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
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] 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)
- - ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
<PAGE>
[ ] 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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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
PAYCHEX
PAYCHEX, INC.
911 Panorama Trail South
Rochester, New York 14625-0397
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 2, 1997
To the Stockholders:
The Annual Meeting of Stockholders of Paychex, Inc., will be held at the
Rochester Riverside Convention Center, 123 East Main Street, Rochester, New
York on Thursday, October 2, 1997. 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
150,000,000 to 300,000,000; and
3. 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 4, 1997 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
John M. Morphy
Secretary
Rochester, New York
August 8, 1997
<PAGE>
PROXY STATEMENT
PAYCHEX, INC.
911 Panorama Trail South
Rochester, New York 14625-0397
The Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors ("Board") of Paychex, Inc. ("Company"), a
Delaware corporation, to be used at the Annual Meeting of Stockholders to be
held on Thursday, October 2, 1997, 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 has fixed the close of business on August 4,
1997 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 in the
following pages and FOR Proposal 2 as set forth in the Notice and described in
the following pages. 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.
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 not be specified on the proposal relating
to the election of directors, but abstention may be specified on Proposal 2.
Since Proposal 2 requires 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 no effect on the outcome of the
election of directors, but will have the same effect as a vote against
Proposal 2.
The Proxy Statement and Proxy are being mailed to stockholders on or about
August 8, 1997.
All applicable information provided in this Proxy Statement has been
restated to reflect the three-for-two stock splits in May 1997, May 1996 and
May 1995.
<PAGE>
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 on the following pages for
election.
If elected, each nominee will hold office until the Annual Meeting to be
held in 1998 and until his successor is elected and shall qualify.
The Board of Directors recommends the election of the eight nominees 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.
Nominees For Election
The following table sets forth certain information, as of June 30, 1997,
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.
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percentage
Served as Ownership of of
Principal Director Common Stock Common
Name of Nominee Age Occupation Since (1)(2) Stock
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. Thomas Golisano 55 Chairman, President & 1979 12,672,103 11.6
Chief Executive Officer
of Paychex, Inc.
Donald W. Brinckman 66 Chairman and Founder 1990 56,250 (3)
of Safety-Kleen Corp.
Steven D. Brooks 46 Private Investor 1995 3,750 (3)
G. Thomas Clark 59 Director 1980 401,820 (3)
Phillip Horsley 58 Managing Director of 1982 155,114 (3)
Horsley Bridge Partners
Grant M. Inman 55 Partner of Inman & Bowman 1983 199,425 (3)
Harry P. Messina, Jr. 64 Partner of Woods, Oviatt 1985 181,096 (3)
Gilman, Sturman & Clarke
LLP
J. Robert Sebo 61 Director 1979 1,962,950 1.8
</TABLE>
(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-123,102 shares owned by a foundation
of which he and Mr. Clark are trustees; Mr. Clark-206,321 shares,
including the same foundation shares; Mr. Horsley-5,437 shares; Mr.
Inman- 4,537 shares; Mr. Messina-122,782 shares; and Mr. Sebo-5,023
shares.
(2) This column also includes the following shares which may be acquired
within 60 days by exercise of options: Mr. Brooks- 3,750 shares; Mr.
Horsley-35,438 shares; Mr. Inman-35,438 shares; and Mr. Messina-35,438
shares.
(3) Percentage is less than 1%.
<PAGE>
Mr. Golisano founded Paychex, Inc., in 1971 and is Chairman, President and
Chief Executive Officer of the Company. He serves on the Board of Trustees of
Rochester Institute of Technology and on the boards of several privately-held
companies. He is former chairman of Greater Rochester Fights Back (a coalition
to combat illegal drugs and alcohol abuse), has served on the boards of
numerous non-profit organizations, and is founder of the B. Thomas Golisano
Foundation.
Mr. Brinckman is the founder and Chairman of Safety-Kleen Corp., which was
founded in 1968. He also serves on the boards of Sherman Health Systems,
Johnson Worldwide Associates, and Snap-On Incorporated.
