PAYCHEX, INC. 2002 STOCK INCENTIVE PLAN (as amended and restated effective October 12, 2005) FORM OF NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
EXHIBIT 10(q)
PAYCHEX, INC.
2002 STOCK INCENTIVE PLAN
(as amended and restated effective October 12, 2005)
2002 STOCK INCENTIVE PLAN
(as amended and restated effective October 12, 2005)
1. Grant of Option. This Award Agreement, made as of [grant date], serves to notify
you that the Governance and Compensation Committee (the “Committee”) of the Board of Directors of
Paychex, Inc. (the “Company”) hereby grants to you, under the Company’s 2002 Stock Incentive Plan,
as amended and restated effective October 12, 2005 (the “Plan”), a Non-Qualified Stock Option (the
“Option”) to purchase, on the terms and conditions set forth in this Award Agreement and the Plan,
[the number of] shares of the Company’s common stock (the “Common Stock”) at the price of [exercise price] per share,
the closing price on [date of grant] (the “Date of Grant”). The Plan is incorporated herein by reference
and made a part of this Award Agreement. You may obtain a copy of the Plan from the Office of the
Corporate Secretary. You should review the terms of this Award Agreement and the Plan carefully.
The capitalized terms used in this Award Agreement are defined in the Plan.
2. Term. Unless the Option is previously terminated pursuant to the terms of this
Award Agreement or the Plan, the Option will expire at the close of business on [expiration date]
(the “Expiration Date”).
3. Vesting. Subject to the terms set forth in this Award Agreement and the Plan, the
Option will vest and become exercisable pro rata with respect to one-third of the shares subject to
such Option on the first, second and third anniversaries of the Date of Grant, with any fractional
share resulting from such pro-ration vesting on the third anniversary. Vesting is contingent on
your continued Board service through the vesting dates.
4. Exercise.
(a) Method of Exercise. To the extent exercisable under Section 3 of this Award Agreement,
the Option may be exercised in whole or in part, provided that the Option may not be exercised for
less than one share of Common Stock in any single transaction. The Option may be exercised using a
method specified by the Company.
(b) Payment of Exercise Price. The exercise of the Option is conditioned upon your payment to
the Company of the Exercise Price for the number of shares of Common Stock that you elect to
purchase. The Exercise Price may be paid in cash or by check or by way of a broker-assisted stock
option exercise program, if such a program is made available by the Company at the time of the
exercise of the Option.
(c) Withholding. The exercise of the Option is conditioned upon your making arrangements
satisfactory to the Company for the payment to the Company of the amount of all taxes required by
any governmental authority to be withheld and paid over by the Company or any Affiliate to the
governmental authority on account of the exercise. The payment of such withholding taxes to the
Company may be made (i) by you in cash or by check, or (ii) by the Company or any Affiliate
withholding such taxes from any other compensation owed to you by the
Company or any Affiliate. Withholding of shares of Common Stock for payment of tax
withholdings is not permitted for any reason.
(d) Issuance of Shares. Upon determining that compliance with this Award Agreement has
occurred, including compliance with such reasonable requirements as the Company may impose pursuant
to the Plan or Section 12 of this Award Agreement, the Company shall issue to you a certificate for
the shares of Common Stock purchased on the earliest practicable date (as determined by the
Company) thereafter.
5. Effect of Death and Disability. In the event of your death or Disability prior to
the complete exercise of the Option, any unvested portion of the Option will vest in full
immediately and the remaining portion of the Option may be exercised in whole or in part, subject
to all of the conditions on exercise imposed by the Plan and this Award Agreement, within three
years after the date of your death or Disability, but only (i) by you, or in the event of your
death, by your estate or the person or persons to whom the Option passes under your will or the
laws of descent and distribution, and (ii) prior to the close of business on the Expiration Date of
the Option. The term “Disability” means a condition whereby you are unable to perform the
essential functions of your position with reasonable accommodations by reason of any medically
determinable physical or mental impairment which can be expected to result in death or which has
lasted for a continuous period of not less than six months, all as verified by a physician
acceptable to, or selected by, the Company.
6. Effect of Retirement. Upon your Retirement prior to the complete exercise of the
Option, the unvested portion of the Option will be canceled as of your last day of service, and the
remaining portion of the Option may be exercised in whole or in part, subject to all of the
conditions on exercise imposed by the Plan and this Award Agreement, within three years after the
date of such termination, but only (i) to the extent that the Option was vested and exercisable on
the date such termination, and (ii) prior to the close of business on the Expiration Date of the
Option. The term “Retirement” means retirement from the Company at age 55 or later with ten or
more years of service with the Company.
7. Effect of Other Termination. Upon your termination of Board service for a reason
other than death, Disability or Retirement prior to the complete exercise of the Option, the
unvested portion of the Option will be canceled as of your last day of Board service, and the
remaining portion of the Option may be exercised in whole or in part, subject to all of the
conditions on exercise imposed by the Plan and this Award Agreement, within one year after the date
of such termination, but only (i) to the extent that the Option was vested and exercisable on the
date of such termination, and (ii) prior to the close of business on the Expiration Date of the
Option. Notwithstanding the foregoing, if your service is terminated by reason of conduct that is
determined by the Committee to have been knowingly fraudulent, deliberately dishonest, disloyal or
willful misconduct, or if you engage in such conduct after termination of your board service, you will forfeit all rights under the Option, both unvested and
vested.
8. Transfer of Option. Except as otherwise determined by the Committee, the Option
may not be transferred, assigned or pledged (except by will or the laws of descent and
distribution, or pursuant to a domestic relations order) and the Option is only exercisable by you
during your lifetime.
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9. Limitation of Rights. You will not have any rights as a stockholder with respect
to the shares of Common Stock covered by the Option until you become the holder of record of such
shares by exercising the Option. Neither the Plan, the granting of the Option nor this Award
Agreement gives you any right to remain in the service of the Company or any Affiliate.
10. Rights of Company and Affiliates. This Award Agreement does not affect the right
of the Company or any Affiliate to take any corporate action whatsoever, including without
limitation its right to recapitalize, reorganize or make other changes in its capital structure or
business, merge or consolidate, issue bonds, notes, shares of Common Stock or other securities,
including preferred stock, or options therefor, dissolve or liquidate, or sell or transfer any part
of its assets or business.
11. Restrictions on Issuance of Shares. If at any time the Company determines that
the listing, registration or qualification of the shares covered by the Option upon any securities
exchange or under any state or federal law, or the approval of any governmental agency, is
necessary or advisable as a condition to the exercise of the Option, the Option may not be
exercised in whole or in part unless and until such listing, registration, qualification or
approval shall have been effected or obtained free of any conditions not acceptable to the Company.
12. Plan Controls. The Option is subject to all of the provisions of the Plan, which
is hereby incorporated by reference, and is further subject to all the interpretations, amendments,
rules and regulations that may from time to time be promulgated and adopted by the Committee
pursuant to the Plan. In the event of any conflict among the provisions of the Plan and this Award
Agreement, the provisions of the Plan will be controlling and determinative.
13. Amendment. Except as otherwise provided by the Plan, the Company may only alter,
amend or terminate the Option with your consent.
14. Governing Law. This Award Agreement shall be governed by and construed in
accordance with the laws of the State of New York, except as superseded by applicable federal law,
without giving effect to its conflicts of law provisions.
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