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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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)
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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[ ] Fee paid previously with preliminary materials.
[ ] 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:
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Paychex
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Notice of 2001 Annual Meeting and Proxy Statement
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Paychex, Inc.
911 Panorama Trail South
Rochester, New York 14625-0397
Paychex
August 24, 2001
Dear Paychex Stockholder:
The Board of Directors cordially invites you to attend our Annual Meeting of
Stockholders on Thursday, October 11, 2001 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 executive officers.
It is important that your shares be represented at the meeting. Whether or not
you plan to attend the meeting, you are encouraged to vote. 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,
/s/ B. Thomas Golisano
- ----------------------
B. Thomas Golisano
Chairman, President &
Chief Executive Officer
Paychex, Inc.
911 Panorama Trail South - Rochester, New York 14625-0397
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Time: 10:00 a.m. on Thursday, October 11, 2001. Continental
breakfast will be available from 9:00 a.m. to 10:00 a.m.
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Location: Rochester Riverside Convention Center
123 East Main Street
Rochester, NY 14604
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Items of Business: (1) To elect seven members of the Board of Directors for
one-year terms; and
(2) To transact such other business as may properly come
before the meeting.
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Record Date: Stockholders of record as of the close of business on August
13, 2001 are entitled to notice of, and to vote at, the
meeting.
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Proxy Voting: Whether or not you plan to attend the meeting, it is
important that your shares be represented and voted at the
meeting. Please vote in one of these ways:
(1) Call the toll-free telephone number shown on your proxy
card;
(2) Visit the Web site noted on your proxy card to vote via
the Internet; or
(3) Mark, sign, date and promptly return the enclosed
proxy card 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. Any proxy can be revoked
at any time prior to its exercise at the meeting.
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Annual Meeting
Webcast: The Annual Meeting will be simultaneously broadcast over the
Internet at 10:00 a.m. on October 11, 2001. It will then be
archived and available for replay for approximately one week.
You can listen to the live Webcast or the archived replay by
visiting our Web site at www.paychex.com. You are encouraged
to visit the Web site in advance of the broadcast to ensure
that your PCs are properly configured.
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August 24, 2001 John M. Morphy
Secretary
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS OF PAYCHEX, INC.
TO BE HELD ON OCTOBER 11, 2001
This Proxy Statement is being furnished to stockholders of Paychex, Inc.
("Paychex" or the "Company") in connection with the solicitation of proxies by
the Board of Directors (the "Board") to be voted at the 2001 Annual Meeting of
Stockholders. The Annual Meeting will be held on October 11, 2001 at 10:00 a.m.
at the Rochester Riverside Convention Center, 123 East Main Street, Rochester,
New York.
Stockholders entitled to vote:
The Board has fixed the close of business on August 13, 2001, as the record date
for determining the holders of common stock entitled to notice of, and to vote
at, the meeting. Stockholders will be entitled to one vote per share for each
share of common stock held as of the record date.
How to vote:
Your vote is very important and we hope that you will attend the Annual Meeting.
However, whether or not you plan to attend the meeting, please vote by proxy in
accordance with the instructions on your proxy card, voting instruction form
(from your bank or broker), or that you received through electronic mail. There
are three convenient ways of submitting your vote:
o Voting by telephone - You can vote your shares by telephone by
calling the toll-free telephone number indicated on your proxy
card and following the voice prompt instructions. Telephone voting
is available 24 hours a day.
o Voting by the Internet - You can also vote via the Internet by
visiting the web site noted on your proxy card. Internet voting is
available 24 hours a day. We encourage you to vote via the
Internet, as it is the most cost-effective way to vote.
o Voting by mail - If you choose to vote by mail, simply mark your
proxy, date and sign it, and return it in the postage-paid
envelope provided.
If you vote by telephone or Internet, you do not need to return your proxy card.
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. If your shares are held in
the name of a bank, broker, or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
meeting.
Revoking your proxy:
You can revoke your proxy at any time before it is voted at the meeting by
either:
o Sending written notice of revocation to the Secretary of the
Company;
o Submitting a later-dated proxy via mail, telephone, or Internet;
or
o Voting in person at the meeting.