Mr. Brooks is a private investor and strategic advisor to information
technology companies. From 1994 to 1996, he served as head of Global
Technology Investment Banking at Union Bank of Switzerland. From 1989 to 1994,
Mr. Brooks participated as a principal in two private investment partnerships,
Rainwater Inc. and The Powerhouse Group. Prior to 1991, Mr. Brooks served in
senior investment banking positions at Alex. Brown and Sons and Robertson
Stephens and Co., specializing in the information technology sector, and
practiced securities law at Davis Polk and Wardwell in New York City. At
present, Mr. Brooks holds seats on the Boards of Directors of QuickResponse
Services, Inc. and Veritas Software Corporation, as well as several
privately-held companies.
Mr. Clark retired as Sr. Vice President of Finance, Secretary and Treasurer
of Paychex, Inc., in October 1996. He joined Paychex in 1979 after spending
eighteen years in the commercial banking business. He currently is a member of
the Board of Directors of Magnetic Technologies Corp., and several
privately-held companies. He is also a director of Unity Health Systems and
the Rochester School of the Holy Childhood.
Mr. Horsley is the founder and Managing Director of Horsley Bridge
Partners, a financial services firm founded in 1983, focused on the management
of private equity investments for institutional investors.
Mr. Inman is co-founder and general partner of Inman & Bowman, a private
venture capital partnership formed in 1985, with $43.5 million of capital
under management. He also serves as a director of Lam Research Corporation and
InSite Vision, Inc., and several privately-held companies. Mr. Inman is also a
trustee of the University of California, Berkeley Foundation and is also a
trustee of the University of Oregon Foundation.
Mr. Messina has for more than five years been a senior partner in the law
firm of Woods, Oviatt, Gilman, Sturman & Clarke LLP, the Company's general
counsel. He also serves on the Advisory Board of M & T Bank, the Board of
Trustees of St. Joseph's Villa, and the Board of Directors of Rochester
Management, Inc., and other privately-held companies.
Mr. Sebo was elected to the Board of Directors in 1979 after holding many
sales and operations positions within the Company. Prior to his retirement in
1995 he was Senior Vice President/Director of Eastern Operations. He joined
Paychex, Inc., in 1974 and opened the Cleveland, Ohio office. For fourteen
years prior to that he held sales and marketing management positions in the
Cadillac Motor Car Division of General Motors Corporation.
<PAGE>
PROPOSAL 2 - AMENDMENT OF 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 recommends adoption of the proposal.
The Company presently is authorized to issue 150,000,000 shares of common
stock having a par value of $.01 per share. As of August 4, 1997 there were
__________ shares of common stock issued and outstanding. Of the remaining
shares, __________ shares are reserved for unexercised options granted to
employees and members of the Board from the 1987, 1992 and 1995 Stock
Incentive Plans and __________ shares are reserved for future grants under the
Company's 1995 Stock Incentive Plan.
From time to time, the Company has issued additional shares of common stock
for various purposes. During fiscal 1997, the Company issued 36,171,235
shares in a three-for-two stock split, 267,095 shares upon exercise of stock
options and 5,073,914 shares pursuant to mergers with National Business
Solutions, Inc. (4,401,744 shares), The Payroll Service, Inc. (82,781 shares)
and Olsen Computer Systems, Inc. (589,389 shares). During fiscal 1996, the
Company issued 260,700 shares for the acquisition of The Payroll Company, Inc.
(d/b/a Payday) and 746,850 shares in the merger with Pay-Fone Systems, Inc.
On July 10, 1997, the Board unanimously approved a resolution, subject to
stockholder approval at the Annual Meeting on October 2, 1997, to amend
Paragraph 4 of the Company's Certificate of Incorporation ("Certificate") to
increase the number of authorized shares of common stock from 150,000,000 to
300,000,000. 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 2, 1997.
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, 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. The Company has no knowledge that
any person intends to effect such a transaction.
<PAGE>
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, 1997,
Section 16 (a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with,
except for a report involving one transaction by Donald W. Brinckman and a
report involving one transaction by Harry P. Messina, Jr., each of which were
filed late by the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company met five times during the fiscal year
ended May 31, 1997 ("fiscal 1997"). No director attended fewer than 75% of
all meetings of the Board of Directors held during fiscal 1997 or of all
meetings of any Committee upon which such director served during fiscal 1997.
Non-employee directors are paid $6,000 annually plus $1,000 for each Board
meeting and $500 for each Committee meeting attended.
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 1997.
