<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
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 sec. 240.14a-11(c) or sec. 240.14a-12
DAISYTEK INTERNATIONAL CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(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):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
[ ] 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:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
DAISYTEK INTERNATIONAL CORPORATION
500 NORTH CENTRAL EXPRESSWAY
PLANO, TEXAS 75074
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Daisytek International Corporation (the "Company"), which will
be held at the Stonebriar Country Club in Frisco, Texas, on Friday, August 15,
1997, at 10:00 a.m. (local time).
At the Annual Meeting, stockholders will be asked to elect
directors, adopt the Company's 1997 Employee Stock Option Plan and ratify the
appointment of Arthur Andersen LLP as the Company's independent auditors.
Information about these matters is contained in the attached Proxy Statement.
The Company's management would greatly appreciate your attendance
at the Annual Meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, IT IS MOST IMPORTANT THAT YOUR SHARES BE REPRESENTED. Accordingly,
please sign, date and return the enclosed proxy card which will indicate your
vote upon the matters to be considered. If you do attend the meeting and
desire to vote in person, you may do so by withdrawing your proxy at that time.
I sincerely hope you will be able to attend the Annual Meeting,
and I look forward to seeing you on August 15, 1997.
Sincerely,
David A. Heap
Chairman
July 10, 1997
<PAGE> 3
DAISYTEK INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 15, 1997
The Annual Meeting of Stockholders of Daisytek International
Corporation (the "Company") will be held on Friday, August 15, 1997, at 10:00
a.m. at the Stonebriar Country Club, Frisco, Texas, for the following
purposes:
1. To elect three Class III directors;
2. To consider and act upon a proposal to approve the
Company's 1997 Employee Stock Option Plan;
3. To ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending
March 31, 1998; and
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June
25, 1997 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. Each stockholder, even though he
or she may presently intend to attend the Annual Meeting, is requested to
execute and date the enclosed proxy card and return it without delay in the
enclosed postage-paid envelope. Any stockholder present at the Annual Meeting
may withdraw his or her proxy card and vote in person on each matter properly
brought before the Annual Meeting.
Please sign, date and mail the enclosed proxy in the enclosed
envelope promptly, so that your shares of stock may be represented at the
meeting.
By Order of the Board of Directors
Harvey H. Achatz
Secretary
Plano, Texas
July 10, 1997
<PAGE> 4
DAISYTEK INTERNATIONAL CORPORATION
500 NORTH CENTRAL EXPRESSWAY
PLANO, TEXAS 75074
(972) 881-4700
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Daisytek
International Corporation, a Delaware corporation ("Daisytek" or the
"Company"), in connection with the solicitation of proxies for use at the
Company's Annual Meeting of Stockholders (the "Annual Meeting"), to be held at
the Stonebriar Country Club, Frisco, Texas, on Friday, August 15, 1997, at
10:00 a.m., and at any and all adjournments thereof.
This solicitation is being made on behalf of the Board of
Directors of the Company. This Proxy Statement, Notice of Annual Meeting of
Stockholders, the enclosed proxy card and the Company's 1997 Annual Report were
first mailed to stockholders on or about July 14, 1997.
The shares represented by a proxy in the enclosed form, if such
proxy is properly executed and is received by the Company prior to or at the
Annual Meeting, will be voted in accordance with the specifications made
thereon. Proxies on which no specification has been made by the stockholder
will be voted:
(i) in favor of the election of the three nominees to the
Board of Directors listed in this Proxy Statement;
(ii) in favor of the adoption of the Company's 1997 Employee
Stock Option Plan; and
(iii) to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending
March 31, 1998.
Any proxy given by a stockholder may be revoked at any time
before its exercise by sending a subsequently dated proxy or by giving written
notice of revocation, in each case, to the Company's Secretary, at the
Company's principal executive offices at the address set forth above.
Stockholders who attend the Annual Meeting in person may withdraw their proxies
at any time before their shares are voted by voting their shares in person.
Stockholders of record at the close of business on June 25, 1997
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. On the Record Date, the issued and outstanding voting securities of
the Company consisted of 6,763,744 shares of common stock, par value $.01 per
share (the "Common Stock"), each of which is entitled to one vote on all
matters which may properly come before the Annual Meeting or any adjournment
thereof.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum. Each item presented herein to be voted on at the Annual
Meeting must be approved by the affirmative vote of a majority of the holders
of the number of shares present either in person or represented by proxy. The
inspector of elections appointed by the Company will count all votes cast, in
person or by submission of a properly
<PAGE> 5
executed proxy, before the closing of the polls at the meeting. Abstentions
and "broker non-votes" (nominees holding shares for beneficial owners who have
not voted on a specific matter) will be treated as present for purposes of
determining whether a quorum is present at the Annual Meeting. However,
abstentions and broker non-votes will have no effect on the vote, because the
vote required is a majority of the votes actually cast (assuming the presence
of a quorum).
All references in this Proxy Statement to the Company's fiscal
year mean the 12 month period ending on March 31 of such year.
ITEM I
ELECTION OF DIRECTORS
The Board of Directors consists of seven members which are
divided into three classes. Each class serves three years, with the terms of
office of the respective classes expiring in successive years. The term of
Class III directors expires at the Annual Meeting. Each director elected as a
Class III director at the Annual Meeting will have a term of three years. The
nominees for the Class III directors are David A. Heap, Edgar D. Jannotta, Jr.
and Peter P.J. Vikanis who have been nominated and recommended by the Board of
Directors. If elected, Messrs. Heap, Jannotta and Vikanis are expected to
serve until the Company's 2000 annual meeting of stockholders and until their
successors are elected and qualified. The shares represented by proxies in the
accompanying form will be voted for the election of these nominees unless
authority to so vote is withheld. The Board of Directors has no reason to
believe that such nominees will not serve if elected, but if they should become
unavailable to serve as directors, and if the Board designates substitute
nominees, the persons named as proxies will vote for the substitute nominees
designated by the Board. Directors will be elected by a majority of the votes
cast at the Annual Meeting.
The following information, which has been provided by the
individuals named, sets forth the nominees for election to the Board of
Directors and the continuing Class I and II directors, such person's name, age,
principal occupation or employment during at least the past five years, the
name of the corporation or other organization, if any, in which such occupation
or employment is carried on and the period during which such person has served
as a director of the Company.
DIRECTORS STANDING FOR ELECTION
CLASS III
TERM EXPIRES AT THE 2000 ANNUAL MEETING
DAVID A. HEAP, age 53, has served as Chairman of the Board and
Chief Executive Officer of the Company since 1982 and as President from 1982 to
1990. In April 1997, Mr. Heap retired as Chief Executive Officer. From 1970
to 1985, Mr. Heap served as Chairman of ISA International plc (and its
predecessors) ("ISA"), a now publicly traded distributor of computer supplies
in Western Europe which he founded in England in 1970.
EDGAR D. JANNOTTA, JR., age 36, has served as a Director of the
Company since 1991. Mr. Jannotta is a Principal of William Blair & Company,
L.L.C., an investment banking firm he joined in 1988. Mr. Jannotta is also a
director of GNWC Wire and Cable Products, a distributor of wire, cable and
other communications related products ("GNWC"), and Gibraltar Packaging Group,
Inc., a
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<PAGE> 6
diversified packaging company. Mr. Jannotta is a non-employee Director.