General information on voting:
The Company had outstanding on the record date 374,218,301 shares of common
stock, each of which is entitled to one vote. A majority of the outstanding
shares (187,109,152 shares) present in person or by proxy will constitute a
quorum.
All shares that have been properly voted and not revoked will be voted at the
meeting 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 seven nominees described in the following pages.
A plurality of votes cast is required for the election of directors. You may
choose to vote for a nominee or withhold your vote. Votes that are withheld will
be excluded entirely from the vote and will have no effect. A broker non-vote
will have no effect on the outcome of the election of directors.
Cost of solicitation of proxies:
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 25, 2002.
Delivery of Proxy Materials and Annual Report:
The 2001 Annual Report, Notice of Annual Meeting, Proxy Statement and Proxy are
being mailed to stockholders on or about August 24, 2001. You may also obtain a
copy of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission without charge upon written request submitted to Paychex,
Inc., c/o Secretary, 911 Panorama Trail South, Rochester, New York 14625-0397.
The 2001 Annual Report, Notice of Annual Meeting and Proxy Statement are also
available on our Internet site at www.paychex.com. Instead of receiving paper
copies of the Annual Report and Proxy Statement in the mail, stockholders can
elect to receive an e-mail, which will provide a link to these documents on the
Internet. Opting to receive your proxy materials online saves us the cost of
producing and mailing bulky documents. To give your consent to
receive future documents via electronic delivery, please vote your proxy via the
Internet and follow the instructions to register for electronic delivery.
PROPOSAL 1 - ELECTION OF DIRECTORS FOR A ONE-YEAR TERM
Seven persons are to be elected to the Board of Directors. The Board of
Directors has nominated for election the persons listed below, each of whom
currently serves as a director. If elected, each nominee will hold office until
the Annual Meeting to be held in 2002, and until his successor is elected and
has qualified.
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.
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.
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Director Position, Principal Occupation, Business Experience and
Name Age Since Directorships
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B. Thomas Golisano 59 1979 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 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.
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G. Thomas Clark 63 1980 Mr. Clark 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, the Heritage Christian Home Foundation, and
Harris Interactive, Inc., as well as several privately held
companies. Mr. Clark is a Trustee of the B. Thomas Golisano
Foundation.
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Director Position, Principal Occupation, Business Experience and
Name Age Since Directorships
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David J. S. Flaschen 45 1999 Mr. Flaschen is currently a General Partner with OneLiberty
Ventures. From 1997 to 1999, he was 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. Nielsen,
North America, and held senior management positions at IMS and
DataQuest. Mr. Flaschen is a member of the Board of Directors
of Buyerzone.com and a member of the Board of Advisors of SI
Ventures.
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Phillip Horsley 62 1982 Mr. Horsley is the founder and Managing Director of Horsley
Bridge Partners, formed in 1983. Horsley Bridge manages private
equity investments for institutional investors.
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Grant M. Inman 59 1983 Mr. Inman 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 Lam
Research Corporation, 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.
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J. Robert Sebo 65 1979 Mr. Sebo 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.
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Director Position, Principal Occupation, Business Experience and
Name Age Since Directorships
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Joseph M. Tucci 53 2000 Mr. Tucci is the President and Chief Executive Officer of EMC
Corporation, a leading provider of intelligent enterprise
information storage systems, software, networks, and services.
From January 2000 to January 2001, he was President and Chief
Operating Officer of EMC Corporation. Prior to joining EMC,
Mr. Tucci served as Deputy Chief Executive Officer of Getronics
NV, an information technology services company, from June 1999
through December 1999. From 1993 to June 1999, he served as
Chairman and Chief Executive Officer of Wang Global, a leader
in networked technology services and solutions, which was
acquired by Getronics NV in June 1999. Mr. Tucci is a member
of the Board of Directors of Telecom Italia S.p.A.
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The Board of Directors recommends the election of the seven nominees and it is
intended that the proxies named (unless otherwise directed) will vote the proxy
FOR the election of these nominees.
Retiring Directors
Mr. Steven D. Brooks and Mr. Harry P. Messina, Jr. have decided not to
stand for the election of Directors at the 2001 Annual Meeting of Stockholders.
