------------------------------------------------------------------------------------






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

RECONCILIATION OF EARNINGS TO CASH INFLOWS (OUTFLOWS) FROM OPERATING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)                                                    Years ended December 31,
- -------------------------------------------------------------------------------------------------------------
                                                                       1999            1998            1997
- -------------------------------------------------------------------------------------------------------------
                                                                                           
Earnings from continuing operations                                 $ 148.9         $ 164.4         $  35.4
- -------------------------------------------------------------------------------------------------------------
Provision for deferred income taxes                                    87.1            58.1          (175.0)
- -------------------------------------------------------------------------------------------------------------
Depreciation and amortization                                          77.4            51.2            58.4
- -------------------------------------------------------------------------------------------------------------
Impairment loss from asset write-offs                                    --              --            204.4
- -------------------------------------------------------------------------------------------------------------
Restructure reserves utilized and other reconciling items                0.9           (3.3)          (23.7)
- -------------------------------------------------------------------------------------------------------------


Operating cash flows from earnings                                    314.3           270.4            99.5
- -------------------------------------------------------------------------------------------------------------
Operating cash flows from working capital activities                 (116.6)         (106.9)           15.1
- -------------------------------------------------------------------------------------------------------------
Cash flows from operating activities                                $ 197.7         $ 163.5         $ 114.6
- -------------------------------------------------------------------------------------------------------------

                 [END OF PAGE 12 OF THE CERIDIAN ANNUAL REPORT]


Cash flows from operating activities in 1999 and 1998 benefited from the
reduction of income taxes payable for those years due to the utilization of U.S.
net operating loss carryforwards and future tax deductions. Earnings from
continuing operations for 1997 included a noncash $175.0 million tax benefit
from Ceridian's fourth quarter recognition under FAS 109 of the future tax
benefits of its net operating loss carryforwards and future tax deductions and
noncash charges for asset write-offs of $204.4 million. Operating cash flows
from working capital activities reflect increases in receivables of
$67.2 million in 1999, $33.1 million in 1998 and $54.4 million in 1997.
Operating cash flows from working capital activities in 1998 also reflect
payments of tax and other accrued liabilities of $67.1 million, and in 1997
include increases in accrued liabilities of $69.6 million, primarily related
to unusual losses in the fourth quarter of 1997.

Cash flows from investing activities during 1999 principally involved the
acquisitions of ABR in June 1999 for $681.5 million and a majority interest in
SVS in February 1999 for $20.3 million as described in the accompanying Note J,
INVESTING ACTIVITY, to the consolidated financial statements. Capital
expenditures amounted to $107.2 million during 1999, primarily for a new
Ceridian headquarters building, renovation of an office facility in St.
Petersburg, Fla. by Ceridian Benefits Services and hardware and software to be
used in internal financial systems. Total expenditures for the headquarters
building totaled $27.1 million at December 31, 1999, including $24.6 million
incurred in 1999. The projected capitalized cost, including furnishings and
interest, to prepare the building for occupancy by June 2000 is $40.8 million.
The renovation of an office facility, which will house some of Ceridian Benefits
Services operations, has resulted in renovation expenditures of $10.4 million
since Ceridian acquired ABR and $25.7 million in total as of December 31, 1999.
It is expected that the total renovation expenditures will be approximately
$30 million when completed in the first half of 2000.








Investing outflows during 1998 principally involved the acquisitions of the
payroll services businesses of two Canadian banks for a total cash payment of
$140.7 million in the first quarter and the work-life services business of
Work/Family Directions, Inc. for a cash payment of $77.5 million in November.
Investing inflows in 1998 principally involved Comdata's exchange of its gaming
services business for First Data Corporation's NTS transportation services
business and the sales of Ceridian's Resumix and Tesseract operations. During
1997, investing outflows included seven acquisitions that resulted in total cash
payments of $30.0 million. Investing inflows in 1997 related to the sale of the
Computing Devices International division. These and other 1998 and 1997
investing transactions are further described in the accompanying Note J,
INVESTING ACTIVITY, to the consolidated financial statements. Capital
expenditures for 1998 amounted to $63.1 million, including $46.2 million for
tangible property and $16.9 million for software. Capital expenditures for 1997
amounted to $82.0 million, including $44.2 million for tangible property and
$37.8 million for software.

Cash flows from financing activities during 1999 primarily involved financing
arrangements related to the acquisition of ABR as described in the accompanying
Note H, FINANCING, to the consolidated financial statements. Proceeds from stock
option exercises and employee stock plan purchases provided $24.2 million of
financing inflows during 1999. Ceridian repurchased 235,518 shares of its common
stock at an average price of $21.86 per share during the third and fourth
quarters of 1999, resulting in financing outflows of $5.1 million.

Financing inflows during 1998 resulted primarily from financing arrangements
related to the acquisition of the Canadian payroll services businesses as
described in the accompanying Note H, FINANCING, to the consolidated financial
statements. Proceeds from stock option exercises and employee stock plan
purchases provided $41.0 million of financing inflows during 1998. Repurchases
of 6,746,284 Ceridian shares at an average price of $24.42 in 1998 resulted in
financing outflows of $182.0 million, including payment of $17.2 million in
settlement of 1997 repurchases.

Financing outflows in 1997 resulted primarily from repurchases of 15.2 million
Ceridian shares at an average price of $19.58 per share for a total of
$279.8 million, not including the $17.2 million settled in 1998. Proceeds
from stock option exercises and employee stock plan purchases provided
$21.7 million of financing inflows during 1997. During 1997, Ceridian made
net payments of $144.3 million on its outstanding debt, including repaying
all amounts then outstanding under its domestic revolving credit facility and
related supplemental short-term borrowings used to finance stock repurchases.

                 [END OF PAGE 13 OF THE CERIDIAN ANNUAL REPORT]

Ceridian remains in compliance with all financial covenant tests in its credit
agreements and met the fixed charge coverage test of 2.75 times at 10.4 times
and the debt-to-capitalization test with a margin of $240.2 million as of
December 31, 1999. Assuming first quarter 2000 special charges of $50 million
(the upper end of the range announced on January 25, 2000) and interest charges
at the current quarterly rate, Ceridian expects that these and all other
covenant tests would remain in compliance. Ceridian's expenditures for capital
assets and software presently planned for 2000 total approximately $95.8 million
with an estimated allocation of $68.0 million to HRS, $9.9 million to Comdata,
$4.8 million to Arbitron and $13.1 million to corporate center operations. These
planned expenditures include the costs of completing the renovation and
construction of facilities described above. Ceridian also plans to continue to
grow its business through strategic acquisitions. Ceridian expects to meet its
liquidity needs from existing cash balances, cash flow from operations and
borrowings under existing credit facilities.



YEAR 2000 MATTERS

During 1999, Ceridian completed the process of preparing for the Year 2000 date
change. This process involved identifying and remediating date recognition
problems in computer systems, software and other operating equipment; working
with customers, vendors and other third parties to address their Year 2000
issues; and formulating contingency plans to address potential risks in the
event of Year 2000 failures.

As a result of Ceridian's Year 2000 efforts, to date Ceridian has not
experienced any material incident or difficulty related to the Year 2000 event.
In addition, Ceridian has not received notice from its customers that they
experienced any material incident or related difficulty related to Ceridian's
products and services as a result of the Year 2000 event. As a precaution,
however, we will continue to monitor all business processes, including our
interaction with customers, vendors and other third parties, throughout the
remainder of 2000 to address any issues related to the Year 2000 date change and
to ensure all processes continue to function properly.

Year 2000 costs, which were expensed as incurred, amounted to $20.5 million in
1999. Project-to-date Year 2000 costs amounted to $38.1 million. Year 2000 costs
are net of costs recovered or anticipated to be recovered from customers that
were assisted by us with their Year 2000 remediation efforts. In addition, total
Year 2000 capitalizable replacement costs amounted to $4.5 million. Final
project costs of approximately $2.2 million are expected to be incurred in 2000
for ongoing monitoring and support activities.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ceridian's market risk exposure is primarily interest rate risk related to
revenue derived from customer payroll and tax filing deposits. This risk
exposure is partially offset by interest expense on floating rate debt
obligations. Interest income paid to Ceridian from trusts holding client assets
varies as a function of short-term U.S. and Canadian interest rates. Ceridian
uses interest rate collars to hedge the risk of falling interest rates. The
table below indicates the hypothetical change in Ceridian's after-tax interest
income, net of interest expense, over a one-year period due to an immediate and
sustained change in the annual average interest rate. The base scenarios utilize
the Federal funds rate of 5.50% and 4.75% at December 31, 1999 and 1998,
respectively.



- ------------------------------------------ -----------------------------
    PERCENT CHANGE IN INTEREST RATES        HYPOTHETICAL CHANGE IN NET
        EXPRESSED IN BASIS POINTS           INTEREST INCOME FROM BASE
                                                     SCENARIO
                                             (IN MILLIONS OF DOLLARS)
                                               1999           1998
                                               ----           ----
                                                       
                300 Rise                        7.7           20.8
                200 Rise                        6.7           14.6
                100 Rise                        4.4            6.4
                 50 Rise                        2.5            2.6
                 25 Rise                        1.4            1.0
              Base Scenario
               25 Decline                      (1.2)          (1.0)
               50 Decline                      (2.2)          (2.0)
               100 Decline                     (2.7)          (3.9)
               200 Decline                     (2.9)          (7.8)
               300 Decline                     (3.1)         (11.7)

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


                 [END OF PAGE 14 OF THE CERIDIAN ANNUAL REPORT]

Computations in the table above are based on assumptions about the amounts of
funds held in client trusts and the relative levels of short-term market
interest rates within U.S. and Canadian markets and should not be relied on as
precise indicators of future expected results. Included in the computations are
the effects of interest rate changes on



income and expense related to all short-term and floating rate assets and
liabilities owned or issued by Ceridian or its subsidiaries, including
interest rate collar contracts. Compared to 1998, Ceridian reduced exposure
to interest rates by increasing its interest rate collars to cover a higher
percentage of expected interest income, and by increasing the use of fixed
rate investments of funds held for customers. See also the sections entitled
"Payroll and Tax Filing Services" in Note A, ACCOUNTING POLICIES, and
"Interest Rate Collars" in Note K, COMMITMENTS AND CONTINGENCIES, to the
consolidated financial statements.

CAUTIONARY FACTORS THAT COULD AFFECT FUTURE RESULTS

Our future results of operations and the forward-looking statements contained in
this Annual Report, in other of our filings with the Securities and Exchange
Commission, in our press releases and in other publications, and made by our
management, are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those expressed in such forward-looking
statements. Important factors known to us that could cause such material
differences are discussed in the following paragraphs.

IMPLEMENTATION AND SUCCESS OF PLANS TO IMPROVE PERFORMANCE OF U.S. PAYROLL
BUSINESS. In January 2000, we announced initiatives to invest in and improve the
performance of our U.S. payroll business. These initiatives include:

- -    Transitioning small business customers with up to 200 employees to
     Powerpay-TM-, our new Internet payroll product
- -    Improving our customer service model
- -    Changes in our pricing strategy
- -    Continuing product enhancement
- -    Investments in Six Sigma
- -    Consolidation of payroll processing centers

We cannot assure you that our efforts and the amount we invest in this process
will be sufficient to improve the financial performance of our U.S. payroll
business in 2000 and beyond. If these initiatives fail or the level of
investment needs to be increased, the result would have a material adverse
effect on our business, operating results and financial condition.

GOVERNMENT REGULATION CHANGES ON TIMING OF REMITTANCE AND INTEREST RATE CHANGES
AND INVESTMENT INCOME FROM CUSTOMER DEPOSITS. Our payroll and tax filing
business in the United States and Canada derives significant revenue and
earnings from the investment of customer deposits. Customer deposits are
temporarily held and invested before being remitted to tax filing authorities or
the customer's employees. We receive this investment income in lieu of
additional fees that would otherwise be charged to these customers. During 1999,
the average yield on this investment was 5.6%. Changes in governmental
regulations on the timing of remittances may reduce the period of time we are
allowed to hold such remittances and may adversely affect our revenue and
earnings from this source. If governmental regulations change in this fashion,
we would seek to require customers who permit us to retain earnings on their
deposits to pay us additional fees in lieu of this lost investment income.

In addition, changes in interest rates will affect our revenue and earnings from
this source. Interest rate changes are difficult to predict and could be
significant. We have sought to lessen the impact of interest rate decreases by
entering into a series of interest rate collar transactions (see Note K,
COMMITMENTS AND CONTINGENCIES, and the "Quantitative and Qualitative Disclosures
About Market Risk" above). We cannot assure you that we will continue to be able
to obtain collars or obtain them on favorable terms, or to what extent any
decrease in investment income would be offset by the use of these collars. If we
are unable to secure collars on favorable terms and interest rates decrease, our
financial results would be adversely affected.

                 [END OF PAGE 15 OF THE CERIDIAN ANNUAL REPORT]



ABILITY TO INCREASE REVENUE FROM CROSS-SELLING EFFORTS AND NEW PRODUCTS. We
attribute a portion of our anticipated future revenue growth in each of our
business segments to:

- -    The continued selling of additional products and services to our existing
     customer base
- -    The planned introduction of new or enhanced product and service offerings
- -    The selling of our products and services to customers among our various
     business groups

How successful we are in these efforts will depend on a variety of factors,
including:

- -    Product and service selection
- -    Effective sales and marketing efforts
- -    Level of market acceptance and the avoidance of difficulties or delays in
     development or introduction

We cannot assure you that we will achieve our revenue growth objectives from
cross-selling efforts and new products. The inability to cross sell our products
or develop new products would have an adverse effect on our business.