PETER P. J. VIKANIS, age 46, has served as a Director of the
Company since 1996. Mr. Vikanis served as Chief Operating Officer of ISA from
1991 to 1995, as director of ISA from 1979 to 1995, and also served in various
management capacities at ISA from 1971 to 1991. Mr. Vikanis is a non-employee
Director.
DIRECTORS CONTINUING IN OFFICE
CLASS II
TERM EXPIRES AT THE 1999 ANNUAL MEETING
MARK C. LAYTON, age 37, has served as President, Chief Operating
Officer and Chief Financial Officer of the Company since 1993, as a Director
since 1988, as Executive Vice President from 1990 to 1993 and as Vice President
- - - Operations from 1988 to 1990. Since April 1997, Mr. Layton serves as
President, Chief Executive Officer and Chief Operating Officer. Mr. Layton is
also a director of GNWC. Prior to joining the Company, Mr. Layton served as a
management consultant with Arthur Andersen & Co., S.C. for six years through
1988 specializing in wholesale and retail distribution and technology.
TIMOTHY M. MURRAY, age 44, has served as a Director of the
Company since 1991. Mr. Murray is a Principal of William Blair & Company,
L.L.C., an investment banking firm he joined in 1979. Mr. Murray is also a
director of GNWC and several other privately held corporations. Mr. Murray is
a non-employee Director.
CLASS I
TERM EXPIRES AT THE 1998 ANNUAL MEETING
CHRISTOPHER YATES, age 42, was appointed Senior Vice President -
Business Development in February 1996 and has served as Vice President -
Business Development from November 1995 to February 1996, as a Director of the
Company since February 1995, as Vice President-Marketing from January 1994 to
November 1995, as Vice President-Sales from 1988 to 1994 and in various other
sales capacities for the Company since 1982. Prior to joining the Company, Mr.
Yates served in various sales capacities for ISA.
JAMES R. POWELL, age 36, has served as a Director and Senior Vice
President - Sales and Marketing since 1996. Mr. Powell has served as Vice
President - Sales from 1992 to 1996, and in various other sales capacities from
1988 to 1992. Prior to joining the Company, Mr. Powell was engaged in various
sales and marketing activities.
EXECUTIVE OFFICERS
In addition to the individuals named above, the following are the
names, ages and positions of the other executive officers of the Company:
HARVEY H. ACHATZ, age 56, serves as Vice President -
Administration and Secretary, positions he has held since 1993 and 1984,
respectively. Mr. Achatz has served as Vice President -
-5-
<PAGE> 7
Finance from 1985 to 1993, as Controller from 1981 to 1985 and as a Director
from 1984 to 1990.
THOMAS J. MADDEN, age 35, was recently appointed as Chief
Financial Officer and serves as Vice President - Finance, Treasurer and as
Chief Accounting Officer, positions he has held since November 1994, March 1994
and 1992, respectively. From 1992 to 1994 he also served as Controller. From
1983 to 1992, Mr. Madden served in various capacities with Arthur Andersen &
Co., S.C., including financial consulting and audit manager. Mr. Madden is a
certified public accountant.
PETER D. WHARF, age 38, serves as Vice President - International
Markets, a position he has held since February 1996. Mr. Wharf joined the
Company in 1992 and has served in various export and international sales
capacities since such time. Prior to joining the Company, Mr. Wharf served in
various sales capacities for ISA.
STEVE GRAHAM, age 45, has served as Senior Vice President of
Information Technologies and Chief Information Officer since 1996. Prior to
joining the Company, Mr. Graham was employed by Ingram Micro, a major
microcomputer distributor. Mr. Graham has over 23 years of experience in the
information-technology field.
SUZANNE GARRETT, age 32, was recently promoted to Vice President
of Product Management and Marketing and has served as New-Products Manager,
Marketing Manager and Director of Product Management and Marketing. Prior to
joining the Company in 1991, Ms. Garrett served as an account executive for
United Media.
JOHN SNOWDEN, age 30, was recently promoted to Vice President of
Operations. Since joining the Company in 1992, Mr. Snowden has served as
Purchasing Manager, Director of Purchasing, Director of Fulfillment Services,
Director of Distribution and Director of Procurement.
MEETINGS OF THE BOARD
The Board of Directors met five times during the Company's 1997
fiscal year. No Director attended fewer than 75% of the aggregate number of
meetings of the Board and Committees on which such director served.
COMMITTEES OF THE BOARD
The Board of Directors currently has standing Audit, Compensation
and Stock Option Committees.
The Audit Committee makes recommendations to the Board of
Directors as to the engagement or discharge of the independent auditors,
reviews the plan and results of the auditing engagement with the independent
auditors, reviews the adequacy of the Company's system of internal accounting
controls, monitors compliance with the Company's business conduct policy and
directs and supervises investigations into matters within the scope of its
duties. The Audit Committee met once during fiscal year 1997. The Audit
Committee presently is composed of Messrs. Vikanis and Murray who are non-
employee directors.
The Compensation Committee approves, or in some cases recommends,
to the Board,
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<PAGE> 8
remuneration and compensation arrangements involving the Company's executive
officers and other key employees. The Compensation Committee is presently
composed of Messrs. Murray and Jannotta. The Compensation Committee also serves
as the Stock Option Committee to administer the Company's employee stock option
plans. The Compensation Committee and Stock Option Committee met once in
fiscal year 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the
Company's Board of Directors are Timothy M. Murray and Edgar D. Jannotta, Jr.
who are non-employee directors.
COMPENSATION OF DIRECTORS
Each non-employee Director receives an annual director's fee of
$20,000 for each year in which he or she serves as a director. Non-employee
directors do not receive additional Board or Committee meeting fees. The
Company has also adopted a Non-Employee Director Stock Option and Retainer Plan
(the "Non-Employee Director Plan") pursuant to which each non-employee director
(i) may elect to receive payment of the director's fees in shares of Common
Stock in lieu of cash, and (ii) is entitled to receive certain grants of
options in accordance with the formula, and subject to the conditions
precedent, set forth therein.
The Non-Employee Director Plan is a formula grant plan pursuant
to which each non-employee director receives options to purchase shares of
Common Stock as of the date of each annual meeting of stockholders. Under the
terms of the Non-Employee Director Plan, during fiscal year 1997, each of the
Company's non-employee directors received options to purchase 1,000 shares of
Common Stock at an exercise price of $39.75 (the fair market value on the date
of grant). In April 1997, such options were canceled and the Board authorized
the issuance to each non-employee director of new options to purchase 1,000
shares of Common Stock at an exercise price of $25 (the fair market value on
the date of grant). Such new options were not issued under the Non-Employee
Director Plan. In addition, under the terms of the Non-Employee Director Plan,
each non-employee director will receive options to purchase 1,240 shares of
Common Stock as of the date of the 1997 Annual Meeting. The number of options
to be issued under the Non-Employee Director Plan will increase each year based
on the percentage increase, if any, in the Company's earnings before taxes
("EBT") for such fiscal year over the Company's EBT for the immediately
preceding fiscal year. No options will be issued, however, under the Non-
Employee Director Plan with respect to any fiscal year in which the Company's
EBT does not equal or exceed the Company's projected EBT for such year, nor
will any options be issued to any non-employee director who does not attend at
least 75% of all Board (and committee) meetings held during such fiscal year.
All options issued under the Non-Employee Director Plan are non-
qualified options for federal income tax purposes and have an exercise price
equal to the fair market value of a share of common stock as of the date of the
annual meeting upon which such option is granted. All options are subject to a
three year cumulative vesting schedule.