BOARD MEETINGS AND COMMITTEE MEMBERSHIP
The Board of Directors of the Company met four times during the fiscal year
ended May 31, 2001 ("fiscal 2001"). No director attended fewer than 75% of all
meetings held of the Board of Directors and of the committees on which such
director served during fiscal 2001.
Non-employee directors are paid $8,000 annually plus $1,000 for each Board
meeting attended and $500 for each committee meeting attended. In fiscal 2001,
under the 1998 Stock Option Plan, each non-employee director received a grant of
options to purchase 10,000 shares of common stock. The options carry an exercise
price of fair market value on the date of the grant and have a term of ten
years. The grant will vest one-third annually, commencing two years after the
date of grant.
The Board has four standing committees.
The Executive Committee is comprised of Mr. Golisano, Mr. Clark and Mr. Horsley
and may exercise all the powers and authority of the Board of Directors except
as limited by law. The Committee held one meeting during fiscal 2001.
The Audit Committee is comprised of Mr. Brooks, Mr. Clark, Mr. Flaschen
(Chairman) and Mr. Inman, all of whom meet the independence and experience
requirements of the National Association of Securities Dealers listing
standards. The Committee's responsibilities are described in the Audit Committee
Charter adopted by the Board, which is attached as Appendix A to this Proxy
Statement. The Committee held two meetings during fiscal 2001. In addition, the
Chairman of the Committee, Mr. Flaschen, met with the Company's management,
internal auditors and independent auditors to review the financial statements
included in the Company's Quarterly Reports on Form 10-Q during fiscal 2001.
The Compensation Committee is comprised of Mr. Flaschen, Mr. Horsley, Mr. Inman
and Mr. Tucci (Chairman). The Committee makes recommendations with respect to
officers' salaries and grants of stock options to the Company's employees. The
Committee met once during fiscal 2001.
The Investment Committee is comprised of Mr. Brooks, Mr. Horsley (Chairman) and
Mr. 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 2001.
The Board does not have a Nominating Committee.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Committee") oversees the
Company's financial reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial statements and the
reporting process, including the systems of internal controls. In fulfilling its
oversight responsibilities, the Committee reviewed the audited financial
statements in the Fiscal Year 2001 Annual Report with management including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity of
disclosures in the financial statements.
The Company's independent auditors, Ernst & Young LLP, are responsible for
expressing an opinion on the conformity of the audited financial statements with
generally accepted accounting principles. The Committee reviewed with the
independent auditors their judgments as to the quality, not just the
acceptability, of the Company's accounting principles and such other matters as
are required to be discussed with the Committee under generally accepted
auditing standards. In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the written disclosures required by the Independence
Standards Board Standard No. 1 (Independence Discussions With Audit Committees).
The Committee has also considered whether the independent auditors provision of
other non-audit services to the Company is compatible with the auditor's
independence. The Committee held two meetings during fiscal 2001.
The Committee discussed with the Company's internal auditors and independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company's internal controls and the overall quality of the Company's financial
reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended and the Board of Directors approved that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended May
31, 2001 for filing with the Securities and Exchange Commission. The Audit
Committee will recommend to the Board of Directors, who will approve, the
selection of the Company's internal auditors.
The Audit Committee:
David J. S. Flaschen, Chairman
Steven D. Brooks
G. Thomas Clark
Grant M. Inman
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for making recommendations regarding the compensation of the Chief
Executive Officer and other executive officers of the Company. The Committee's
recommendations are presented to the Board for discussion and decision.
The compensation for executive officers is designed to be competitive with
companies of similar size and performance, reward exceptional individual
performance, tie compensation to overall Company objectives and align the
interest of executive officers with the interests of stockholders. The
components of the compensation program are base salary, annual incentive bonus
and stock option awards under the Company's Stock Incentive Plan.
Base Salary and Annual Incentive Plan (Bonus)
Annual compensation is composed primarily of base salary and an annual incentive
bonus. The salaries of the executive officers are determined based on their
performance and comparisons with base salaries paid to executive officers having
similar responsibilities in comparable companies. The Committee and the Board
have instituted an Officer Incentive Program, which provides for the executive
officers annual cash bonuses of up to 40% of base salary based on the Company's
annual net income growth. The purpose of this bonus plan is to make a
significant component of the officers' annual compensation tied directly to
overall Company financial performance. For fiscal 2001, a bonus equalling 34.6%
of base salary was earned.
