<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 [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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)(1) 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 Stonebridge Country Club in McKinney, Texas, on Friday, August
14, 1998, at 10:00 a.m. (local time).
At the Annual Meeting, stockholders will be asked to elect
directors, adopt the Company's 1998 Amended and Restated Employee Stock Option
Plan, adopt the Company's 1998 Employee Stock Purchase Plan, approve an
amendment to the Company's Certificate of Incorporation increasing the number of
authorized shares of common stock 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 14, 1998.
Sincerely,
David A. Heap
Chairman
July 2, 1998
<PAGE> 3
DAISYTEK INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 14, 1998
The Annual Meeting of Stockholders of Daisytek International
Corporation (the "Company") will be held on Friday, August 14, 1998, at 10:00
a.m. at the Stonebridge Country Club, McKinney, Texas, for the following
purposes:
1. To elect two Class I directors;
2. To consider and act upon a proposal to approve the
Company's 1998 Amended and Restated Employee Stock
Option Plan;
3. To consider and act upon a proposal to approve the
Company's 1998 Employee Stock Purchase Plan;
4. To consider and act upon an amendment to the
Company's Amended and Restated Certificate of
Incorporation increasing the number of authorized
shares;
5. To ratify the appointment of Arthur Andersen LLP as
the Company's independent auditors for the fiscal
year ending March 31, 1999; and
6. 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
24, 1998 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 2, 1998
<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
Stonebridge Country Club, McKinney, Texas, on Friday, August 14, 1998, 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 1998 Annual Report on
Form 10-K were first mailed to stockholders on or about July 3, 1998.
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 two nominees to the
Board of Directors listed in this Proxy Statement;
(ii) in favor of the adoption of the Company's 1998
Amended and Restated Employee Stock Option Plan;
(iii) in favor of the adoption of the Company's 1998
Employee Stock Purchase Plan;
(iv) in favor of the amendment to the Company's Amended
and Restated Certificate of Incorporation; and
(v) to ratify the appointment of Arthur Andersen LLP as
the Company's independent auditors for the fiscal
year ending March 31, 1999.
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 24,
1998 (the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. On the Record Date, the issued and
<PAGE> 5
outstanding voting securities of the Company consisted of 17,041,308 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 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 I directors expires at the Annual Meeting. Each director elected as a
Class I director at the Annual Meeting will have a term of three years. The
nominees for the Class I directors are Chris Yates and James R. Powell who have
been nominated and recommended by the Board of Directors. If elected, Messrs.
Yates and Powell are expected to serve until the Company's 2001 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 II and III 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.
2
<PAGE> 6
DIRECTORS STANDING FOR ELECTION
CLASS I
TERM EXPIRES AT THE 2001 ANNUAL MEETING
CHRISTOPHER YATES, age 43, 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 International plc (and its
predecessors) ("ISA"), a now publicly traded distributor of computer supplies in
Western Europe.
JAMES R. POWELL, age 37, 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.
DIRECTORS CONTINUING IN OFFICE
CLASS III
TERM EXPIRES AT THE 2000 ANNUAL MEETING
DAVID A. HEAP, age 54, has served as Chairman of the Board
since 1982, as Chief Executive Officer from 1982 until his retirement from that
position in April 1997 and as President from 1982 to 1990. From 1970 to 1985,
Mr. Heap served as Chairman of ISA which he founded in England in 1970.
EDGAR D. JANNOTTA, JR., age 37, has served as a Director of
the Company since 1991. Mr. Jannotta is a Principal of GTCR Golden Rauner
L.L.C., an investment banking firm. Prior to joining such firm, Mr. Jannotta was
a Principal of William Blair & Company, L.L.C., an investment banking firm. Mr.
Jannotta is also a director of Gibraltar Packaging Group, Inc., a diversified
packaging company. Mr. Jannotta is a non-employee Director.
PETER P. J. VIKANIS, age 47, has served as a Director of the
Company since 1996. Mr. Vikanis served as Chief Operating Officer of ISA from
1991 to 1995, as a 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.
3
<PAGE> 7
DIRECTORS CONTINUING IN OFFICE
CLASS II
TERM EXPIRES AT THE 1999 ANNUAL MEETING
MARK C. LAYTON, age 38, has served as President, Chief
Executive Officer and Chief Operating Officer since April 1997 and as a Director
since 1988. Mr. Layton served as President, Chief Operating Officer and Chief
Financial Officer from 1993 to April 1997, as Executive Vice President from 1990
to 1993 and as Vice President - Operations from 1988 to 1990. 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 45, 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 several privately held corporations. Mr. Murray is a non-employee
Director.
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 57, serves as Vice President -
Administration and Secretary, positions he has held since 1993 and 1984,
respectively. Mr. Achatz has served as Vice President - Finance from 1985 to
1993, as Controller from 1981 to 1985 and as a Director from 1984 to 1990.
THOMAS J. MADDEN, age 36, was appointed as Chief Financial
Officer in July 1997 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 39, serves as Vice President -
International Operations, 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.
4
<PAGE> 8
SUZANNE GARRETT, age 33, 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.
MEETINGS OF THE BOARD
The Board of Directors met six times during the Company's 1998
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 1998. During fiscal year 1998, the members
of the Audit Committee were Messrs. Vikanis and Murray who are non-employee
directors.
The Compensation Committee approves, or in some cases
recommends, to the Board, remuneration and compensation arrangements involving
the Company's executive officers and other key employees. During fiscal year
1998, the members of the Compensation Committee were Messrs. Murray and
Jannotta, who are non-employee directors. The Compensation Committee also serves
as the Stock Option Committee to administer the Company's employee stock option
and purchase plans. The Compensation Committee and Stock Option Committee met
once in fiscal year 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1998, the members of the Compensation
Committee of the Company's Board of Directors were Timothy M. Murray and Edgar
D. Jannotta, Jr. who are non-employee directors.
5
<PAGE> 9
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 a defined 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 1998, each of the
Company's non-employee directors received options to purchase 2,480 shares of
Common Stock, at an exercise price of $22.4375 (the fair market value on the
date of grant). In addition, each non-employee director will receive options to
purchase 2,998 shares of Common Stock as of the date of the 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, 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.
