<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:
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(4) Date Filed:
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<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 20, 1999, at
10:00 a.m. (local time).
At the Annual Meeting, stockholders will be asked to elect directors
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 20, 1999.
Sincerely,
/s/ MARK C. LAYTON
Mark C. Layton
President, Chief Executive Officer
and Chief Operating Officer
July 14, 1999
<PAGE> 3
DAISYTEK INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 20, 1999
The Annual Meeting of Stockholders of Daisytek International
Corporation (the "Company") will be held on Friday, August 20, 1999, at 10:00
a.m. at the Stonebridge Country Club, McKinney, Texas, for the following
purposes:
1. To elect two Class II directors;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending March 31, 2000; and
3. 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 July 6, 1999
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
/s/ HARVEY H. ACHATZ
Harvey H. Achatz
Secretary
Plano, Texas
July 14, 1999
<PAGE> 4
DAISYTEK INTERNATIONAL CORPORATION
500 NORTH CENTRAL EXPRESSWAY
PLANO, TEXAS 75074
(972) 881-4700
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Daisytek
International Corporation, a Delaware corporation ("Daisytek" or the "Company"),
in connection with the solicitation of proxies for use at the Company's Annual
Meeting of Stockholders (the "Annual Meeting"), to be held at the Stonebridge
Country Club, McKinney, Texas, on Friday, August 20, 1999, 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 1999 Annual Report on Form 10-K were first
mailed to stockholders on or about July 15, 1999.
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) to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending March 31, 2000.
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 July 6, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, the issued and outstanding voting securities of the Company
consisted of 17,170,114 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
<PAGE> 5
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 II directors
expires at the Annual Meeting. Each director elected as a Class II director at
the Annual Meeting will have a term of three years. The nominees for the Class
II directors are Mark C. Layton and Timothy M. Murray who have been nominated
and recommended by the Board of Directors. If elected, Messrs. Layton and Murray
are expected to serve until the Company's 2002 annual meeting of stockholders
and until their successors are elected and qualified. The shares represented by
proxies in the accompanying form will be voted for the election of these
nominees unless authority to so vote is withheld. The Board of Directors has no
reason to believe that such nominees will not serve if elected, but if they
should become unavailable to serve as directors, and if the Board designates
substitute nominees, the persons named as proxies will vote for the substitute
nominees designated by the Board. Directors will be elected by a majority of the
votes cast at the Annual Meeting.
The following information, which has been provided by the individuals
named, sets forth the nominees for election to the Board of Directors and the
continuing Class I and 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.
DIRECTORS STANDING FOR ELECTION
CLASS II
TERM EXPIRES AT THE 2002 ANNUAL MEETING
MARK C. LAYTON, age 39, 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
2
<PAGE> 6
and technology. Mr. Layton also serves as a Director of ISA International plc
("ISA"), a distributor of computer supplies in Western Europe, and uBid, Inc.,
an Internet auction company.
TIMOTHY M. MURRAY, age 47, 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 a director of MedE
America Corporation and several privately held corporations. Mr. Murray is a
non-employee Director.
DIRECTORS CONTINUING IN OFFICE
CLASS I
TERM EXPIRES AT THE 2001 ANNUAL MEETING
CHRISTOPHER YATES, age 44, was appointed Senior Vice President -
Business Development in February 1996 with primary responsibility for the PFS
segment and has served as Vice President - Business Development from November
1995 to February 1996, and as a Director of the Company since February 1995. He
has also served 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 and its predecessors.
JAMES R. POWELL, age 38, has served as a Director and Senior Vice
President - Sales and Marketing since 1996 with primary responsibility for the
U.S. Computer Supplies segment. 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 55, has served as Chairman of the Board since 1982,
as Chief Executive Officer from 1982 until his retirement in April 1997 and as
President from 1982 to 1990. From 1970 to 1985, Mr. Heap served as Chairman of
ISA and its predecessors which he founded in England in 1970. Mr. Heap presently
serves as Chairman and Chief Executive Officer of ISA.
PETER P. J. VIKANIS, age 48, 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 presently serves as
a Non-Executive Director of ISA. Mr. Vikanis is a non-employee Director.
JAMES F. REILLY, age 40, has served as a Director of the Company since
October 1998. Mr. Reilly is a Managing Director of the Technology Group of
Warburg Dillon Read LLC, a subsidiary of UBS AG, a global investment banking
firm. Mr. Reilly has been with Warburg Dillon
3
<PAGE> 7
Read or one of its predecessor companies since 1983 and specializes in corporate
finance advisory work for a broad range of technology companies, including
distribution companies. Mr. Reilly 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:
STEVE GRAHAM, age 46, 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 24 years of experience in the
information-technology field.