The Audit Committee is comprised of Messrs. Brinckman, Brooks, Clark and
Messina. The Audit Committee held three meetings during fiscal 1997. The
Committee is responsible for monitoring Management's standards and practices
for financial reporting and the effectiveness of the Company's system of
internal control.
The Compensation Committee is comprised of Messrs. Brinckman, Horsley,
Inman and Sebo. The Committee met once during fiscal 1997. The Committee
makes recommendations with respect to the amount of officers' salaries and
grants of stock options to the Company's employees.
The Investment Committee is comprised of Messrs. Brooks, Horsley and Inman.
The Committee met once during fiscal 1997. The Committee is responsible for
setting and reviewing investment policies and reviewing the investment
portfolio's performance, market risks and credit risks.
There is no standing Nominating Committee of the Board of Directors.
Stockholders who wish to suggest nominees for election as directors at future
annual meetings should do so in writing addressed to the Chairman.
<PAGE>
OTHER EXECUTIVE OFFICERS
Daniel A. Canzano, 43, 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.
William Kuchta, 50, joined the Company in February 1995 and was elected
Vice President, Organizational Development in April 1996. Prior to joining
the Company (1993 to 1995), Mr. Kuchta was principal of his own consulting
firm and served as Vice President of Human Resources of Fisons Corporation
from 1989 to 1993.
John M. Morphy, 49, joined the Company in October 1995 and was elected Vice
President, Director of Finance in July 1996 and elected Chief Financial
Officer and Secretary in October 1996. Prior to joining the Company, Mr.
Morphy served as Chief Financial Officer and in other senior management
capacities for over 10 years at Goulds Pumps, Incorporated.
Eugene R. Polisseni, 57, has served as Vice President, Marketing since
April 1989. Mr. Polisseni has been with the Company since 1977 and during
that period served in various capacities.
Diane Rambo, 46, was elected Vice President, Electronic Network Services in
October, 1994. Ms. Rambo has been with the Company since August 1980 and has
served as Director of Electronic Network Services and as a Branch Manager.
Edmund S. Russo, 60, was elected Vice President, Director of Western
Operations in April 1989 and Vice President, 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.
Walter Turek, 45, 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.
In May 1997, John T. Carlen, 49, resigned from the Company to pursue other
interests. Mr. Carlen 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.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
Compensation of Chief Executive Officer
The Compensation Committee ("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, Inc.
Mr. Golisano's substantial stock position in the Company assures the
Committee of his close identification with the interests of its stockholders.
His compensation has been limited to his salary and participation in the
Officer Incentive Program discussed on the following page. Each recommended
adjustment is 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 fiscal 1997 compensation (including base salary and bonus
under the Officer Incentive Program) was 19.3% over that in fiscal 1996. Mr.
Golisano's base salary and bonus was based in part on the Company's
performance during fiscal 1997. The Company's fiscal 1997 total revenue
increased 29.7%, dividends paid per share increased 29.4%, earnings per share
increased 37.3%, and its stock price increased 25.3% over the prior year's
figures.
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 1997, 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.
<PAGE>
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 net income growth,
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 Messrs. Brinckman, Horsley, Inman
and Sebo. 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 OFFICER COMPENSATION
The following table sets forth all compensation received by the Company's
Chief Executive Officer and the Company's five other most highly compensated
Executive Officers during the last three fiscal years ended May 31, 1997, 1996
and 1995, respectively.
<TABLE>
<CAPTION>
Summary Compensation Table
- - ----------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
- - ----------------------------------------------------------------- ------------
Number of
Shares
Underlying
Options All Other
Name and Principal Position Year Salary Bonus Granted Compensation (1)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. Thomas Golisano 1997 $490,625 $150,000 0 $5,328
Chairman, President & 1996 $465,625 $ 71,250 0 $4,797
Chief Executive Officer 1995 $440,625 $ 59,850 0 $4,153
John T. Carlen (2) 1997 $284,375 $ 87,000 30,000 $4,563
Executive Vice President 1996 $269,375 $ 41,250 33,750 $4,185
1995 $246,875 $ 34,580 67,500 $3,686
Edmund S. Russo 1997 $232,500 $ 71,100 0 $4,926
Vice President, 1996 $221,250 $ 33,750 15,750 $5,081
Director of Operations 1995 $201,875 $ 28,595 33,750 $5,390
Walter Turek 1997 $212,500 $109,300 7,500 $4,474
Vice President, Sales 1996 $199,375 $ 59,500 15,750 $4,180
1995 $183,625 $ 63,452 20,250 $2,967
Eugene R. Polisseni 1997 $212,500 $ 65,100 0 $4,902
Vice President, Marketing 1996 $201,250 $ 30,750 15,750 $5,044
1995 $186,375 $ 25,935 20,250 $5,184
John M. Morphy (3) 1997 $199,375 $ 61,500 22,500 $3,782
Vice President, Chief
Financial Officer & Secretary
</TABLE>
(1) Represents Company contributions to the Paychex, Inc. 401(k) Incentive
Retirement Plan as well as premiums paid by the Company for group term
life insurance.