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, 1998, 1997 and 1996:
6
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
-------------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPLE POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION (1)
- ------------------------------- ------ ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
David A. Heap................ 1998 $ 250,000 $ 201,897 151,554 $ 4,951
Chairman 1997 385,000 222,900 85,728 5,970
1996 385,000 280,676 75,666 8,636
Mark C. Layton............... 1998 319,599 269,196 122,836 9,731
President, Chief Executive 1997 299,013 222,900 69,832 8,458
and Operating Officer 1996 276,386 280,676 56,040 6,008
Christopher Yates............ 1998 248,454 88,835 84,742 6,088
Senior Vice President - 1997 232,200 73,557 41,120 5,004
Business Development 1996 215,000 92,623 40,276 2,430
Steven Graham................ 1998 189,491 88,835 60,000 37,829
Senior Vice President - 1997 78,268 32,439 50,000 5,610
Information Technologies 1996 -- -- -- --
and Chief Information
Officer
James R. Powell.............. 1998 175,037 88,835 76,116 3,015
Senior Vice President - 1997 163,652 73,557 42,660 3,715
Sales and Marketing 1996 150,359 70,169 28,008 3,707
</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 name executive officer; tax return
preparation services paid by the Company; personal travel expenses and
relocation costs.
(2) The fiscal year 1997 option grants were cancelled in April 1997 and
reissued in fiscal year 1998 at an exercise price per share of $12.50
(the fair market value on the date of reissue) and have a ten year
term. All such options are subject to a three year cumulative vesting
schedule and are included in the fiscal year 1998 option grants in the
table above.
The following table sets forth information with respect to
grants of stock options during the year ended March 31, 1998 to the named
executive officers reflected in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERMS (2) (3)
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------------
NAME GRANTED YEAR SHARE (3) DATE (1) (3) 5% 10%
- ----------------------- ---------- ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David A. Heap.......... 151,554 11.3% $ 12.50 4-17-07 $ 1,191,394 $ 3,019,226
Mark C. Layton......... 122,836 9.2% 12.50 4-17-07 965,636 2,447,112
Christopher Yates...... 84,742 6.3% 12.50 4-17-07 666,172 1,688,212
Steven Graham.......... 60,000 4.5% 12.50 4-17-07 471,671 1,195,307
James R. Powell........ 76,116 5.7% 12.50 4-17-07 598,362 1,516,366
</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 cancelled in April 1997 and
reissued at an exercise price per share of $12.50 (the fair market
value on the date of reissue) and have a ten year term. All such
options are subject to a three year cumulative vesting schedule and are
included in the option grants in the table above.
7
<PAGE> 11
The following table sets forth information concerning the
aggregate stock option exercises during the fiscal year ended March 31, 1998 and
stock option values as of the end of fiscal year 1998 for unexercised stock
options held by each of the named executive officers:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END (1) (3)
ON VALUE --------------------------- -----------------------------
NAME EXERCISE RECEIVED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David A. Heap.......... -- $ -- 37,833 189,387 $ 553,308 $ 2,353,011
Mark C. Layton......... 91,532 987,401 19,614 150,856 286,855 1,868,470
Christopher Yates...... 121,600 1,814,154 20,138 104,880 294,518 1,300,830
Steven Graham.......... -- -- -- 60,000 -- 712,500
James R. Powell........ 21,856 275,947 -- 90,120 -- 1,108,686
</TABLE>
- ------------------
(1) Calculated by determining the difference between $24 3/8 (the last sale
price of the Common Stock on March 31, 1998 as reported by the Nasdaq
National Market) and the exercise price of 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
1998
The Compensation Committee of the Board of Directors (the
"Committee") for fiscal year 1998 was 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 1998
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
8
<PAGE> 12
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 1998 the base salary of Mr. Mark Layton, the
Company's Chief Executive Officer, was $319,599, which was approximately a seven
percent increase from his base salary for the prior fiscal year. The Committee
believes that this amount appropriately reflected Mr. Layton's services as
President, Chief Executive Officer and Chief Operating Officer, although such
determination was not based upon any specific qualitative or quantitative
formula.
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. Layton received a bonus of $269,196 for the 1998 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 1998, Mr.
Layton received options to purchase 122,836 shares at an exercise price of
$12.50 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 1998 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.
9
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 9, 1998, 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 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)................................. 1,224,997 7.6%
500 North Central Expressway
Plano, Texas 75074
Royal Bank of Canada Trust Company
(Jersey) Limited and Kenneth Edward
Rayner, Trustees, of the David Heap
Life Interest Settlement (No.10)(3)........... 1,169,346 7.3%
19-21 Broad Street
St. Helier, Jersey, Channel Islands
Robert Fleming Inc.(4)........................... 1,053,910 6.6%
1285 Avenue of the Americas
New York, New York 10019
Amvescap Plc(5).................................. 915,600 5.7%
11 Devonshire Square
London, England
Mark C. Layton(6)................................ 253,234 *
Christopher Yates(7)............................. 52,987 *
Harvey H. Achatz(8).............................. 59,484 *
James R. Powell(9)............................... 14,004 *
Steven Graham(10)................................ 9,000 *
Thomas J. Madden(11)............................. 60,634 *
Edgar D. Jannotta, Jr.(12)....................... 39,179 *
Timothy M. Murray(13)............................ 69,679 *
Peter P.J. Vikanis(14)........................... 2,125 *
Suzanne Garrett(15).............................. 12,186 *
Peter D. Wharf(16)............................... 20,421 *
All directors and executive officers
as a group (11 persons)(17)................... 1,817,930 11.3%
</TABLE>
- ----------
* Represents less than 1%
(1) This table is based on 16,025,204 shares of Common Stock outstanding
on May 9, 1998.
10
<PAGE> 14
(2) Includes outstanding options to purchase 98,399 shares of Common
Stock, which are fully vested and exercisable. Does not include (i)
1,800 shares held by Mr. Heap's spouse as custodian for minor
children as to which beneficial ownership is disclaimed, (ii) options
to purchase 128,821 shares of Common Stock which are not vested or
exercisable and (iii) 1,169,346 shares of Common Stock held of record
by the trust set forth above (the "Heap Trust"). Although Mr. Heap
and members of his family are the primary beneficiaries of the Heap
Trust, 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, 222,099 are pledged to a financial institution to
secure indebtedness owing by Mr. Heap to such institution.