ABILITY TO IMPROVE OPERATING MARGINS IN HUMAN RESOURCE SERVICES (HRS). Our
ability to improve profit margins in our HRS businesses will depend on factors
that include the degree to which and the speed with which we are able to
increase operational efficiencies and reduce operating costs in those businesses
(see "Implementation and Success of Plans to Improve Performance of U.S. Payroll
Business" above), and the level of customer retention in those businesses (see
"Customer Retention" below). Delays or difficulties in implementing process
improvements (such as those designed to reduce printing, telecommunication and
customer service costs, or installing new products and services and in
consolidating various functions) could adversely affect the timing or
effectiveness of cost reduction and margin improvement efforts.

CUSTOMER RETENTION. Customer retention is an important factor in the amount and
predictability of revenue and profits in each of our businesses. Customer
retention is dependent on a number of factors, including:

- -    Customer satisfaction
- -    Offerings by competitors
- -    Our customer service levels
- -    Price

In providing certain services, particularly payroll processing and tax filing
services, we incur installation and conversion costs in connection with new
customers that must be recovered before the contractual relationship provides
incremental profit. The longer we are able to retain a customer, the more
profitable that contract is likely to be to us.

EFFECTING SYSTEM UPGRADES AND CONVERSIONS. We are in the process of
transitioning to new data processing systems and/or software in several of our
business units, including systems that process customer data and internal
management information systems. The successful implementation of these new
systems is critical to the effective delivery of products and services and the
efficient operation of our businesses. Problems or delays with the installation
or initial operation of the new systems could disrupt or increase costs in
connection with the delivery of services and with operations planning, financial
reporting and management.

DEFERRALS IN INSTALLATIONS RELATED TO THE YEAR 2000 EVENT. In the second half of
1999, we experienced deferrals in new product installations in HRS as a result
of our customers' reaction to the Year 2000 event. The deferral of installations
from 1999 into the first half of 2000 will negatively impact our revenue in
2000. We cannot assure you of the timing of the installations of deferred
product.

                 [END OF PAGE 16 OF THE CERIDIAN ANNUAL REPORT]



CONSOLIDATION IN RADIO BROADCASTING INDUSTRY. The recent consolidation in the
radio broadcasting industry could put pressure on the pricing of Arbitron's
radio ratings service, from which Arbitron derives a substantial majority of its
total revenue. While Arbitron has experienced some success in offsetting the
revenue impact of any concessions by providing ratings to additional stations
within a radio group and by providing additional software and other services, we
cannot assure you as to the degree to which Arbitron will be able to continue to
do so.

ABILITY TO ADAPT TO CHANGING TECHNOLOGY. As a provider of information management
and data processing services, we must adapt and respond to technological
advances offered by competitors and technological requirements of customers in
order to maintain and improve upon our competitive position. We cannot assure
you that new products and product enhancements can be developed and released
within the projected time frames and within targeted costs. Significant delays,
difficulties or added costs in introducing new products or enhancements, either
through internal development, acquisitions or cooperative relationships with
other companies, could have a material adverse effect on the market acceptance
of our products and services and the results of operations of our businesses
generally.

ACQUISITION RISKS. We expect that we will continue to make acquisitions of,
investments in and strategic alliances with complementary businesses, products
and technologies to enable us to add products and services for our core customer
base and for adjacent markets, and to expand each of our businesses
geographically. However, implementation of this strategy entails a number of
risks, including:

- -    Inaccurate assessment of undisclosed liabilities
- -    Entry into markets in which we may have limited or no experience
- -    Diversion of management's attention from our core businesses
- -    Potential loss of key employees or customers of the acquired businesses
- -    Difficulties in assimilating the operations and products of an acquired
     business or in realizing projected efficiencies and cost savings
- -    Increase in our indebtedness and a limitation in our ability to access
     additional capital when needed

Integration of acquisitions and obtaining anticipated revenue synergies or cost
reductions are also a risk in many acquisitions. Also, if we must utilize
purchase accounting for acquisitions, and given the financial characteristics of
information services businesses, it may be difficult for us to avoid having
acquisitions that are dilutive to earnings per share.

COMPETITIVE CONDITIONS. Because the markets we serve are large and attractive,
new competitors could decide to enter these markets, and thereby intensify the
highly competitive conditions that already exist. These new entrants could offer
new technologies (see "Ability to Adapt to Changing Technology" above) or a
different service model, or could treat the services provided by one of our
businesses as one component of a larger product/service offering. These
developments could enable new competitors to offer similar products at reduced
prices. Any of these or similar developments could have a material adverse
impact on our business and results of operations.

LIABILITY AS A PORTABILITY ADMINISTRATOR. As a result of our acquisition of ABR
Information Services, Inc., now known as Ceridian Benefits Services, we are
subject to potential legal liability as a provider of portability compliance
services. As a provider of COBRA (Consolidated Omnibus Budget Reconciliation
Act) compliance services, Ceridian Benefits Services is subject to excise taxes
for noncompliance with certain provisions of COBRA. In addition to the excise
tax liability that may be imposed on Ceridian Benefits Services, substantial
excise taxes may be imposed under COBRA on Ceridian Benefits Services'
customers. Under Ceridian Benefits Services' service agreements with its
customers, Ceridian Benefits Services assumes financial responsibility for the
payment of such taxes assessed against its customers arising out of Ceridian
Benefits Services' failure to comply with COBRA, unless such taxes are
attributable to the customer's failure to comply with COBRA or with the terms of
its agreement with Ceridian Benefits Services. In addition to liability for
excise taxes for noncompliance with

                 [END OF PAGE 17 OF THE CERIDIAN ANNUAL REPORT]



COBRA, Ceridian Benefits Services accepts financial responsibility for certain
liabilities incurred by its customers that are attributable to Ceridian Benefits
Services' failure to comply with COBRA or to fulfill the terms of its
obligations to its customers under its agreements. These liabilities could, in
certain cases, be substantial. The imposition of such liability on us as a
result of the acquisition of Ceridian Benefits Services in excess of any
available insurance coverage could harm our business and adversely affect our
operating results.

As a provider of HIPAA (Health Insurance Portability and Accountability Act of
1996) compliance and administration services, Ceridian Benefits Services is
subject to ERISA penalties for noncompliance with certain provisions of HIPAA.
Under Ceridian Benefits Services' service agreements with its customers,
Ceridian Benefits Services assumes financial responsibility for the payment of
penalties assessed against its customers arising out of Ceridian Benefits
Services' failure to comply with HIPAA, unless such penalties are attributable
to the customer's failure to comply with HIPAA or with the terms of its
agreement with Ceridian Benefits Services. These liabilities could, in certain
cases, be substantial. The imposition of such liability on us as a result of the
acquisition of Ceridian Benefits Services in excess of any available insurance
coverage could harm our business and adversely affect our operating results.

CHANGES IN GOVERNMENTAL REGULATIONS. Changes in governmental regulations, and in
particular, the extent and type of benefits that employers are required to or
may choose to provide employees, and the amount and type of federal or state
taxes, may adversely affect our revenue and earnings. Changes in governmental
regulations are difficult to predict and could be significant.

OTHER FACTORS. Trade, monetary and fiscal policies, and political and economic
conditions may substantially change, with corresponding impacts on the
industries which we serve, particularly more economically sensitive industries
such as trucking. These changes could also affect employment levels, with a
corresponding impact on our payroll processing and tax filing businesses. Our
future operating results may also be adversely affected by adverse judgments,
settlements, unanticipated costs or other effects of legal and administrative
proceedings now pending or that may be instituted in the future.

                 [END OF PAGE 18 OF THE CERIDIAN ANNUAL REPORT]

EX-13.03

                                                                   Exhibit 13.03


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of
Ceridian Corporation:

We have audited the accompanying consolidated balance sheets of Ceridian
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ceridian
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.

/s/ KPMG LLP

Minneapolis, Minnesota
January 25, 2000


                 From Page 19 of the Ceridian Annual Report






CONSOLIDATED STATEMENTS OF OPERATIONS                           (Dollars in millions, except per share data)

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

- ----------------------------------------------------------------------------------------------------------------
                                                                           Years Ended December 31,

                                                               -------------------------------------------------
                                                                   1999              1998             1997
- ----------------------------------------------------------------------------------------------------------------
                                                                                         
Revenue                                                          $ 1,342.3          $1,162.1          $1,074.8

Costs and Expenses
  Cost of revenue                                                    630.5             551.5             527.6
  Selling, general and administrative                                379.6             316.0             308.0
  Research and development                                            74.4              77.8              59.6
  Other expense (income)                                               1.1              (6.8)            309.3
                                                               -------------     -------------    --------------
     Total costs and expenses                                      1,085.6             938.5           1,204.5
                                                               -------------     -------------    --------------

EARNINGS (LOSS) BEFORE INTEREST AND TAXES                            256.7             223.6            (129.7)
- ----------------------------------------------------------------------------------------------------------------

  Interest income                                                      6.4              10.4               2.3
  Interest expense                                                   (24.7)             (4.3)            (11.2)
                                                               -------------     -------------    --------------

EARNINGS (LOSS) BEFORE INCOME TAXES                                  238.4             229.7            (138.6)


Income tax provision (benefit)                                        89.5              65.3            (174.0)
                                                               -------------     -------------    --------------

EARNINGS FROM CONTINUING OPERATIONS                                  148.9             164.4              35.4
- ----------------------------------------------------------------------------------------------------------------

DISCONTINUED OPERATIONS
  Gain on sale                                                          --              25.4             386.3
  Earnings from operations                                              --                --              50.7
                                                               -------------     -------------    --------------

NET EARNINGS                                                     $   148.9           $ 189.8           $ 472.4
                                                               =============     =============    ==============

BASIC EARNINGS PER SHARE
  Continuing operations                                          $    1.03           $  1.14           $  0.23
  Net earnings                                                   $    1.03           $  1.32           $  3.01

DILUTED EARNINGS PER SHARE
  Continuing operations                                          $    1.01           $  1.11           $  0.22
  Net earnings                                                   $    1.01           $  1.29           $  2.96

SHARES USED IN CALCULATIONS (IN THOUSANDS)
  Weighted average shares (basic)                                  144,524           144,070           156,835
  Dilutive securities                                                3,440             3,527             2,646
                                                               -------------     -------------    --------------
  Weighted average shares (diluted)                                147,964           147,597           159,481
                                                               =============     =============    ==============

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

See notes to consolidated financial statements.




                 From Page 20 of the Ceridian Annual Report







CONSOLIDATED BALANCE SHEETS                                                (Dollars in millions, except per share data)
- ------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31,
                                                                           ------------------------------------------
                                                                                 1999                      1998
     ----------------------------------------------------------------------------------------------------------------
                                                                                                 
     ASSETS
     CURRENT ASSETS
     Cash and equivalents                                                          $   59.4               $   101.8
     Short-term investments                                                            22.0                      --
     Trade and other receivables
        Trade, less allowance of $19.5 and $21.7                                      415.8                   343.4
        Other                                                                          44.6                    41.1
                                                                           ------------------          --------------
           Total                                                                      460.4                   384.5

     Current portion of deferred income taxes                                          78.7                   127.8
     Other current assets                                                              24.8                    19.6
                                                                           ------------------          --------------
              Total current assets                                                    645.3                   633.7

     ----------------------------------------------------------------------------------------------------------------
     Property, plant and equipment, net                                               192.8                    91.3
     Goodwill and other intangibles, net                                            1,047.2                   377.5
     Software and development costs, net                                               48.3                    26.1
     Prepaid pension cost                                                             118.3                   103.4
     Deferred income taxes, less current portion                                        4.1                    53.4
     Other noncurrent assets                                                            3.9                     4.3

     ----------------------------------------------------------------------------------------------------------------
              Total assets                                                       $  2,059.9              $  1,289.7
                                                                           ==================          ==============
     ----------------------------------------------------------------------------------------------------------------
     LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES
     Short-term debt and current portion of long-term obligations                  $    0.2                $    0.3
     Accounts payable                                                                  47.5                    65.0
     Drafts and customer funds payable                                                136.9                   111.0
     Customer advances                                                                 14.6                    13.6
     Deferred income                                                                   34.5                    25.4
     Accrued taxes                                                                     74.8                    76.2
     Employee compensation and benefits                                                69.5                    74.4
     Other accrued expenses                                                            73.7                    70.8
                                                                           ------------------          --------------
              Total current liabilities                                               451.7                   436.7

     ----------------------------------------------------------------------------------------------------------------
     Long-term obligations, less current portion                                      611.1                    54.2
     Deferred income taxes                                                             10.3                     3.6
     Restructure reserves, less current portion                                        26.8                    29.0
     Employee benefit plans                                                            77.7                    74.1
     Deferred income and other noncurrent liabilities                                  39.6                    41.5
     ----------------------------------------------------------------------------------------------------------------
     STOCKHOLDERS' EQUITY
     Common Stock, $.50 par, authorized 500,000,000 shares,
         issued 161,685,596                                                            80.8                    80.8
     Additional paid-in capital                                                     1,126.2                 1,110.5
     Retained earnings (deficit)                                                       12.1                  (136.8)
     Treasury common stock, 16,951,228 and 18,171,620 shares                         (364.6)                 (390.8)
     Accumulated other comprehensive income                                           (11.8)                  (13.1)
                                                                           ------------------          --------------
              Total stockholders' equity                                              842.7                   650.6

     ----------------------------------------------------------------------------------------------------------------
              Total liabilities and stockholders' equity                         $  2,059.9              $  1,289.7
                                                                           ==================          ==============

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

     See notes to consolidated financial statements.