PETER D. WHARF, age 40, serves as Vice President - International
Operations with primary responsibility for the International Computer Supplies
segment, 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.
SUZANNE GARRETT, age 34, serves as Vice President with primary
responsibility for the Professional Tape Products segment and has served as Vice
President of Product Management and Marketing, Director of Product Management
and Marketing, Marketing Manager, and New-Products Manager. Prior to joining the
Company in 1991, Ms. Garrett served as an account executive for United Media.
THOMAS J. MADDEN, age 37, 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.
JOHN D. (JACK) KEARNEY, age 45, joined the Company in March 1999 as
Vice President of Corporate Development. Prior to joining the Company, Mr.
Kearney served as Vice President of Corporate Development for F.Y.I.,
Incorporated. Mr. Kearney has significant experience in investment banking,
having served as Managing Director of Corporate Finance at Rauscher Pierce
Refsnes, Inc., Senior Vice President of Corporate Finance at Raymond James &
Associates.
HARVEY H. ACHATZ, age 58, 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.
4
<PAGE> 8
MEETINGS OF THE BOARD
The Board of Directors met four times during the Company's 1999 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 twice during fiscal year 1999. During fiscal year 1999, 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 1999, the members
of the Compensation Committee were Messrs. Murray and Reilly, who are
non-employee directors. Prior to Mr. Reilly joining the Board in October 1998,
the other member of the Compensation Committee was Mr. Edgar Jannotta, Jr., a
non-employee director, who no longer serves on the Board of 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 twice in fiscal year 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1999, the members of the Compensation Committee of
the Company's Board of Directors were Timothy M. Murray and James F. Reilly who
are non-employee directors. Prior to Mr. Reilly joining the Board in October
1998, the other member of the Compensation Committee was Mr. Edgar Jannotta,
Jr., a non-employee director, who no longer serves on the Board of Directors.
COMPENSATION OF DIRECTORS
Each non-employee Director receives an annual director's fee of $20,000
for each year in which he or she serves as a director. Non-employee directors do
not receive additional Board or Committee meeting fees. The Company has also
adopted a Non-Employee Director Stock Option and Retainer Plan (the
"Non-Employee Director Plan") pursuant to which each non-employee director (i)
may elect to receive payment of the director's fees in shares of Common Stock in
lieu of cash, and (ii) is entitled to receive certain grants of options in
accordance with a defined formula, and subject to the conditions precedent, set
forth therein.
5
<PAGE> 9
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. 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 previously reported 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. Under the terms of the
Non-Employee Director Plan, during fiscal year 1999 and related to fiscal year
1998 performance, each of the Company's non-employee directors received options
to purchase 2,998 shares of Common Stock, at an exercise price of $21.125 (the
fair market value on the date of grant). For fiscal year 1999, there will be no
options issued.
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.
6
<PAGE> 10
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, 1999, 1998 and 1997.
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 COMPENSATION(1)
- --------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
David A. Heap .................... 1999 $200,000 $ 87,580 36,250 $ 1,332
Chairman 1998 250,000 201,897 151,554 4,951
1997 385,000 222,900 85,728 5,970
Mark C. Layton ................... 1999 337,819 175,160 412,080 18,063
President, Chief Executive 1998 319,599 269,196 122,836 9,731
and Operating Officer 1997 299,013 222,900 69,832 8,458
Christopher Yates ................ 1999 263,361 57,803 222,026 9,534
Senior Vice President - 1998 248,454 88,835 84,742 6,088
Business Development 1997 232,200 73,557 41,120 5,004
Steven Graham .................... 1999 200,950 57,803 186,302 9,489
Senior Vice President - 1998 189,491 88,835 60,000 37,829
Information Technologies 1997 78,268 32,439 50,000 5,610
and Chief Information
Officer
James R. Powell .................. 1999 184,690 57,803 185,134 4,320
Senior Vice President - 1998 175,037 88,835 76,116 3,015
Sales and Marketing 1997 163,652 73,557 42,660 3,715
</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.
7
<PAGE> 11
The following table sets forth information with respect to grants of
stock options during the year ended March 31, 1999 to the named executive
officers reflected in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 1999
<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)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------------
NAME GRANTED YEAR SHARE DATE (1) 5% 10%
- ----------------------- ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David A. Heap.......... 36,250 1.3% $ 22.88 6-18-08 $ 521,491 $ 1,321,561
Mark C. Layton......... 360,000 13.0% 12.88 12-15-08 2,914,927 7,386,996
52,080 1.9% 22.88 6-18-08 749,221 1,898,673
Christopher Yates...... 180,000 6.5% 12.88 12-15-08 1,457,463 3,693,498
42,026 1.5% 22.88 6-18-08 604,585 1,532,136
Steven Graham.......... 150,000 5.4% 12.88 12-15-08 1,214,553 3,077,915
36,302 1.3% 22.88 6-18-08 522,239 1,323,457
James R. Powell........ 150,000 5.4% 12.88 12-15-08 1,214,553 3,077,915
35,134 1.3% 22.88 6-18-08 505,436 1,280,875
</TABLE>
- ---------------
(1) Options expiring in June 2008 are subject to a three year cumulative
vesting and options expiring in December 2008 are subject to a four or
five 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.