(2) Resigned May 1997.
(3) Began with the Company in October 1995 and elected as Vice President,
Director of Finance in July 1996 and elected Chief Financial Officer and
Secretary in October 1996.
<PAGE>
1997 Option Grants Table
The following table sets forth stock options granted to the Company's Chief
Executive Officer and the Company's five other most highly compensated
Executive Officers during fiscal 1997. Under Securities and Exchange
Commission ("SEC") 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
Number of % of Total Assumed Annual Rates of
Shares Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term (2)
Options Employees Price Expiration ------------------------
Name Granted (1) in 1997 Per Share Date 5% 10%
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B. Thomas Golisano 0 0% $ 0 $ 0 $ 0
John T. Carlen (3) 30,000 2.3% $40.67 10/3/06 $767,252 $1,944,367
Edmund S. Russo 0 0% $ 0 $ 0 $ 0
Walter Turek 7,500 .6% $40.67 10/3/06 $191,813 $ 486,092
Eugene R. Polisseni 0 0% $ 0 $ 0 $ 0
John M. Morphy 22,500 1.7% $40.67 10/3/06 $575,439 $1,458,276
</TABLE>
(1) Options were granted from the Paychex, Inc. 1995 Stock Incentive Plan
established for Directors, Officers and 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 after
two years in cumulative annual installments of 33 1/3% and expire ten
(10) years from the date of grant.
(2) Represents potential 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, net 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.
(3) Mr. Carlen resigned May 31, 1997. Therefore, the 30,000 options granted
will be forfeited in accordance with the terms of the 1995 Stock
Incentive Plan.
<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 five other most highly compensated
Executive Officers during fiscal 1997, 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, 1997.
<TABLE>
<CAPTION>
Number of Shares
Number Underlying Unexercised Value of Unexercised
of Shares Options at In-The-Money Options at
Acquired Net Value May 31, 1997 May 31, 1997 (2)
on Realized -------------------------------------------------------------
Name Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B. Thomas Golisano 0 $0 0 0 $ 0 $ 0
John T. Carlen (3) 0 $0 56,250 0 $ 1,496,352 $ 0
Edmund S. Russo 0 $0 103,220 55,125 $ 3,172,414 $1,345,885
Walter Turek 0 $0 302,233 53,625 $10,018,362 $1,110,468
Eugene R. Polisseni 0 $0 19,575 42,075 $ 546,881 $ 984,630
John M. Morphy 0 $0 0 22,500 $ 0 $ 0
</TABLE>
(1) Represents market value of the Company's common stock at exercise date
less the exercise price.
(2) Represents market value ($36.75 per share) of the Company's common stock
at May 31, 1997, less the exercise price.
(3) Mr. Carlen resigned on May 31, 1997, and under the terms of the 1995
Stock Incentive Plan, the exercisable options will be forfeited after 90
days if not exercised. All unvested options at May 31, 1997, will be
forfeited in accordance with the terms of the 1995 Stock Incentive Plan.
<PAGE>
Performance Graph
The following graph shows a five-year comparison of the total cumulative
returns of investing $100 on May 31, 1992 in Paychex, Inc., common stock, the
S&P Midcap 400 Index, the S&P Services (Data Processing) Super Composite ("S&P
S(DP)") Index and the S&P Computer Software and Services ("S&P CS&S") Index.
The S&P Midcap 400 Index represents a broad market group in which the Company
participates. The S&P S(DP) Index was chosen as having a representative peer
group of companies for the 1997 Proxy Statement, and includes Paychex, Inc.
