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.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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PAYCHEX
August 16, 1999
Dear Paychex Stockholder:
The Board of Directors cordially invites you to attend our Annual Meeting of
Stockholders on Thursday, October 7, 1999, at the Rochester Riverside
Convention Center, 123 East Main Street, Rochester, New York.
This booklet includes the formal notice of the meeting and the proxy
statement. The proxy statement tells you about the agenda items and the
procedures for the meeting. It also provides certain information about the
Company, its Board of Directors and its Senior Management.
This year, you may vote by Internet, telephone, written proxy, or written
ballot at the meeting. We encourage you to use the Internet because it is the
most cost-effective way to vote.
We hope you will be able to attend the Annual Meeting, and would like to take
this opportunity to remind you that your vote is important. If you need
special assistance at the meeting, please contact the Secretary of the Company
at (716) 385-6666, or write to Paychex, Inc., c/o Secretary, 911 Panorama
Trail South, Rochester, New York 14625-0397.
Sincerely,
B. Thomas Golisano
Chairman, President &
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
PAYCHEX, INC.
911 Panorama Trail South
Rochester, New York 14625-0397
To our 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 7, 1999. 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 the proposal to amend the Certificate of
Incorporation to increase the authorized shares of common stock from
300,000,000 to 600,000,000;
3. To consider and act upon the proposal to amend the 1998 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 9, 1999, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting.
The Board of Directors extends a cordial invitation to all stockholders to
attend the meeting. However, whether or not you plan to attend the meeting,
please vote by proxy in accordance with the instructions on the proxy card (if
you received the proxy materials in paper form), or voting instruction form
(if you received the proxy materials in paper form from a broker or bank), or
that you have received through electronic mail. This year, you can vote your
proxy or voting instruction form over the Internet, use a toll-free telephone
number or by mail in the postage paid envelope provided.
Signing and returning the proxy card or submitting your proxy via Internet or
by telephone does not affect your right to vote in person if you attend the
Annual Meeting, and your shares are registered in your name.
By order of the Board of Directors,
John M. Morphy
Secretary
Rochester, New York
August 16, 1999
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS OF PAYCHEX, INC.
TO BE HELD ON OCTOBER 7, 1999
911 Panorama Trail South
Rochester, New York 14625-0397
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Paychex, Inc. (the
"Company"), a Delaware corporation, to be used at the Annual Meeting of
Stockholders to be held on Thursday, October 7, 1999, at 10:00 a.m. for the
purposes set forth in the foregoing Notice of Annual Meeting.
The Board has fixed the close of business on August 9, 1999, 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 and 3 as 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, who are elected by a plurality of
the votes cast, 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 Proposals 2 and 3. Since
Proposals 2 and 3 require the approval of a majority of the shares present, or
represented by proxy, and entitled to vote at the meeting, abstentions will
have the effect of a vote AGAINST these proposals. 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 Proposals 2 and 3.
The 1999 Annual Report, Proxy Statement and Proxy are being mailed to
stockholders on or about August 16, 1999.
All applicable information provided in this Proxy Statement has been restated
to reflect the three-for-two stock splits effected in the form of 50% stock
dividends distributed in May 1999.
PROPOSAL 1 - ELECTION OF DIRECTORS
Eight directors are to be elected to the Board of Directors. The Board of
Directors has nominated for election the persons listed below. If elected,
each nominee will hold office until the Annual Meeting to be held in 2000 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.
The following biographies set forth certain information with respect to the
nominees for election as directors of the Company, none of whom is related to
any other nominee or executive officer.
B. Thomas Golisano, 57, a director since 1979, founded Paychex, Inc., in 1971
and is Chairman, President, and Chief Executive Officer of the Company. He
serves on the Board of Trustees of the Rochester Institute of Technology and
is a member of the Board of Directors of Iron Mountain Corporation and several
privately held companies. He is former chairman of Greater Rochester Fights
Back (a coalition to combat illegal drugs and alcohol abuse), has served as a
member of the Board of Directors of numerous non-profit organizations, and is
founder of the B. Thomas Golisano Foundation.
Steven D. Brooks, 48, a director since 1995, joined Broadview Capital
Partners, a private equity firm focused on investments in the technology
sector, in February 1999, as Managing Director. From 1997 to 1999, he served
as Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation.
From 1996 to August 1997, he was a private investor and a consultant to
technology companies. From 1994 to 1996, he served as Managing Director and
head of Global Technology Investment Banking at Union Bank of Switzerland
Securities, LLC. He is a member of the Board of Directors of QRS, Inc., an
electronic commerce company, and VERITAS Software Corporation, a storage
management software company, as well as several privately held companies.