The following table sets forth information concerning the aggregate
stock option exercises during the fiscal year ended March 31, 1999 and stock
option values as of the end of fiscal year 1999 for unexercised stock options
held by each of the named executive officers:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
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)
ON VALUE --------------------------- -----------------------------
NAME EXERCISE RECEIVED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David A. Heap.......... -- $ -- 98,399 165,071 $ 613,977 $ 531,387
Mark C. Layton......... -- -- 66,060 516,490 403,491 1,780,691
Christopher Yates...... -- -- 52,987 294,057 329,330 972,128
Steven Graham.......... -- -- 9,000 237,302 37,125 772,875
James R. Powell ....... 25,421 315,650 -- 249,833 -- 829,383
</TABLE>
- -------------
(1) Calculated by determining the difference between $16 5/8 (the last sale
price of the Common Stock on March 31, 1999 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.
8
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION FOR FISCAL YEAR
1999
The Compensation Committee of the Board of Directors (the "Committee")
is responsible for approval or recommendation to the Board of Directors of the
compensation arrangements for the Company's senior executive officers. During
fiscal year 1999, the members of the Committee were Timothy M. Murray and James
F. Reilly who are non-employee directors. Prior to Mr. Reilly joining the Board
in October 1998, the other member of the Committee was Mr. Edgar Jannotta, Jr.,
a non-employee director, who no longer serves on the Board of Directors.
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 1999 fiscal
year, the Committee did not retain an independent compensation consultant, nor
did the Committee rely upon any formal study or review of comparable companies
in the Company's industry. Nevertheless, the Committee believes that the
Company's executive compensation salary levels may be less than industry norms
in the Company's geographic regions.
The Committee annually establishes the salaries to be paid to the Chief
Executive Officer and other senior executive officers during each fiscal year.
Base salaries for senior executive officers are set to reflect the duties and
level of responsibility in each position. In setting salaries, the Committee
takes into account several factors including individual job performance, the
level of responsibility and, to the extent information is available, competitive
pay practices in the Company's industry. The Committee does not assign specific
relative weights to the various factors it considers, however, but rather
exercises its discretion and makes a judgment after considering all factors it
deems relevant.
For fiscal year 1999 the base salary of Mr. Mark Layton, the Company's
Chief Executive Officer, was $337,819, which was approximately a six 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
9
<PAGE> 13
EBT which exceeds 105% of the projected EBT. Under this program, Mr. Layton
received a bonus of $175,160 for the 1999 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 to
five year cumulative vesting schedule and have an exercise price not less than
the fair market value on the date of grant. During fiscal year 1999, Mr. Layton
received options to purchase 52,080 shares at an exercise price of $22.88 per
share and 360,000 shares at an exercise price of $12.88 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 1999 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
James F. Reilly
10
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 11, 1999, 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).......................... 2,259,072 13.2%
500 North Central Expressway
Plano, Texas 75074
Amvescap Plc (3).......................... 1,816,529 10.6%
11 Devonshire Square
London, England EC2M 4YR
Robert Fleming Inc. (4)................... 1,323,707 7.7%
320 Park Avenue, 11th & 12th Floors
New York, New York 10022
T Rowe Price Associates, Inc. (5)......... 1,000,100 5.8%
100 East Pratt Street
Baltimore, MD 21202
Mark C. Layton (6)........................ 325,226 1.9%
Christopher Yates (7)..................... 83,647 *
Harvey H. Achatz (8)...................... 63,109 *
James R. Powell (9)....................... 29,150 *
Steven Graham (10)........................ 33,000 *
Thomas J. Madden (11)..................... 82,757 *
James F. Reilly........................... 6,765 *
Timothy M. Murray (12).................... 82,605 *
Peter P.J. Vikanis (13)................... 8,551 *
Suzanne Garrett (14)...................... 24,305 *
Peter D. Wharf (15)....................... 37,541 *
John D. Kearney (16)...................... -- --
All directors and executive officers
as a group (13 persons) (17)............ 3,035,728 17.7%
</TABLE>
- -------------
* Represents less than 1%
(1) This table is based on 17,166,814 shares of Common Stock outstanding on
June 11, 1999.