Stock Incentive Plan
The Company's Stock Incentive Plan is designed to align executive officers'
compensation with long-term performance of the Company's stock. Stock options
are granted to executive officers, with the exception of Mr. Golisano, in
amounts based upon their individual performance. Stock options are granted at
fair market value as of the date of the grant, and have a term of up to ten
years. These options vest one-third each year commencing two years after the
date of grant. Stock options provide incentive for the executive officers to
create stockholder value over the long term.
Compensation of Chief Executive Officer
The Committee meets annually without the Chief Executive Officer to evaluate his
performance and recommends to the Board the compensation to be paid to him. 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 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. In view of
his substantial stock position, Mr. Golisano has chosen not to receive any stock
option grants. His compensation is reflective in part of the Committee's
evaluation of the Company's performance in the areas of revenue, profitability,
return on stockholders' equity and other areas. Salary adjustments 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 2001 compensation (including base salary and bonus under
the Officer Incentive Program) increased 4% over his compensation for fiscal
2000. Mr. Golisano's bonus was determined based on the Officer Incentive Program
described above. In fiscal 2001, the Company's total revenues increased 19% and
net income increased 34% over the prior year's figures, while return on
stockholders' equity was 38%.
Compensation of Other Executive Officers
The Committee sets compensation for executive officers other than the CEO after
the CEO provides the Committee with his evaluation of the performance of each
executive officer and his recommendation with respect to base 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. However, it is possible that at some point
in the future, circumstances may cause the Committee to authorize compensation
that is not deductible.
The Compensation Committee:
Joseph M. Tucci, Chairman
Grant M. Inman
David J. S. Flaschen
Phillip Horsley
OTHER EXECUTIVE OFFICERS OF THE COMPANY
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Name Age Position and Business Experience
- ---------------------------------------- ----------- -----------------------------------------------------------------
Daniel A. Canzano 47 Mr. Canzano 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.
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William G. Kuchta, Ed. D. 54 Mr. Kuchta 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 54 Mr. Morphy joined the Company in October 1995 and was elected
Vice President, Director of Finance in July 1996 and 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 ten
years at Goulds Pumps, Incorporated.
- ---------------------------------------- ----------- -----------------------------------------------------------------
Diane Rambo 50 Ms. Rambo was named Vice President, Human Resource Services in
fiscal 2001 and prior to that was Vice President, Electronic
Network Services from 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 49 Mr. Turek 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.
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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. Based solely on the filings made with the SEC, the Company
believes that during the fiscal year ended May 31, 2001, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten percent beneficial owners were complied with, with the exception of a
report on a sale of 80 shares of common stock by Harry P. Messina, Jr. in June
2000, which was filed 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 three fiscal years ended May 31, 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
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Long-term
Annual Compensation Compen-
sation
- -------------------------------------------------------------------------------------------------
Number of Common
Shares
Underlying All Other
Name and Principal Options Compen-
Position Year Salary Bonus Granted sation (1)
- -----------------------------------------------------------------------------------------------------------------
B. Thomas Golisano 2001 $694,230 $242,200 - $5,100
Chairman, President & 2000 $644,230 $260,000 - $5,100
Chief Executive Officer 1999 $594,230 $240,000 - $4,800
- -----------------------------------------------------------------------------------------------------------------
Walter Turek 2001 $304,115 $105,807 - $5,269
Vice President, Sales 2000 $289,910 $116,480 9,000 $4,929
1999 $274,810 $112,000 20,250 $4,534
- -----------------------------------------------------------------------------------------------------------------
John M. Morphy 2001 $282,040 $ 98,714 15,000 $5,426
Vice President, Chief 2000 $254,840 $102,800 22,500 $5,020
Financial Officer & Secretary 1999 $235,925 $ 95,200 40,500 $4,754
- -----------------------------------------------------------------------------------------------------------------
Daniel A. Canzano 2001 $255,400 $ 89,130 9,000 $5,320
Vice President, Information 2000 $236,965 $ 95,400 13,500 $4,956
Technology 1999 $223,615 $ 90,000 20,250 $4,693
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Diane Rambo 2001 $248,320 $ 86,742 12,000 $5,338
Vice President, Human 2000 $228,335 $ 92,000 13,500 $4,974
Resource Services 1999 $213,500 $ 86,000 20,250 $4,717
- -----------------------------------------------------------------------------------------------------------------
(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 2001. 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
Number of Value at Assumed
Common % of Total Annual Rates of Stock
Shares Options Price Appreciation
Underlying Granted to Exercise for Option Term (2)
Options Employees Price Expiration ------------------------------
Name Granted (1) in 2001 Per Share Date 5% 10%