(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) Based upon a Schedule 13G dated February 19, 1998 filed by Robert
Fleming Inc. reporting beneficial ownership and shared voting and
dispositive power as of December 31, 1997.
(5) Based upon a Schedule 13G dated February 9, 1998 filed by Amvescap
Plc, as parent holding company of Avz, Inc., AIM Management Group,
Inc., Amvescap Group Services Inc., Invesco, Inc., and Invesco North
American Holdings Inc., reporting beneficial ownership and shared
voting and dispositive power as of December 31, 1997.
(6) Includes outstanding options to purchase 66,060 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 104,410 shares of Common Stock, which
are not vested or exercisable.
(7) Includes outstanding options to purchase 52,987 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 72,031 shares of Common Stock, which
are not vested or exercisable.
(8) Includes outstanding options to purchase 59,484 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 6,374 shares of Common Stock, which
are not vested or exercisable.
(9) Includes outstanding options to purchase 14,004 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 64,699 shares of Common Stock, which
are not vested or exercisable.
(10) Includes outstanding options to purchase 9,000 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 51,000 shares of Common Stock, which
are not vested or exercisable.
11
<PAGE> 15
(11) Includes outstanding options to purchase 39,184 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 51,298 shares of Common Stock, which
are not vested or exercisable.
(12) Includes outstanding options to purchase 300 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 4,180 shares of Common Stock, which are not
vested or exercisable.
(13) Includes outstanding options to purchase 300 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 4,180 shares of Common Stock, which are not
vested or exercisable.
(14) Includes outstanding options to purchase 300 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 4,180 shares of Common Stock, which are not
vested or exercisable.
(15) Includes outstanding options to purchase 12,186 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 29,432 shares of Common Stock, which
are not vested or exercisable.
(16) Includes outstanding options to purchase 20,421 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 41,091 shares of Common Stock, which
are not vested or exercisable.
(17) Includes outstanding options to purchase 372,625 shares of Common
Stock, which are fully vested and exercisable. Does not include (i)
outstanding options to purchase 561,696 shares of Common Stock which
are not vested or exercisable or (ii) shares of Common Stock held by
the Heap Trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1998, Messrs. Layton, Powell and Wharf were
indebted to the Company in respect of certain loans previously made to such
persons 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 year 1998 was $458,684, $186,440 and $61,956,
respectively. Prior to March 31, 1998, Mr. Wharf repaid in full his indebtedness
to the Company. As of March 31, 1998, Messrs. Layton and Powell and were
indebted to the Company in the amount of $458,684 and $186,440, respectively.
The indebtedness owing by such persons accrues interest at the rate charged to
the Company for working capital borrowings. Messrs. Layton's and Powell's
indebtedness is due and payable in one installment on March 31, 1999.
David Heap, the Company's Chairman of the Board, owned
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
12
<PAGE> 16
not received any dividends, distributions or other amounts in respect of his
equity interest. During fiscal year 1998, Mr. Heap sold all of his remaining
equity interest and he no longer retains an equity interest in BSC.
During fiscal year 1998, the Company's sales to BSC (during the
period of the year that Mr. Heap owned an equity interest in BSC) aggregated
approximately $537,000, 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 April 1997, the Company entered into a one-year aircraft lease
with a corporation owned by Mr. Heap under which the Company, on a non-exclusive
basis, leased an aircraft from such corporation. The lease was terminable by
either party at any time. During fiscal year 1998 the Company incurred
approximately $342,000 in lease payments and reimbursement of certain operating
costs relating to this aircraft lease. The aircraft lease was terminated on
March 31, 1998.
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, 1998,
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 $7.50 per share (as
adjusted for a 2 for 1 stock split effective March 2, 1998). The graph also
assumes investments in the Nasdaq Total Return (US) Index and the Nasdaq
Non-Financial Stocks Index of $89.94 and $90.04 respectively on March 31, 1993.
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.
13
<PAGE> 17
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
3/31/93 3/31/94 1/27/95 3/31/95 3/31/96 3/31/97 3/31/98
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Daisytek -- -- 100.00 144.17 220.00 208.33 325.00
Nasdaq U.S.(a) 89.84 96.98 100.00 107.88 146.47 162.80 247.09
Nasdaq Non-Financial(a) 90.04 98.79 100.00 108.25 146.07 157.63 236.95
</TABLE>
(a) Prepaid by the Center for Research in Security Prices
ITEM 2
PROPOSAL TO ADOPT THE COMPANY'S 1998
AMENDED AND RESTATED EMPLOYEE
STOCK OPTION PLAN
The Company's 1998 Amended and Restated Employee Stock Option
Plan (the "Plan") was adopted by the Company's Board of Directors in June 1998
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 Plan amends, restates and replaces the Company's 1997
Employee Stock Option Plan (the "1997 Plan"), and, upon approval of the Plan,
all options outstanding under the 1997 Plan will be deemed outstanding under the
Plan. Subject to the approval of the Plan at the Annual Meeting, no further
options will be issued under the 1997 Plan. In the event the Plan is not
approved, the 1997 Plan, and the options issued thereunder, will remain in
effect in accordance with their terms.
PLAN DESCRIPTION
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-
14
<PAGE> 18
qualified stock options. The maximum number of shares of Common Stock for which
options may be granted under the Plan is 4,000,000 shares.
The Plan is administered by a committee of the Board of Directors
(the "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
of Directors. The Board may, and currently intends, to limit the members of the
Stock Option Committee to Directors who are both "non-employee directors", as
defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and
"outside directors", as defined in Section 162(m) of the Code. The Stock Option
Committee has complete authority and discretion to determine from among eligible
persons those to whom options will be granted and the number and 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 Stock Option 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, 2008.
Options are exercisable at such times and in such installments
(which may be cumulative) as the Stock Option Committee may provide in the terms
of each individual option. Generally, options granted under the Plan are
expected to be subject to multi-year cumulative vesting schedules as shall be
determined by the Stock Option Committee, in its discretion.
The Plan permits the Stock Option Committee to authorize and
approve (i) the issuance of immediately exercisable options to purchase
restricted stock subject to restrictions on transfer and forfeiture, (ii)
subject to such terms and conditions as the Stock Option Committee shall
determine in its sole discretion, the acceptance of promissory notes and/or
shares of the Company's common stock (whether issued upon exercise of
outstanding options or otherwise) in payment of the option exercise price (or
applicable taxes arising in connection therewith) and (iii) the transferability
of non-qualified options to family members and family trusts of option holders.
