SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
PAYCHEX, INC.
-----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PAYCHEX, INC.
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: _/
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Set forth the amount of which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
PAYCHEX
PAYCHEX, INC.
911 Panorama Trail South
Rochester, New York 14625
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held on October 5, 1995
To the Stockholders:
The Annual Meeting of Stockholders of Paychex, Inc. will be held at
the Strong Museum Auditorium, One Manhattan Square, Rochester, New York on
Thursday, October 5, 1995. A continental breakfast will be available from
9:00 a.m. to 10:00 a.m. The Annual Meeting will begin at 10:00 a.m. for the
following purposes:
1. To elect eight directors;
2. To consider and act upon a proposal to amend the Certificate
of Incorporation to increase the authorized shares of common
stock from 50,000,000 to 150,000,000;
3. To consider and act upon a proposal to adopt the Paychex,
Inc. 1995 Stock Incentive Plan; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors of the Company has fixed the close of business
on August 11, 1995 as the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting.
It is important that all shares be represented at the meeting. The
Board of Directors extends a cordial invitation to all stockholders to attend
the meeting. However, if you are unable to attend the meeting, you are
requested to sign, date and return the enclosed Proxy in the return envelope.
You may revoke your Proxy and vote in person if you decide to attend the
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
G. Thomas Clark, Secretary
Rochester, New York
August 25, 1995
<PAGE>
PROXY STATEMENT
The Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Paychex, Inc. ("Company"), to be used
at the Annual Meeting of Stockholders of the Company to be held on Thursday,
October 5, 1995, at 10:00 a.m. for the purposes set forth in the foregoing
Notice of Annual Meeting. The cost of this solicitation will be borne by the
Company. The Board of Directors has fixed the close of business on August
11, 1995 as the record date for determining the holders of common stock
entitled to notice of, and to vote at, the meeting. The Company had
outstanding on that date ____________ shares of common stock, each of which
is entitled to one vote. A majority of the outstanding shares (____________
shares) present in person or by proxy will constitute a quorum.
If the enclosed Proxy is properly executed and returned, the shares
represented will be voted by the proxies in accordance with the stockholder's
directions. If the Proxy is signed and returned without choices having been
specified, the shares will be voted FOR the eight nominees described below and
for FOR Proposals 2 and 3, as set forth in the Notice. The Proxy may be
revoked by the person giving it at any time prior to its use by a written
revocation, submission of a later dated Proxy, or in person at the meeting.
The Proxy Statement and Proxy are being mailed to stockholders on or
about August 25, 1995.
With regard to the election of directors, votes may be cast for
nominees or withheld; votes that are withheld will be excluded entirely from
the vote and will have no effect. Abstention may be specified on all
proposals (but not the election of directors) and will be counted as present
for purposes of the proposal on which the abstention is noted. Since
Proposals 2 and 3 require the approval of a majority of the outstanding
shares, abstentions will have the effect of a negative vote. Under
applicable Delaware law, a broker non-vote will have the same effect as a
vote against Proposals 2 and 3 and will have no effect on the outcome of
the election of directors.
PROPOSAL 1 - ELECTION OF DIRECTORS
Eight directors are to be elected to the Board of Directors. The
Board of Directors has nominated the persons listed below for election.
If elected, each nominee will hold office until the Annual Meeting to
be held in 1996 and until his successor is elected and shall qualify.
The Board of Directors recommends the election of the eight nominees
listed below and it is intended that the proxies named (unless otherwise
directed) will vote the Proxy FOR the election of these nominees. Although
the Board of Directors believes that all of the nominees will be available to
serve, the proxies may exercise discretionary authority to vote for
substitutes proposed by the Board of Directors of the Company. However, the
enclosed Proxy cannot be voted for more than eight nominees.
<PAGE>
NOMINEES FOR ELECTION
The following table sets forth certain information as of August 11,
1995, with respect to the nominees for election as directors of the Company,
none of whom is related to any other nominee or executive officer. Under the
rules of the Securities and Exchange Commission, "beneficial ownership" is
deemed to include shares for which the individual, directly or indirectly,
has or shares voting or investment power, whether or not they are held for
the individual's benefit.
Each of the nominees, other than Steven D. Brooks, has been serving as
a director of the Company for several years. Mr. Brooks is a new nominee.
Mr. Brooks has been Managing Director and head of the Union Bank of
Switzerland Global Trading Group since November, 1994. From 1992 through
1994, he was a private investor and from 1989 through 1992, he was a principal
of Rainwater, Inc., a private investment firm.
<TABLE>
<CAPTION>
Amount and
Nature of
Served Beneficial
Principal as Ownership Percentage
Occupation for Director Common Common
Name of Nominee Age Last Five Years Since Stock (1)(2) Stock
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. Thomas Golisano 53 Chairman, President & 1979 5,741,813 12.5
Chief Executive Officer
G. Thomas Clark 57 Vice President of Finance, 1980 251,967 (4)
Secretary & Treasurer (3)
Donald W. Brinckman 64 Chairman, and Founder of 1990 34,500 (4)
Safety-Kleen Corp. (5)
Steven D. Brooks 44 Managing Director, Union - -0- -
Bank of Switzerland Global
Trading Group(6)
Phillip Horsley 56 Managing Director of Horsley 1982 65,999 (4)
Bridge Partners, Inc.,
venture capital investors
Grant M. Inman 53 Partner of Inman & Bowman, 1983 101,925 (4)
venture capital investment
partnership (7)
Harry P. Messina, Jr. 63 Partner of Woods, Oviatt, 1985 75,784 (4)
Gilman, Sturman & Clarke,
LLP, Attorneys
J. Robert Sebo 59 Director 1979 973,864 2.1
(8)
</TABLE>
<PAGE>
(1) Included in this column are the following shares with respect to which
nominees have or share voting or investment power, (including shares
directly owned by certain relatives with whom they are presumed to
share voting and/or investment power), and as to which the nominees
disclaim beneficial ownership: Mr. Golisano - 36,712 shares owned by a
foundation of which he and Mr. Clark are trustees; Mr. Clark - 78,749
shares, including the same foundation shares; Mr. Horsley - 1,732
shares; Mr. Inman - 1,350 shares; Mr. Messina - 13,500 shares and
Mr. Sebo - 2,233 shares.