Directors who are employees of the Company or any of its
subsidiaries do not receive additional compensation for service on the Board of
Directors.
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<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued
by the Company to its Chief Executive Officer and to each of the four most
highly compensated executive officers for services rendered during the fiscal
years ended March 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------
ANNUAL NUMBER OF
COMPENSATION SECURITIES
--------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- ------ ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
David A. Heap ................................. 1997 $ 385,000 $ 222,900 42,864 $ 5,970
Chairman and Chief ......................... 1996 385,000 280,676 37,833 8,636
Executive Officer (2) ................. 1995 350,000 171,000 -- 24,701
Mark C. Layton ................................ 1997 $ 299,013 $ 222,900 34,916 $ 8,458
President, Chief Operating and ............. 1996 276,386 280,676 28,020 6,008
Financial Officer (2) ................. 1995 250,971 171,000 -- 3,967
Christopher Yates ............................. 1997 $ 232,200 $ 73,557 20,560 $ 5,004
Senior Vice President - .................... 1996 215,000 92,623 20,138 2,430
Business Development................... 1995 195,000 -- -- 3,321
James R. Powell ............................... 1997 $ 163,652 $ 73,557 21,330 $ 3,715
Senior Vice President - Sales and .......... 1996 150,359 70,169 14,004 3,707
Marketing ............................. 1995 123,551 -- -- 3,414
Thomas J. Madden
Vice President - Finance, .................. 1997 $ 120,276 $ 22,900 16,587 $ 4,618
Chief Accounting Officer and .......... 1996 112,649 -- 14,703 4,005
Treasurer (2) ......................... 1995 94,294 -- -- --
</TABLE>
- - --------------------
(1) Represents compensation in respect of one or more of the
following: personal use of Company automobiles; life insurance premiums
paid by the Company for the benefit of the named executive officer; tax
return preparation services paid by the Company; and personal travel
expenses.
(2) Mr. Heap presently serves as Chairman; Mr. Layton presently
serves as President, Chief Executive Officer and Chief Operating
Officer; and Mr. Madden presently serves as Vice President - Finance,
Chief Financial Officer, Chief Accounting Officer and Treasurer.
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<PAGE> 10
The following table sets forth information with respect to grants of
stock options during the year ended March 31, 1997, to the named executive
officers reflected in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERMS (2)(3)
-------------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR PER SHARE (3) DATE (1)(3) 5% 10%
---- ------- ------------ ------------- ----------- -- ---
<S> <C> <C> <C> <C> <C> <C>
David A. Heap ....................... 42,864 12.6% 32.50 4-11-06 $ 876,140 $2,220,355
Mark C. Layton ...................... 34,916 10.3% 32.50 4-11-06 713,683 1,808,649
Christopher Yates ................... 20,560 6.1% 32.50 4-11-06 420,246 1,065,008
James R. Powell ..................... 21,330 6.3% 32.50 4-11-06 435,985 1,104,894
Thomas J. Madden .................... 16,587 4.9% 32.50 4-11-06 339,038 859,207
</TABLE>
- - --------------------
(1) All of such options are subject to a three year cumulative
vesting schedule.
(2) These are hypothetical values using assumed annual rates of stock
price appreciation as prescribed by the rules of the Securities
and Exchange Commission.
(3) The fiscal year 1997 option grants were canceled in April 1997
and reissued at an exercise price of $25 (the fair market valued
on the date of reissue) and have a ten-year term. All such
options are subject to a three-year cumulative vesting schedule.
The following table sets forth information concerning the
aggregate stock option exercises during the fiscal year ended March 31, 1997
and stock option values as of the end of fiscal year 1997 for unexercised stock
options held by each of the named executive officers:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END (1) (3)
ACQUIRED ON VALUE ------------------------- --------------------------
NAME EXERCISE RECEIVED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
David A. Heap .................... -- $ -- 5,675 75,022 $ 66,681 $ 377,868
Mark C. Layton ................... 4,203 69,350 45,766 58,733 1,187,628 279,850
Christopher Yates ................ -- -- 63,821 37,677 1,773,651 201,137
James R. Powell .................. 20,500 665,725 6,027 33,233 126,566 139,872
Thomas J. Madden ................. 3,300 101,673 17,568 29,085 424,579 146,852
</TABLE>
- - --------------------
(1) Calculated by determining the difference between $31 1/4 (the
last sale price of the Common Stock on March 31, 1997 as reported
by the Nasdaq National Market) and the exercise price of
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<PAGE> 11
the shares of Common Stock underlying the options.
(2) Calculated by determining the difference between the last sale
price of the Common Stock on the date of exercise as reported by
the Nasdaq National Market and the exercise price.
(3) See footnote 3 above.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION FOR FISCAL YEAR
1997
The Compensation Committee of the Board of Directors (the
"Committee") is presently comprised of Messrs. Murray and Jannotta and is
responsible for approval or recommendation to the Board of Directors of the
compensation arrangements for the Company's senior executive officers.
The Committee believes that the total compensation of the
Company's senior executive officers should be primarily based on the subjective
determination of the Committee as to the Company's overall financial
performance and the individual contribution to such performance. The Committee
further believes that a portion of total compensation should consist of
variable, performance-based components such as stock option awards and bonuses,
which it can increase or decrease to reflect its assessment of changes in
corporate and individual performance. These incentive compensation programs
are intended to reinforce management's commitment to enhance profitability and
stockholder value.
In formulating compensation levels and policies for the 1997
fiscal year, the Committee did not retain an independent compensation
consultant, nor did the Committee rely upon any formal study or review of
comparable companies in the Company's industry. Nevertheless, the Committee
believes that the Company's executive compensation salary levels may be less
than industry norms in the Company's geographic regions.
The Committee annually establishes the salaries to be paid to the
Chief Executive Officer and other senior executive officers during each fiscal
year. Base salaries for senior executive officers are set to reflect the
duties and level of responsibility in each position. In setting salaries, the
Committee takes into account several factors including individual job
performance, the level of responsibility and, to the extent information is
available, competitive pay practices in the Company's industry. The Committee
does not assign specific relative weights to the various factors it considers,
however, but rather exercises its discretion and makes a judgment after
considering all factors it deems relevant.
For fiscal year 1997, the base salary of Mr. David Heap, the
Company's Chairman and Chief Executive Officer, was $385,000, which was the
same as his base salary for the prior fiscal year. The Committee believes that
this amount appropriately reflected Mr. Heap's services as Chairman and Chief
Executive Officer, although such determination was not based upon any specific
qualitative or quantitative formula. In April 1997, Mr. Heap retired as the
Company's
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<PAGE> 12
Chief Executive Officer.
In considering bonus compensation awards, and in order to more
closely link executive compensation to the Company's performance, the Committee
continued a bonus program pursuant to which bonus compensation is subject to
the Company's EBT for each fiscal year (as set forth in the Company's audited
Consolidated Financial Statements) being equal to or greater than the EBT
projected in the Company's approved budget for such fiscal year. Under this
program, selected officers are entitled to receive a cash bonus equal to (i) up
to 1% of EBT, to the extent EBT is 100% to 105% of the projected EBT and (ii)
up to 5% of that portion of EBT which exceeds 105% of the projected EBT. Under
this program, Mr. Heap received a bonus of $222,900 for the 1997 fiscal year.