The Board of Directors or the Stock Option 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.
There are presently 868,781 options outstanding under the 1997
Plan held by 268 employees at a weighted average exercise price of $21.83 per
share, of which Mr. Heap is the holder of 36,250 options at a weighted average
exercise price of $22 7/8 per share; Mr. Layton is the holder of 52,080 options
at a weighted average exercise price of $22 7/8 per share; Mr. Yates is the
holder of 42,026 options at a weighted average exercise price of $22 7/8 per
share; Mr. Graham is the holder of 36,302 options at a weighted average exercise
price of $22 7/8 per share; Mr. Powell is the holder of 35,134 options at a
weighted average exercise price of $22 7/8 per share; and all current
15
<PAGE> 19
executive officers as a group (9 persons) are the holders of 298,861 options at
a weighted average exercise price of $22 7/8 per share.
No options have been granted under the Plan and since option
grants under the Plan are to be determined by the Stock Option Committee on a
discretionary basis, the benefits to be received by any particular executive
officer, by all executive officers as a group, or by the non-executive officer
employees as a group cannot be determined at this time.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax
consequences to employees participating in the Plan and to the Company, based
upon current provisions of the Code, the Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, and does not
address any consequences under any other applicable tax laws. The provisions of
the Code, regulations thereunder and related interpretations are complicated and
their impact in any one case may depend upon the particular circumstances
relating thereto.
Incentive Stock Options. In general, a participant will not
recognize taxable income upon the grant or exercise of an incentive stock
option. Instead, a participant will recognize taxable income with respect to an
incentive stock option only upon the sale of Common Stock acquired through the
exercise of the option ("ISO Stock"). The exercise of an incentive stock option,
however, may subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary
with the length of time that the participant has owned the ISO Stock at the time
it is sold. If the participant sells ISO Stock after having owned it for at
least two years from the date the option was granted (the "Grant Date") and one
year from the date the option was exercised (the "Exercise Date"), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise
price prior to having owned it for at least two years from the Grant Date and
one year from the Exercise Date (a "Disqualifying Disposition"), then all or a
portion of the gain recognized by the participant will be ordinary compensation
income and the remaining gain, if any, will be a capital gain. This capital gain
will be long or short term capital gain depending upon the length of time the
participant has held the ISO Stock prior to the date of sale.
If a participant sells ISO Stock for less than the exercise
price, then the participant will recognize a capital loss equal to the excess of
the exercise price over the sale price of the ISO Stock. This capital loss will
be long or short term capital loss depending upon the length of time the
participant has held the ISO Stock prior to the date of sale.
Nonstatutory Stock Options. As in the case of an incentive
stock option, a participant will generally not recognize taxable income upon the
grant of a nonstatutory stock
16
<PAGE> 20
option. Unlike the case of an incentive stock option, however, a participant who
exercises a nonstatutory stock option generally will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the Common Stock acquired through the exercise of the option ("NSO Stock") on
the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax
basis equal to the exercise price plus any income recognized upon the exercise
of the option. Upon selling NSO Stock, a participant generally will recognize
capital gain or loss in an amount equal to the excess of the sale price of the
NSO Stock over the participant's tax basis in the NSO Stock. This capital gain
or loss will be long or short term gain or loss depending upon the length of
time the participant has held the NSO Stock prior to the date of the sale.
Tax Consequences to the Company. The grant of an option under
the Plan will generally have no tax consequences to the Company. Moreover, in
general, neither the exercise of an incentive stock option nor the sale of any
Common Stock acquired under the Plan will have any tax consequences to the
Company. The Company generally will be entitled to a business-expense deduction,
however, with respect to any ordinary compensation income recognized by a
participant under the Plan, including as a result of the exercise of a
nonstatutory stock option or a Disqualifying Disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code.
At the Annual Meeting, the Company's stockholders will be
asked to approve the proposal to adopt the Plan. The Board of Directors believes
that approval of the Plan is in the best interest of the Company, its
stockholders and its employees because it will provide employees with an
incentive and opportunity to meaningfully share in the economic growth and
success of the Company.
The Board of Directors recommends a vote FOR adoption of the
Company's 1998 Amended and Restated Employee Stock Option Plan.
ITEM 3
PROPOSAL TO ADOPT THE COMPANY'S
1998 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1998 Employee Stock Purchase Plan (the "Purchase
Plan") was adopted by the Company's Board of Directors in June 1998 and is
subject to approval by stockholders at the Annual Meeting. The following
description of the Purchase Plan is qualified in its entirety by the provisions
of the Purchase Plan, a copy of which is attached as Appendix II to the Proxy
Statement.
PLAN DESCRIPTION
The purpose of the Purchase Plan is to provide eligible
employees of the Company and its participating subsidiaries with the continuing
opportunity to acquire a
17
<PAGE> 21
proprietary interest in the Company through participation in a payroll deduction
based employee stock purchase plan designed to operate in compliance with
Section 423 of the Code.
The Company has reserved 250,000 shares of Common Stock for
issuance under the Purchase Plan. These shares may be authorized but unissued
shares, treasury shares or shares purchased in the open market.
The Plan will be administered by a committee of the Board of
Directors (the "Purchase Plan Committee"). The Purchase Plan Committee will
consist of two or more Directors, appointed by and holding office at the
pleasure of the Board of Directors. The Board may, and currently intends, to
limit the members of the Purchase Plan Committee to Directors who are both
"non-employee directors", as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, and "outside directors" as defined in Section 162(m) of
the Code. The Purchase Plan Committee will have complete authority to adopt such
rules, regulations and procedures as it may deem necessary or appropriate for
the proper administration of the Purchase Plan. All costs and expenses incurred
in administering the Purchase Plan will be paid by the Company.
The Purchase Plan Committee is authorized to establish, from
time to time, one or more offering periods for each calendar year, and each
participant in the Purchase Plan may designate periodic payroll deductions from
his or her salary to be applied to the purchase of shares of Common Stock on
each purchase date (which will be the last business day of each offering
period). The purchase price per share at which Common Stock will be purchased on
the participant's behalf on each purchase date will be determined by the
Purchase Plan Committee for each offering period, but will not be less than 85%
of the lower of the fair market value of the Common Stock on the first business
day of the applicable offering period or the fair market value of the Common
Stock on the applicable purchase date.