(2) This column also includes the following shares which may be acquired
within 60 days by exercise of options: Mr. Clark - 145,626 shares;
Mr. Brinckman - 4,500 shares; Mr. Horsley - 15,750 shares; Mr. Inman -
32,625 shares and Mr. Messina - 11,250 shares.
(3) Mr. Clark is also a director of Magnetic Technologies Corporation.
(4) Percentage is less than 1%.
(5) Mr. Brinckman is also a director of Johnson Worldwide Associates, Inc.,
Snap-On Incorporated and Sherman Health Systems.
(6) See above for Mr. Brook's last five years' principal occupation. Mr.
Brooks is also a director of QuickResponse Service, Inc.
(7) Mr. Inman is also a director of Lam Research Corporation.
(8) Includes approximately 7,300 shares held for Mr. Sebo's account in the
Paychex 401(k) Incentive Investment Plan.
<PAGE>
PROPOSAL 2 - PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
At the Annual Meeting there will be submitted to stockholders a
proposal to increase the number of shares of common stock the Company is
authorized to issue. The Board of Directors ("Board") recommends adoption of
the proposal.
The Company presently is authorized to issue 50,000,000 shares of
common stock having a par value of $.01 per share. As of August 11, 1995
there were __________ shares of common stock issued and outstanding. Of the
remaining shares, 1,335,293 shares are authorized for issuance under the
Company's 1987 Stock Incentive Plan and 1992 Stock Incentive Plan, and
1,250,000 shares are reserved for the 1995 Stock Incentive Plan discussed in
Proposal 3.
From time to time, the Company has issued additional shares of common
stock for various purposes. During fiscal 1995, the Company issued 15,007,290
shares in a three-for-two split effected in the form of a dividend and 171,186
shares upon exercise of stock options. In June, 1995, it became obligated
to issue up to 356,803 shares in connection with the acquisition of Pay-Fone
Systems, Inc. and an indeterminate number of shares upon exercise of
options held by Pay-Fone employees.
On July 13, 1995, the Board unanimously approved a resolution, subject
to stockholder approval at the Annual Meeting on October 5, 1995, to amend
Article 4 of the Company's Certificate of Incorporation ("Certificate") to
increase the number of authorized shares of common stock from 50,000,000 to
150,000,000. The pertinent provisions of the amendment to the Certificate
are set forth in Exhibit A to this Proxy Statement. The Affirmative vote of
holders of a majority of the outstanding shares of common stock is required to
adopt the proposed amendment. The amendment, if approved by the stockholders,
will take effect at the close of business on October 5, 1995.
The purpose of the amendment is to provide the Company with additional
shares of common stock which may be made available for future financing and
acquisition transactions, stock dividends or splits, employee benefit plans
and other general corporate purposes. If the amendment is approved, the
Company also will have generally greater flexibility in the future to issue
shares in excess of those presently authorized, without the expense and delay
of a special stockholders' meeting.
Except in connection with its stock option plans discussed above and a
possible aquisition for approximately 135,000 shares, the Company currently
has no arrangements or understandings for the issuance of additional shares
of common stock and, as set forth in the Company's Certificate, no holder of
common stock has any preemptive right with respect to the common stock. If
the Board deems it in the best interests of the Company and the stockholders
to issue additional shares of common stock in the future, the Board generally
would not seek further authorization by vote of the stockholders, unless such
authorization is otherwise required by applicable law or regulations.
Should the Board desire to issue additional shares of common stock in
the future, such issuance of additional shares could dilute the voting power
of a person seeking control of the Company, thereby deterring or rendering
more difficult a merger, tender offer, proxy contest or an extraordinary
corporate transaction opposed by the Company's Board of Directors. The
Company has no knowledge that any person intends to effect such a transaction.
<PAGE>
PROPOSAL 3 - APPROVAL OF THE 1995 STOCK INCENTIVE PLAN
The Board of Directors of the Company, on July 13, 1995, unanimously
adopted a new stock incentive plan for directors, officers and key employees,
the Paychex, Inc. 1995 Stock Incentive Plan (the "1995 Plan"), to become
effective September 1, 1995 subject to stockholders' approval. The
affirmative vote of the holders of a majority of the outstanding shares is
required for approval. The following summary of the 1995 Plan does not
purport to be complete and is subject to, and qualified in its entirety by,
reference to the text of the 1995 Plan annexed hereto as Exhibit B.
The Board of Directors believes that, in order to attract and retain
people of ability and initiative in key managerial positions and to provide
an incentive for such persons to continue to render outstanding service to
the Company, it is in the best interests of the Company and its stockholders
to provide them, through the granting of stock options, the opportunity to
participate in any appreciation in value of the Company's common stock which
may result from their enhanced performance.
Currently there are approximately 275 employees in key
managerial positions (including executive officers) eligible for grants.