G. Thomas Clark, 61, a director since 1980, retired as Senior 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 is a member of the Board of Directors of Unity Health Systems,
the Rochester School of the Holy Childhood, and the Heritage Christian Home
Foundation, as well as several privately held companies.
David J. S. Flaschen, 43, a director since July 8, 1999, is the President and
Chief Executive Officer of Thomson Financial, an information services company
focused on the financial industry. Previously, he served as Chairman and
Chief Executive Officer of Donnelley Marketing, Inc., a consumer information
services company. Prior to 1995, he was with Dun & Bradstreet for ten years
as the President and Chief Operating Officer of A. C. Nielson, North America,
and held senior management positions at IMS and DataQuest. Prior to his
business career, Mr. Flaschen was a professional athlete in the North American
Soccer League and a co-founder of the Players Association.
Phillip Horsley, 60, a director since 1982, is the founder and Managing
Director of Horsley Bridge Partners, formed in 1983, a financial services firm
focused on the management of private equity investments.
Grant M. Inman, 57, a director since 1983, is the founder and President of
Inman Investment Management, a private venture capital investment company
formed in 1998. Prior to 1998, he co-founded and was general partner of Inman
& Bowman, a private venture capital partnership formed in 1985. He is a
member of the Board of Directors of the Lam Research Corporation, MySoftware
Co., Wind River Systems, Inc., and several privately held companies. Mr.
Inman is a trustee of the University of California, Berkeley Foundation and
the University of Oregon Foundation.
Harry P. Messina, Jr., 66, a director since 1985, has been a partner for more
than thirty years in the law firm of Woods, Oviatt, Gilman, Sturman & Clarke
LLP, the Company's general counsel. He serves on the Advisory Board of M & T
Bank, the Board of Trustees of St. Joseph's Villa, and is a member of the
Board of Directors of Rochester Management, Inc., as well as several privately
held companies.
J. Robert Sebo, 63, a director since 1979, retired as Senior Vice
President/Director of Eastern Operations of Paychex, Inc., in December 1994,
where he also held many sales and operations positions within the Company. In
1974, he started his own Paychex franchise operation in Cleveland, Ohio. For
fourteen years prior to that he held sales, marketing, and business management
positions in the Cadillac Motor Car Division of General Motors Corporation.
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
On July 8, 1999, the Board unanimously approved a resolution, subject to
stockholder approval, to amend Paragraph 4 of the Company's Certificate of
Incorporation ("Certificate") to increase the number of authorized shares of
common stock from 300,000,000 to 600,000,000. 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 shares of
common stock present in person or represented by proxy at the meeting and
entitled to vote is required to adopt the proposed amendment. The amendment,
if approved by the stockholders, will take effect at the close of business on
October 7, 1999.
The Company presently is authorized to issue 300,000,000 shares of common
stock having a par value of $.01 per share. As of August 9, 1999, 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 under the 1987, 1992, 1995, and 1998 Stock
Incentive Plans and ________ shares are reserved for future grants under the
Company's 1998 Stock Incentive Plan.
From time to time, the Company has issued additional shares of common stock
for various purposes. During fiscal 1999, the Company issued 82,106,000
shares in a three-for-two stock split, and 1,032,000 shares upon exercise of
stock options.
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 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 will have the authority to determine the terms of the issuance and,
generally, would not seek further authorization by vote of the stockholders
unless such authorization is 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.
PROPOSAL 3 - AMENDMENT TO THE PAYCHEX, INC. 1998 STOCK INCENTIVE PLAN
On July 8, 1999, the Board unanimously approved a resolution, subject to
stockholder approval, to amend the Paychex, Inc. 1998 Stock Incentive Plan
("the Plan").
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. Compensation from the
exercise of employee stock options will generally be exempt from the limit on
tax deductibility if the plan under which the options are granted includes
certain provisions. One of the provisions is a statement of the maximum
number of shares with respect to which options may be granted during a
specified period to any employee.
The Paychex, Inc. 1998 Stock Incentive Plan as approved by the stockholders on
October 1, 1998, did not include language regarding the maximum number of
shares with respect to which options may be granted during a specified period
to any employee. Accordingly, the Board is recommending an amendment to the
Plan to specify a per-employee limitation.
The pertinent provisions of the amendment to the Plan are set forth in Exhibit
B to this Proxy Statement. The affirmative vote of holders of a majority of
the shares of common stock present in person or represented by proxy at the
meeting and entitled to vote is required to adopt the proposed amendment. The
amendment, if approved by the stockholders, will take effect at the close of
business on October 7, 1999.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company met four times during the fiscal year
ended May 31, 1999 ("fiscal 1999"). No director attended fewer than 75% of
all meetings held of the Board of Directors and of any Committee upon which
such director served during fiscal 1999. Non-employee directors are paid
$6,000 annually plus $1,000 for each Board meeting attended and $500 for each
Committee meeting attended. The Board has four standing committees.