The Committee also administers the Company's stock option plans
and recommends other option grants which are used to further link executive
compensation to the Company's performance. All options are subject to a three
year cumulative vesting schedule and have an exercise price not less than the
fair market value on the date of grant. During fiscal year 1997, Mr. Heap
received options to purchase 42,864 shares at an exercise price of $32.50 per
share.
As part of its overall consideration of executive compensation,
the Committee considers the anticipated tax treatment of various payments and
benefits, including the applicability of Section 162(m) of the Internal Revenue
Code which provides a limit on the deductibility of compensation for certain
executive officers in excess of $1,000,000 per year. The Committee believes
that no named officer in the Summary Compensation Table had taxable
compensation for fiscal year 1997 in excess of the deduction limit. The
Committee intends to continue to evaluate the impact of this Code provision.
The Committee believes that the policies and programs described
above have supported the Company's business objectives and have contributed to
the Company's performance.
COMPENSATION COMMITTEE
Timothy M. Murray
Edgar D. Jannotta, Jr.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 18, 1997, certain
information regarding the beneficial ownership of the Common Stock by (i) each
person who is known to the Company to beneficially own more than 5% of the
Common Stock, (ii) each of the Directors and executive officers of the Company
individually and (iii) the Directors and executive officers of the Company
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<PAGE> 13
as a group. The information contained in this table reflects "beneficial
ownership" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Unless otherwise indicated, the stockholders
identified in this table have sole voting and investment power with respect to
the shares owned of record by them.
<TABLE>
<CAPTION>
Number
Name and Address of Beneficial Owner of shares Percent (1)
------------------------------------ --------- -----------
<S> <C> <C>
David A. Heap (2) ...................................................................... 1,088,645 16.1%
500 North Central Expressway
Plano, Texas 75074
Royal Bank of Canada Trust Company
(Jersey) Limited, Brian Gerald Balleine,
Kenneth Edward Rayner, Trustees,
of the David Anthony Heap 1996
Interest in Possession Settlement (3) .................................................. 312,173 4.6%
19-21 Broad Street
St. Helier, Jersey, Channel Islands
Royal Bank of Canada Trust Company
(Jersey) Limited, Brian Gerald Balleine
and Kenneth Edward Rayner, Trustees,
of the David Heap Life Interest
Settlement (No. 10) (4) ................................................................ 584,673 8.6%
19-21 Broad Street
St. Helier, Jersey, Channel Islands
A I M Management Group Inc. (5) ........................................................ 567,000 8.4%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Mark C. Layton (6) ..................................................................... 118,631 1.8%
Christopher Yates (7) .................................................................. 13,153 *
Harvey H. Achatz (8) ................................................................... 37,812 *
James R. Powell (9) .................................................................... 36,991 *
Thomas J. Madden (10) .................................................................. 22,928 *
Peter D. Wharf (11) .................................................................... 14,059 *
Edgar D. Jannotta, Jr. (12) ............................................................ 18,911 *
Timothy M. Murray (13) ................................................................. 34,216 *
Peter P. J. Vikanis (14) ............................................................... 439 *
Suzanne Garrett (15) ................................................................... 8,376 *
John Snowden (16) ...................................................................... 2,368 *
Steve Graham (17) ...................................................................... -- --
All directors and executive officers as a group (13 persons) (18) ..................... 1,396,529 20.6%
</TABLE>
- - --------------------
*Represents less than 1%
(1) This table is based on 6,763,744 shares of Common Stock outstanding as
of June 18, 1997.
-12-
<PAGE> 14
(2) Includes outstanding options to purchase 25,346 shares of Common Stock
which are fully vested and exercisable. Does not include (i) 900 shares
held by Mr. Heap's spouse as custodian for minor children as to which
beneficial ownership is disclaimed, (ii) options to purchase 88,264
shares of Common Stock which are not vested or exercisable and (iii) an
aggregate of 896,846 shares of Common Stock held of record by the trusts
set forth above (the "Heap Trusts"). Although Mr. Heap and members of
his family are the primary beneficiaries of the Heap Trusts, neither Mr.
Heap nor such beneficiaries have voting or investment power with respect
to such shares. Of the shares owned of record by Mr. Heap, 227,532 are
pledged to financial institutions to secure indebtedness owing by Mr.
Heap to such institutions.
(3) Shares are held of record by a Trust established by Mr. Heap for which
he and members of his family are the primary beneficiaries, although
neither Mr. Heap nor such beneficiaries may exercise voting or
investment power with respect to such shares.
(4) Shares are held of record by a Trust established by Mr. Heap for which
he and members of his family are the primary beneficiaries, although
neither Mr. Heap nor such beneficiaries may exercise voting or
investment power with respect to such shares. All of such shares are
pledged to a financial institution to secure indebtedness owing by such
Trust and Mr. Heap to such institution.
(5) Based upon a Schedule 13G filing dated February 12, 1997, filed by AIM
Management Group Inc. ("AIM"). AIM, as parent holding company to AIM
Advisors, Inc. and AIM Capital Management, Inc., investment advisors,
has beneficial ownership and shared dispositive power of 567,000 shares.
(6) Includes outstanding options to purchase 15,044 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 70,191 shares of Common Stock which are not vested
or exercisable.
(7) Includes outstanding options to purchase 13,153 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 49,356 shares of Common Stock which are not vested
or exercisable.
(8) Includes outstanding options to purchase 28,561 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 4,368 shares of Common Stock which are not vested or
exercisable.
(9) Includes outstanding options to purchase 12,027 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 41,860 shares of Common Stock which are not vested
or exercisable.
(10) Includes outstanding options to purchase 20,203 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 35,038 shares of Common Stock which are not vested
or exercisable.
(11) Includes outstanding options to purchase 14,059 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 29,209 shares of Common Stock which are not vested
or exercisable.
(12) Does not include outstanding options to purchase 1,000 shares of Common
Stock which are not vested or exercisable.
-13-
<PAGE> 15
(13) Does not include outstanding options to purchase 1,000 shares of
Common Stock which are not vested or exercisable.
(14) Does not include outstanding options to purchase 1,000 shares of
Common Stock which are not vested or exercisable.
(15) Includes outstanding options to purchase 4,876 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 19,338 shares of Common Stock which are not vested
or exercisable.
(16) Includes outstanding options to purchase 2,368 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 15,234 shares of Common Stock which are not vested
or exercisable.
(17) Does not include outstanding options to purchase 30,000 shares of Common
Stock which are not vested or exercisable.
(18) Includes outstanding options to purchase 135,637 shares of Common Stock
which are fully vested and exercisable. Does not include (i) outstanding
options to purchase 385,858 shares of Common Stock which are not vested
or exercisable or (ii) shares of Common Stock held by the Heap Trusts.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1997, the Company made loans in varying
amounts to Messrs. Layton, Powell and Wharf in order to provide such persons
with the funds necessary to satisfy various personal obligations and for other
purposes. The largest amount owing by such persons during fiscal 1997 was
$423,552, $122,274 and $60,550, respectively, and as of May 31, 1997, such
persons were indebted to the Company in the amount of $428,497, $174,285 and
$61,257, respectively. The indebtedness owing by such persons accrues interest
at the rate charged to the Company for working capital borrowings. Mr.
Layton's indebtedness is due and payable in one installment on April 1, 1999,
while Messrs. Powell's and Wharf's indebtedness is due and payable in one
installment on March 31, 1998.