The fair market value per share of Common Stock on any
relevant date will be the last sales price per share on such date as reported by
NASDAQ or a successor quotation system. On June 18, 1998, the fair market value
per share of Common Stock was $24 3/8 per share.
Any individual who is employed on a basis under which he or
she is regularly expected to work for at least 20 hours per week for more than
five months per calendar year as an employee of the Company or any designated
subsidiary of the Company and has completed 15 days of employment as of the
first day of any offering period will be eligible to participate in the Purchase
Plan. As of March 31, 1998, approximately 970 employees, including the Company's
executive officers, would have been eligible to participate in the Purchase
Plan.
The Purchase Plan imposes certain limitations upon a
participant's rights to acquire Common Stock under the Purchase Plan, including
the following: (i) no purchase right may be granted to any individual who owns
stock (including stock purchasable under any outstanding purchase rights and
options, whether vested or unvested) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company and (ii) no
purchase right granted to a participant may permit such individual to purchase
Common Stock at
18
<PAGE> 22
a rate greater than $25,000 worth of such Common Stock (valued at the time such
purchase right is granted) for each calendar year the purchase right remains
outstanding.
A participant's purchase right will immediately terminate upon
the participant's termination of employment or loss of eligible employee status
or upon his or her withdrawal from participation. The payroll deductions
collected from the purchase period in which the purchase right terminates will
be refunded. No purchase right is assignable or transferable by an eligible
employee.
Participants in the Purchase Plan will have no rights as a
stockholder with respect to the shares of Common Stock covered by his or her
purchase right until such time as the shares are actually purchased on the
applicable purchase date. No adjustment will be made for dividends,
distributions or other rights with respect to any record date during an offering
period which is prior to a purchase date.
In the event of (i) the dissolution or liquidation of the
Company, (ii) the sale of all or substantially all of the assets of the Company,
(iii) the merger or consolidation of the Company with or into another
corporation or other entity (if the Company is not the surviving corporation of
such merger on consolidation) or (iv) the acquisition by another person or
entity of 80% or more of the Company's then outstanding voting stock, then, upon
the effective date of any such event, any outstanding offering period under the
Purchase Plan will terminate and such date will be treated as the purchase date
and, in lieu of the issuance of Common Stock to participating eligible
employees, there shall be paid, for each such share of Common Stock, as nearly
as reasonably may be determined, the cash, securities and/or property which a
holder of one share of Common Stock was entitled to receive upon and as of the
effective date of such event.
The Board of Directors of the Company may terminate the Plan
or amend the Plan from time to time; provided, however, that the Board shall
not, without the approval of the stockholders of the Company (i) increase the
number of shares available for purchase under the Purchase Plan, (ii) change the
class of persons eligible to participate in the Purchase Plan, or (iii) reduce
the purchase price of Common Stock below that set forth in the Purchase Plan.
The Purchase Plan shall become effective if and when approved
by the stockholders of the Company at the Annual Meeting. If approved, the first
offering period will be established by the Purchase Plan Committee upon a date
following the date of the Annual Meeting.
Participation in the Purchase Plan is voluntary and the
Company cannot now determine the amount of shares of Common Stock that may be
acquired by the participants therein (which include the Company's executive
officers) or the value of any such participation.
19
<PAGE> 23
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax
consequences to employees participating in the Purchase Plan and to the Company,
based upon current provisions of the Code, the Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, and does not
address any consequences under any other applicable tax laws. The provisions of
the Code, regulations thereunder and related interpretations are complicated and
their impact in any one case may depend upon the particular circumstances
relating thereto.
Rights to purchase stock under the Purchase Plan are referred
to in the Code as "options". A participating employee will not recognize income
at the time options are granted to such employee at the commencement of an
offering period or when the employee exercises such options and purchases shares
of Common Stock at the end of an offering period. An employee will be taxed on
amounts withheld from salary under the Purchase Plan as if actually received,
and the Company will be entitled to deduct a corresponding amount.
If an employee does not dispose of the shares of Common Stock
purchased pursuant to the Purchase Plan until more than two years after the date
of grant of the options and one year after the transfer of the shares to the
employee, or if the employee dies without having disposed of such shares, such
employee must include in gross income as compensation (as ordinary income and
not as capital gain) for the taxable year of disposition or death an amount
equal to the lesser of (i) the excess of the fair market value of the shares at
the time of disposition or death over the amount paid for the shares, or (ii)
the excess of the fair market value of the shares at the date of grant of the
options over the exercise price. If the amount realized upon such a disposition
by way of sale or exchange of the shares exceeds the purchase price plus the
amount, if any, included in income as compensation, such excess will be capital
gain. This capital gain will be long or short term capital gain depending upon
the length of time the employee has held the stock prior to the date of sale.
The Company will not be entitled to any deduction in respect
of options granted under the Purchase Plan or shares of Common Stock issued and
delivered pursuant to the exercise of such options, if the holding period
requirements are met or the employee dies prior to disposing of the shares
acquired upon exercise.
If an employee disposes of the shares of Common Stock within
two years from the date of grant of the option or within one year from the date
of exercise (an "Early Disposition"), the employee will recognize ordinary
income at the time of disposition which will equal the excess, if any, of the
fair market value of the shares on the date of exercise over the amount paid for
such shares. The Company may be required to withhold taxes related to such
ordinary income from other payments due the employee. The Company will generally
be entitled to a deduction in an amount equal to such income. The excess, if
any, of the amount realized on disposition of such shares over the fair market
value of such shares on the date of exercise will be long-term or short-term
capital gain, depending upon the holding period for the shares. If an employee
disposes of such shares for less than his or her basis in the shares, the
20
<PAGE> 24
difference between the amount realized and such basis will be a long-term or
short-term capital loss, depending upon the holding period for the shares.
At the Annual Meeting, the Company's stockholders will be
asked to approve the proposal to adopt the Purchase Plan. The Board of Directors
believes that approval of the Purchase Plan is in the best interest of the
Company, its stockholders and its employees because it will encourage employees
to share in the economic growth and success of the Company.
The Board of Directors recommends a vote FOR adoption of the
Company's 1998 Employee Stock Purchase Plan.