The 1995 Plan authorizes the granting of options to purchase up to
1,250,000 shares of the Company's common stock, subject to adjustment as
described below. The 1995 Plan will be administered by the Compensation
Committee of the Board of Directors ("Board"), with respect to options
granted to officers and key employees and other persons responsible for the
success and growth of the Company, and by the Directors' Option Committee of
the Board, with respect to options granted to non-employee directors, each of
which is hereafter referred to as "Committee". The shares subject to the
options will be made available from either authorized and unissued shares or
previously issued treasury shares. Options under the 1995 Plan may not be
granted after August 31, 1998.
The Committee may recommend the grant of Incentive Stock Options or
Non-Qualified Stock Options. Incentive Stock Options are available only to
key employees of the Company and must comply with requirements of Section
422A of the Internal Revenue Code of 1986, as amended (the "Code").
Non-Qualified Stock Options may be granted to employees (including employee -
directors) and non-employee directors of the Company and others and are
intended not to qualify as Incentive Stock Options. The principal difference
between the two types of options relates to their tax treatment.
The following description will apply to both types of options unless
otherwise noted.
<PAGE>
The exercise price per share will be no less than 100% of fair market
value of the Company's common stock on the date the option is granted, as
determined by the Committee. The Committee shall determine the time of
exercise of each option when granted. Each option will expire not more than
ten (10) years from the date of its grant. The 1995 Plan permits the payment
of the exercise price by cash or by application of shares already owned by
the option holder (at the fair market value thereof when submitted), or, upon
approval by the Committee, by the surrender of stock options that are eligible
for exercise (valued at the difference between the fair market value of the
stock on the date surrendered and the exercise price of the option), or any
combination thereof. Shares subject to options which have been surrendered
upon exercise of an option are not available again for grant. In addition,
payment may also be made, in the discretion of the Committee, through
so-called "cashless exercise" wherein the optionholder exercises the option
and instructs a broker-dealer to sell so many shares as shall be sufficient
to pay the exercise price.
In general, for an option to become exercisable, an employee who is
granted an option must remain continuously employed by the Company until the
grant becomes exercisable. A non-employee director must serve for at least
one year before an option is exercisable. Upon termination of employment, an
Incentive Stock Option (unless otherwise expired) will terminate in three
months (one year if the option holder is disabled) if not exercised. A
non-qualified stock option, unless otherwise expired, will terminate in one
year after termination of employment (whether or not because of disability or
death) and three years after retirement. Nevertheless, if termination of
employment was by reason of conduct which the Committee determines to have
been knowingly fraudulent, deliberately dishonest, disloyal or willful
misconduct, or if the Committee makes such a determination after the
optionholder's retirement, the option shall be forfeited. Incentive Stock
Options are not transferable, except by will or by the laws of descent and
distribution. Nonqualified stock options may be transferred to immediate
family members or to trusts for their benefit, subject always to the same
restrictions applicable to the original optionee. Options which for any
reason cease to be exercisable shall be considered terminated. Shares
subject to expired or terminated options are again available for grant.
With limited exceptions, if any change is made in the shares subject
to the 1995 Plan or to any option granted thereunder (through merger,
reorganization, recapitalization, stock dividend, issuance of subscription
rights or similar events), such adjustments or substitutions will be made as
the Committee deems equitable to prevent dilution or enlargement of option
rights.
The Board of Directors and the Committee may amend or terminate the
1995 Plan in all respects, except that without stockholder approval, no such
amendment or modification may (a) change the maximum number of shares
reserved for options thereunder (except as described in the preceding
paragraph), (b) change the class of persons eligible to be granted options,
or (c) extend the maximum period during which an option may be exercised.
<PAGE>
Incentive Stock Options granted under the 1995 Plan are intended to
qualify for the special Federal income tax treatment available under Section
422A of the Code. Under this law, no tax is associated with the grant or
exercise of any option; rather, the recipient is taxed at a capital gains
rate on the sale of shares received on the exercise of an option. In order
to obtain this treatment, the option holder must not dispose of the shares
within two (2) years from the date of the grant of the option nor within one
(1) year after receipt of the shares upon exercise of the option. If the
option holder does not comply with the required holding periods, the
difference between the fair market value of the shares at time of exercise
and the exercise price is taxed as ordinary income (rather than capital gain)
and the Company is allowed a tax deduction for that amount (a deduction it
would not have had if the holding periods were followed). The differential
is also considered a tax preference item for purposes of the alternative
minimum tax.
Non-Qualified Stock Options granted under the 1995 Plan will result
in no income to the option holder for Federal income tax purposes upon the
grant. Upon his exercise of such an option, the option holder will realize
ordinary income in an amount equal to the excess of the fair market value of
the stock acquired over the exercise price; and the amount so realized will
be deductible by the Company. Upon any sale thereafter, any amount realized
in excess of such fair market value will constitute a capital gain.
The aggregate market value of the shares with respect to which a
holder of Incentive Stock Options, may exercise an option for the first time
during any calendar year is $100,000.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires directors, officers and beneficial owners of more than 10% of
the Company's common stock to file with the Securities and Exchange
Commission reports of transactions in the stock. Because of the complexity
of the rules, the Company agreed to assume the responsibility for timely
filing such reports for those reporting persons who so requested and who
agreed to advise the Company promptly of changes in the ownership of the
Company's equity securities.
The Company believes that during the fiscal year ended May 31, 1995,
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company met four times during the
fiscal year ended May 31, 1995 ("fiscal 1995").
<PAGE>
The Executive Committee is comprised of Messrs. Golisano, Clark and
Horsley and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Company except
as limited by law. There were two meetings of the Executive Committee
during fiscal 1995.
The Audit Committee is comprised of Messrs. Brinckman, Inman and
Messina. It is responsible for evaluating and approving the services
performed by the Company's independent accountants as well as reviewing and
evaluating the Company's accounting practices and internal controls. The
Audit Committee met twice during fiscal 1995.