David Heap, the Company's Chairman of the Board, owns
approximately a one-third equity interest in a small computer supplies dealer,
Business Software Centers, Inc. ("BSC"). In December 1991, Mr. Heap agreed to
remit to the Company any dividends, distributions or other amounts which he may
receive in respect of such interest. Mr. Heap has not received any dividends,
distributions or other amounts in respect of his equity interest and it is
unlikely that he will receive any in the future.
During fiscal year 1997, the Company's sales to BSC aggregated
approximately $1,844,000 and constituted less than 1% of the Company's total
sales in such fiscal year. Such sales were made in accordance with the
Company's usual terms, except that BSC received extended payment terms in
return for which BSC agreed, among other things, to provide the Company with
quarterly financial information. In December 1993, the Company and BSC agreed
-14-
<PAGE> 16
that (i) $500,000 of the past due trade receivable then owing by BSC would be
evidenced by a promissory note, payable in 48 monthly installments and accruing
interest at the rate of 7% per annum, (ii) the Company would provide BSC with
60 day credit terms up to a maximum amount of $350,000 (subject to BSC
continuing to meet its obligations under the note), (iii) BSC would provide the
Company with quarterly financial information and (iv) at such time as the note
is paid in full, Mr. Heap will transfer to BSC, for a nominal consideration,
the one-third equity interest held in BSC. As of May 31, 1997, there was
approximately $20,000 outstanding under the note and there were past due trade
amounts payable of approximately $27,000 by BSC to the Company.
In April 1997, the Company entered into a one-year aircraft lease
with a company owned by Mr. Heap under which the Company, on a non-exclusive
basis, leases an aircraft from such company. Under the terms of the lease, the
Company pays monthly lease payments of $14,400 and is responsible for certain
operating expenses. The lease is terminable by either party at any time.
PERFORMANCE GRAPH
The following line graph displays the cumulative total return to
stockholders of the Company's Common Stock from January 27, 1995 (the
commencement of trading of the Company's Common Stock) to March 31, 1997,
compared to the cumulative total return for the Total Return Index for The
Nasdaq Stock Market (US), a broad market index, and to the Nasdaq Non-Financial
Stocks Index, an index of non-financial companies found within a range of
Standard Industrial Classification code numbers, which includes the Company.
The graph assumes a $100 investment in the Company's Common Stock
on January 27, 1995 at the initial offering price of $15 per share. The graph
also assumes investments in the Nasdaq Total Return (US) Index and the Nasdaq
Non-Financial Stocks Index of $78.15 and $83.46 respectively on March 31, 1992.
The value of these investments would have increased to $100 on January 27,
1995.
Although the Common Stock has only been publicly-held since
January 1995, the graph shows the performance of the Nasdaq Total Return (US)
Index and the Nasdaq Non-Financial Stocks Index for the past five years. This
information is being provided as the Company believes that it enhances the
reader's understanding of the performance of the Common Stock. Depicting the
two Nasdaq indexes only for the period that the Common Stock has been publicly-
held would deprive the reader of the historical perspective of the indexes.
-15-
<PAGE> 17
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
3/31/92 3/31/93 3/31/94 1/27/95 3/31/95 3/31/96 3/31/97
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Daisytek 100.00 146.67 220.00 208.33
Nasdaq U.S. (a) 78.15 89.84 96.97 100.00 107.88 146.47 162.79
Nasdaq non-financial (a) 83.46 90.04 98.79 100.00 108.25 146.05 157.58
</TABLE>
(a) Prepared by the Center for Research in Security Prices (CRSP)
ITEM 2
PROPOSAL TO ADOPT THE COMPANY'S 1997 EMPLOYEE
STOCK OPTION PLAN
The Company's 1997 Employee Stock Option Plan (the "Plan") was
adopted by the Company's Board of Directors in April 1997 and is subject to
approval by stockholders at the Annual Meeting. The following description of
the Plan is qualified in its entirety by the provisions of the Plan, a copy of
which is attached as Appendix I to this Proxy Statement.
The purpose of the Plan is to further the growth, development and
financial success of the Company by providing additional incentives to certain
of its key employees by assisting them to become owners of the Company's Common
Stock and, thus, to benefit directly from its growth, development and financial
success.
The Plan provides for the granting to employees of both incentive
stock options (as defined in Section 422 of the Internal Revenue Code of 1986
as amended (the "Code")) and non-qualified stock options. The maximum number
of shares of Common Stock for which options may be granted under the Plan is
1,000,000 shares.
The Plan is administered by a committee of the Board of Directors
(the
-16-
<PAGE> 18
"Committee"), presently consisting of Messrs. Murray and Jannotta, which has
the authority to determine from among eligible persons those to whom options
will be granted and the terms of such options.
The exercise price of options granted under the Plan may not be
less than 100% of the fair market value on the date of the grant, except that
incentive stock options granted to individuals owning (within the meaning of
Section 424(d) of the Code) more than ten percent of the total combined voting
power of the Company, may not have an exercise price less than 110% of the fair
market value on the date of grant. The Plan gives the Committee complete
discretion as to the times at which the options are exercisable, provided that
such options must expire no later than ten years from the date of grant.
Options may not be granted under the Plan after March 31, 2007.
The Board of Directors or the Committee may make modifications to
the Plan as it deems proper and in the best interests of the Company, subject
to any requirement of stockholder approval under the Code or other applicable
law.
Options are exercisable at such times and in such installments
(which may be cumulative) as the Committee may provide in the terms of each
individual option. Generally, options granted under the Plan will not be
exercisable during the six months after such option is granted and will be
subject to a three year cumulative vesting schedule under which 15% vest after
the first year, 50% vest after the second year and 100% vest after the third
year.
As of May 31, 1997, the Company had issued stock options under
the Plan to 208 employees which are exercisable (subject to vesting
requirements) into a total of 327,342 shares of Common Stock. Of the foregoing
options, Mr. Heap received options to purchase 32,913 shares; Mr. Layton
received options to purchase 26,502 shares; Mr. Madden received options to
purchase 13,588 shares; Mr. Powell received options to purchase 16,728 shares;
Mr. Yates received options to purchase 21,811 shares; and all officers and
directors as a group received options to purchase 143,910 shares. All of such
options have an exercise price of $25 per share which was the closing sale
price of the Common Stock (as reported by the Nasdaq National Market) on the
date of grant.
The Board of Directors recommends a vote FOR adoption of the
Company's 1997 Employee Stock Option Plan.
ITEM 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has appointed Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending March 31, 1998. Arthur
Andersen LLP has audited the Company's financial statements since 1988.
Ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors will require the affirmative vote of a majority of the
shares of Common Stock represented in person or by proxy and entitled to vote
at the Annual Meeting. In the
-17-
<PAGE> 19
event shareholders do not ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors, such appointment will be reconsidered by the
Audit Committee and the Board of Directors. Representatives of Arthur Andersen
LLP will be present at the Annual Meeting to respond to appropriate questions
and to make such statements as they may desire.
The Board of Directors of the Company recommends a vote FOR
ratification of Arthur Andersen LLP as the Company's independent auditors for
the fiscal year ending March 31, 1998.
GENERAL INFORMATION
VOTING PROCEDURES
All matters specified in this Proxy Statement that are to be
voted on at the Annual Meeting will be by written ballot. One or more
inspectors of election will be appointed, among other things, to determine the
number of shares outstanding and the voting power of each, the shares
represented at the Annual Meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, to receive votes or ballots, to
hear and determine all challenges and questions in any way arising in
connection with the right to vote, to count and tabulate all votes and to
determine the result.