ITEM 4
PROPOSED AMENDMENT TO COMPANY CHARTER
The Board of Directors recommends that Article Fourth of the
Company's Amended and Restated Certificate of Incorporation be amended for the
purpose of increasing the number of authorized shares of Common Stock from 20
million shares to 30 million shares. The form of Amendment is set forth as
Appendix III to this Proxy Statement.
The additional authorized shares may be used in the future for
any proper corporate purpose approved by the Board of Directors. Permissible
uses might include financings, corporate mergers or acquisitions, employee
benefit programs, acquisitions of property, funding of new product programs or
businesses, stock dividends, stock splits and other corporate purposes. No
further action or authorization by the stockholders would be necessary prior to
the issuance of additional shares unless the applicable laws or regulations or
the rules of any stock exchange on which the Company's common stock may then be
listed require such approval. If the proposed Amendment is adopted, all or any
of the authorized shares of Common Stock may be issued without first offering
such shares to existing stockholders for subscription. The issuance of such
shares otherwise than to existing stockholders on a pro rata basis could have
the effect of reducing an existing stockholder's proportionate interests. The
Company has no present plans, agreements, commitments or understandings
regarding the issuance of any newly authorized shares.
As is presently the case, the availability for issuance of
additional shares of Common Stock could enable the Board of Directors to render
more difficult or discourage an attempt to obtain control of the Company. For
example, the issuance of shares of Common Stock in a public or private sale,
merger or similar transaction would increase the number of outstanding shares,
thereby possibly diluting the interest of a party attempting to obtain control
of the Company. The Company is not aware of any efforts to obtain control of the
Company.
If adopted, the Amendment will be effective upon filing with the
Delaware Secretary of State as required by the General Corporation Law of
Delaware. It is anticipated that this will occur promptly following the date of
the Annual Meeting.
21
<PAGE> 25
The Board of Directors recommends a vote FOR the adoption of the
Amendment to the Company's Amended and Restated Certificate of Incorporation.
ITEM 5
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, 1999. 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 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, 1999.
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.
22
<PAGE> 26
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
A stockholder desiring to submit an otherwise eligible proposal
for inclusion in the Company's proxy statement for the 1999 annual meeting of
stockholders of the Company must deliver the proposal so that it is received by
the Company no later than March 2, 1999. 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, 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 on Form 10-K for the year ended March
31, 1998 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.
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 2, 1998
23
<PAGE> 27
APPENDIX I
1998 AMENDED AND RESTATED STOCK OPTION PLAN
OF
DAISYTEK INTERNATIONAL CORPORATION
------------------------------------------------------
Daisytek International Corporation, a corporation organized
under the laws of the State of Delaware, hereby adopts this 1998 Amended and
Restated 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. This Plan shall amend and restate in its
entirety the 1997 Stock Option Plan of the Company (the "1997 Plan").
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, Options
outstanding under the Plan, in a transaction to which Section 424(a) of the Code
applies.
24
<PAGE> 28
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.
25
<PAGE> 29
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 1998 Amended and Restated 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 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.
26
<PAGE> 30
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 4,000,000 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.
27
<PAGE> 31
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.
28
<PAGE> 32
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, except as otherwise set forth herein.
(b) Each Option granted hereunder shall be subject to such
vesting schedule (which may be cumulative or non-cumulative), conditions,
restrictions and other provisions as the Committee shall, in its sole and
absolute discretion, deem necessary or appropriate, which determinations may be
non-uniform and selective and based upon such factors as it deems relevant in
its sole and absolute discretion.
(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
29
<PAGE> 33
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.
(e) Notwithstanding the provisions of paragraph (a) above, the
Committee shall have the right to issue Options hereunder which are immediately
exercisable on the date of grant; provided, however, that in such event, the
shares of Common Stock to be issued thereunder shall be subject to such
restrictions on transfer and forfeiture as the Committee shall, in its sole
discretion, deem appropriate, which determinations may be non-uniform and
selective and based upon such factors as it deems appropriate in its sole
discretion.
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 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 Options held by such Optionee; and
30
<PAGE> 34
(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 one or more years
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.
31
<PAGE> 35
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) 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, a promissory note
duly executed and delivered by the Optionee in the principal amount of the
exercise price thereof, or any portion thereof, in each case upon such terms and
conditions (including without limitation, terms regarding rates of interest,
payment schedule, collateral or other security) as the Committee may establish
in its sole and absolute discretion; or
32
<PAGE> 36
(iv) With the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i), (ii) and (iii);
(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 consideration provided in the
foregoing subsections (i), (ii) and (iii) of the preceding paragraph (b) and may
be used to make all or part of such payment;
(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 such periods following the date of release
of the quarterly or annual summary statement of sales and earnings of the
Company and/or to such other periods as the Committee shall, in its sole
discretion, deem appropriate, (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 (or such other period as the Committee may determine) 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
33
<PAGE> 37
(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.
34
<PAGE> 38
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 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.
35
<PAGE> 39
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, except as otherwise set
forth herein 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, except as otherwise set forth herein. 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, 2008 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 stockholders
holding at least a majority of the Company's voting stock voting in person or by
proxy at the Company's 1998 Annual Meeting of Stockholders. In the event the
Plan is not so approved, this Plan shall not become effective, and shall be null
and void, and any Options issued hereunder shall be terminated.
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
Except as otherwise set forth herein, the adoption of this
Plan shall not affect any other compensation or incentive plans in effect 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
36
<PAGE> 40
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.
Section 7.9 - Amendment and Restatement of 1997 Stock Option Plan.
Upon the effective date of this Plan as herein provided, this
Plan shall amend, restate and replace in its entirety the 1997 Plan of the
Company, and all Options issued under the 1997 Plan and outstanding as of the
effective date of this Plan shall, automatically and without any action on the
part of the holder thereof or the Company, be deemed as issued and outstanding
under this Plan. In the event this Plan shall not become effective, the 1997
Plan, and all Options issued thereunder, shall remain in full force and effect
in accordance with their terms.