The Compensation Committee is comprised of Messrs. Brinckman, Horsley
and Inman. It met once during fiscal 1995. The Committee makes
recommendations with respect to amount of officers' salaries and grants stock
options to key employees.
The Directors' Option Committee was established for the sole purpose
of considering the grant of stock options to non-employee directors under the
Company's 1992 Stock Incentive Plan. Messrs. Golisano and Sebo comprise this
Committee. The Directors' Option Committee held one meeting during fiscal
1995.
No director attended fewer than 75% of all meetings of the Board of
Directors held during fiscal 1995 or of all meetings of any committee upon
which such director served during fiscal 1995.
Non-employee directors are paid $6,000 annually, plus $1,000 for each
board meeting and $500 for each committee meeting attended. On October 5,
1994 Messrs. Brinckman, Horsley and Inman were awarded non-qualified stock
options under the Paychex, Inc. 1992 Stock Incentive Plan to purchase 4,500
shares of common stock each at $24.66 per share, the market price of the
stock on the day of grant. On January 12, 1995, Mr. Messina was
awarded a non-qualified stock option under the Paychex Inc. 1992 Stock
Incentive Plan to purchase 4,500 shares at $27.33 per share, the market price
on the day of grant. The options extend for 10 years and are exercisable
after one year. (Share and dollar amounts have been adjusted to reflect the
May, 1995 three-for-two stock split.)
OTHER EXECUTIVE OFFICERS
John Carlen, 48, joined the Company in August, 1993 and was elected
Executive Vice president in October, 1993. Prior thereto (1981-1993), Mr.
Carlen served in various executive positions with the May Department Store
Company.
Walter Turek, 43, has served as Vice President - Sales since April,
1989. Mr. Turek has been with the Company since 1979 and has served in
various sales management capacities.
Edmund Russo, 58, was elected Vice President - Director of Western
Operations in April, 1989 and Director of Operations in October, 1994. Mr.
Russo joined the Company in January, 1987 and prior to being elected Vice
President, served as a Regional Manager.
<PAGE>
Eugene Polisseni, 55, has served as Vice President - Marketing since
April, 1989. Mr. Polisseni has been with the Company since its formation in
1979 and during that period served in various capacities.
Daniel Canzano, 41, was elected Vice President - Information
Technology in April 1993. Mr. Canzano has been with the Company since
1989 and has served as a Zone Sales Manager and Director of Information
Technology.
Diane Rambo, 44, was elected Vice President - Electronic Network
Services (ENS) in October, 1994. Ms. Rambo has been with the Company since
August, 1980 and has served as the Director of ENS and as a Branch Manager.
REPORT OF THE COMPENSATION COMMITTEE
Compensation of Chief Executive Officer
The Compensation Committee recommends to the Board of Directors the
compensation to be paid to the Chief Executive Officer "(CEO"). In
performing that function, the Committee reviews the range and components of
compensation paid to CEO's of other public companies. In particular, the
Committee looks to those public companies whose size and performance with
respect to revenue, earnings per share and stock price are similar to those
of Paychex.
Mr. Golisano's substantial stock position in the Company assures
the Committee of his close identification with the interests of its
stockholders. Thus, his compensation has been limited to his salary with
each recommended adjustment reflective in part of the Committee's evaluation
of the Company's performance in the three areas discussed above as well as
other areas. Adjustments also reflect the Committee's opinion of the impact,
both short - and long - term, which Mr. Golisano's creativity, strategic
focus and leadership had on these and other factors.
Mr. Golisano's 1995 compensation (including base salary and bonus
under the Officer Incentive Program) was 14% over that in 1994. Base
compensation was based in part on the Company's performance during fiscal
1995 during which the Company's revenue increased 19%, dividends paid
increased 47%, earnings per share increased 38%, and its stock price
increased 38%, over the prior year's figures.
<PAGE>
Compensation of Other Executive Officers
Recommended compensation for senior executives other than the CEO is
determined by the Compensation Committee after the CEO provides the Committee
with his evaluation of the performance of each senior officer and his
recommendation with respect to salary, bonus and stock options. Committee
members discuss his recommendations in light of their own experiences and
familiarity with levels and components of compensation for persons with
similar responsibilities in other public companies. The goal of the
Committee is to compensate fairly for the job done, to reward extraordinary
performance or promise and to encourage long-term identification with
stockholder interest through award of stock options under the Company's Stock
Incentive Plan. Company performance is also considered.
The Compensation Committee's recommendations are presented to the
Board for discussion and decision. An officer-director whose compensation is
being considered is excused from that portion of the meeting. In fiscal
1995, all recommendations of the Committee were approved by the Board. Base
salary changes are prospective and are made following the annual
stockholders' meeting in October. Thus, salary adjustments and stock option
grants are made four to five months after the Company's fiscal year end in
May.
The Compensation Committee and the Board have instituted an Officer
Incentive Program whereby a portion of the compensation of senior executive
officers (including the CEO) is incentive-based and dependent upon the
Company's performance. The performance factor (currently earnings per
share), minimum, target and maximum levels, and bonus percentage of base
compensation, are established for the new year within 45 days after the end
of the prior fiscal year.