SOLICITATION COSTS
The Company will pay the cost of preparing and mailing this Proxy
Statement and other costs of the proxy solicitation made by the Board of
Directors. Certain of the Company's officers and employees may solicit the
submission of proxies authorizing the voting of shares in accordance with the
Board of Directors' recommendations, but no additional remuneration will be
paid by the Company for the solicitation of those proxies. Such solicitations
may be made by personal interview or telephone. Arrangements have also been
made with brokerage firms and others for the forwarding of proxy solicitation
materials to the beneficial owners of Common Stock, and the Company will
reimburse such persons for reasonable out-of-pocket expenses incurred in
connection therewith.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
A stockholder desiring to submit an otherwise eligible proposal
for inclusion in the Company's proxy statement for the 1998 annual meeting of
stockholders of the Company must deliver the proposal so that it is received by
the Company no later than March 2, 1998. The Company requests that all such
proposals be addressed to the Company's Secretary at the Company's principal
executive offices, 500 North Central Expressway, Plano, Texas 75074, and mailed
by certified mail, return-receipt requested.
COMPLIANCE WITH CERTAIN REPORTING OBLIGATIONS
Section 16(a) of the Exchange Act requires the Company's
executive officers,
-18-
<PAGE> 20
directors and controlling stockholders to file initial reports of ownership and
reports of changes of ownership of the Company's Common Stock with the
Securities and Exchange Commission and the Company. To the Company's
knowledge, all reports required to be so filed were filed in accordance with
the provisions of said Section 16(a).
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the year ended March 31, 1997,
including financial statements, is being sent to stockholders of record as of
the Record Date together with this Proxy Statement. The Annual Report is not a
part of the proxy solicitation materials. The Company will furnish, without
charge, a copy of its Annual Report on Form 10-K for the year ended March 31,
1997 as filed with the Securities and Exchange Commission to any stockholder
who submits a written request to the Company at its executive offices, 500
North Central Expressway, Plano, Texas 75074, Attention: Investor Relations.
OTHER MATTERS
The Board of Directors knows of no matters other than those
described in this Proxy Statement which are likely to come before the Annual
Meeting. If any other matters properly come before the Annual Meeting, or any
adjournment thereof, the persons named in the accompanying form of proxy intend
to vote the proxies in accordance with their best judgment.
By Order of the Board of
Directors,
Harvey H. Achatz
Secretary
Plano, Texas
July 10, 1997
-19-
<PAGE> 21
APPENDIX I
1997 STOCK OPTION PLAN
OF
DAISYTEK INTERNATIONAL CORPORATION
Daisytek International Corporation, a corporation organized under
the laws of the State of Delaware, hereby adopts this 1997 Stock Option Plan.
The purpose of this Plan is to further the growth, development and financial
success of the Company by providing additional incentives to certain of its key
Employees by assisting them to become owners of the Company's Common Stock and
thus to benefit directly from its growth, development and financial success.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall
have the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter and the
singular shall include the plural, where the context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the Stock Option Committee of the Board,
appointed as provided in Section 6.1.
Section 1.4 - Company
"Company" shall mean Daisytek International Corporation, a
Delaware corporation. In addition, "Company" shall mean any corporation
assuming, or issuing new employee stock options in substitution for, Incentive
Stock Options, outstanding under the Plan, in a transaction to which Section
424(a) of the Code applies.
<PAGE> 22
Section 1.5 - Director
"Director" shall mean a member of the Board.
Section 1.6 - Employee
"Employee" shall mean any employee (as defined in accordance with
the regulations and revenue rulings then applicable under Section 3401(c) of
the Code) of the Company, or of any corporation which is then a Parent
Corporation or a Subsidiary, whether such employee is so employed at the time
this Plan is adopted or becomes so employed subsequent to the adoption of this
Plan. To the extent not included in the foregoing, "Employee" shall also mean
any officer, director, employee or consultant of the Company, or any entity
which, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company, as the Committee
shall from time to time select in its sole discretion.
Section 1.7 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.8 - Incentive Stock Option
"Incentive Stock Option" shall mean an Option which qualifies
under Section 422 of the Code and which is designated as an Incentive Stock
Option by the Committee.
Section 1.9 - Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not an
Incentive Stock Option and which is designated as a Non-Qualified Option by the
Committee.
Section 1.10 - Officer
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the
future.
Section 1.11 - Option
"Option" shall mean an option to purchase Common Stock of the
Company, granted under the Plan. "Options" includes both Incentive Stock
Options and Non-Qualified Options.
Section 1.12 - Optionee
"Optionee" shall mean an Employee to whom an Option is granted
under the Plan.
<PAGE> 23
Section 1.13 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken
chain of corporations ending with the Company if each of the corporations other
than the Company then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Section 1.14 - Plan
"Plan" shall mean this 1997 Stock Option Plan of Daisytek
International Corporation.
Section 1.15 - Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended in the future.
Section 1.16 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.17 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.18 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.19 - Termination of Employment
"Termination of Employment" shall mean the time when an Optionee
ceases to be an Employee for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement, but
excluding terminations where there is a simultaneous reemployment by the
Company, a Parent Corporation, a Subsidiary or any entity which, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the Company. The Committee, in its absolute
discretion, and with respect to all Options hereunder, shall determine all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment is
for "cause" and what actions constitute "cause", and all questions of whether
particular leaves of absence constitute Terminations of Employment; provided,
however, that, with respect to Incentive Stock Options, a leave of absence
shall constitute a Termination of
<PAGE> 24
Employment if, and to the extent that, such leave of absence interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options shall be shares of the
Company's Common Stock, $.01 par value. The aggregate number of such shares
which may be issued upon exercise of Options shall be 1,000,000 shares. The
shares to be issued upon exercise of Options may be newly-issued shares or
Treasury shares.
Section 2.2 - Unexercised Options
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned hereunder.
Section 2.3 - Changes in Company's Shares
In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or kind
of shares or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind
of shares for the purchase of which Options may be granted, including
adjustments of the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued on exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any key Employee shall be eligible to be granted Options, subject
to such rules and conditions as the Committee may establish from time to time
in its sole discretion.
Section 3.2 - Qualification of Incentive Stock Options
Subject to the provisions of Section 7.7 hereof, no Incentive
Stock Option shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code.
<PAGE> 25
Section 3.3 - Granting of Options
(a) Subject to the provisions hereof, the Committee shall from
time to time, in its absolute discretion:
(i) Determine which Employees are key Employees and select
from among the key Employees (including those to whom Options have been
previously granted under the Plan or any other plan of the Company) such
of them as in its opinion should be granted Options; and
(ii) Determine the number of shares to be subject to such
Options granted to such selected key Employees, and determine whether
such Options are to be Incentive Stock Options or Non-Qualified Options;
and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) In selecting the key Employees to whom Options shall be
granted hereunder, the number of shares to be subject to such Options and the
terms and conditions of such Options, the Committee shall have sole and
absolute discretion and shall be free to make non-uniform and selective
determinations based upon such factors as it deems relevant.