37
<PAGE> 41
APPENDIX II
DAISYTEK INTERNATIONAL CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------------------------
SECTION 1. PURPOSE OF THE PLAN
The purpose of the Daisytek International Corporation 1998 Employee
Stock Purchase Plan (the "Plan") is to provide employees of Daisytek
International Corporation (the "Company") and designated Subsidiaries an
opportunity to acquire a proprietary interest in the Company through the
purchase of shares of common stock, $.01 par value, of the Company ("Common
Stock"). It is intended that the Plan qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended
("Code"), and the provisions of the Plan shall be construed accordingly.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Business Day" means each day that the New York Stock
Exchange, Inc. is open for the transaction of business.
(b) "Fair Market Value" means, with respect to the Common
Stock as of any date (i) the closing price of a share of the Common Stock on the
principal exchange on which shares of the Common Stock are then trading, if any,
on such date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred; or (ii) if the 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, on such date as reported by
NASDAQ or such successor quotation system; or (iii) if the 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 Common Stock,
on such date, as determined in good faith by the Committee; or (iv) if the
Common Stock is not publicly traded, the fair market value established by the
Committee acting in good faith.
(c) "Participating Company" shall mean the Company and each
Subsidiary which the Committee has designated to participate in the Plan.
(d) "Offering Period" means each period which begins on a
Commencement Date and ends on a Purchase Date during which Eligible Employees
may purchase Common Stock pursuant to an Offering under the Plan.
38
<PAGE> 42
(e) "Commencement Date" shall mean the first Business Day of
each Offering Period.
(f) "Eligible Employee" means any person who, on a
Commencement Date, (i) is customarily scheduled to be employed by any
Participating Company as an employee for at least twenty (20) hours per week and
for more than five (5) months in any calendar year, and (ii) has completed
fifteen (15) days of employment with the Company or any Subsidiary.
(g) "Purchase Date" shall mean the last Business Day of each
Offering Period.
(h) "Offering" means any proposal made in accordance with the
terms and conditions of the Plan permitting Eligible Employees to purchase
Common Stock under the Plan during an Offering Period.
(i) "Subsidiary" shall mean any corporation which is a
"subsidiary" of the Company, as that term is defined in Section 424(f) of the
Code.
SECTION 3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee of the Board of Directors
of the Company (the "Committee"). The 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 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and "outside directors", as
defined in Section 162(m) of the Code. Subject to the limitations set forth in
the preceding sentence, the powers of the Committee may be exercised by the
Compensation Committee or the Stock Option 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 Committee if it so elects, and, in which
event, the term "Committee" shall mean the Board. Any action of the Committee in
administering the Plan shall be final, conclusive and binding on all persons,
including the Company, its Subsidiaries, employees, persons claiming rights from
or through employees and the stockholders of the Company.
Subject to the provisions of the Plan, the Committee shall have full
and final authority in its discretion (a) to designate the Subsidiaries whose
employees will participate in the Plan, (b) to determine the maximum number of
shares of Common Stock to be acquired by each Eligible Employee during each
Offering Period, (c) to determine the terms and conditions of each Offering, (d)
to determine the length of each Offering Period and the Commencement Date
thereof, (e) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan, (f) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan and the conduct of each Offering, and (g) to make all other determinations
as it may deem necessary or advisable for the administration of the Plan.
39
<PAGE> 43
SECTION 4. PARTICIPATION IN THE PLAN
(a) Only individuals who are employees of a Participating
Company shall be eligible to acquire Common Stock pursuant to any Offering under
the Plan. Except as provided in paragraph (b) hereof, every Eligible Employee on
the Commencement Date of an Offering shall be eligible to participate in such
Offering, provided such individual remains an Eligible Employee until the
Purchase Date.
(b) Notwithstanding any provisions of the Plan to the
contrary, no Eligible Employee shall be eligible to participate in any Offering
if:
(i) on the Commencement Date, such Eligible Employee would own
stock (together with stock owned by any other person or entity that would be
attributed to such Eligible Employee pursuant to Section 424(d) of the Code) of
the Company (including, for this purpose, all shares of stock subject to any
outstanding options to purchase such stock, whether or not currently exercisable
and irrespective of whether such options are subject to the favorable tax
treatment of Section 421(a) of the Code) possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or a Subsidiary; or
(ii) the Eligible Employee belongs to a class or group of
Eligible Employees which the Committee deems ineligible for participation in any
Offering (as the Committee may determine from time to time), so long as the
exclusion of such class or group of Eligible Employees from participation in an
Offering does not jeopardize the qualification of the Plan under Section 423 of
the Code or other applicable law.
SECTION 5. OFFERINGS
(a) The Plan shall be implemented by a series of Offerings to
all Eligible Employees, the duration and frequency of which will be specified
from time to time by the Committee.
(b) Each Offering shall permit each Eligible Employee to
purchase on the Purchase Date shares of Common Stock at a purchase price per
share determined by the Committee which shall not be less than the lower of (i)
85% of the Fair Market Value of the Common Stock on the Commencement Date, or
(ii) 85% of the Fair Market Value of the Common Stock on the Purchase Date.
(c) No Offering Period pursuant to the Plan shall be for a
period greater than 12 months from the Commencement Date.
(d) All Eligible Employees participating in an Offering under
the Plan shall have the same rights and privileges, except that the Committee
may from time to time provide for differences in the rights and privileges of
Eligible Employees so long as such differences do not jeopardize the
qualification of the Plan under Section 423 of the Code or violate other
applicable law.
40
<PAGE> 44
SECTION 6. SHARES AVAILABLE UNDER THE PLAN
(a) Subject to the provisions of Section 7 hereof, the
aggregate number of shares of Common Stock available for purchase pursuant to
all Offerings under the Plan shall be 250,000 shares, which may be authorized
but unissued shares, treasury shares or shares purchased in the open market.
(b) If the total number of shares of Common Stock to be
purchased on any Purchase Date when added to the number of shares of Common
Stock previously purchased pursuant to Offerings under the Plan exceeds the
number of shares then available under the Plan, the Committee shall make a pro
rata allocation of the shares available for purchase in such Offering in as
nearly a uniform manner as shall be practicable and as it shall determine to be
equitable, and the amounts received from each Eligible Employee in excess of the
amounts applied to purchase Common Stock shall be refunded to each Eligible
Employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event that the Committee determines that any stock dividend,
recapitalization, forward split or reverse split, reorganization, merger,
consolidation, spin-off, combination, share exchange or other similar
transaction or event affects the Common Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Eligible Employees under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares of
Common Stock which may thereafter be available under the Plan, (ii) the number
and kind of shares of Common Stock issuable or to be purchased in respect of any
current Offering, and (iii) the purchase price relating to any purchase of
Common Stock to be acquired in any Offering; provided, however, that no
adjustment shall be made if, or to the extent that, such adjustment would cause
the Plan to violate Section 423 of the Code.