                        From Page 21 of the Ceridian Annual Report








     CONSOLIDATED STATEMENTS OF CASH FLOWS                                     (Dollars in millions, except per share data)

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

                                                                                      Years Ended December 31,
                                                                        -------------------------------------------------
                                                                            1999                1998            1997
     --------------------------------------------------------------------------------------------------------------------
                                                                                                    
     CASH FLOWS FROM OPERATING ACTIVITIES
     Net earnings                                                            $ 148.9           $  189.8         $ 472.4
     Adjustments to reconcile net earnings to net cash provided by
     operating activities:
         Earnings from discontinued operations                                    --                --            (50.7)
         Gain on sale of discontinued operations                                  --              (25.4)         (386.3)
         Deferred income tax provision (benefit)                                87.1               58.1          (175.0)
         Impairment loss from asset write-offs                                    --                 --           204.4
         Depreciation and amortization                                          77.4               51.2            58.4
         Restructure reserves utilized                                          (2.3)              (2.9)          (21.1)
         Other                                                                   3.2               (0.4)           (2.6)
         Decrease (Increase) in trade and other receivables                    (67.2)             (33.1)          (54.4)
         Increase (Decrease) in accounts payable                                 0.2              (11.2)            7.0
         Increase (Decrease) in drafts and customer funds payable               (7.8)              (0.9)          (26.5)
         Increase (Decrease) in employee compensation and benefits              (4.7)               8.8             8.0
         Increase (Decrease) in accrued taxes                                   (9.8)             (21.3)           10.4
         Increase (Decrease) in other current assets and liabilities           (27.3)             (49.2)           70.6
                                                                        --------------      -------------    ------------
           Net cash provided by operating activities                           197.7              163.5           114.6
     --------------------------------------------------------------------------------------------------------------------
     CASH FLOWS FROM INVESTING ACTIVITIES
     Expended for property, plant and equipment                                (77.7)             (46.2)          (44.2)
     Expended for software and development costs                               (29.5)             (16.9)          (37.8)
     Proceeds from sales of businesses and assets                                7.9               50.5           596.7
     Proceeds from sales of short-term investments                               3.2                --               --
     Expended for business acquisitions, less cash acquired                   (716.0)            (232.9)          (30.0)
                                                                        --------------      -------------    ------------
           Net cash provided by (used for) investing activities               (812.1)            (245.5)          484.7
     --------------------------------------------------------------------------------------------------------------------
     CASH FLOWS FROM FINANCING ACTIVITIES
     Revolving credit and overdrafts, net                                      108.4               57.2          (133.1)
     Borrowings of other debt                                                  444.8                 --              --
     Repayment of other debt                                                    (0.3)              (0.4)          (11.2)
     Repurchase of common stock                                                 (5.1)            (182.0)         (279.8)
     Proceeds from exercise of stock options and other                          24.2               41.0            21.7
                                                                        --------------      -------------    ------------
           Net cash provided by (used for) financing activities                572.0              (84.2)         (402.4)
     --------------------------------------------------------------------------------------------------------------------
     NET CASH FLOWS PROVIDED (USED)                                            (42.4)            (166.2)          196.9
     Cash and equivalents at beginning of year                                 101.8              268.0            71.1
                                                                        --------------      -------------    ------------
     Cash and equivalents at end of year                                     $  59.4           $  101.8         $ 268.0
                                                                        ==============      =============    ============

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

                                                                                      Years Ended December 31,
                                                                        -------------------------------------------------
     INTEREST AND INCOME TAXES PAID (REFUNDED)                              1999                1998            1997
     --------------------------------------------------------------------------------------------------------------------
                                                                                                    
     Interest paid                                                           $  21.0           $    4.2         $  11.5
     Income taxes paid                                                       $   9.4           $   17.6         $   2.9
     Income taxes refunded                                                   $  (0.5)          $   (0.2)        $  (0.1)
     --------------------------------------------------------------------------------------------------------------------

     See notes to consolidated financial statements.


                     From Page 22 of the Ceridian Annual Report




CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                       (Dollars in millions, except per share data)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                    -----------------------------------------------
                                                             Amount                                     Shares
                                             --------------------------------------------------------------------------------------
                                                 1999        1998        1997            1999            1998           1997
- ----------------------------------------------------------------------------------  ----------------------------------------------
                                                                                                  
COMMON SHARES ISSUED
Beginning balance                                $  80.8     $  80.8    $   79.8       161,685,596    161,685,596    159,579,254
Exercises of stock options                            --          --         0.2                --             --        345,904
Restricted stock awards, net                          --          --          --                --             --          6,400
Employee stock purchase plans                         --          --          --                --             --        123,114
Acquisitions                                          --          --         0.8                --             --      1,630,924
                                             -------------------------------------  ----------------------------------------------
Ending balance - issued                          $  80.8     $  80.8    $   80.8       161,685,596    161,685,596    161,685,596
- ----------------------------------------------------------------------------------  ----------------------------------------------
TREASURY STOCK - COMMON SHARES
Beginning balance                               $ (390.8)   $ (271.0)    $  (0.4)      (18,171,620)   (13,801,852)       (42,392)
Repurchases                                         (5.1)     (164.8)     (297.0)         (235,518)    (6,746,284)   (15,172,302)
Exercises of stock options                          27.2        57.8        21.7         1,265,599      2,804,050      1,148,452
Restricted stock awards, net                        (1.0)      (17.1)       (6.3)          (32,524)      (630,522)      (345,250)
Employee stock purchase plans                        5.1         4.3         6.6           239,369        202,988        355,224
Acquisitions                                          --          --         4.4           (16,534)            --        254,416
                                             -------------------------------------  ----------------------------------------------
Ending balance - treasury                       $ (364.6)   $ (390.8)   $ (271.0)      (16,951,228)   (18,171,620)   (13,801,852)
- ----------------------------------------------------------------------------------  ----------------------------------------------
COMMON SHARES OUTSTANDING                                                              144,734,368    143,513,976    147,883,744
- ----------------------------------------------------------------------------------  ==============================================
ADDITIONAL PAID-IN CAPITAL
Beginning balance                              $ 1,110.5   $ 1,112.6   $ 1,071.5
Exercises of stock options                          (8.3)      (21.3)       (8.0)
Tax benefit from stock options                      10.2        13.3        28.6
Restricted stock awards, net                         1.8         5.6         8.9
Employee stock purchase plans                        0.5         0.3         0.9
Acquisitions                                        11.5          --        10.7
                                             -------------------------------------
                                                                                    ------------------------------------------------
Ending balance                                 $ 1,126.2   $ 1,110.5   $ 1,112.6                  COMPREHENSIVE INCOME

- ----------------------------------------------------------------------------------  ------------------------------------------------
RETAINED EARNINGS (DEFICIT)                                                                    1999           1998           1997
                                                                                    ----------------------------------------------
Beginning balance                               $ (136.8)   $ (326.6)   $ (798.7)
Net earnings                                       148.9       189.8       472.4          $   148.9      $   189.8      $   472.4
Acquisitions by pooling                               --          --        (0.3)
                                             -------------------------------------
Ending balance                                   $  12.1    $ (136.8)   $ (326.6)
- ----------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
FOREIGN CURRENCY TRANSLATION
Beginning balance                                $  (3.6)    $   2.0     $   0.4
Rate changes, net                                    0.4        (5.6)        0.1               0.4           (5.6)           0.1
Disposition of investment                             --         --          1.5               --             --             1.5
                                             -------------------------------------
Ending balance                                      (3.2)       (3.6)        2.0
                                             -------------------------------------
PENSION LIABILITY ADJUSTMENT
Beginning balance                                $  (9.5)  $    (9.5)    $  (6.3)

Pension liability change                             0.9          --        (3.2)              0.9             --           (3.2)
                                             -------------------------------------
Ending balance                                      (8.6)       (9.5)       (9.5)
                                             -------------------------------------
Total ending balance                             $ (11.8)   $  (13.1)    $  (7.5)
                                             -------------------------------------  ----------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                       $ 842.7    $  650.6    $  588.3         $   150.2      $   184.2      $   470.8
                                             =====================================  ==============================================


- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------

                     From Page 23 of the Ceridian Annual Report


     INDEX TO NOTES
    24  A.        Accounting Policies
    27  B.        Supplementary Data to
                  Statements of Operations
    28  C.        Segment Data
    30  D.        Income Taxes
    31  E.        Capital Assets
    32  F.        Retirement Plans
    34  G.        Stock Plans
    36  H.        Financing
    37  I.        Leasing
    38  J.        Investing Activity
    39  K.        Commitments and
                  Contingencies
    40  L.        Legal Matters


A. ACCOUNTING POLICIES

BASIS OF CONSOLIDATION
The consolidated financial statements of Ceridian Corporation ("Ceridian")
include the accounts of all majority owned subsidiaries.

    As further discussed in Note B, Computing Devices International ("CDI"), a
division of Ceridian sold in December 1997, is presented as a discontinued
operation.

    Investments in other affiliated companies where Ceridian has significant
influence are accounted for by the equity method. Other investments are
accounted for by the cost method.

    All material intercompany transactions have been eliminated from the
consolidated financial statements.

NEW ACCOUNTING PRONOUNCEMENTS
FAS 133, "Accounting for Derivative Instruments and Hedging Activities," (as
amended by FAS 137 with respect to the effective date) will be effective for
Ceridian in January 2001. FAS 133 requires all derivatives to be recognized as
assets or liabilities on the balance sheet and measured at fair value on a
mark-to-market basis. This applies whether the derivatives are stand-alone
instruments, such as forward currency exchange contracts and interest rate swaps
or collars, or embedded derivatives, such as call options contained in
convertible debt investments. Along with the derivatives, the underlying hedged
items are also to be marked-to-market on an ongoing basis. These market value
adjustments are to be included either in net earnings or loss in the statement
of operations or in other comprehensive income (and accumulated in stockholders'
equity), depending on the nature of the transaction. Ceridian is currently
reviewing the potential impact of this accounting standard.

    In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. Aspects of SAB 101
relevant to Ceridian primarily concern the timing of the recognition of revenue
and certain expenses related to arrangements that involve the receipt of
nonrefundable, up-front fees. SAB 101 requires that in particular situations the
nonrefundable fees and certain associated costs be recognized over the
contractual term or average life of the underlying arrangement. SAB 101 will be
effective for Ceridian in the first quarter of 2000. Ceridian does not expect
SAB 101 to have a material impact on its financial condition or results of
operations.

STOCK-BASED COMPENSATION
Ceridian accounts for stock-based compensation under APB Opinion No. 25 and
related interpretations. Therefore, compensation expense is not recorded with
respect to Ceridian's fixed stock option and employee stock purchase plans, and
compensation expense for performance-based restricted stock awards is recorded
based on the stock price at time of vesting or estimated future vesting.
Ceridian also reports under the disclosure-only provisions of FAS 123,
"Accounting for Stock-Based Compensation."

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.


                     From Page 24 of the Ceridian Annual Report



CHANGES IN PRESENTATION
Certain prior year amounts have been reclassified to conform to the current
year's presentation.

CASH AND SHORT-TERM INVESTMENTS
Investments which are readily convertible to cash within three months of
purchase are classified in the balance sheet as cash equivalents. Investments,
if any, with longer maturities are considered available-for-sale under FAS 115
and reported in the balance sheet as short-term investments.

    At December 31, 1999, short-term investments of $22.0 consisted of
marketable securities, primarily issued by U.S. government agencies. These
securities are reported at cost, which approximates fair value.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and depreciated for financial
statement purposes using straight-line and accelerated methods at rates based on
the estimated lives of the assets, which are generally as follows:




- --------------------------- -----------
                          
Buildings                      40 years
Building improvements        5-15 years
Machinery and equipment       3-8 years
Computer equipment            3-6 years
- --------------------------- -----------


    Repairs and maintenance are expensed as incurred. Gains or losses on
dispositions are included in results of operations. Interest capitalized in 1999
of $1.7 related to the construction of a new headquarters facility in
Bloomington, Minn. and the renovation of an office facility in St. Petersburg,
Fla. that will house certain benefits services operations.

EARNINGS PER SHARE
Basic earnings per share represents earnings divided by the weighted average
number of common shares outstanding for the reporting period. Diluted earnings
per share represents earnings divided by the sum of the weighted average number
of common shares outstanding plus shares derived from potentially dilutive
securities. For Ceridian, potentially dilutive securities includes "in the
money" fixed stock options outstanding. The numbers of shares added for stock
options is determined by the treasury stock method, which assumes exercise of
these options and the use of any proceeds to repurchase a portion of these
shares at the average market price for the period. The option shares excluded
from the calculation of potentially dilutive securities because the exercise
price exceeded the average market price were 849,000 in 1999, 341,000 in 1998
and 5,492,000 in 1997.

GOODWILL AND OTHER INTANGIBLES
Goodwill, which represents the excess purchase price over the fair value of net
assets of businesses acquired, is assigned to operating units based on the
benefits derived from the acquisition and amortized on a straight-line basis
over the expected periods to be benefited, ranging up to 40 years.

    Other intangible assets represents amounts assigned to intangible assets at
the time of a purchase acquisition and includes such items as customer lists and
bases, technology, covenants not to compete, tradenames, workforce-in-place and
other rights. Such costs are amortized on a straight-line basis over periods
ranging up to 30 years.