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. The Committee did not meet during fiscal 1999.
The Audit Committee is comprised of Messrs. Brooks, Clark, Horsley and Inman.
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 Committee held two meetings during fiscal
1999.
The Compensation Committee is comprised of Messrs. Flaschen, Horsley, and
Inman. The Committee makes recommendations with respect to the amount of
officers' salaries and grants of stock options to the Company's employees.
The Committee met once during fiscal 1999.
The Investment Committee is comprised of Messrs. Brooks, Horsley and Inman.
The Committee is responsible for setting and reviewing investment policies and
reviewing the investment portfolio's performance, market risks and credit
risks. The Committee met once during fiscal 1999.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee ("Committee") and the Board have instituted an
Officer Incentive Program whereby a portion of the compensation of senior
executive officers, including the Chief Executive Officer ("CEO"), is
incentive-based and dependent upon the Company's performance. The performance
factors, primarily year-over-year net income growth, and the bonus percentage
of base compensation are established for the new year within 45 days after the
end of the prior fiscal year.
The Committee's recommendations are presented to the Board for discussion and
decision. In fiscal 1999, the Board approved all recommendations of the
Committee.
Compensation of Chief Executive Officer
The Committee recommends to the Board the compensation to be paid to the CEO.
In performing that function, the Committee reviews the range and components of
compensation paid to CEOs of other public companies. In particular, the
Committee looks to those public companies whose size and performance with
respect to revenue, profitability 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 previous page. Each recommended adjustment
is reflective in part of the Committee's evaluation of the Company's
performance in the three areas previously discussed 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 1999 compensation (including base salary and bonus under
the Officer Incentive Program) was a 20% increase over fiscal 1998's
compensation. Mr. Golisano's bonus was based on the Company's performance
during fiscal 1999. The Company's fiscal 1999 payroll client base increased
10%, service revenues increased 21%, net income increased 36%, diluted
earnings per share increased 37%, and cash dividends per common share
increased 47% over the prior year's figures.
Compensation of Other Executive Officers
Recommended compensation for senior executives other than the CEO is
determined by the 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 the award of stock options under the Company's Stock Incentive Plan.
Company performance is also considered.
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 Committee has carefully
considered the impact of this provision. 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 (see Proposal 3 above). 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 Committee is comprised of Messrs. Flaschen, Horsley, and Inman. All
members of the Committee are non-employees of the Company. None of the
Company's executive officers serves on the board of any other entity that
employs a member of the Committee.
OTHER EXECUTIVE OFFICERS OF THE COMPANY
Daniel A. Canzano, 45, 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 G. Kuchta, Ed. D., 52, joined the Company in February 1995 and was
elected Vice President, Organizational Development in April 1996. From 1993
to 1995, Mr. Kuchta was principal of his own consulting firm, and from 1989 to
1993, he served as Vice President of Human Resources of Fisons Corporation.
John M. Morphy, 52, 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, 59, has served as Vice President, Marketing since April
1989, and for the past several years, has managed the Company's HRS-PEO
division. Mr. Polisseni has been with the Company since 1977 and during that
period served in various capacities.
Diane Rambo, 48, 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.
Walter Turek, 47, 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
officers and beneficial owners of more than 10% of the Company's common stock
to file with the Securities and Exchange Commission (SEC) reports of
transactions in the stock. Because of the complexity of the rules, the
Company provides assistance with filing such reports for those reporting
persons who so requested and agreed to advise the Company promptly of changes
in the ownership of the Company's equity securities.
Based solely on the filings made with the SEC, the Company believes that
during the fiscal year ended May 31, 1999, 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 a gift of
3,000 shares of common stock by Mr. Clark, which was filed with the SEC one
day late.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth all compensation received by the Company's
Chief Executive Officer and the Company's four other most highly compensated
executive officers during the last three fiscal years ended May 31, 1999, 1998
and 1997, respectively.