Impact of Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code generally limits the tax
deductibility of annual compensation paid to certain executive officers to $1
million, unless specified requirements are met. The Compensation Committee
has carefully considered the impact of this provision in the Tax Law. At
this time, it is the Committee's intention to continue to compensate all
officers based on overall performance. The Committee expects that most, if
not all compensation paid to officers will qualify as a tax deductible
expense. However, it is possible that at some point in the future,
circumstances may cause the Committee to authorize compensation that is not
deductible.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Donald W. Brinckman, Phillip
Horsley and Grant M. Inman. All members of the Compensation Committee are
non-employees of the Company. None of the Company's executive officers
serves on the board of any other entity which employs a member of the
Compensation Committee.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation received by the Company's
Chief Executive Officer and the Company's other most highly compensated
Executive Officers during the last three fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compen-
sation
Number of
Annual Compensation Shares All
------------------------------------------- Underlying Other
Name and Principal Options Compen-
Position Year Salary(1) Bonus(1) Granted sation(2)
------------------ ---- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
B. Thomas Golisano 1995 $440,625 $59,850 0 $ 4,153
Chairman, President, 1994 $411,875 $26,000 0 $ 4,107
and Chief Executive 1993 $375,000 $0 0 $ 4,439
Officer
John T. Carlen (3) 1995 $246,875 $34,580 30,000 $ 3,686
Executive Vice President 1994 $175,000 $0 22,500 $35,994
1993 - - - -
G. Thomas Clark 1995 $234,375 $31,920 0 $ 5,177
Secretary, 1994 $217,875 $0 15,000 $ 5,078
Treasurer, and Vice 1993 $200,750 $0 22,500 $ 4,855
President of Finance
Edmund S. Russo 1995 $201,875 $28,595 15,000 $ 5,390
Vice President, Director 1994 $174,750 $0 9,000 $ 4,948
of Operations 1993 $161,125 $0 22,500 $ 4,683
Walter Turek 1995 $183,625 $63,452 9,000 $ 2,967
Vice President of 1994 $170,000 $54,000 9,000 $ 3,954
Sales 1993 $162,000 $84,000 22,500 $ 4,095
J. Robert Sebo (4) 1995 $154,583 $0 0 $ 343
Retired 1994 $257,500 $10,000 0 $ 4,345
1993 $239,750 $0 22,500 $ 4,126
</TABLE>
(1) Represents compensation earned.
(2) Represents Company contributions to the Paychex 401(k) Incentive
Retirement Plan as well as premiums paid by the Company for group term
life insurance. Amounts in 1994 for Mr. Carlen include payments for
relocation allowances of $35,721 made by the Company in connection
with relocation to the Corporate Office in Rochester, New York.
(3) Mr. Carlen became an executive officer of the Company in 1994.
Therefore, his compensation by another employer for 1993 is
not required to be disclosed.
(4) Mr. Sebo retired during fiscal 1995.
<PAGE>
1995 OPTION GRANTS TABLE
The following table sets forth stock options granted to the Company's Chief
Executive Officer and the Company's other most highly compensated Executive
Officers during 1995. Under Securities and Exchange Commission regulations,
Companies are required to project an estimate of appreciation of the
underlying shares of stock during the option term. The Company has chosen
the 5% - 10% formula approved by the SEC. However, the ultimate value will
depend on the market value of the Company stock at a future date, which may
or may not correspond to the projections below.
<TABLE>
<CAPTION>
Individual Grants Potential
-------------------------------------------------------- Realizable
Value at Assumed
Number of % of Total Annual Rates of
Shares Options Exercise Stock Price
Underlying Granted to Price Expir- Appreciation
Options Employees Per ation for Option Term (2)
Name Granted(1) in 1995 Share Date 5% 10%
--------------- ---------- --------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
B. Thomas Golisano -0- 0% $0 $0 $0
John T. Carlen 30,000 14.31% $23.83 10/6/04 $449,659 $1,139,524
G. Thomas Clark -0- 0% $0 $0 $0
Edmond S. Russo 15,000 7.15% $23.83 10/6/04 $224,830 $ 569,762
Walter Turek 9,000 4.29% $23.83 10/6/04 $134,898 $ 341,857
J. Robert Sebo -0- 0% $0 $0 $0
</TABLE>
(1) Options were granted from the Paychex, Inc. 1992 Stock Incentive Plan
established for directors, officers and key employees. Options are
granted at prices not less than 100% of the fair market value of the
common stock at the date of grant, unless the grant is under Section
422A of the Internal Revenue Code, in which case if the employee owns
more than 10% of the outstanding common stock, the option price must
be not less than 110% of the fair market value. The options granted
are exercisable in cumulative annual installments of 33 1/3% after two
years and expire ten years from the date of grant.
(2) Represents realizable values net of the option exercise price but
before any income taxes that the executives may have to pay. The
dollar amounts under these columns are the result of calculations at
the 5% and 10% rates (determined from the price at the date of grant,
not the stock's current market value) set by the Securities and
Exchange Commission and therefore are not intended to forecast
possible future appreciation, if any, of the Company's stock price.
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth stock options exercised by the Company's Chief
Executive Officer and the Company's other most highly compensated
Executive Officers during 1995, and the number and value of all unexercised
options at year-end. The value of "in-the-money" options refers to options
having an exercise price which is less than the market price of the Company's
stock on May 31, 1995.
<TABLE>
<CAPTION>
Number of
Shares
Underlying Value of Unexer-
Number Unexercised cised In-The-
of Shares Net Options at Money Options at
Acquired Value May 31, 1995 May 31, 1995 (2)
on Real- Exercis- Unexer- Exercis- Unexer-
Name Exercise ized(1) able cisable able cisable
---- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
B. Thomas Golisano 0 $0 0 0 $0 $0
John T. Carlen 0 $0 0 52,500 $0 $335,000
G. Thomas Clark 5,400 $133,600 140,626 15,000 $3,054,397 $110,000
Edmond S. Russo 0 $0 93,375 37,500 $2,133,812 $376,750
Walter Turek 0 $0 116,325 31,500 $2,662,389 $342,750
J. Robert Sebo 22,500 $327,500 0 0 $0 $0
</TABLE>
(1) Represents market value of the Company's common stock at exercise date
less the exercise price.