    Recorded amounts are regularly reviewed and recoverability assessed. The
review considers factors such as whether the amortization of the goodwill and
other intangible assets for each operating unit over its remaining life can be
recovered through forecasted undiscounted cash flows.

SOFTWARE AND DEVELOPMENT COSTS
Ceridian capitalizes purchased software that is ready for service and
development costs for marketable software incurred from the time the preliminary
project stage is completed until the software is ready for use. Under the
provisions of SOP 98-1, Ceridian capitalizes costs associated with software
developed or obtained for internal use when both the preliminary project stage
is completed and Ceridian management has authorized further funding for the
project which it deems probable of completion and use for the function intended.
Capitalized internal-use software costs include only (1) external direct costs
of materials and services consumed in developing or obtaining the software, (2)
payroll and payroll-related costs for employees who are directly associated with
and who devote time to the project, and (3) interest costs incurred, when
material, while


                     From Page 25 of the Ceridian Annual Report





developing the software. Capitalization of such costs ceases no
later than the point at which the project is substantially complete and ready
for its intended purpose.

    Research and development costs and other computer software maintenance costs
related to software development are expensed as incurred. Software development
costs are amortized using the straight-line method over a range of three to
seven years, but not exceeding the expected life of the product.

    The carrying value of software and development costs is regularly reviewed
by Ceridian, and a loss is recognized when the value of estimated undiscounted
cash flow benefit related to the asset falls below the unamortized cost.

INCOME TAXES
The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences between
such income and that recognized for tax return purposes. Ceridian and its
eligible subsidiaries file a consolidated U.S. federal income tax return.
Certain subsidiaries which are consolidated for financial reporting are not
eligible to be included in the consolidated U.S. federal income tax return and
separate provisions for income taxes have been determined for these entities.
Except for selective dividends, Ceridian intends to reinvest the unremitted
earnings of its non-U.S. subsidiaries and postpone their remittance
indefinitely. Accordingly, no provision for U.S. income taxes was required on
such earnings during the three years ended December 31, 1999.

REVENUE RECOGNITION
Services revenue is recognized when the services are performed and billable,
except for certain services provided by Ceridian's Comdata subsidiary, Comdata
Network, Inc., and revenue from payroll and tax filing services described below.

    Revenue from Comdata funds transfer and regulatory permit services consists
of the transaction fees charged to customers. Such revenue does not include the
costs of goods and services for which funds are advanced by Comdata (e.g., fuel
purchased, permit provided or face amount of the Comchek purchased and cashed).
However, Comdata pays the issuing agent (e.g., truck stop or state agency) for
the full cost of the goods and services provided and, accordingly, bills the
customer for such cost as well as the transaction fee. As a result, Ceridian's
accounts receivable includes both the cost of the goods and services purchased
and the transaction fees. Ceridian's drafts and customer funds payable includes
the amount due to the issuing agent for the cost of the goods and services.
Revenue is recognized for the amount of the transaction fee at the time the
goods and services are purchased.

PAYROLL AND TAX FILING SERVICES
In connection with its U.S. payroll tax filing services, Ceridian collects funds
for payment of taxes due, holds such funds in trust until payment is due, remits
the funds to the appropriate taxing authority, files federal, state and local
tax returns, handles related regulatory correspondence and amendments, and
selectively absorbs regulatory charges for certain penalties and interest. For
such services, Ceridian derives its payroll tax filing revenue from fees charged
and from investment income it receives on tax filing deposits temporarily held
pending remittance on behalf of customers to taxing authorities. The trust
invests primarily in high quality collateralized short-term investments or top
tier commercial paper. The trust also invests in U.S. Treasury and Agency
securities, AAA rated asset-backed securities and corporate securities rated
A3/A- or better.

    The aggregate amount of collected but unremitted funds varies significantly
during the year and averaged $1,353.3 in 1999, $1,320.1 in 1998 and $1,376.1 in
1997. The amounts of such funds at December 31, 1999 and 1998, were $1,619.2 and
$2,142.2, respectively.

    Ceridian handles payroll as well as tax filing funds for its Canadian
customers. Ceridian collects funds for payment to clients' employees and tax
authorities and holds these funds in trust until remitted. The Canadian trust
invests in securities issued by the government and provinces of Canada, highly
rated Canadian banks and corporations, asset backed trusts and mortgages.
Ceridian earns income from the trust and fees for services similar to those
provided in the U.S. The aggregate balances in U.S. dollars for the Canadian
trust as of December 31, 1999 and 1998, respectively, were $652.5 and $562.8,
with average outstanding balances during those years of $436.3 and $397.1.

TRANSLATION OF FOREIGN CURRENCIES
Local currencies have been determined to be functional currencies for Ceridian's
international operations. Foreign currency balance sheets are translated at the
end-of-period exchange rates and earnings statements at the average exchange
rates for each period. The resulting translation gains or losses are described
as "foreign currency translation" and reported in "other comprehensive income
(loss)" in the accompanying Statements of Stockholders' Equity. Gains and losses
from translation of assets and liabilities denominated in other than the
functional currency of the operation are recorded in results of operations as
"other expense (income)."


                     From Page 26 of the Ceridian Annual Report



B. SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS

UNUSUAL CHARGES (GAINS)

On January 25, 2000, Ceridian announced that it will be taking certain
actions to improve the operations of its U.S. payroll business. It is
expected that specific plans for these actions will be completed by the end
of the first quarter of 2000 and result in special charges of $35.0 to $50.0
in that quarter.

    The 1998 unusual gains of $9.2 ($5.8 after tax) are related primarily to
the sale in fourth quarter of land not used in operations. The 1997 unusual
charges included $13.0 in first quarter in connection with a litigation
settlement, $150.0 in third quarter in connection with the termination of a
payroll processing software development project, and $144.6 in fourth
quarter, due principally to asset write-offs. The largest portion of these
charges related to an aggregate impairment loss from asset write-offs of
$204.4.

    The payments of liabilities incurred in connection with the termination
of the software development project largely related to severance, contract
termination penalties, unused facilities and incremental costs to convert
beta customers to the ongoing system as originally anticipated under the
project termination plan.



- ------------------------------------------------------------------------------------------------
                                                                  Years Ended December 31,
                                                            ------------------------------------
OTHER EXPENSE (INCOME)                                           1999         1998       1997
- ------------------------------------------------------------------------------------------------
                                                                             
Foreign currency translation expense (income)                $      0.4   $      0.1   $    0.1
Loss (Gain) on sale of assets                                      (3.6)        (0.3)       0.3
Unusual charges (gains)                                               -         (9.2)     307.6
Minority interest and equity in operations of affiliates            6.0          3.0        3.9
Other expense (income)                                             (1.7)        (0.4)      (2.6)
                                                             ------------ -----------------------
Total                                                        $      1.1   $     (6.8)  $  309.3
                                                             ============ ============ ==========
- -------------------------------------------------------------------------------------------------


    The asset write-offs of $87.5 in fourth quarter 1997 included $64.8 of
goodwill and other intangible assets, $11.7 of hardware and software in
Comdata, and a $11.0 loss on the sale of Comdata's gaming services business,
which sale closed in January 1998. In accordance with the original plans of
action initiated, payments applied against fourth quarter 1997 accrued
liabilities included planned expenditures related to excess facilities and
severance costs, contract negotiation costs and costs associated with legal
and administrative proceedings involving Ceridian.

DISCONTINUED OPERATIONS

On December 31, 1997, Ceridian sold substantially all of the net assets of
CDI, which comprised its defense electronics segment. As a result, the gain
from this sale, along with the financial position, results of operations and
cash flows of CDI are separately presented as discontinued operations and
eliminated from continuing operations amounts in the accompanying
consolidated financial statements and notes. The gain at the time of sale
amounted to $386.3 or $2.42 per diluted share ($2.46 per basic share). The
gain was increased by $25.4 or $0.18 per diluted or basic share in fourth
quarter 1998, due to a reduction of estimated accruals related to this sale.
The earnings from CDI operations were $0.32 per diluted or basic share in
1997.



- ----------------------------------------------------------------------------------
                                  Litigation    Payroll Software      Other
1997 UNUSUAL CHARGES              Settlement   Project Termination    Charges
- ----------------------------------------------------------------------------------
                                                           
Initial charge                      $ 13.0           $ 150.0          $144.6
Impairment loss from asset               -            (116.9)          (87.5)
write-offs
Payments/Utilization:
   1997                              (13.0)            (19.6)           (8.2)
   1998                                  -              (5.7)          (15.4)
   1999                                  -              (7.3)          (13.4)
                                    --------         ---------        --------
Remaining balance                   $    -           $   0.5          $ 20.1
                                    ========         =========        ========
- ----------------------------------------------------------------------------------


                    From Page 27 of the Ceridian Annual Report


C.  SEGMENT DATA

Ceridian operates in the information services industry principally in the
U.S. and provides products and services to the human resources,
transportation and media information markets. Its business segments include
Human Resource Services, Comdata and Arbitron. These businesses collect,
manage and analyze data and process transactions on behalf of customers,
report information resulting from such activities to customers, and provide
customers with related software applications and services. The
technology-based products and services of these businesses are typically
provided through long-term customer relationships that result in a high level
of recurring revenue. The business segments are distinguished primarily by
reference to the markets served and the nature of the services provided.
Selected business segment information is provided in an accompanying table.

      Human Resource Services offers a broad range of services and software
designed to help employers more effectively manage their work forces and
information that is integral to human resource processes. These products and
services include transaction-oriented administrative services and software
products, primarily in areas such as payroll processing and tax filing, as
well as management support software and services in areas such as benefits
administration, qualified plan administration, skills management, regulatory
compliance, employee training, work-life effectiveness and employee
assistance programs. Revenue from payroll and tax filing services also
includes investment income earned by Ceridian from deposits temporarily held
pending remittance on behalf of customers to taxing authorities and
customers' employees. These activities are conducted primarily in the U.S.
and, to a lesser extent, through subsidiaries in the United Kingdom ("UK")
and, beginning in 1998, Canada.



- ------------------------------------ ----------- ----------- -----------
GEOGRAPHIC DATA                          1999        1998        1997
- ------------------------------------ ----------- ----------- -----------
                                                    
U.S. OPERATIONS
Revenue                                $1,187.0    $1,034.0    $1,029.3
Property, plant and equipment             181.4        82.3        74.9
- ------------------------------------ ----------- ----------- -----------
NON-U.S. OPERATIONS
Revenue                               $   155.3   $   128.1    $   45.5
Property, plant and equipment              11.4         9.0         4.7
- ------------------------------------ ----------- ----------- -----------


    Comdata provides transaction processing and decision support services to
the transportation industry, primarily trucking companies, truck stops and
truck drivers, in both the long haul and local markets in the U.S. These
services primarily involve the use of a proprietary funds transfer card which
facilitates truck driver transactions and provides transaction control and
trip information for trucking firms. Additionally, Comdata provides
assistance in obtaining regulatory permits and other compliance services,
driver relations services, local fueling services and discounted
telecommunications services in its markets. In 1999, Comdata established its
Payment Services division for extending Comdata's products and services to
customers outside the transportation industry.

    Arbitron provides media and marketing information (primarily radio
audience measurement) to broadcasters, advertising agencies, advertisers and,
through a joint venture, newspaper and magazine publishers and TV
broadcasters. Arbitron also provides software applications that give
customers access to Arbitron's database and, through a joint venture,
measurement data concerning consumer retail behavior and media usage. These
activities are conducted primarily in the U.S. and, to a lesser extent, in
the UK.

    The Other segment includes the unallocated amounts related to corporate
center operations. The assets of corporate center operations include cash and
equivalents as well as deferred income tax and pension assets.

    Ceridian measures business segment results by reference to earnings
before interest and taxes ("EBIT"), adjusted for unusual gains and losses. In
1998, adjustments included unusual gains related primarily to the disposition
of land not used in the business. In 1997, adjustments included charges of
$13.0 for a litigation settlement, $150.0 for termination of a payroll
software development project and $144.6 due principally to goodwill and other
asset write-offs. Expenses incurred by corporate center operations are
charged or allocated to the business segments.

    Revenue from sales between business segments is not material. The
operations of Ceridian are conducted primarily in the U.S and revenue from
sales between U.S. and non-U.S. entities is not material. Non-U.S. operations
in Canada and the UK relate largely to the Human Resource Services segment.
Geographic data for or at the end of each of the last three years, presented
above, is determined by reference to the location of operation.