- ---------------------------------------------------------------------------------------------------------------------
B. T. Golisano - -% $ - - $ - $ -
- ---------------------------------------------------------------------------------------------------------------------
W. Turek - -% $ - - $ - $ -
- ---------------------------------------------------------------------------------------------------------------------
J. Morphy 15,000 1.9% $42.69 7/13/2010 $402,694 $1,020,505
- ---------------------------------------------------------------------------------------------------------------------
D. Canzano 9,000 1.1% $42.69 7/13/2010 $241,616 $ 612,303
- ---------------------------------------------------------------------------------------------------------------------
D. Rambo 12,000 1.5% $42.69 7/13/2010 $322,155 $ 816,404
- ---------------------------------------------------------------------------------------------------------------------
(1) Non-qualified stock options were granted under the Paychex, Inc. 1998 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 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 and ten percent, respectively.
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 2001, and the number and value of all unexercised options
at May 31, 2001. 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, 2001.
-------------------------------------------------------------------------------------------------------------------------
Number Number of
Of Common Shares
Common Underlying Unexercised Value of Unexercised
Shares Options at In-The-Money Options at
Acquired May 31, 2001 May 31, 2001 (2)
On Net Value -----------------------------------------------------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
B. T. Golisano - $ - - - $ - $ -
- -------------------------------------------------------------------------------------------------------------------------
W. Turek - $ - 351,521 39,375 $11,790,072 $ 867,285
- -------------------------------------------------------------------------------------------------------------------------
J. Morphy 66,938 $2,374,939 - 87,000 $ - $1,509,435
- -------------------------------------------------------------------------------------------------------------------------
D. Canzano 113,907 $4,267,213 224,439 46,125 $ 7,219,868 $ 762,750
- -------------------------------------------------------------------------------------------------------------------------
D. Rambo 80,251 $3,112,688 77,625 49,125 $ 2,009,340 $ 762,750
- -------------------------------------------------------------------------------------------------------------------------
(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 $38.43 per share closing price of the Company's common stock on May
31, 2001 for all in-the-money options held by each named executive. The
in-the-money stock option exercise prices range from $1.68 per share to
$21.46 per share. These stock options were granted at exercise prices
equal to the fair market value of the stock on the date of grant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The following table sets forth information, based upon reports filed by such
persons with the Securities and Exchange Commission (SEC) as of July 31, 2001,
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.
- ---------------------------------------------------------------------------------------------------------------
Amount of
Beneficial
Ownership of
Common Percent of
Name Stock Class (1)
- ---------------------------------------------------------------------------------------------------------------
More than 5% owners:
B. Thomas Golisano (2)
911 Panorama Trail South
Rochester, NY 14625 39,867,253 10.6%
- ---------------------------------------------------------------------------------------------------------------
Janus Capital Corporation (3)
100 Fillmore Street
Denver, CO 80206 34,399,955 9.2%
- ---------------------------------------------------------------------------------------------------------------
Directors:
B. Thomas Golisano (2) 39,867,253 10.6%
- ---------------------------------------------------------------------------------------------------------------
Steven D. Brooks 3,376 **
- ---------------------------------------------------------------------------------------------------------------
G. Thomas Clark (2), (4), (5) 484,550 **
- ---------------------------------------------------------------------------------------------------------------
David J. S. Flaschen 2,250 **
- ---------------------------------------------------------------------------------------------------------------
Phillip Horsley (4) 291,973 **
- ---------------------------------------------------------------------------------------------------------------
Grant M. Inman (4) 213,125 **
- ---------------------------------------------------------------------------------------------------------------
Harry P. Messina, Jr. (4), (5) 458,806 **
- ---------------------------------------------------------------------------------------------------------------
J. Robert Sebo (4), (5) 4,952,971 1.3%
- ---------------------------------------------------------------------------------------------------------------
Joseph M.Tucci - **
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Named Executive Officers:
Walter Turek (4) 1,040,369 **
- ---------------------------------------------------------------------------------------------------------------
John M. Morphy 5,000 **
- ---------------------------------------------------------------------------------------------------------------
Daniel A. Canzano (4), (5) 259,667 **
- ---------------------------------------------------------------------------------------------------------------
Diane Rambo (4) 66,599 **
- ---------------------------------------------------------------------------------------------------------------
All Directors and Officers
Of the Company
As a Group (14 persons) (4) 47,706,205 12.7%
- ---------------------------------------------------------------------------------------------------------------