(2) Represents market value of the Company's common stock at May 31,
1995, less the exercise price.
<PAGE>
PERFORMANCE GRAPH
The following graph shows a five-year comparison of the total
cumulative returns of investing $100 on May 31, 1990 in Paychex, Inc. Common
Stock, the S&P Midcap 400 Index and the S&P Computer Software and Service
Index. The S&P Midcap 400 Index represents a broad market group in which the
Company participates. The S&P Computer Software and Services Index (S&P C S
& S) was chosen as having a representative peer group of companies. The
Paychex, Inc. stock price performance shown assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
Measure-
ment
Point
5/31/90 5/31/91 5/31/92 5/31/93 5/31/94 5/31/95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Paychex, Inc. $100 $148 $245 $393 $472 $658
S&P Midcap 400 $100 $119 $138 $164 $171 $194
S&P C S & S $100 $ 92 $109 $146 $175 $245
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as set forth below, the Company is not aware of any persons who
held in excess of 5% of the Company's outstanding common stock at August 11,
1995.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address Beneficial Owner of Class
---------------- -------------------- --------
<S> <C> <C>
B. Thomas Golisano
911 Panorama Trail South 5,741,813 12.5
Rochester, New York 14625 (1)
Putnam Investments 3,137,309 6.8
One Post Office Square (2)
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc.
100 East Pratt Street 2,782,950 6.1
Baltimore, Maryland 21202 (3)
All Directors and Officers of 8,584,587
the Company as a Group (4) 18.7
</TABLE>
-----------------------------------
(1) See Footnote (1) to the table under "Nominees for Election" with
respect to Mr. Golisano.
(2) These securities are owned by Putnam Investments, Inc. through two
wholly owned registered investment advisors, Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc.
(3) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price
Associates") and T. Rowe Price New Horizons Fund, Inc. ("New
Horizons") serve as investment advisers with power to direct
investments and/or shared power to vote the securities. For purposes
of the reporting requirements of the Securities Exchange Act of 1934,
Price Associates and New Horizons are deemed to be beneficial owners
of such securities; however, they expressly disclaim that they are, in
fact, the beneficial owners of such securities.
(4) See Footnote (1) and (2) to the table under "Nominees for Election".
The shares included therein as subject to shared voting power by
Messrs. Golisano and Clark are included only once in this total. In
addition, the total includes the following shares which may be acquired
within 60 days by exercise of options: Walter Turek - 123,825 shares;
Edmond Russo - 100,875 shares; Daniel Canzano - 29,301 shares; Eugene
Polisseni - 5,700 shares; John Carlen - 7,500 shares; and Diane Rambo -
8,400 shares.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant since 1983 has been Ernst
& Young LLP. Management expects to reappoint this firm for fiscal 1996.
However, it will not seek stockholder approval or ratification.
Representatives of Ernst & Young LLP are expected to be present at the
stockholders' meeting and will have an opportunity to make a statement if
they desire to do so. They are also expected to be available to respond to
appropriate questions.
OTHER MATTERS AND INFORMATION
As of the date of this Proxy Statement, Management does not intend to
present, and has not been informed that any other person intends to present,
any matter for action at the meeting other than those described above. If
any other matters properly come before the meeting, it is intended that the
persons named in the enclosed Proxy will vote the Proxy on such matters in
accordance with their best judgement.
The cost of solicitation of Proxies will be paid by the Company. In
addition to solicitation by use of mails, some of the officers and regular
employees of the Company, without extra remuneration, may solicit Proxies
personally or by telephone, telegraph or cable. The Company will reimburse
any banks, brokers and other custodians, nominees and fiduciaries for their
expenses in forwarding Proxies and Proxy solicitation material to the
beneficial owners of the shares held by them.
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement for the
next Annual Meeting of Stockholders must be received by the Company at its
executive offices on or before April 27, 1996.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ G. Thomas Clark
--------------------------
G. Thomas Clark, Secretary
Rochester, New York
August 25, 1995
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PAYCHEX,INC.
Paragraph 4 of the Certificate of Incorporation is amended to read
in its entirety as follows:
4. The total number of shares of stock which the Corporation
shall have authority to issue is 150,000,000 shares of
common stock and the par value of each of such shares is
$.01, amounting in the aggregate to $1,500,000.
<PAGE>
EXHIBIT B
---------
PAYCHEX, INC.
1995 STOCK INCENTIVE PLAN
Section 1. Purposes
The purposes of the Paychex, Inc. 1995 Stock Incentive Plan (the "Plan")
are to provide, through options to purchase Paychex, Inc. $.01 par value
common stock ("Stock"), long term incentives and rewards to directors,
officers and other key employees or persons responsible for the success
and growth of Paychex, Inc. and its subsidiary corporations (the
"Company"), to attract and retain such persons on a competitive basis and
to associate the interests of such persons with those of the Company.
Section 2. Effective Date
The Plan will become effective September 1, 1995 and shall be submitted
for approval by the Company's stockholders within 12 months of the
effective date.
Section 3. Administration of the Plan
The Plan will be administered by two Committees of the Board of Directors
("Board") of the Company: the Compensation Committee (with respect to
options granted to officers, employees and other persons who are not
directors) and the Directors' Option Committee (with respect to options
granted to directors), each of which is hereafter referred to as
"Committee" and shall have not less than two directors (or such lesser
number as may be permitted under Rule 16b-3 ("Rule 16b-3") promulgated
under the Securities Exchange Act of 1934 (the "1934 Act"). Each
Committee shall consist solely of directors who are "disinterested
persons" within the meaning of Rule 16b-3. The Committee is authorized,
with respect to those persons to whom it is authorized to grant options,
to establish such rules and regulations as it deems necessary for the
proper administration of the Plan; to make such determinations and
interpretations and to take such action in connection with the Plan and
any options granted under the Plan as it deems necessary or advisable, to
correct any defect, supply any deficiency and reconcile any inconsistency
in the Plan or any Stock Option Agreement; and to amend the Plan to
reflect changes in applicable law. The Committee may designate one or
more persons to implement its rules, regulations and determinations. All
determinations of the Committee shall be by a majority of its members and
its determinations shall be final. The Committee from time to time, and
whenever requested, will report to the Board on its administration of the
Plan and the actions it has taken. The expenses of administering the Plan
will be paid by the Company.