                    From Page 28 of the Ceridian Annual Report




- --------------------------------------------------------------------------------------------------
                                                     (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------------------------
BUSINESS SEGMENTS                                             Years Ended December 31,
                                              ----------------------------------------------------
                                                       1999           1998            1997
- --------------------------------------------------------------------------------------------------
                                                                        
HUMAN RESOURCE SERVICES
Revenue                                          $       828.0   $      700.3    $        578.6

EBIT before unusual charges and gains            $       113.2   $      100.6    $         68.1
Unusual (charges) gains                                     --             --            (223.5)
                                                 --------------  -------------   ---------------
EBIT                                             $       113.2   $      100.6    $       (155.4)

Total assets                                     $     1,296.4   $      471.5    $        229.5
Depreciation and amortization                    $        63.5   $       40.0    $         43.0
Expended for property, plant and equipment       $        37.8   $       35.8    $         24.3
- --------------------------------------------------------------------------------------------------
COMDATA
Revenue                                          $       298.9   $      267.3    $        331.0

EBIT before unusual charges and gains            $        72.2   $       52.4    $         57.2
Unusual (charges) gains                                     --             --             (41.0)
                                                 --------------  -------------   ---------------
EBIT                                             $        72.2   $       52.4    $         16.2

Total assets                                     $       468.4   $      398.6    $        434.1
Depreciation and amortization                    $        15.6   $       13.4    $         17.0
Expended for property, plant and equipment       $        11.7   $        6.7    $         18.1
- --------------------------------------------------------------------------------------------------
ARBITRON
Revenue                                          $       215.4   $      194.5    $        165.2

EBIT before unusual charges and gains            $        71.3   $       61.4    $         52.7
Unusual (charges) gains                                     --             --              (5.0)
                                                 --------------  -------------   ---------------
EBIT                                             $        71.3   $       61.4    $         47.7

Total assets                                     $        65.4   $       66.8    $         49.7
Depreciation and amortization                    $         5.2   $        4.7    $          3.9
Expended for property, plant and equipment       $         2.4   $        1.2    $          1.2
- --------------------------------------------------------------------------------------------------
OTHER
Revenue                                          $          --   $         --    $            --

EBIT before unusual charges and gains            $          --   $         --    $            --
Unusual (charges) gains                                     --            9.2             (38.2)
                                                 --------------  -------------   ---------------
EBIT                                             $          --   $        9.2    $        (38.2)

Total assets                                     $       229.7   $      352.8    $        530.0
Depreciation and amortization                    $        (6.9)  $       (6.9)   $         (5.5)
Expended for property, plant and equipment       $        25.8   $        2.5    $          0.6
- --------------------------------------------------------------------------------------------------
TOTAL CERIDIAN
Revenue                                          $     1,342.3   $    1,162.1    $      1,074.8

EBIT before unusual charges and gains            $       256.7   $      214.4    $        178.0
Unusual (charges) gains                                     --            9.2            (307.7)
                                                 --------------  -------------   ---------------
EBIT                                             $       256.7   $      223.6    $       (129.7)

Total assets                                     $     2,059.9   $    1,289.7    $      1,243.3
Depreciation and amortization                    $        77.4   $       51.2    $         58.4
Expended for property, plant and equipment       $        77.7   $       46.2    $         44.2
- --------------------------------------------------------------------------------------------------



                    From Page 29 of the Ceridian Annual Report


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

D.  INCOME TAXES


Ceridian has U.S. net operating loss carryforwards of $216.2 and future tax
deductions of $108.2, which will be available to offset regular taxable U.S.
income during the carryforward period (through 2014). The tax benefits of these
items are reflected in the accompanying table of deferred tax asset and deferred
tax liability. If not used, these carryforwards will begin to expire in 2005.

    In 1998, Ceridian realized a tax benefit of $18.5 related to the difference
between its tax and financial reporting basis in a subsidiary that was disposed
of during fourth quarter.

    Under tax sharing agreements existing at the time of the disposition of
certain former operations of Ceridian, Ceridian remains subject to income tax
audits in various jurisdictions for the years 1985-1992. Ceridian considers its
tax accruals adequate to cover any U.S. and international tax deficiencies not
recoverable through deductions in future years.



- ---------------------------------------------------------------------------------
COMPONENTS OF EARNINGS AND TAXES FROM        1999          1998          1997
CONTINUING OPERATIONS
- ---------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES
                                                            
  U.S.                                   $   225.8     $   218.5     $  (134.1)
  International                               12.6          11.2          (4.5)
                                         -----------   -----------   -----------
       Total                             $   238.4     $   229.7     $  (138.6)
                                         ===========   ===========   ============
INCOME TAX PROVISION (BENEFIT)
  Current
     U.S.                                $    --       $     4.2     $    --
     State and other                           2.4           3.0           1.0
                                         -----------   -----------   ------------
                                               2.4           7.2           1.0
                                         -----------   -----------   ------------
  Deferred
     U.S.                                     79.9          54.2          32.8
     U.S. valuation reserve benefit            --             --        (207.8)
     State and other                           7.2           3.9           --
                                         -----------   -----------   ------------
                                              87.1          58.1        (175.0)
                                         -----------   -----------   ------------
       Total                             $    89.5     $    65.3     $  (174.0)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------



- ---------------------------------------------------------------------------------
EFFECTIVE RATE RECONCILIATION                1999          1998          1997
- ---------------------------------------------------------------------------------

                                                            
U.S. statutory rate                            35%           35%           35%
                                         -----------   -----------   ------------

Income tax provision (benefit) at
   U.S. statutory rate                   $    83.5     $    80.4     $   (48.5)
State income taxes, net                        3.1           1.4           1.0
Goodwill                                       6.4           3.1          44.7
Benefit of net operating loss                 --            --          (175.0)
carryforwards
Benefit from sale of subsidiary               --           (18.5)         --
Other                                         (3.5)         (1.1)          3.8
- ---------------------------------------------------------------------------------
          Income tax provision (benefit) $    89.5     $    65.3     $  (174.0)
                                         ===========   ===========   ============
- ---------------------------------------------------------------------------------



- ---------------------------------------------------------------------------------
TAX EFFECT OF ITEMS THAT COMPRISE A SIGNIFICANT PORTION OF THE NET DEFERRED
TAX ASSET AND DEFERRED TAX LIABILITY
- ---------------------------------------------------------------------------------
                                                          December 31,
                                                ---------------------------------
                                                     1999              1998
- ---------------------------------------------------------------------------------
                                                           
DEFERRED TAX ASSET
Net operating loss carryforwards              $          75.7    $        120.5
Restructuring and other accruals                         56.2              66.9
Other                                                    19.0              17.7
                                                ---------------    --------------
Total                                                   150.9             205.1
                                                ---------------    --------------

DEFERRED TAX LIABILITY
Employment related accruals                             (25.9)            (21.1)
Intangibles                                             (29.1)               --
Other                                                   (13.1)             (2.8)
                                                ---------------    --------------
Total                                                   (68.1)            (23.9)
                                                ---------------    --------------

NET DEFERRED TAX ASSET                        $          82.8    $        181.2
                                                ===============    ==============

NET DEFERRED TAX ASSET (U.S.)
Current portion                               $          78.7    $        127.8
Noncurrent portion                                        4.1              53.4
                                                ---------------    --------------
Total                                         $          82.8    $        181.2
                                                ===============    ==============

- ---------------------------------------------------------------------------------
DEFERRED TAX LIABILITY
International                                 $          10.5    $          3.6
Non-consolidated U.S. subsidiaries                        1.4                --
                                                ---------------    --------------
Total                                         $          11.9    $          3.6
                                                ===============    ==============

Current portion                               $           1.6    $           --
Noncurrent portion                                       10.3               3.6
                                                ---------------    --------------
Total                                         $          11.9    $          3.6
                                                ===============    ==============



                  From Page 30 of the Ceridian Annual Report


E.  CAPITAL ASSETS



                                                     (Dollars in millions, except per share data)
- -------------------------------------------------------------------------------------------------
                                                                              December 31,
- -------------------------------------------------------------------------------------------------
                                                                          1999              1998
- -------------------------------------------------------------------------------------------------
                                                                              
PROPERTY, PLANT AND EQUIPMENT
Land                                                                $      14.8       $       1.2
Machinery and equipment                                                   233.9             189.8
Buildings and improvements                                                 65.3              42.1
Construction in progress                                                   54.7               4.0
                                                                  -------------     -------------
                                                                          368.7             237.1
Accumulated depreciation                                                 (175.9)           (145.8)
                                                                  -------------     -------------
Property, plant and equipment, net                                  $     192.8       $      91.3
                                                                  =============     =============

- -------------------------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLES
Goodwill                                                            $     973.4       $     358.4
Accumulated amortization                                                  (63.9)            (36.4)
                                                                  -------------     -------------
Goodwill, net                                                             909.5             322.0
                                                                  -------------     -------------
Other intangible assets                                                   164.5              77.0
Accumulated amortization                                                  (26.8)            (21.5)
                                                                  -------------     -------------
Other intangible assets, net                                              137.7              55.5
                                                                  -------------     -------------
Goodwill and other intangible assets, net                               1,047.2             377.5
                                                                  =============     =============

- -------------------------------------------------------------------------------------------------
SOFTWARE AND DEVELOPMENT COSTS
Purchased software                                                  $      33.9       $      31.9
Software development costs                                                 45.7              24.5
                                                                  -------------     -------------
                                                                           79.6              56.4
Accumulated amortization                                                  (31.3)            (30.3)
                                                                  -------------     -------------
Software and development costs, net                                 $      48.3       $      26.1
                                                                  =============     =============

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



- -------------------------------------------------------------------------------------------------
                                                             Years Ended December 31,
                                         ------------------------------------------------------
DEPRECIATION AND AMORTIZATION                   1999                      1998              1997
- -------------------------------------------------------------------------------------------------
                                                                           
Depreciation and amortization
  of property, plant and equipment               $   38.4           $     32.2       $      33.3
Amortization of goodwill                             27.5                 12.0              13.5
Amortization of other intangibles                    11.8                 10.1               7.6
Amortization of software and development costs        7.6                  4.8              10.6
Pension credit                                       (7.9)                (7.9)             (6.6)
                                                ----------        -------------     -------------
Total                                             $  77.4           $     51.2        $     58.4
                                                ==========        =============     =============

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



                  From Page 31 of the Ceridian Annual Report


F.  RETIREMENT PLANS

PENSION BENEFITS
Ceridian maintains a defined benefit pension plan for U.S. employees that closed
to new participants effective January 1, 1995. Assets of the plan consist
principally of equity securities, U.S. government securities, and other fixed
income obligations and do not include securities issued by Ceridian. Benefits
under the plan are calculated on maximum or career average earnings and years of
participation in the plan. Employees participate in this plan by means of salary
reduction contributions. Certain former employees are inactive participants in
the plan. Retirement plan funding amounts are based on independent consulting
actuaries' determination of the Employee Retirement Income Security Act of 1974
funding requirements.

    The funded status of the plan at September 30, 1999 and 1998 measurement
dates and changes in funded status for the annual periods then ended are shown
in the accompanying tables, along with the net periodic pension cost and
assumptions used in calculations for each of the last three years.

    Ceridian also sponsors a nonqualified supplemental retirement plan. The
projected benefit obligations at September 30, 1999 and 1998 for this plan were
$23.2 and $23.5, respectively, and the net periodic pension cost was $3.0 for
1999, $2.8 for 1998 and $2.3 for 1997. The related intangible asset amounts
included in prepaid pension cost were $1.5 at December 31, 1999 and $2.0 at
December 31, 1998. At December 31, 1999, prepaid pension cost also included $7.5
held in Rabbi trusts for certain beneficiaries of this plan.

    The costs recognized by Ceridian with respect to its defined contribution
retirement plans were $7.9 in 1999, $8.9 in 1998 and $6.7 in 1997.



- ---------------------------------------------------------------------------------
FUNDED STATUS OF DEFINED BENEFIT                             September 30,
                                                     ----------------------------
RETIREMENT PLAN AT MEASUREMENT DATE                       1999          1998
- ---------------------------------------------------------------------------------
                                                             
CHANGE IN PROJECTED BENEFIT OBLIGATION DURING THE
  PERIOD
At beginning of period                               $     567.7   $     542.7
Service cost                                                 2.6           2.0
Interest cost                                               39.7          42.1
Actuarial (gain) loss                                      (11.9)         27.1
Benefits paid                                              (44.0)        (46.2)
                                                     ------------- --------------
At end of period                                     $     554.1   $     567.7
                                                     ------------- --------------

CHANGE IN FAIR VALUE OF PLAN ASSETS DURING THE PERIOD
At beginning of period                               $     552.5   $     620.3
Actual return on plan assets                                67.8         (21.6)
Benefits paid                                              (44.0)        (46.2)
                                                     ------------- --------------
At end of period                                     $     576.3   $     552.5
                                                     ------------- --------------

FUNDED STATUS OF PLAN                                $      22.2   $     (15.2)
Unrecognized net loss                                       78.1         105.8
Unrecognized prior service cost                              9.0          12.5
Unrecognized net transition asset                           --            (1.7)
                                                     ------------- --------------
Net pension asset recognized
   in the consolidated balance sheet                 $     109.3   $     101.4
                                                     ============= ==============

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




ASSUMPTIONS USED IN CALCULATIONS                       1999     1998     1997
- ------------------------------------------------------ -------- -------- --------
                                                                

Discount rate                                            7.50%    7.00%    7.75%


Rate of compensation increase                            4.00%    4.00%    4.50%


Expected return on plan assets                           9.50%    9.50%    9.50%
- ------------------------------------------------------ -------- -------- --------



- ---------------------------------------------------------------------------------
NET PERIODIC PENSION COST (CREDIT)                    1999      1998     1997
- ---------------------------------------------------------------------------------
                                                               
Service cost                                        $   2.6   $  2.0    $  1.7
Interest cost                                          39.7     42.1      42.5
Expected return on plan assets                        (54.9)   (53.8)    (53.1)
Net amortization and deferral                           4.7      1.8       2.3
                                                    -----------------------------
          Total                                     $  (7.9)  $ (7.9)  $  (6.6)
                                                    ========  ========  ========
- ---------------------------------------------------------------------------------



                  From Page 32 of the Ceridian Annual Report


POSTRETIREMENT BENEFITS

Ceridian provides health care and life insurance benefits for eligible retired
employees, including individuals who retired from operations of Ceridian that
were subsequently sold or discontinued. Ceridian sponsors several health care
plans in the U.S. for both pre- and post-age 65 retirees. Company contributions
to these plans differ for various groups of retirees and future retirees.
Employees hired on or after January 1, 1992 may enroll at retirement in
company-sponsored plans with no company subsidy. Employees hired before and
retiring after that date may enroll in plans that subsidize pre-age 65 coverage
only. Employees who retired prior to 1992 are subject to various cost-sharing
policies depending on when retirement began and eligibility for Medicare. This
is a closed group. Most retirees outside the United States are covered by
governmental health care programs, and Ceridian's cost is not significant.