(c) Upon the selection of a key Employee to be granted an Option,
the Committee shall instruct the Secretary to issue such Option and may impose
such conditions on the grant of such Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition on
the grant of an Option to an Employee that the Employee surrender for
cancellation some or all of the unexercised Options which have been previously
granted to him. An Option the grant of which is conditioned upon such
surrender may have an option price lower (or higher) than the option price of
the surrendered Option, may cover the same (or a lessor or greater) number of
shares as the surrendered Option, may contain such other terms as the Committee
deems appropriate and shall be exercisable in accordance with its terms,
without regard to the number of shares, price, option period or any other term
or condition of the surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized Officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with the Plan. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to qualify such Options as "incentive stock options" under Section
422 of the Code.
<PAGE> 26
Section 4.2 - Option Price
(a) The price of the shares subject to each Option shall be not
less than 100% of the fair market value of such shares on the date such Option
is granted; provided, however, that, in the case of an Incentive Stock Option,
the price per share shall not be less than 110% of the fair market value of
such shares on the date such Option is granted in the case of an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company, any
Subsidiary or any Parent Corporation.
(b) For purposes of the Plan, the fair market value of a share of
the Company's Common Stock as of a given date shall be: (i) the closing price
of a share of the Company's Common Stock on the principal exchange on which
shares of the Company's Common Stock are then trading, if any, on the day
previous to such date, or, if shares were not traded on the day previous to
such date, then on the next preceding trading day during which a sale occurred;
or (ii) if such Common Stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, (1) the last sales price (if the
Company's Common Stock is then listed as a National Market Issue under the NASD
National Market System) or (2) the mean between the closing representative bid
and asked prices (in all other cases) for the Company's Common Stock, in each
case, as of the day previous to such date as reported by NASDAQ or such
successor quotation system; or (iii) if such Common Stock is not publicly
traded on an exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for the Company's Common
Stock, on the day previous to such date, as determined in good faith by the
Committee; or (iv) if the Company's Common Stock is not publicly traded, the
fair market value established by the Committee acting in good faith.
Section 4.3 - Commencement of Exercisability
(a) No Option may be exercised in whole or in part during the six
months after such Option is granted.
(b) Subject to the provisions of paragraph (c) below, each Option
granted hereunder shall be subject to the following cumulative vesting
schedule:
(i) Until the date which is one year from the date of
grant, the Option shall not be vested and shall not be exercisable as to
any of the shares subject thereto;
(ii) From and after the date which is one year from the
date of grant, the Option shall vest and be exercisable as to 15% of the
number of shares subject thereto;
(iii) From and after the date which is two years from the
date of grant, the Option shall vest and be exercisable as to 50% of the
number of shares subject thereto; and
(iv) From and after the date which is three years from the
date of grant, the Option
<PAGE> 27
shall be fully vested and exercisable as to 100% of the number of shares
subject thereto.
(c) Subject to the provisions hereof governing Incentive Stock
Options, the Committee shall have the right to accelerate the vesting of any
outstanding Option, or any portion thereof, at any time and from time to time,
and upon such terms and conditions as it shall determine in its sole
discretion.
(d) Notwithstanding any other provision of this Plan, to the
extent that the aggregate fair market value (determined at the time the
Incentive Stock Option is granted) of the shares of the Company's stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code) are exercisable by any Optionee for the first time by such
Optionee during any calendar year (under the Plan and all other incentive stock
option plans of the Company, any Subsidiary and any Parent Corporation) exceeds
$100,000, such Options shall be treated as Non-Qualified Options. For purposes
of this Section, Options shall be taken into account in the order in which they
were granted.
Section 4.4 - Expiration of Options
No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option
was granted;
(ii) With respect to an Incentive Stock Option, in the
case of an Optionee owning (within the meaning of Section 424(d) of the
Code), at the time the Incentive Stock Option was granted, more than 10%
of the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation, the expiration of
five years from the date the Incentive Stock Option was granted;
(iii) The date of the Optionee's Termination of Employment
for any reason, other than such Optionee's death or disability (within
the meaning of Section 22(e)(3) of the Code), unless the Committee
otherwise elects to permit the exercise of such Option for a period of
time thereafter; provided, however (a) such period of time shall end no
later than ten years from the date the Option was granted, (b) with
respect to Incentive Stock Options, such period of time shall not exceed
three months from such Termination of Employment and (c) the Committee
may make such elections in such manner as it deems appropriate, which
may be non-uniform and selective, and based upon such factors as it
deems relevant;
(iv) With respect to an Incentive Stock Option held by an
Optionee who is disabled (within the meaning of Section 22(e)(3) of the
Code), the expiration of one year from the date of the Optionee's
Termination of Employment for any reason other than such Optionee's
death unless the Optionee dies within said one-year period;
(v) The expiration of one year from the date of the
Optionee's death with respect to all Incentive Stock Options held by
such Optionee; and
<PAGE> 28
(vi) With respect to all Options, and notwithstanding any
other provision contained herein, the date of the Optionee's Termination of
Employment in the event such Termination is for "cause" (as provided in
Section 1.19 above).
Section 4.5 - Consideration
In consideration of the granting of an Option, the Committee may
require that the Optionee shall agree to remain in the employ of the Company,
a Parent Corporation or a Subsidiary for a period of at least one year after
the Option is granted. Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continue in the employ of
the Company, any Parent Corporation or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company, its Parent Corporations and
its Subsidiaries, which are hereby expressly reserved, to discharged any
Optionee at any time for any reason whatsoever, with or without cause.
Section 4.6 - Adjustments in Outstanding Options
In the event that the outstanding shares of the stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be
exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in Option
price per share; provided, however, that, in the case of Incentive Stock
Options, each such adjustment shall be made in such manner as not to constitute
a "modification" within the meaning of Section 424(h)(3) of the Code. Any such
adjustment made by the Committee shall be final and binding upon all Optionees,
the Company and all other interested persons.
Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution
By its acceptance of each Option, each Optionee agrees that the
Board shall have the power and right to declare and determine, by a duly
adopted resolution of the Board, that each Option may not be exercised after
(i) the merger or consolidation of the Company with or into another corporation
(if the Company is not the surviving corporation of such merger or
consolidation), (ii) the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock or (iii) the liquidation or dissolution of the
Company; provided, that such resolution shall be adopted prior to the
occurrence of such merger, consolidation, acquisition, liquidation or
dissolution.
<PAGE> 29
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise an
Option (or any portion thereof) granted to him. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution. Notwithstanding the foregoing, the
Committee may, in its sole discretion, permit the transfer of any Non-Qualified
Option, in whole or in part, and the exercise thereof by any transferee
thereof.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee may
require any partial exercise to be with respect to a specified minimum number
of shares.