Section 4. Shares Subject to the Plan
The Stock that may be optioned or purchased under the Plan will not exceed
an aggregate of 1,250,000 shares and may be authorized, unissued shares or
treasury shares. Upon the expiration or termination, in whole or in part,
of any unexercised options, shares of Stock covered by such unexercised
options shall be available again for new options under the Plan. However,
shares subject to option which are surrendered in exercising an option
shall not be available for new options.
<PAGE>
Section 5. Eligible Persons
The class of persons eligible to receive options under the Plan will
consist of directors, officers and other key employees of the Company and
other persons responsible for the success of the Company. In making its
determination as to whether an option will be granted under the Plan and
the number of shares to be subject to each option, the Committee will take
into account the duties of the director, officer, employee or other
person, the present and potential contributions of that person to the
success of the Company, and other factors which members of the Committee,
in their discretion, consider to be reasonable and appropriate in
connection with accomplishing the purposes of the Plan.
Section 6. Grant of Options
The Compensation Committee shall determine participation in the Plan by
officers and key employees of the Company and other persons who are not
directors and the extent of that participation. The Committee shall also
determine whether the option shall be an Incentive Stock Option (being an
option whose terms comply with the requirements of Section 422A of the
Internal Revenue Code of 1986, as amended, ("Code") or any successor
section) or a Non-Qualified Stock Option (being an option whose terms are
not intended to meet the requirements of an Incentive Stock Option);
provided, however, that Incentive Stock Options shall be awarded only to
employees of the Company. The Directors' Option Committee will grant
options only to non-employee directors. The options shall be evidenced by
Stock Option Agreements in such form as the Committee shall approve from
time to time, which Agreements shall conform to the Plan.
Section 7. Provisions of Incentive Stock Options
Each Incentive Stock Option granted under the Plan will contain those
terms and provisions as may be necessary and appropriate to qualify it as
such under Section 422A of the Code including, without limitations, the
following:
A. Number of Shares. Each option will specify the
number of shares which may be acquired.
B. Purchase Price. Each option will provide for an exercise
price of not less than 100% of the fair market value of the Stock, as
determined by the Committee, on the date the option is awarded; provided
that, in the event the option holder owns more than 10% of the combined
voting power of all classes of stock of a parent or subsidiary of the
Company at the time of the grant, then the purchase price will be not less
than 110% of such fair market value.
C. Exercise. Each option by its terms will not be exercisable
prior to six (6) months from the date of grant or after the expiration of
ten years from the date the option is granted; and, during the actual
term, may be exercised in such manner and at such time(s) as shall be
specified in the option, by written notice to the Company of the option
holder's election to exercise.
<PAGE>
D. Transfer. Each option by its terms will be exercisable,
during the lifetime of the option holder to whom it is granted, only by
the option holder and will not be transferable otherwise than by will or
the laws of descent and distribution.
E. Payment. Each option will provide that the purchase price of
any Stock purchased upon exercise of the option shall be payable in full
on the exercise date, in cash or by check, or by delivery of Stock owned
by the option holder (with appropriate documents of transfer), or, in the
discretion of the Committee, by surrender of exercisable options to
purchase Stock, or any combination of the foregoing. Any Stock so
delivered shall be valued at the fair market value of the Stock on such
date. Any options so surrendered shall be valued at the difference
between the fair market value of the Stock at the time of surrender and
the exercise price thereof. Payment may also be made, in the discretion
of the Committee, by delivery (including by facsimile) to the Company or
its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions to a broker/dealer to sell or
margin a sufficient portion of the shares and deliver the sale or margin
loan proceeds directly to the Company to pay for the exercise price.
F. Rights as Stockholder. Each option shall provide that the
option holder shall have no rights as a stockholder, unless and until
certificates for shares of Stock are issued to the option holder.
G. Termination of Employment/Disability. Each option will
provide that if the employment of an option holder is terminated, and the
option has not otherwise expired or terminated by its terms, then the
option will expire if not exercised within three months after the
termination of employment or one year for an employee who is disabled.
Nevertheless, an option holder whose employment is terminated by reason of
conduct which the Committee determines to have been knowingly fraudulent,
deliberately dishonest, disloyal or willful misconduct shall forfeit all
rights under the option. The extent to which an option may be exercised
following termination of an option holder's employment is limited to the
number of shares which the option holder could have purchased on the date
of such termination.
H. Maximum Value of Stock. The aggregate fair market value of
Stock (determined at the time the option is granted) with respect to which
an Incentive Stock Option is exercisable for the first time by an option
holder during any calendar year (under all such plans of the Company)
shall not exceed $100,000.
I. Disqualifying Disposition. In the event a disposition of
Stock acquired upon exercise of an option which is deemed "disqualifying"
under Section 422A of the Code, so as to require the withholding of
Federal, State or Local taxes, the option holder agrees promptly to pay to
the Company the amount of such taxes if the Company is unable to withhold
the necessary sums.
J. Other Terms. Each option will contain those further or
different restrictions and provisions as the Committee and the Board deem
to be reasonable and appropriate and in the best interests of the Company.