    The following tables present the amounts and changes in the aggregate
benefit obligation at the beginning and end of and for each of the last two
measurement periods and the components of net periodic postretirement benefit
cost for the plans for the last three years. For 1999, the measurement date was
changed from December 31 to September 30 without any material impact on amounts
presented. Ceridian does not prefund these costs.



- ---------------------------------------------
FUNDED STATUS OF POSTRETIREMENT
HEALTH CARE AND LIFE INSURANCE PLANS
- ---------------------------------------------
                             1999      1998
                          --------   --------
                                
CHANGE IN BENEFIT
   OBLIGATION
At beginning of period      $44.6     $44.9
Service cost                  0.1       0.1
Interest cost                 3.0       3.0
Participant contributions     1.1       1.6
Actuarial loss (gain)        (4.1)      0.1
Benefits paid                (2.9)     (5.1)
                          -------------------
At end of period            $41.8     $44.6
                          -------------------

CHANGE IN PLAN ASSETS
At beginning of period    $    --     $  --
Company contributions         1.8       3.5
Participant contributions     1.1       1.6
Benefits paid                (2.9)     (5.1)
                          -------------------
At end of period          $    --     $  --
                          -------------------

FUNDED STATUS OF PLAN
Benefit obligation, net     $41.8     $44.6
Unrecognized actuarial
  loss                       10.4       6.5
                          -------------------
At end of period            $52.2     $51.1
                            =====     =====
- ---------------------------------------------

Current portion           $   6.0     $ 6.0
Noncurrent portion           46.2      45.1
                          -------------------
  Total                     $52.2     $51.1
                            =====     =====
- ---------------------------------------------



- ---------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COST
- ---------------------------------------------------
                               1999    1998   1997
                              ------  ------  -----
                                    
Service cost                  $ 0.1   $ 0.1  $ 0.2
Interest cost                   3.0     3.0    3.6
Actuarial gain amortization    (0.2)   (0.2)  (0.1)
Other                            --     0.4   (0.6)
- ---------------------------------------------------
  Net periodic benefit cost   $ 2.9   $ 3.3  $ 3.1
                              ====== ======= =====
- ---------------------------------------------------


    The assumed health care cost trend rate used in measuring the benefit
obligation is 9% for pre-age 65 and 5.75% for post-age 65 in 1999, with pre-age
65 rates declining at a rate of 1% per year to an ultimate rate of 5.75% in
2003. A one percent increase in this rate would increase the benefit obligation
at September 30, 1999 by $2.5 and the aggregate service and interest cost for
the 1999 measurement period by $0.2. A one percent decrease in this rate would
decrease the benefit obligation at September 30, 1999 by $2.2 and the aggregate
service and interest cost for the 1999 measurement period by $0.2. The weighted
average discount rates used in determining the benefit obligation at the
measurement dates were 7.5% for 1999 and 7.0% for 1998.


                  From Page 33 of the Ceridian Annual Report


G. STOCK PLANS

During the three-year period ended December 31, 1999, Ceridian provided
stock-based compensation plans for directors, officers, other employees,
consultants and independent contractors.

    The 1996 Director Performance Incentive Plan authorizes the issuance of up
to 250,000 shares in connection with awards of stock options and non-performance
restricted stock to non-employee directors of Ceridian. An annual grant of a
non-qualified stock option to purchase 4,000 shares (3,000 shares before 1998)
is made to each eligible director with such grants becoming fully exercisable
six months after the date of grant. The exercise price of the options is the
fair market value of the underlying stock at the date of grant, and the options
expire in ten years.

    A one-time award of non-performance restricted shares is made to each
non-employee director when the director first joins the Board with restrictions
on transfer that will ordinarily lapse annually over a five-year period. The
number of shares awarded will have a fair market value equal to two and one-half
times (four times before 1998) the then current annual retainer paid to
non-employee directors.

    Additionally, one-half of the annual retainer for each non-employee director
is also provided in the form of restricted stock. The restrictions on transfer
of the retainer restricted stock awards will lapse at the conclusion of the
director's service.

    The 1999 Stock Incentive Plan ("1999 SIP") authorizes the issuance until
February 2, 2009 of up to 12,695,048 common shares, which includes remaining
shares that were authorized and available for grant under the 1993 Long-Term
Incentive Plan, as amended ("1993 LTIP"), in connection with awards of stock
options, restricted stock awards and performance unit awards to eligible



   -----------------------------------------------------------------------------------------------------
                                                                                             Weighted-
                                                                                               Average
   STOCK  PLANS                                                                               Exercise
                              Option                                            Available        Price
                           Price Per Share     Outstanding    Exercisable       for Grant   of Options
   -----------------------------------------------------------------------------------------------------
                                                                                
   At December 31, 1996     $0.89 -$26.13       10,603,124       3,688,900      3,335,042       $15.28
   -----------------------------------------------------------------------------------------------------
   Authorized                                                                   6,000,000
   Granted                  15.32 - 22.38        4,505,500                     (4,505,500)       20.13
   Became exercisable        1.33 - 26.13                       2,938,656
   Exercised                 1.33 - 22.38       (1,494,356)    (1,494,356)                        9.08
   Canceled                  1.33 - 25.38       (1,353,580)       (70,420)      1,262,382        21.13
   Expired                           8.08          (13,494)       (13,494)                        8.08
   ESPP purchases                                                                (478,338)
   Restricted stock, net                                                          338,850
   Performance units
     forfeited                                                                     12,000
   -----------------------------------------------------------------------------------------------------
   At December 31, 1997     $0.89 -$26.13       12,247,194      5,049,286       5,964,436       $17.18
   -----------------------------------------------------------------------------------------------------
   Authorized                                                                   3,006,000
   Granted                  18.63 - 33.16        5,109,000                     (5,109,000)       27.42
   Became exercisable        4.43 - 28.10                       2,200,162                        13.00
   Exercised                 0.89 - 26.13       (2,804,050)    (2,804,050)
   Canceled                  6.47 - 33.16       (1,058,196)       (82,194)        980,448        20.68
   Expired                           5.92           (2,280)        (2,280)       (360,062)        5.92
   ESPP purchases                                                                (202,988)
   Restricted stock, net                                                          630,522
   Performance units
     forfeited                                                                      8,000
   -----------------------------------------------------------------------------------------------------
   At December 31, 1998    $3.09 - $33.16       13,491,668      4,360,924       4,917,356       $21.65
   -----------------------------------------------------------------------------------------------------
   AUTHORIZED                                                                  12,695,048
   ABR CONVERSION            5.08 - 42.64          844,393        428,335
   GRANTED                  19.94 - 38.97        3,891,970                     (3,891,970)       22.73
   BECAME EXERCISABLE        6.47 - 34.58                       3,038,429
   EXERCISED                 3.76 - 29.00       (1,265,599)    (1,265,599)                       14.98
   CANCELED                  6.47 - 36.78       (1,031,166)       (70,019)        932,488        25.36
   EXPIRED                           7.65           (1,860)        (1,860)     (2,695,048)        7.65
   ESPP PURCHASES                                                                (239,073)
   UK PLAN PURCHASES                                                                 (296)
   RESTRICTED STOCK, NET                                                           37,864
   PERFORMANCE UNITS
     FORFEITED                                                                     14,660
   -----------------------------------------------------------------------------------------------------
   AT DECEMBER 31, 1999   $3.09 - $42.64        15,929,406      6,490,210      11,771,029       $22.26
   -----------------------------------------------------------------------------------------------------

   COMMON SHARES RESERVED FOR FUTURE ISSUANCE AT DECEMBER 31, 1999 WERE 27,700,435.
   -----------------------------------------------------------------------------------------------------


participants in the 1999 SIP. Eligible participants in the 1999 SIP include
all employees of Ceridian and any non-employee director, consultant and
independent contractor of Ceridian. The 1993 LTIP and the 1994 Stock Option Plan
("1994 SOP"), which provided awards of stock options and restricted stock to
executive officers and other key employees of Ceridian, expired on December 31,
1999 and December 31, 1998, respectively.

    Stock options awarded under the 1999 SIP and its predecessor plans generally
vest annually either over a three-year period or on a specific date if certain
performance criteria are satisfied, have 10-year terms and have an exercise
price that may not be less than the fair market value of the underlying stock at
the date of grant. Options that remain outstanding under the 1993 LTIP, the 1994
SOP and other predecessor plans are subject to similar terms as the 1999 SIP.

    The 1999 SIP gives discretion to the Compensation and Human Resources
Committee (the committee of the Board of Directors of Ceridian that administers
the 1999 SIP) to determine the effect that a change of control of Ceridian will
have upon awards made under that plan. The vesting of stock option awards
granted in 1999 under the 1999 SIP will accelerate upon a change of control of
Ceridian. The predecessor employee plans also provide for the accelerated
exercisability of options and the accelerated lapse of transfer restrictions on
restricted stock if a participant's employment terminates for specified reasons
within two years of a change of control of Ceridian.

                     From Page 34 of the Ceridian Annual Report



    Another 844,393 authorized shares were added to outstanding options as a
result of the conversion of certain options held by optionees in certain plans
of ABR Information Services, Inc. ("ABR") when ABR was acquired by Ceridian in
mid-1999. With the exception of options held by certain key executives, the
converted options vested upon the acquisition of ABR, but otherwise remain under
the same terms and conditions as the original grants, which included an option
price at not less than fair market value at date of grant, vesting at 25% of
grant annually and expiration ten years after date of original grant.

     During 1998, Ceridian reserved 1,000,000 common shares for a new
stock-based compensation plan ("UK Plan") for certain employees in its
operations in the United Kingdom.

    The Employee Stock Purchase Plan ("ESPP"), as amended in 1998 to authorize
an additional 2,000,000 shares, provides for the issuance of up to 3,000,000
shares of newly issued or treasury common stock of Ceridian to eligible
employees. The purchase price of the stock to ESPP participants is 85% of the
lesser of the fair market value on either the first day or the last day of the
applicable three-month offering period.

    As reported in Note A, Ceridian adopted the disclosure-only provisions of
FAS 123 and continues to account for stock-based compensation as in prior years.
Therefore, no expense is recorded with respect to Ceridian's stock option or
employee stock purchase plans, and compensation expense (credit) of $0.9 in
1999, $(3.3) in 1998 and $(2.4) in 1997 were included in continuing operations
in connection with restricted stock awards.



STOCK OPTION INFORMATION AS OF DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------
                             Options Outstanding                Options Exercisable
                   ----------------------------------------  --------------------------

                                    Weighted
                                     Average   Weighted                    Weighted
    Range of                       Remaining    Average                     Average
    Exercise            Number   Contractual   Exercise         Number     Exercise
      Prices       Outstanding          Life      Price     Exercisable       Price
- -----------------  ------------  ------------- -----------  ------------ ------------
                                                             
  $ 3.09 - $19.94     2,193,257         5.12       $12.21     1,809,937         $11.09
  $19.95 - $21.00     5,453,195         8.74       $20.09     1,639,771         $20.38
  $21.01 - $26.60     3,520,563         7.47       $23.26     1,747,989         $23.55
  $26.61 - $27.69     3,175,484         8.80       $27.38       739,839         $27.38
  $27.70 - $42.64     1,586,907         8.24       $31.14       552,674         $32.33
- -------------------------------------------------------------------------------------
  $ 3.09 - $42.64    15,929,406         7.92       $22.26     6,490,210         $20.46
- -------------------------------------------------------------------------------------



- --------------------------------------------- ----------- -------------- ------------
PRO FORMA EFFECT OF FAIR VALUE ACCOUNTING           1999           1998         1997
- --------------------------------------------- ----------- -------------- ------------
                                                                  
Net earnings as reported                          $148.9         $189.8       $472.4
Pro forma net earnings                            $129.9         $175.7       $462.6
Diluted earnings per share as reported             $1.01          $1.29        $2.96
Pro forma diluted earnings per share               $0.88          $1.19        $2.90
- --------------------------------------------- ----------- -------------- ------------
WEIGHTED-AVERAGE ASSUMPTIONS
Expected lives in years                              4-8            4-8          4-8
Expected volatility                                37.4%          34.5%        32.7%
Expected dividend rate                                --             --           --
Risk-free interest rate                             6.3%           4.8%         5.3%
- --------------------------------------------- ----------- -------------- ------------



- ----------------------------------------------------------------------- -- --- --- --
WEIGHTED AVERAGE FAIR VALUES OF GRANTS, AWARDS AND PURCHASES
- ----------------------------------------------------------------------- -- --- --- --
                           1999                   1998                 1997
                      SHARES  FAIR VALUE   SHARES    FAIR VALUE  SHARES   FAIR VALUE
                   ---------- ----------- ---------- ---------- --------- ----------
                                                          
Stock options      3,891,970       $7.97  5,109,000      $8.82  4,505,500     $6.90
ESPP                 239,073       $5.16    202,988      $1.08    478,338     $2.40

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


    The following disclosure, including referenced tables, is provided with
respect to the provisions of FAS 123. Ceridian employs the Black-Scholes option
pricing model for determining the fair value of stock option grants, restricted
stock awards and ESPP purchases, as presented in an accompanying table. Weighted
average exercise prices for stock option activity and options outstanding at
December 31, 1999, 1998 and 1997 are included in the Stock Plans table on the
previous page.