In prior year Proxy Statements, the S&P CS&S Index was used as the peer group
index. In July 1996, Paychex, Inc.'s direct competitors listed as peer
companies in the S&P CS&S Index were replaced, and included in a new index:
the S&P S(DP) Index. Therefore, the S&P S(DP) Index was chosen as the more
appropriate index for the 1997 performance graph. The S&P CS&S Index is shown
for transitional purposes only, as required by the Securities and Exchange
Commission, and does not include a representative peer group of companies for
the 1997 Proxy Statement. All comparisons of stock price performance shown
assumes reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT
POINT
May 31, 1992 1993 1994 1995 1996 1997
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paychex, Inc. $100 $160 $193 $269 $605 $763
S&P CS&S $100 $134 $161 $226 $316 $529
S&P S(DP) $100 $115 $135 $173 $242 $239
S&P Midcap 400 $100 $119 $123 $140 $180 $213
</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 June 30, 1997.
Amount and Nature of Percent of
Name and Address Beneficial Ownership Class (1)
- - ------------------------------------------------------------------------------
More than 5% owners:
B. Thomas Golisano 12,672,103 11.6
911 Panorama Trail South (2)
Rochester, New York 14625
Provident Investment Counsel, Inc. 5,634,356 5.2
300 North Lake Ave. (3)
Pasadena, California 91101
Putnam Investments 5,561,615 5.1
One Post Office Square (4)
Boston, Massachusetts 02109
Nominees for Election 15,509,406 14.2
(5)
Five Highest Paid Executive
Officers Other Than CEO(6):
John T. Carlen 56,250 (7)
Edmund S. Russo 124,508 (7)
Walter Turek 380,816 (7)
Eugene R. Polisseni 2,342,659 2.1
John M. Morphy 799 (7)
All Directors and Officers of 18,546,594 17.0
the Company as a Group (8)
(1) Based upon the number of shares of common stock outstanding as of June
30, 1997, including shares which may be acquired within 60 days by
exercise of options.
(2) See Footnote (1) to the table under "Nominees for Election" with respect
to Mr. Golisano.
(3) As of April 30, 1997, based on a Schedule 13G filed with the Securities
and Exchange Commission by Provident Investment Counsel, Inc., an
investment adviser. According to the Schedule 13G, Provident Investment
Counsel, Inc., has sole investment power with respect to all such shares
and sole voting power with respect to 3,880,850 of such shares.
(4) These securities are owned by Putnam Investments, Inc. and through two
wholly-owned registered investment advisors, Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc.
(5) See page 2 for the list of Directors & Nominees & Footnotes (1) and (2).
(6) The amount for each Executive Officer includes the following shares which
may be acquired within 60 days by exercise of options: John Carlen-
56,250 shares; Edmund S. Russo-103,220 shares; Walter Turek-302,233
shares; and Eugene R. Polisseni- 19,575 shares.
(7) Percentage is less than 1%.
(8) See Footnotes (1) and (2) to the table under "Nominees for Election." In
addition, the total includes the following shares which may be acquired
within 60 days by exercise of options: Daniel A. Canzano-87,716 shares;
John Carlen-56,250 shares; Eugene R. Polisseni-19,575 shares; Diane
Rambo-15,450 shares; Edmund S. Russo-103,220 shares; and Walter
Turek-302,233 shares.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant since 1983 has been Ernst &
Young LLP. Management expects to re-appoint this firm for fiscal 1998.
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
so desire and will 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 in this Proxy
Statement. 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 judgment.
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 10, 1998.
BY THE ORDER OF THE BOARD OF DIRECTORS
John M. Morphy
Secretary
Rochester, New York
August 8, 1997
<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 300,000,000 shares of common stock
and the par value of each of such shares is $.01, amounting in
the aggregate to $3,000,000.
<PAGE>
PAYCHEX, INC.
PROXY
The undersigned hereby appoints B. THOMAS GOLISANO and JOHN M. MORPHY, 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 2, 1997, and at any adjournment thereof, with all the
powers 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 THE REMAINDER.)
II. AMENDMENT OF CERTIFICATE OF INCORPORATION
[ ] 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,
AND "FOR" PROPOSAL II.
Dated: ______________________________, 1997
Signed: ______________________________
(Name of Stockholder to be signed exactly as it appears on this proxy)