** Indicated percentage is less than 1%.
(1) Based upon the number of shares of common stock outstanding and deemed
outstanding as of July 31, 2001, including shares that may be acquired
within 60 days by exercise of options.
(2) Not included in the beneficial ownership are 780,568 shares owned by the
B. Thomas Golisano Foundation for which Mr. Golisano and Mr. Clark are
Trustees.
(3) The beneficial ownership for Janus Capital Corporation as reported on Form
13F-HR/A filed with the Securities and Exchange Commission on May 24, 2001,
which reported beneficial ownership as of March 31, 2001.
(4) Includes shares that may be acquired upon exercise of stock options, which
are exercisable on or prior to September 29, 2001. The shares beneficially
owned include: Mr. Clark - 33,750 shares; Mr. Horsley - 47,673 shares; Mr.
Inman - 47,673 shares; Mr. Messina - 96,606 shares; Mr. Sebo - 33,750
shares; Mr. Turek - 361,271 shares; Mr. Canzano - 235,689 shares, Ms. Rambo
- 48,875 shares; and all directors and executive officers as a group -
960,368 shares.
(5) Included in shares beneficially owned are the following number of
shares held in the names of family members or other entities: Mr.Clark -
258,474 shares; Mr. Messina - 301,147 shares; Mr. Sebo - 17,780
shares; and Mr. Canzano - 337 shares. Mr. Messina disclaims beneficial
ownership of 298,763 shares.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant since 1983 has been Ernst & Young
LLP. The Audit Committee and Management expects to re-appoint this firm for
fiscal year 2002. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting of Stockholders to respond to appropriate
questions. They will also have the opportunity to make a statement if they so
desire.
Annual Audit Fees: The aggregate fees billed by Ernst & Young for professional
services rendered for the audit of the Company's consolidated financial
statements for fiscal 2001 and reviews of the financial statements included in
the Company's quarterly Form 10-Q's for fiscal 2001 were approximately $125,000.
Financial Information Systems Design and Implementation Fees: Ernst & Young
provided no professional services of this nature to the Company in fiscal year
2001.
All Other Fees: The fiscal 2001 aggregate fees billed for services rendered to
the Company by Ernst & Young other than the services described above were
approximately $499,100. These fees were comprised of $199,600 of audit related
services for benefit plan audits, various statutory audits and internal control
reviews, and $299,500 of non-audit services for tax planning and compliance.
PERFORMANCE GRAPH
The following graph shows a five-year comparison of the total cumulative returns
of investing $100 on May 31, 1996, 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.
[OBJECT OMITTED]
- ---------------------------------------------------------------------------------------------------------
May 31, 1996 1997 1998 1999 2000 2001
- ---------------------------------------------------------------------------------------------------------
Paychex, Inc. $100 $126 $187 $232 $415 $459
S&P S(DP) $100 $110 $110 $132 $168 $184
S&P Midcap 400 $100 $118 $153 $172 $209 $231
S&P 500 $100 $129 $169 $205 $226 $202
- ---------------------------------------------------------------------------------------------------------
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 Annual Meeting other than those described in this Proxy
Statement. If any other matters properly come before the meeting, the persons
named in the enclosed proxy will vote the proxy on such matters in accordance
with their judgment.