    Further information on outstanding and exercisable stock options by exercise
price range as of the end of the current year is disclosed in an accompanying
table. Ceridian is required to report the pro forma effect on net earnings and
earnings per share that would have resulted if the fair value method of
accounting for stock-based compensation issued in those years had been adopted.
The application of the fair value method would have resulted in the
determination of compensation cost for grants of stock options and purchases
under the ESPP and would have eliminated from the related compensation cost the
revaluation to market price of unvested awards of restricted stock. Such
compensation cost would then be allocated to the related period of service. The
results of this calculation and the assumptions used appear in the accompanying
pro forma table.

                     From Page 35 of the Ceridian Annual Report



H.  FINANCING

On June 10, 1999, Ceridian completed a Rule 144A senior notes offering with
registration rights and a face amount of $450.0, which was sold through initial
purchasers led by Banc of America Securities LLC. Pursuant to the terms of this
private debt offering, Ceridian registered like senior notes with the SEC on a
Form S-4 that was declared effective on September 20, 1999. Holders of $445.0 of
the privately held notes subsequently exchanged their holdings for registered
senior notes. Ceridian applied the private debt offering net proceeds of $445.6
to the payment of a $450.0 short-term loan with Bank of America National Trust
and Savings Association. Those proceeds, along with Ceridian funds and an
advance of $210.0 on Ceridian's $250.0 domestic revolving credit agreement at an
average interest rate of 5.7% per annum, provided funding for the acquisition of
ABR. The original issue discount of $4.4, recorded as an offset to senior notes,
and capitalizable issue costs of $0.8, recorded as other noncurrent assets, will
be amortized to interest expense over the term of the senior notes. The senior
notes have a five-year term, a coupon interest rate of 7.25% per annum payable
semiannually beginning December 1, 1999, and mature on June 1, 2004. Based on
quoted market prices for the same or similar securities or current rates offered
to Ceridian for debt of the same maturities, the estimated fair value of the
senior notes at December 31, 1999 was $436.5.

    At December 31, 1999, the amount of advances outstanding under a $250.0
domestic revolving credit facility, arranged with a commercial bank syndicate in
July 1997, amounted to $125.0, along with $3.5 of letters of credit. No amount
of advances was outstanding at December 31, 1998. The domestic credit facility
is unsecured and has a



- -----------------------------------------------------------------------------
                                                            DECEMBER 31,
                                                   --------------------------
DEBT OBLIGATIONS                                        1999         1998
- -----------------------------------------------------------------------------
                                                        
Revolving credit agreements and overdrafts         $    163.7   $     53.9
Senior notes, net of discount                           446.1           --
Other long-term debt obligations                          1.5          0.6
                                                   -----------  -------------
Total debt obligations                                  611.3         54.5
  Less short-term debt and current
   portions of long-term debt                             0.2          0.3
                                                   -----------  -------------
Long-term obligations, less current portions       $    611.1   $     54.2
                                                   ===========  =============

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




- -----------------------------------------------------------------------------
AGGREGATE AMOUNTS OF MATURITIES AT DECEMBER 31, 1999
- -----------------------------------------------------------------------------
                        2000     2001     2002     2003     2004     Total
                      -------------------------------------------------------
                                               
Revolving credit     $   --    $ --    $ 163.7   $ --     $  --    $ 163.7
Senior notes             --      --        --      --       446.1    446.1
Other                     0.2     0.2      --       1.1      --        1.5
                      -------  ------  -------  --------  -------  ---------
        Total        $    0.2  $  0.2  $ 163.7   $  1.1   $ 446.1  $ 611.3
                      =======  ======  =======  ========  =======  =========
- -----------------------------------------------------------------------------



final maturity of July 31, 2002. The full amount of the credit facility may be
utilized for revolving loans and up to $75.0 of the credit facility may be used
to obtain standby letters of credit. The pricing of the credit facility for both
loans and letters of credit is determined based on Ceridian's senior unsecured
debt ratings. Under the terms of the credit facility, Ceridian's consolidated
debt must not exceed its stockholders' equity as of the end of any fiscal
quarter, and the ratio of Ceridian's EBIT to interest expense on a rolling four
quarter basis must be at least 2.75 to 1. The credit facility also limits liens,
subsidiary debt, contingent obligations, operating leases, minority equity
investments and divestitures. At December 31, 1999, Ceridian was in compliance
with all covenants contained in the credit facility.

    During first quarter 1998 and in connection with the purchases of two
payroll services businesses in Canada, Ceridian entered into two revolving
credit arrangements which expire on July 31, 2002 with Canadian banks through a
Canadian subsidiary. The initial borrowings amounted to $70.4 in the aggregate,
carry interest rates of approximately 5.5% per annum and had aggregate
outstanding balances at December 31, 1999 and 1998 of $38.7 and $53.9,
respectively. No additional advances have been drawn against the Canadian credit
arrangements since the initial borrowings. Other borrowing activities during
1999 and 1998 primarily involved small revolving credit or overdraft credit
lines of subsidiaries.

                     From Page 36 of the Ceridian Annual Report



I. LEASING

Ceridian conducts a substantial portion of its operations in leased facilities.
Most of these leases contain renewal options and require payments for taxes,
insurance and maintenance. Ceridian remains secondarily liable for future rental
obligations related to assigned leases totaling $7.7 at December 31, 1999.
Ceridian does not anticipate any material non-performance by the assignees of
these leases.

    Virtually all leasing arrangements for equipment and facilities are
operating leases and the rental payments under these leases are charged to
operations as incurred. The amounts in the accompanying tables do not include
assigned leases or obligations recorded as liabilities.

    The amounts of rental expense and sublease income for each of the three
years ended December 31, 1999 appear in the Rental Expense table.



- ---------------------------------------------
RENTAL EXPENSE        1999      1998   1997
- ---------------------------------------------
                              
Rental expense       $43.2     $38.6   $38.8
Sublease rental
  income              (1.8)    (2.27)   (1.7)
                     -----     -----    ----
  Net rental expense $41.4     $36.4   $37.1
                     =====     =====    ====
- ----------------------------------------------


    Future minimum noncancelable lease payments on operating leases existing at
December 31, 1999, and which have an initial term of more than one year, are
described in the Future Minimum Lease Payments table.



- -----------------------------------------
FUTURE MINIMUM LEASE PAYMENTS
- -----------------------------------------
                             
2000                              $42.1
2001                               36.5
2002                               28.5
2003                               21.2
2004                               15.6
Thereafter                         44.8
- -----------------------------------------


                     From Page 37 of the Ceridian Annual Report



J.  INVESTING ACTIVITY

As of June 7, 1999, Ceridian acquired ABR Information Services, Inc. ("ABR"),
now known as Ceridian Benefits Services, as a result of a tender offer for all
outstanding shares of ABR common stock at a price of $25.50 per share in cash
and a subsequent merger on July 22, 1999. ABR provided comprehensive benefits
administration, payroll and human resource services to employers of all sizes.

    The purchase price of $751.8 included $720.9 for tendered shares, $12.7 for
ABR shares converted to the right to receive $25.50 per share and $6.7 for
Ceridian direct acquisition costs. The purchase price also included the exchange
of Ceridian stock options valued at $11.5 for any unexercised ABR stock options
outstanding.

    The value assigned to the net assets of ABR that were acquired by
Ceridian amounted to $62.7, and the total goodwill and other intangibles of
$689.1 is being amortized on average over a 30-year period. The allocation of
purchase price resulted in the recording of acquired assets and liabilities
listed in the table below. Property, plant and equipment of $66.2 included
$15.6 of construction in progress related to an ABR office facility in St.
Petersburg, Fla.



- -------------------------------------
ALLOCATION OF ABR PURCHASE PRICE
- -------------------------------------
                        
Cash and equivalents        $  77.4
Short-term investments         25.3
Receivables                    12.5
Other current assets            1.4
Property, plant and
  equipment                    66.2
Goodwill                      602.1
Other intangibles              87.0
Customer funds payable        (26.7)
Accrued acquisition costs     (18.9)
Deferred income taxes         (26.5)
Other liabilities             (48.0)
                             --------
   Total purchase cost      $ 751.8
                             ========
- -------------------------------------




- -------------------------------------------------------------------
                                                 December 31,
PRO FORMA INFORMATION (UNAUDITED)               1999        1998
- -------------------------------------------------------------------
                                                 
Pro forma revenue                             $1,400.4  $  1,245.5
Pro forma earnings from continuing
  operations                                  $  134.7  $    111.5
Diluted shares used in calculations (in
  thousands)                                   147,964     147,597
Pro forma diluted earnings per share          $   0.91  $     0.76
Historical diluted earnings per share as
  reported                                    $   1.01  $     1.11
- -------------------------------------------------------------------



    The 1999 net investing cash outflows related to the ABR acquisition,
after reduction for cash and equivalents acquired of $77.4, amounted to
$681.5. These outflows included payments of $720.9 for shares tendered in
June, $12.7 deposited in July for the remaining shares, and payments of $6.4
for Ceridian direct acquisition costs and $18.9 for ABR liabilities directly
related to the acquisition. The directly related ABR liabilities assumed
included payments during 1999 of $11.4 paid in July to buy out vested ABR
stock options and $7.5 for investment consulting fees.

    The above unaudited pro forma information presents the results of operations
of Ceridian for the twelve-month periods ended December 31, 1999 and 1998 as if
the acquisition of ABR had taken place on January 1, 1998. ABR earnings for the
1998 period included a $11.0 write-off of purchased in-process research and
development and a $13.8 software write-off.

    During first quarter 1999, Comdata acquired a majority interest in Stored
Value Systems, Inc. ("SVS"). Comdata has the option to purchase the remainder of
SVS in 2000. The acquisition required payments by Comdata of $7.3 to SVS to
retire an amount due to its former parent company and $13.0 to other investors.
Revenue of SVS was approximately $15.0 in 1998.

     During first quarter 1998, Ceridian, through a Canadian subsidiary,
acquired the payroll services businesses of two Canadian banks for a total
cash payment of $140.7 of which $70.4 was borrowed from the sellers. The
acquisitions resulted in the recording of $123.5 of goodwill. Pre-acquisition
revenue for these operations was approximately $65.0 in 1997. Substantially
all of the 1998 revenue for these businesses was reported in Ceridian's
revenue. In November 1998, Ceridian acquired the work-life services business
of Work/Family Directions, Inc., which had estimated pre-acquisition revenue
of approximately $52.0 in 1998 and $57.0 in 1997. The acquisition resulted in
a cash payment of $77.5 and the recording of $66.5 of goodwill. In May 1998,
Ceridian purchased certain assets of Tapscan, Inc., which, along with other
minor purchase acquisitions made during 1998, resulted in cash payments
totaling $14.7, deferred payment obligations of $3.0 and goodwill of $13.6.

    In January 1998, Comdata exchanged its gaming services business for First
Data Corporation's NTS transportation services business and $50.5 in cash. The
net cash inflow from the exchange was $30.1 and the net reduction in goodwill
was $44.1. During the year, Ceridian sold its Resumix and Tesseract operations,
along with other smaller businesses and assets. The aggregate net cash proceeds
from these sales were $19.4 with no material gain or loss.

    During 1997, Ceridian sold CDI as further described in Note B. Also during
1997, Ceridian acquired or invested in seven small businesses. The aggregate
consideration for these acquisitions and investments consisted of $30.0 in cash,
assumption of $8.6 of debt and 1,885,340 shares of Ceridian's common stock.
Goodwill recorded for these transactions was $40.2.


                     From Page 38 of the Ceridian Annual Report



K.  COMMITMENTS AND CONTINGENCIES

COMMITMENTS

In 1995, Comdata extended its contract arrangements with IBM Global Services for
substantially all data processing functions for a term of ten years. Under the
terms of the agreement as amended, the minimum monthly fee was $1.4 in 1997,
$1.6 in 1998 and $1.8 in 1999 and thereafter. The expenses incurred under these
contract arrangements were $23.1 in 1999, $20.8 in 1998 and $17.6 in 1997.
Cancellation of the agreement for convenience in 2000 would require payment of a
termination fee of $7.5.

     Under a Telecommunications Services Agreement with WilTel, Comdata has
agreed to purchase a minimum of $1.1 of such services each month until
January 2003. Comdata is able to terminate its minimum purchase commitment at
such time as it has purchased an aggregate of $45.0 in services under the
Agreement. Cancellation of the Agreement for convenience would result in a
cancellation charge equal to 12.5% of the average monthly revenue during the
last 12 months times the number of full months remaining in the term of such
Agreement. Purchases charged to expense under the Agreement and its
predecessors amounted to $14.5 in 1999, $17.1 in 1998 and $20.3 in 1997.

INTEREST RATE COLLARS

During 1999, Ceridian maintained in effect an average notional amount of collars
of $991.3 for the purpose of hedging interest rate risk on invested customer
deposits held in its U.S. tax filing and Canadian payroll trusts. The
counterparties to these arrangements are commercial banks with debt ratings of A
or better. Under current accounting standards, neither the collar arrangements
nor the related trust investments and offsetting liability to customers are
reflected in Ceridian's balance sheets. These arrangements, which do not require
collateral, require the banks to pay Ceridian the amount by which a certain
index of short-term interest rates falls below a specified floor strike level.
Alternatively, when that index exceeds a specified cap strike level, Ceridian is
required to pay out the excess above the cap strike level.