SECTION 8. ACCRUAL LIMITATIONS
(a) No Eligible Employee shall be entitled to accrue rights to
acquire Common Stock in any Offering under this Plan (which right shall accrue
on the Purchase Date for an Offering Period) if, and to the extent, such
accrual, when aggregated with (i) rights to purchase Common Stock accrued under
any other Offering under this Plan during the same calendar year and (ii) rights
accrued under any other employee stock purchase plan (within the meaning of
Section 423 of the Code) of the Company or any Subsidiary during the same
calendar year, would cause such Eligible Employee to be able to purchase more
than Twenty-Five Thousand Dollars ($25,000) worth of Common Stock or stock of
any Subsidiary (determined on the basis of the Fair Market Value of such stock
on the date or dates such rights are granted) for each calendar year such rights
are at any time outstanding.
41
<PAGE> 45
SECTION 9. MERGER, CONSOLIDATION, LIQUIDATION, ETC.
Upon the effective date of any Corporate Transaction (as herein
defined), any outstanding Offering under the Plan will terminate and such date
shall be treated as the Purchase Date, and in lieu of the issuance of Common
Stock to participating Eligible Employees, there shall be paid to such Eligible
Employees, for each such share of Common Stock, as nearly as reasonably may be
determined, the cash, securities and/or property which a holder of one share of
the Common Stock was entitled to receive upon and as of the effective date of
such Corporate Transaction. As used herein, the term "Corporate Transaction"
shall mean (i) the dissolution or liquidation of the Company, (ii) the sale of
all or substantially all of the assets of the Company, (iii) the merger or
consolidation of the Company with or into another corporation or entity (if the
Company is not the surviving corporation of such merger or consolidation) or
(iv) the acquisition by another person or entity of 80% or more of the Company's
than outstanding voting stock.
SECTION 10. GENERAL PROVISIONS
(a) Neither the Plan nor any action taken hereunder shall be
construed as giving any employee or Eligible Employee any right to be retained
in the employ of the Company or any Subsidiary, and no employee of any
Subsidiary which is not a Participating Company shall have any claim or right to
participate in any Offerings under the Plan.
(b) No right of an Eligible Employee to purchase Common Stock
pursuant to an Offering under the Plan shall be assigned or transferred by such
Eligible Employee and such rights to purchase Common Stock pursuant to an
Offering shall be exercisable during the lifetime of the Eligible Employee only
by the Eligible Employee.
(c) No Offering shall confer on any Eligible Employee any of
the rights of a stockholder of the Company unless and until Common Stock is duly
issued or transferred to the Eligible Employee in accordance with the terms of
the Offering.
(d) This Plan is intended to conform to the extent necessary
with all provisions of the Securities Act of 1933, as amended, 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 the rights to purchase in any Offering 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, this Plan and rights
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
(e) The provisions of the Plan shall be governed by the laws
of the State of Delaware without giving effect to applicable conflict-of-laws
rules.
SECTION 11. EFFECTIVE DATE; AMENDMENT; TERMINATION
(a) The Plan shall become effective if and when approved by
the stockholders of the Company at the 1998 Annual Meeting of Stockholders.
42
<PAGE> 46
(b) The Board of Directors of the Company may terminate the
Plan or amend the Plan from time to time; provided, however, that the Board of
Directors of the Company shall not, without the approval of the stockholders of
the Company (i) increase the number of shares available for purchase pursuant to
all Offerings, (ii) change the class of persons eligible to participate in
Offering under the Plan, or (iii) reduce the purchase price of Common Stock
below that set forth in Section 5(b) herein.
(c) Unless sooner terminated by the Board of Directors of the
Company, the Plan shall terminate when all shares available for issuance or
purchase under the Plan have been purchased pursuant to an Offering under the
Plan, or the date of any Corporate Transaction, if earlier.
43
<PAGE> 47
APPENDIX III
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DAISYTEK INTERNATIONAL CORPORATION
(A DELAWARE CORPORATION)
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Daisytek International Corporation.
2. The Amended and Restated Certificate of Incorporation of
the Corporation is hereby amended by striking out Article FOURTH of Section 4
thereof and by substituting in lieu of said Article the following new Article
FOURTH:
"The total number of shares which the Corporation
shall have authority to issue is Thirty One Million
(31,000,000) shares, consisting of One Million (1,000,000)
shares of Preferred Stock, of a par value of One Dollar
($1.00) per share (hereinafter called "Preferred Stock"), and
Thirty Million (30,000,000) shares of Common Stock, of the par
value of One Cent ($.01) per share (hereinafter called "Common
Stock")."
3. The amendment of the Amended and Restated Certificate of
Incorporation herein certified has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Signed on August __, 1998.
DAISYTEK INTERNATIONAL CORPORATION
By:
----------------------------------
Mark C. Layton, President
ATTEST:
By:
-------------------------------
Harvey Achatz, Secretary
44
<PAGE> 48
Please mark
your vote as
indicated in
this example
[X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5
ITEM 1- ELECTION OF DIRECTORS FOR WITHHELD
Nominees FOR ALL
Christopher Yates [ ] [ ]
James R. Powell
WITHHELD FOR: (Write that nominee's name in the space provided below)
- -------------------------------------------------------------
ITEM 2- TO APPROVE THE COMPANY'S FOR AGAINST ABSTAIN
1998 EMPLOYEE STOCK
OPTION PLAN [ ] [ ] [ ]
ITEM 3- TO APPROVE THE COMPANY'S FOR AGAINST ABSTAIN
1998 EMPLOYEE STOCK
PURCHASE PLAN [ ] [ ] [ ]
ITEM 4- TO APPROVE AN AMENDMENT TO THE FOR AGAINST ABSTAIN
COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION [ ] [ ] [ ]
INCREASING THE NUMBER OF
AUTHORIZED SHARES
ITEM 5- RATIFY APPOINTMENT OF FOR AGAINST ABSTAIN
INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
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.
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 a the Annual Meeting of Stockholders of the Company to
be held August 14, 1998 or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