By order of the Board of Directors,
/s/ John M. Morphy
- ------------------
John M. Morphy
Secretary
Rochester, New York
August 24, 2001
APPENDIX A
PAYCHEX, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities to the stockholders, potential
stockholders and the investment community by reviewing: financial reports and
other financial information provided by the Company to governmental bodies or
the public; the Company's systems of internal controls and the Company's
auditing, accounting and financial reporting processes. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Company's policies, procedures and practices at
all levels. The Audit Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
o Review and appraise the audit efforts of the Company's independent
accountants and internal audiing department.
o Provide an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department, and the
Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. COMPOSITION
The Audit Committee shall be comprised of at least three directors who meet the
independence and experience requirements of the Nasdaq Stock Market, Inc. The
members shall be appointed by the Board. The Board will designate a Chairman who
will also be the primary contact to management, the independent accountants and
the manager of Internal Audit during the time periods between the formal Audit
Committee meetings.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise.
III. MEETINGS
The Committee shall meet at least two times annually and participation can be in
person or telephonic. The Committee shall make regular reports to the Board. As
part of its job to foster open communication, the Committee should ensure
management, the manager of the Internal Audit department and the independent
accountants are present at these meetings. The Committee will complete each
meeting with the following exit protocol, the Committee will meet individually
with the manager of the Internal Audit department and then with the independent
accountants to discuss any matters that the Committee or each of these groups
believes should be discussed privately. The independent accountants will have
access to the full Board of Directors if the independent accountants determine
it is necessary. In addition, the Chair of the Committee should communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors limited
review procedures.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
1. Review and update this Charter at least annually and recommend any
proposed changes to the full Board of Directors for their approval.
2. Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices, financial reporting issues and judgements as well as the
adequacy of internal controls that could significantly affect the Company's
financial statements.
3. Review significant financial risk exposures and the steps management has
taken to monitor, control and report such exposures. Review significant
findings prepared by the independent auditors and the Internal Audit
department together with management's responses.
4. The Chair of the Committee should review with financial management and the
independent auditors the Company's quarterly financial results prior to the
release of earnings and/or the Company's quarterly financial statements
prior to filing or distribution. Discuss significant changes to the
Company's accounting principles and any items required to be communicated
by the independent auditors in accordance with auditing standards.
5. Recommend to the Board of Directors the selection of the independent
accountants, which firm is ultimately accountable to the Audit Committee
and the Board. On an annual basis, the Committee should review and discuss
with the accountants all significant relationships the accountants have
with the Company to determine the accountants' independence consistent with
Independence Standards Board Standard Number 1.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
7. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
8. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
9. Receive periodic reports regarding any significant judgments made in
management's preparation of the financial statements and the appropriate-
ness of such judgments.
10. Following completion of the annual audit, review separately with each of
management, the independent accountants and the Internal Audit manager any
significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to required
information.
11. Review any significant disagreement among management and the independent
accountants or the Internal Audit department in connection with the
preparation of the financial statements.
12. Review with the independent accountants, the Internal Audit manager and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been
implemented.
13. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
14. Review activities, organizational structure, and qualifications of the
Internal Audit department.
15. Perform any other activities and prepare any other reports consistent with
this Charter, the Company's By-laws and applicable federal or state law, as
the Committee or the Board deems necessary or appropriate.
16. Review, at least annually, report(s) from the Company's general counsel
concerning legal and regulatory matters that may have a material impact on
the financial statements.
17. The manager of Internal Audit is required to annually document in the form
of a memorandum the actions of the Audit Committee which indicate
compliance with the Charter. This memo will be presented to the Audit
Committee at the July Audit Committee meeting.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Ethical Conduct.
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 Shareholders of the Company to be held
on October 11, 2001, 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.
1. ELECTION OF DIRECTORS
[ ] FOR all Nominees [ ] WITHHOLD all Nominees [ ] For all EXCEPT _____________
01) B. Thomas Golisano, 02) G. Thomas Clark, 03) David J. S. Flaschen,
04) Phillip Horsley, 05) Grant M. Inman, 06) J. Robert Sebo, and
07) Joseph M. Tucci.
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT"
AND WRITE THE NOMINEE'S NUMBER ON THE LINE ABOVE.)
2. In accordance with their judgement in connection with such other business, if
any may come before the meeting.
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 SEVEN NOMINEES.
Dated: ______________________________, 2001
Signed: ______________________________
(Name of Shareholder to be signed exactly as it appears on this proxy)