    At December 31, 1999, Ceridian had fourteen collar transactions in effect
with an aggregate notional amount of $1,069.2, remaining terms of 5 to 53
months, floor strike levels ranging from 4.75% to 6.0% (averaging 5.22%) and cap
strike levels ranging from 5.6% to 8.18% (averaging 6.78%). The risk of
accounting loss through non-performance by the counterparties under any of these
arrangements is considered negligible.


                     From Page 39 of the Ceridian Annual Report





L.  LEGAL MATTERS

Ceridian and its subsidiaries are involved in a number of judicial and
administrative proceedings considered normal in the nature of its current and
past operations, including employment-related disputes, contract disputes,
government proceedings, customer disputes and tort claims. In some proceedings,
the claimant seeks damages as well as other relief, which, if granted, would
require substantial expenditures on the part of Ceridian or its subsidiaries.

    Some of these matters raise difficult and complex factual and legal issues,
and are subject to many uncertainties, including, but not limited to, the facts
and circumstances of each particular action, and the jurisdiction, forum and law
under which each action is proceeding. Because of this complexity, final
disposition of some of these proceedings may not occur for several years. As
such, Ceridian is not always able to estimate the amount of its possible future
liabilities related to these matters. There can be no certainty that Ceridian
may not ultimately incur charges in excess of presently or future established
accruals or insurance coverage. Although occasional adverse decisions (or
settlements) may occur, it is the opinion of management that the final
disposition of these proceedings will not, considering the merits of the claims
and established reserves, have a material adverse effect on Ceridian.

SECURITIES LITIGATION SETTLEMENT

In 1997, Ceridian and ten of its current and former executive officers were
named as defendants in the consolidated class action complaint filed by five
Ceridian shareholders in U.S. District Court in Minnesota. The lawsuit arose out
of Ceridian's announcement, on August 26, 1997, that it had decided to terminate
further development of its CII payroll processing software system. The named
plaintiffs, who purport to act on behalf of a class of purchasers of Ceridian
common stock during the period from January 23, 1996 to August 26, 1997, alleged
in their consolidated complaint that the defendants provided false and
misleading information regarding the development of the CII system and the
impact that system would have on Ceridian's future operations, concealed
problems with the development of the CII system and improperly capitalized the
costs of the CII development effort, thereby overstating Ceridian's financial
results during the development period. On March 31, 1999, the U.S. District
Court dismissed the suit, but permitted the plaintiffs to file an amended
complaint. The plaintiffs filed an amended consolidated complaint dated May 28,
1999. On January 3, 2000, the U.S. District Court preliminarily approved a
settlement of this litigation. A hearing with the U.S. District Court to
finalize the settlement is scheduled for March 21, 2000. Ceridian and the
individual defendants deny any wrongdoing or liability related to the lawsuit,
but have concluded that further conduct of the litigation would be expensive and
protracted. It is the opinion of management that the proposed settlement of $5
million plus up to $175,000 in administrative costs, a portion of which will be
covered by insurance, will not have a material adverse effect on Ceridian's
financial position or results of operations.


                     From Page 40 of the Ceridian Annual Report

EX-13.04

                                                                 Exhibit 13.04



              SUPPLEMENTARY QUARTERLY DATA (Unaudited)                                  (Dollars in millions, except per share data)

- ------------------------------------------------------------------------------------------------------------------------------------
                                                           1999                                           1998
- ------------------------------------------------------------------------------------------------------------------------------------
                                           4TH         3RD         2ND         1ST         4th         3rd         2nd          1st
                                       QUARTER     QUARTER     QUARTER     QUARTER     Quarter     Quarter     Quarter      Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Revenue                                $ 361.4     $ 337.3     $ 322.2     $ 321.4     $ 309.6     $ 286.1     $ 284.1      $ 282.3
Costs and Expenses
  Cost of revenue                        174.8       159.6       151.3       144.8       150.4       137.2       135.0        128.9
  Selling, general and
    administrative                        98.7        94.8        93.5        92.6        78.5        77.7        79.3         80.5
  Research and development                19.9        17.4        18.5        18.6        20.0        20.1        20.3         17.4
  Other expense (income) (1)                --        (0.6)        1.1         0.6        (9.2)        0.6         1.2          0.6
                                       ---------------------------------------------------------------------------------------------
     Total costs and expenses            293.4       271.2       264.4       256.6       239.7       235.6       235.8        227.4
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE
  INTEREST AND TAXES                      68.0        66.1        57.8        64.8        69.9        50.5        48.3         54.9
Interest income                            1.1         1.5         2.1         1.7         2.5         2.7         2.5          2.7
Interest expense                         (10.1)      (10.5)       (3.2)       (0.9)       (1.0)       (1.1)       (1.5)        (0.7)
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES              59.0        57.1        56.7        65.6        71.4        52.1        49.3         56.9
Income tax provision (2)                  22.5        22.2        21.0        23.8         7.3        18.9        18.0         21.1
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS FROM
  CONTINUING OPERATIONS                   36.5        34.9        35.7        41.8        64.1        33.2        31.3         35.8
Discontinued operations (3)
  Gain on sale                              --          --          --          --        25.4          --          --           --
- ------------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS                           $  36.5     $  34.9     $  35.7     $  41.8     $  89.5     $  33.2     $  31.3      $  35.8
                                       =======     =======     =======     =======     =======     =======     =======      =======
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE (4)(5)
  BASIC
    Continuing operations              $  0.25     $  0.24     $  0.25     $  0.29     $  0.45     $  0.23     $  0.22      $  0.25
    Net earnings                       $  0.25     $  0.24     $  0.25     $  0.29     $  0.62     $  0.23     $  0.22      $  0.25
  DILUTED
    Continuing operations              $  0.25     $  0.24     $  0.24     $  0.28     $  0.44     $  0.23     $  0.21      $  0.24
    Net earnings                       $  0.25     $  0.24     $  0.24     $  0.28     $  0.61     $  0.23     $  0.21      $  0.24
SHARES USED IN CALCULATIONS (5)
(IN THOUSANDS)
    Weighted average shares (basic)    144,676     144,743     144,590     144,086     143,234     144,020     144,931      144,110
    Dilutive securities                  1,082       2,673       4,265       5,025       3,920       3,500       3,670        3,085
    Weighted average
      shares (diluted)                 145,758     147,416     148,855     149,111     147,154     147,520     148,601      147,195
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK-PER SHARE
Market price ranges (5)(6)
    High                                    24      33 1/4     38 1/16      40 1/2          36      32 1/4      30 7/8     27 13/16
    Low                                 16 5/8      24 3/4     30 7/16      33 1/4          24      24 1/4     25 5/16       21 3/4
No cash dividends have been declared on common stock during the periods presented.
- ------------------------------------------------------------------------------------------------------------------------------------

(1)  Includes fourth quarter 1998 unusual gains of $9.2 as described in Note B.
(2)  For information on a fourth quarter 1998 unusual tax benefit, see Note D.
(3)  For information on discontinued operations, see Note B.
(4)  For information on the calculation of earnings per share, see Note A.
(5)  Reflects a 2-for-1 stock split in the form of a 100% stock dividend
     announced January 20, 1999 and effective for holders of record on
     February 10, 1999.
(6)  From the New York Stock Exchange - Composite Transactions Listing.
- --------------------------------------------------------------------------------


                    Page 41 of the Ceridian Annual Report

EX-21.01

                                                                   EXHIBIT 21.01


                               CERIDIAN CORPORATION

                                   SUBSIDIARIES

                                FEBRUARY 29, 2000



                                                             STATE OR
                                                             OTHER JURISDICTION
SUBSIDIARIES AND THEIR AFFILIATES:                           OF INCORPORATION
- ----------------------------------                           ------------------
                                                          
ABR Information Services, Inc                                Florida
        ABR Employer Services, Inc.                          Florida
        ABR Properties, Inc.                                 Florida
        BMC Consultants, Inc.                                Colorado
        Ceridian Benefits Services, Inc.                     Florida
             (f/k/a ABR Benefits Services, Inc.
        Ceridian Retirement Plan Services, Inc.              Florida
             (f/k/a ABR Retirement Plan Services, Inc.)
        Charing Company, Inc.                                Wisconsin
        Chowning, Ltd.                                       Wisconsin
             The Barrington Group                            Wisconsin
        Matthews, Malone & Associates, Ltd.                  Arizona
        MidAtlantic 401(K) Services, Inc.                    Virginia
        Western Pension Service Corporation                  California
             Ceridian Investors Advisors, Inc.               Florida
                  (f/k/a ABR Investment Advisors, Inc.)
Ceridian Canada Holdings, Inc.                               Delaware
        Ceridian Canada Ltd.                                 Canada
        Ceridian Performance Partners Ltd.                   Canada
Ceridian Holdings U.K. Limited                               United Kingdom
        Centre-file Limited (f/k/a Datacarrer Limited)       United Kingdom
        CSW Research Limited                                 United Kingdom
        Ceridian Performance Partners Limited                United Kingdom
             (f/k/a Letterallied Limited)
        Usertech UK Limited                                  United Kingdom
Ceridian Infotech (India) Private Limited                    India
Ceridian Tax Service, Inc.                                   California
Comdata Network, Inc.                                        Maryland
        Comdata Network Inc. of California                   California
        Comdata Telecommunications Services, Inc.            Delaware
        International Automated Energy Systems, Inc.         Florida
        Permicom Permits Services, Inc.                      Canada
        Stored Value Systems, Inc.                           Delaware
Partnership Group, Inc., The                                 Pennsylvania
POWERPAY.COM INC.                                            New Jersey
        (f/k/a Ceridian Small Business Solutions, Inc.)
Scarborough Research (General Partnership)                   Delaware
User Technology Services Inc.                                New York


Certain subsidiaries, which in the aggregate would not constitute a
significant subsidiary, are omitted from this listing.

EX-23.01

                                                                   EXHIBIT 23.01


                         CONSENT OF INDEPENDENT AUDITORS


The Board of Directors
of Ceridian Corporation:


     We consent to incorporation by reference in Registration Statements
Nos. 33-49601, 33-61551, 33-34035, 2-97570, 33-56833, 33-54379, 33-56325,
33-62319, 33-64913, 333-01793, 333-01887, 333-03661, 333-28069, 333-58143,
333-58145, 333-66643, 333-50757, 333-83455 and 333-89565 on Form S-8 of Ceridian
Corporation of our reports dated January 25, 2000. Such reports relate to the
consolidated financial statements and related financial statement schedule of
Ceridian Corporation and subsidiaries as of December 31, 1999 and 1998 and for
each of the years in the three-year period ended December 31, 1999 and are
included or incorporated by reference in the 1999 Annual Report on Form 10-K of
Ceridian Corporation.



                                                 /s/ KPMG LLP


Minneapolis, Minnesota
March 23, 2000

EX-24.01

                                                                   EXHIBIT 24.01


                                POWER OF ATTORNEY

     The undersigned, a Director of Ceridian Corporation (the "Company"), a
Delaware corporation, does hereby make, nominate and appoint JOHN R. EICKHOFF
and GARY M. NELSON, and each of them, to be my attorney-in-fact for three months
from the date hereof, with full power and authority to execute for and on behalf
of the undersigned the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended; provided that such
Form 10-K is first reviewed by the Audit Committee of the Board of Directors of
the Company and by my attorney-in-fact, and his name, when thus signed, shall
have the same force and effect as though I had manually signed such Form 10-K.

     I have signed this Power of Attorney as of February 4, 2000.


                                            /s/ Bruce R. Bond
                                            -------------------------------
                                            Bruce R. Bond

                                            /s/ William J. Cadogan
                                            -------------------------------
                                            William J. Cadogan

                                            /s/ Nicholas D. Chabraja
                                            -------------------------------
                                            Nicholas D. Chabraja

                                            /s/ Ruth M. Davis
                                            -------------------------------
                                            Ruth M. Davis

                                            /s/ Robert H. Ewald
                                            -------------------------------
                                            Robert H. Ewald

                                            /s/ Richard G. Lareau
                                            -------------------------------
                                            Richard G. Lareau

                                            /s/ Ronald T. LeMay
                                            -------------------------------
                                            Ronald T. LeMay

                                            /s/ George R. Lewis
                                            -------------------------------
                                            George R. Lewis

                                            /s/ Lawrence Perlman
                                            -------------------------------
                                            Lawrence Perlman

                                            /s/ Ronald L. Turner
                                            -------------------------------
                                            Ronald L. Turner

                                            /s/ Carole J. Uhrich
                                            -------------------------------
                                            Carole J. Uhrich

                                            /s/ Paul S. Walsh
                                            -------------------------------
                                            Paul S. Walsh

EX-27.01

 


<ARTICLE> 5
<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                          59,400
<SECURITIES>                                    22,000
<RECEIVABLES>                                  479,900
<ALLOWANCES>                                    19,500
<INVENTORY>                                          0
<CURRENT-ASSETS>                               645,300
<PP&E>                                         368,700
<DEPRECIATION>                                 175,900
<TOTAL-ASSETS>                               2,059,900
<CURRENT-LIABILITIES>                          451,700
<BONDS>                                        611,100
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
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<TOTAL-LIABILITY-AND-EQUITY>                 2,059,900
<SALES>                                              0
<TOTAL-REVENUES>                             1,342,300
<CGS>                                                0
<TOTAL-COSTS>                                  630,500
<OTHER-EXPENSES>                                 1,100
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              24,700
<INCOME-PRETAX>                                238,400
<INCOME-TAX>                                    89,500
<INCOME-CONTINUING>                            148,900
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   148,900
<EPS-BASIC>                                       1.03
<EPS-DILUTED>                                     1.01