Summary Compensation Table
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Long-Term
Annual Compensation Compensation
------------------- ------------
Number of
Common
Shares
Underlying
Options All Other
Name and Principal Year Salary Bonus Granted Compensation
Position (1)
- ----------------------- ---- -------- -------- ----------- ------------
B. Thomas Golisano 1999 $594,230 $240,000 0 $4,800
Chairman, President & 1998 $531,250 $165,000 0 $4,600
Chief Executive Officer 1997 $490,625 $150,000 0 $4,750
Walter Turek 1999 $274,810 $112,000 13,500 $4,534
Vice President, Sales 1998 $228,250 $112,100 33,750 $4,300
1997 $212,500 $109,300 16,875 $4,224
Eugene R. Polisseni 1999 $248,270 $100,000 13,500 $4,702
Vice President, Marketing 1998 $228,250 $70,500 20,250 $4,978
1997 $212,500 $65,100 0 $4,652
John M. Morphy 1999 $235,925 $95,200 27,000 $4,754
Vice President, Chief 1998 $214,375 $66,000 45,000 $4,940
Financial Officer & 1997 $199,375 $61,500 50,625 $3,548
Secretary
Daniel A. Canzano 1999 $223,615 $90,000 13,500 $4,693
Vice President, 1998 $207,000 $63,900 20,250 $4,953
Information Technology 1997 $192,500 $59,100 20,250 $4,652
(1) The amounts reported in this column consist solely of the Company's
matching contributions under the Paychex, Inc. 401(k) Incentive Retirement
Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth stock options granted to the Company's Chief
Executive Officer and the Company's four other most highly compensated
executive officers during fiscal 1999. Under 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's stock at a future date, which may or may not correspond
to the projections below.
Individual Grants
---------------------------------------- Potential Realizable
Value at
Number of % of Assumed Annual Rates
Common Total of
Shares Options Stock Price
Underlying Granted Exercise Appreciation
Options to Price for Option Term (2)
Granted Employees Per Expiration ---------------------
Name (1) in 1999 Share Date 5% 10%
- --------------- ---------- --------- -------- ---------- ---------- ----------
B. T. Golisano 0 0% $0 $0 $0
W. Turek 13,500 1.8% $28.50 7/9/2008 $241,967 $613,192
E. R. Polisseni 13,500 1.8% $28.50 7/9/2008 $241,967 $613,192
J. M. Morphy 27,000 3.6% $28.50 7/9/2008 $483,934 $1,226,385
D. A. Canzano 13,500 1.8% $28.50 7/9/2008 $241,967 $613,192
(1) Non-qualified stock options were granted under the Paychex, Inc. 1995
Stock Incentive Plan. Options are granted at prices not less than 100% of the
fair market value of the common stock at the date of grant. The options
granted are exercisable after two years in cumulative annual installments of
33 1/3% and expire after a term of ten (10) years from the date of grant.
(2) In accordance with SEC rules, these columns show potential realizable
values net of the option exercise price, but before any potential income
taxes, assuming the market price of the Company's common stock appreciates
from the date of grant over a period of ten years at the annualized rates of
five (5) and ten (10) percent, respectively. If the common stock price does
not increase above the exercise price at the time of the exercise, realized
value to the named executives from these stock options will be zero.
AGGREGATED OPTION EXERCISES IN 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 four other most highly compensated
executive officers during fiscal 1999, and the number and value of all
unexercised options at May 31, 1999. The value of "in-the-money" options
refers to options having an exercise price that is less than the market price
of the Company's stock at May 31, 1999.
<TABLE>
<CAPTION>
Number
of Number of Common Shares Value of
Common Underlying Unexercised Unexercised
Shares Net Options at In-The-Money Options at
Acquired Value May 31, 1999 May 31, 1999 (2)
on Realized ------------------------- -------------------------
Name Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
- --------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
B. T. Golisano 0 $0 0 0 $0 $0
W. Turek 414,733 $11,849,230 353,889 70,313 $9,300,034 $800,307
E. R. Polisseni 0 $0 126,903 45,563 $3,131,239 $505,923
J. M. Morphy 15,000 $170,139 1,875 105,750 $21,658 $968,340
D. A. Canzano 42,367 $1,324,174 259,143 59,063 $6,497,725 $661,860
</TABLE>
(1) Represents market value of the Company's common stock at exercise date
less the exercise price.
(2) Represents the difference between the exercise price of the stock options
and the $29.625 per share closing price of the Company's common stock on May
28, 1999 (the last day of trading for the fiscal year ended May 31, 1999) for
all in-the-money options held by each named executive. The in-the-money stock
option exercise prices range from $.89 per share to $28.50 per share. These
stock options were granted at exercise prices equal to the fair market value
of the stock on the date of grant.