<PAGE>
Section 8. Provisions of Non-Qualified Stock Options
Each Non-Qualified Stock Option granted under the Plan will
contain the provisions of Subsections 7.A, B, C, E and F above and, in
addition, such terms, conditions and restrictions as the Committee deems
to be reasonable and appropriate and in the best interests of the Company,
including the following:
A. Transfer. Each option by its terms will be exercisable,
during the lifetime of the optionholder to whom it is granted, only by the
optionholder and by any member of the optionholder's immediate family,
or the trust for the benefit of such member, to whom the option (or a
portion thereof) is assigned and will not be otherwise transferable except
by the laws of descent and distribution.
B. Termination of Employment/Retirement/Disability/ Death. Each
option will provide that if the employment of the optionholder is
terminated (whether or not in connection with the death or disability of
the optionholder), and the option has not otherwise expired or terminated
by its terms, then the option will expire if not exercised within one year
after termination of employment. If the optionholder's employment is
terminated for retirement (not related to a disability), and the option
has not otherwise expired or terminated by its terms, then the option will
expire if not exercised within three years after retirement.
Nevertheless, an option holder whose employment is terminated by reason of
conduct which the Committee determines to have been knowingly fraudulent,
deliberately dishonest, disloyal or willful misconduct, or who engages in
such conduct (including violation of any agreement with the Company) after
retirement, shall forfeit all rights under the option. The extent to
which an option may be exercised following an optionholder's termination
of employment or retirement is limited to the number of shares which the
optionholder could have purchased on the date of such termination or
retirement.
C. Withholding. Except for options granted to non-employee
directors, each option shall provide that the option holder shall agree to
pay to the Company upon exercise of the option all Federal, State and
Local taxes required to be withheld. The Committee may, nevertheless,
determine to withhold from the Stock to be issued that number of shares
valued at their fair market value at the time, that would satisfy the
amount required to be withheld.
D. Non-Employee Director Options. Each option granted to a
non-employee director shall provide that it may be exercised not less than
one year after grant.
Section 9. Government Regulations
The Plan, the options and the Stock under option will be subject
to all applicable Federal and State statutes, rules and regulations,
including, without limitation, all applicable Federal and State securities
laws. If, in the opinion of the Company's counsel, the transfer, issue or
sale of any shares of its Stock under the Plan is not lawful for any
reason, the Company will not be obliged to transfer, issue or sell any
Stock and, subject to Section 12, the Committee may amend the Plan or any
Option Agreement to conform to the requirements of applicable statutes,
rules and regulations.
<PAGE>
Section 10. Other Limitations
A. The granting of any option under this Plan will be solely at
the discretion of the Committee and neither the adoption of the Plan nor
any of the terms and provisions herein will give, or be construed to give,
any director, officer or other employee or other person any right to
participate in the Plan or to receive any options under it.
B. The adoption of the Plan and the granting of an option under
it will not constitute an understanding or agreement, express or implied,
upon the part of the Company to employ the recipient of the option for any
specified time.
Section 11. Adjustments
If there is any change in the Stock through the declaration of
stock dividends, or through recapitalization resulting in stock splits, or
combinations or exchanges of shares or otherwise, the number of shares
available for option and the shares subject to any option and the option
prices shall be appropriately adjusted by the Committee.
Section 12. Termination and Amendment of the Plan
The Board of Directors of the Company may at any time amend or
terminate the Plan. If not sooner terminated, the Plan will terminate
automatically three years from the effective date.
No amendment will adversely affect an option previously granted
hereunder. Unless holders of at least a majority of the outstanding
shares of stock approve, no amendment (except under Section 11) will
increase the maximum number of shares which may be delivered under the
Plan, change the class of persons eligible to receive options, reduce the
minimum option price hereinbefore specified, extend the maximum period
during which an option may be exercised, materially increase the benefits
accruing to eligible persons under the Plan, or otherwise effect a change
required by Section 16(b) of the 1934 Act, as amended, to be approved by
such majority.
With the consent of the affected option holder, the Committee may
amend outstanding options, provided, however, the amendment is consistent
with the Plan.
Section 13. Laws Governing
The validity and construction of the Plan and any Agreement
under it will be governed by the laws of the State of Delaware.
<PAGE>
PAYCHEX, INC. PROXY
-----------------------------------------------------------------------------
The undersigned hereby appoints B. THOMAS GOLISANO and G. THOMAS
CLARK, or any one of them, with full power of substitution, attorneys and
proxies to represent the undersigned at the Annual Meeting of Stockholders of
the Company to be held on October 5, 1995, and at any adjournment thereof,
with all the power which the undersigned would possess if personally present
to vote all shares of stock which the undersigned may be entitled to vote at
said meeting.
I. ELECTION OF DIRECTORS
[ ] FOR all Nominees [ ] WITHHOLD all Nominees
B. Thomas Golisano, G. Thomas Clark, Donald W. Brinckman, Steven D.
Brooks, Phillip Horsley, Grant M. Inman, Harry P. Messina, Jr. and
J.Robert Sebo
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CIRCLE SUCH
NOMINEE'S NAME. YOUR PROXY WILL BE VOTED FOR REMAINDER.)
II. AMENDMENT OF CERTIFICATE OF INCORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. ADOPTION OF PAYCHEX, INC. 1995 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
PLEASE DATE, SIGN AND RETURN IT IN THE ENCLOSED ENVELOPE. IF NOT OTHERWISE
MARKED, THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED "FOR" THE EIGHT
NOMINEES, PROPOSALS II AND III .
Dated: , 1995 Signed:
------------------- --------------------------------
(Name of Stockholder to be signed
exactly as it appears on this proxy)
<PAGE>