Section 5.3 - Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
(b) (i) Full payment (in cash or by check) for the shares
with respect to which such Option or portion is thereby exercised; or
(ii) With the consent of the Committee, (A) shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfer to the
Company or (B) except with respect to Incentive Stock Options and subject to
the requirements of Section 5.4, shares of the Company's Common Stock issuable
to the Optionee upon exercise of the Option, in each case, with a fair market
value (as determined under Section 4.2(b)) on the date of Option exercise equal
to the aggregate Option price of the shares with respect to which such Option
or portion is thereby exercised; or
(iii) With the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i) and (ii); and
<PAGE> 30
(c) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; provided, that, with the consent
of the Committee, any combination of the following may be used to make all or
part of such payment: (i) shares of the Company's Common Stock owned by the
Optionee duly endorsed for transfer or (ii) except with respect to Incentive
Stock Options and subject to the requirements of Section 5.4, shares of the
Company's Common Stock issuable to the Optionee upon exercise of the Option, in
each case, valued in accordance with Section 4.2(b) at the date of Option
exercise; and
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
Section 5.4 - Certain Requirements
The Committee may, in its sole discretion, limit or restrict the
use of Shares of the Company's Common Stock issuable to the Optionee upon
exercise of the Option to satisfy the Option price or the tax withholding
consequences of such exercise (i) to the period beginning on the third business
day following the date of release of the quarterly or annual summary statement
of sales and earnings of the Company and ending on the twentieth business day
following such date or (ii) to its receipt of an irrevocable written election
by the Optionee to use shares of the Company's Common Stock issuable to the
Optionee upon exercise of the Option to pay all or part of the Option price or
the withholding taxes (subject to the approval of the Committee) made at least
six months prior to the payment of such Option price or withholding taxes or
(iii) in accordance with such other rules and regulations as the Committee may
determine to be necessary or appropriate from time to time.
Section 5.5 - Conditions to Issuance of Stock Certificates
The shares of stock issuable and deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company. The Company shall not be required to issue or deliver any certificate
or certificates for shares of stock purchased upon the exercise of any Option
or portion thereof prior to the fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed; and
<PAGE> 31
(b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
Section 5.6 - Rights as Shareholders
The holders of Options shall not be, nor have any of the rights
or privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
holders.
Section 5.7 - Transfer Restrictions
If required at any time by the Committee, no shares acquired upon
exercise of any Option by any Officer may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have elapsed from
(but excluding) the date that such Option was granted. The Committee, in its
absolute discretion, may impose such other restrictions on the transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such other restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of stock, acquired by exercise of an
Incentive Stock Option, within two years from the date of granting such Option
or one year after the transfer of such shares to such Employee. The Committee
may direct that the certificates evidencing shares acquired by exercise of an
Incentive Stock Option refer to such requirement to give prompt notice of
disposition.
ARTICLE VI
ADMINISTRATION
Section 6.1 - Stock Option Committee
The Stock Option Committee shall consist of two or more
Directors, appointed by and holding office at the pleasure of the Board. The
Board may limit the members of the Committee to directors who are both "non-
employee directors", as defined in Rule 16b-3, and "outside directors", as
defined in
<PAGE> 32
Section 162(m) of the Code. Subject to the limitations set forth in the
preceding sentence, the powers of the Stock Option Committee may be exercised
by the Compensation Committee of the Board. Appointment of Committee members
shall be effective upon acceptance of appointment. Committee members may be
removed by the Board at any time and may resign at any time. Vacancies in the
Committee shall be filled by the Board. The Board reserves the right to serve
as the Stock option Committee if it so elects, and, in which event, the term
"Committee" shall mean the Board.
Section 6.2 - Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any
such interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock
options" within the meaning of Section 422 of the Code.
Section 6.3 - Majority Rule
The Committee shall act by a majority of its members in office.
The Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
Section 6.4 - Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Company and its Officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation. The Committee shall have the unrestricted
right to make non-uniform decisions and determinations in all matters regarding
the Plan and all Options issued hereunder.
<PAGE> 33
ARTICLE VII
OTHER PROVISIONS
Section 7.1 - Options Not Transferable
No Option or interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution. Notwithstanding the foregoing, the Committee may, in
its discretion, permit the holder of any Non-Qualified Option to transfer such
Option, or any portion thereof, to such holder's spouse, lineal descendent or
trust established for the benefit thereof or any other person or entity.
Section 7.2 - Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Committee, including without limitation, any amendment to increase or decrease
the number of shares as to which Options may be granted hereunder, subject to
any requirements of shareholder approval set forth in Section 16b-3 or the
applicable provisions of the Code. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of the Option,
impair any rights or obligations under any Option theretofore granted. Subject
to any applicable provisions of Section 16b-3 and the Code, the Committee and
the holder of any Option may at any time, by mutual consent, amend, modify or
otherwise waive any of the terms and provisions, including the exercise price,
of such holder's Option and Stock Option Agreement. No Option may be granted
during any period of suspension nor after termination of the Plan, and in no
event may any Option be granted under this Plan after the first to occur of (a)
March 31, 2007 or (b) the expiration of ten years from the date the Plan is
approved by the Company's shareholders under Section 7.3.
Section 7.3 - Effective Date; Approval of Plan by Shareholders
This Plan will be effective upon its approval by the Board or
such other date as the Board shall determine; provided, however, that,
notwithstanding any other provision contained herein, no Option shall be
exercisable unless this Plan shall be approved within 12 months of its
effective date by stockholders holding at least a majority of the Company's
voting stock voting in person or by proxy at a duly held stockholders' meeting.
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
The adoption of this Plan shall not affect any other compensation
or incentive plans in effect
<PAGE> 34
for the Company, any Parent Corporation or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company, any Parent
Corporation or any Subsidiary to (a) establish any other forms of incentives or
compensation for employees of the Company, any Parent Corporation or any
Subsidiary or (b) grant or assume options otherwise than under this Plan in
connection with any proper corporate purpose, including, but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
Section 7.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.
Section 7.6 - Conformity to Securities Laws
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
Section 7.7 - Incentive Stock Options
With respect to Incentive Stock Options, if the Plan does not
contain any provision now or hereafter required to be included herein under
Section 422 of the Code, such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had been set out at
length herein. Notwithstanding anything contained herein, to the extent any
Option which is intended to qualify as an Incentive Stock Option cannot so
qualify, such Option, to that extent, shall be deemed to be a Non-Qualified
Option under the Code for all purposes of the Plan.
Section 7.8 - Exclusion from Pension and Profit-Sharing Computation
By acceptance of an Option, each Optionee shall be deemed to have
agreed that such grant is special incentive compensation that will not be taken
into account, in any manner, as salary, compensation or bonus in determining
the amount of any payment under any pension, retirement or other employee
benefit plan of the Company or any of its Subsidiaries, whether now existing or
hereafter arising. In addition, such Option will not affect the amount of any
life insurance coverage, if any, provided by the Company on the life of the
Optionee which is payable to such beneficiary under any life insurance plan
covering employees of the Company or any of its Subsidiaries.
<PAGE> 35
Please mark
your vote as
indicated in
this example
[X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.
1. ELECTION OF DIRECTOR FOR WITHHELD
Nominees FOR ALL
David A. Heap [ ] [ ]
Edgar D. Jannotta, Jr.
Peter P.J. Vikanis
ITEM 2-TO APPROVE OF THE FOR AGAINST ABSTAIN
COMPANY'S 1997 EMPLOYEE
STOCK OPTION PLAN [ ] [ ] [ ]
ITEM 3-APPOINTMENT OF INDEPENDENT FOR AGAINST ABSTAIN
ACCOUNTANTS
[ ] [ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided below.)
- - ----------------------------------------------------------------------
Signature__________________ Signature______________________Date ______________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
<PAGE> 36
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DAISYTEK INTERNATIONAL CORPORATION
The undersigned hereby appoints David A. Heap, Mark C. Layton, and
Harvey H. Achatz as proxies, with power to act without the other and with power
of substitution, and hereby authorizes them to represent and vote, as
designated on the other side, all the shares of stock of Daisytek International
Corporation standing in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Stockholders of
the Company to be held August 15, 1997 or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- - --------------------------------------------------------------------------------
Fold and Detach Here