PERFORMANCE GRAPH
The following graph shows a five-year comparison of the total cumulative
returns of investing $100 on May 31, 1994, in Paychex, Inc. common stock, the
S&P Services (Data Processing) Super Composite (the "S&P S(DP)") Index, the
S&P Midcap 400 Index, and the S&P 500 Index. The S&P S(DP) Index includes a
representative peer group of companies, and includes Paychex, Inc. The S&P
Midcap 400 Index represents a broad market group of companies with an average
market capitalization, which included Paychex, Inc. until September 1998.
Since September 1998, the Company has been a participant in the S&P 500 Index,
a market group of companies with a larger than average market capitalization.
The S&P Midcap 400 Index is shown for transitional purposes. All comparisons
of stock price performance shown assume reinvestment of dividends.
Measurement
Point
May 31, 1994 1995 1996 1997 1998 1999
Paychex, Inc. $100 $139 $314 $396 $586 $729
S&P S(DP) $100 $128 $179 $177 $203 $244
S&P Midcap 400 $100 $114 $146 $172 $224 $250
S&P 500 $100 $120 $154 $200 $261 $316
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The following table sets forth information, based upon reports filed by such
persons with the SEC as of July 31, 1999, with respect to the beneficial
ownership of common stock of the Company by each beneficial owner of more than
5% of the common stock, by each director and nominee for director of the
Company, by each of the executive officers of the Company named in the Summary
Compensation Table and by all directors and executive officers of the Company
as a group. Under the rules of the SEC, "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.
Of Shares Of Shares
Beneficially Beneficially
Amount of Owned, Shares Owned, Shares
Beneficial That May Be Disclaimed as to
Ownership of Percent of Acquired Within Beneficial
Name Common Stock Class (1) 60 Days Ownership (2)
- ------------------- ------------ ---------- --------------- ----------------
More than 5%
owners:
B. Thomas
Golisano 26,962,349 10.9%
911 Panorama
Trail South
Rochester,
New York 14625
Janus Capital 16,281,448 6.6%
Corporation
100 Fillmore Street
Denver, CO 80206
Directors:
B. Thomas
Golisano 26,962,349 10.9%
Steven D. Brooks 36,000 (3) 33,750
G. Thomas Clark 363,900 (3) 172,616
David J. S.
Flaschen 1,000 (3)
Phillip Horsley 262,039 (3) 79,737
Grant M. Inman 275,714 (3) 63,282 7,500
Harry P.
Messina, Jr. 185,891 (3) 79,737 52,807
J. Robert Sebo 3,837,932 1.6% 11,301
Named Executive
Officers:
Walter Turek 934,636 (3) 353,889
Eugene R.
Polisseni 5,290,617 2.1% 126,903 624,853
John M. Morphy 3,672 (3) 1,875
Daniel A. Canzano 312,559 (3) 259,143 225
All Directors and
Officers of the
Company as a
Group (15 persons) 38,577,934 15.6% 1,094,129 869,302
(1) Based upon the number of shares of common stock outstanding and deemed
outstanding as of July 31, 1999, including shares that may be acquired within
60 days by exercise of options.
(2) Included in this column are shares with respect to each individual which
are directly owned by certain relatives with whom they are presumed to share
voting and/or investment power, and as to which the individual disclaims
beneficial ownership.
(3) Indicates percentage is less than 1%.
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 year 2000.
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 Company will pay the cost of solicitation of Proxies. 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
The Company must receive stockholder proposals for inclusion in the Proxy
Statement for the next Annual Meeting of Stockholders at its executive offices
on or before April 19, 2000.
By order of the Board of Directors,
John M. Morphy
Secretary
Rochester, New York
August 16, 1999
EXHIBIT A
AMENDMENT
TO THE
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 600,000,000 shares of common stock and the par value of
each of such shares is $.01, amounting in the aggregate to $6,000,000.
EXHIBIT B
AMENDMENT TO PAYCHEX, INC.
1998 STOCK INCENTIVE PLAN
Section 5 of the Paychex, Inc. 1998 Stock Incentive Plan shall be amended by
adding the following language to the end of paragraph A:
"In no event shall the maximum number of shares with respect to which options
may be granted to any employee during a fiscal year exceed 100,000. This
maximum number of shares may be adjusted to reflect the effects of a corporate
transaction as defined in Section 4c."
PAYCHEX, INC.
PROXY
The undersigned hereby appoints B. THOMAS GOLISANO and JOHN M. MORPHY, or
either 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 7, 1999, 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, Steven D. Brooks, G. Thomas Clark, David J. S. Flaschen,
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 TO THE CERTIFICATE OF INCORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. AMENDMENT OF THE 1998 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,
AND "FOR" PROPOSALS II AND III.
Dated: ______________________________, 1999
Signed: ______________________________
(Name of Stockholder to be signed exactly as it appears on this proxy)