11
<PAGE> 15
(2) Includes outstanding options to purchase 151,443 shares of Common
Stock, which are fully vested and exercisable. Does not include 1,800
shares held by Mr. Heap's spouse as custodian for minor children as to
which beneficial ownership is disclaimed, and options to purchase
112,027 shares of Common Stock which are not vested or exercisable. Of
the shares owned of record by Mr. Heap, 2,068,491 are pledged to a
financial institution to secure indebtedness owing by Mr. Heap to such
institution.
(3) Based upon a Schedule 13G/A dated March 10, 1999 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, 1998.
(4) Based upon a Schedule 13G/A dated February 10, 1999 filed by Robert
Fleming Inc. reporting beneficial ownership and shared voting and
dispositive power as of December 31, 1998.
(5) Based upon a Schedule 13-G dated February 12, 1999, these shares are
owned as of December 31, 1998, by various individual and institutional
investors, including T. Rowe Price New Horizons Fund, which T. Rowe
Price Associates, Inc. ("Price Associates") serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of such
securities.
(6) Includes outstanding options to purchase 109,052 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 473,498 shares of Common Stock, which
are not vested or exercisable.
(7) Includes outstanding options to purchase 82,647 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 264,397 shares of Common Stock, which are not
vested or exercisable.
(8) Includes outstanding options to purchase 7,331 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 12,533 shares of Common Stock, which are not vested
or exercisable.
(9) Includes outstanding options to purchase 29,150 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 220,683 shares of Common Stock, which are not
vested or exercisable.
(10) Includes outstanding options to purchase 30,000 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 216,302 shares of Common Stock, which are not
vested or exercisable.
12
<PAGE> 16
(11) Includes outstanding options to purchase 59,581 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 216,155 shares of Common Stock, which are not
vested or exercisable.
(12) Includes outstanding options to purchase 2,240 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 5,238 shares of Common Stock, which are not vested
or exercisable.
(13) Includes outstanding options to purchase 2,240 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 5,238 shares of Common Stock, which are not vested
or exercisable.
(14) Includes outstanding options to purchase 24,305 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 128,153 shares of Common Stock, which are not
vested or exercisable.
(15) Includes outstanding options to purchase 37,341 shares of Common Stock,
which are fully vested and exercisable. Does not include outstanding
options to purchase 205,636 shares of Common Stock, which are not
vested or exercisable.
(16) Does not include outstanding options to purchase 40,000 shares of
common stock which are not vested or exerciseable.
(17) Includes outstanding options to purchase 535,330 shares of Common
Stock, which are fully vested and exercisable. Does not include
outstanding options to purchase 1,899,860 shares of Common Stock which
are not vested or exercisable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1999, the Company had loans outstanding in varying
amounts to Messrs. Layton and Powell in order to provide such persons with the
funds necessary to satisfy various personal obligations and for other purposes.
The largest amount owing by such persons during fiscal year 1999 was $485,476
and $198,881, respectively. As of March 31, 1999, Messrs. Layton and Powell were
indebted to the Company in the amounts of $485,476 and $198,881, respectively.
The indebtedness owing by Messrs. Layton and Powell 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 April 1, 2001 and
March 31, 2000, respectively.
During fiscal year 1999, Warburg Dillon Read LLC, an investment banking
firm of which Mr. Reilly is a Managing Director, performed financial advisory
and investment banking services for the Company, and the Company presently
expects that such firm may continue to provide such services in the current
fiscal year.
13
<PAGE> 17
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, 1999,
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 $96.98 and $98.79 respectively on March 31, 1994. 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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
3/31/94 1/27/95 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Daisytek -- 100.00 144.17 220.00 208.33 325.00 221.67
Nasdaq U.S. (a) 96.98 100.00 107.88 146.47 162.80 247.09 332.02
Nasdaq Non-Financial (a) 98.79 100.00 108.25 146.07 157.63 236.95 328.41
</TABLE>
(a) Prepared by the Center for Research in Security Prices.
14
<PAGE> 18
ITEM 2
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, 2000. 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, 2000.
GENERAL INFORMATION
VOTING PROCEDURES
All matters specified in this Proxy Statement that are to be voted on
at the Annual Meeting will be by written ballot. One or more inspectors of
election will be appointed, among other things, to determine the number of
shares outstanding and the voting power of each, the shares represented at the
Annual Meeting, the existence of a quorum and the authenticity, validity and
effect of proxies, to receive votes or ballots, to hear and determine all
challenges and questions in any way arising in connection with the right to
vote, to count and tabulate all votes and to determine the result.
SOLICITATION COSTS
The Company will pay the cost of preparing and mailing this Proxy
Statement and other costs of the proxy solicitation made by the Board of
Directors. Certain of the Company's officers and employees may solicit the
submission of proxies authorizing the voting of shares in accordance with the
Board of Directors' recommendations, but no additional remuneration will be paid
by the Company for the solicitation of those proxies. Such solicitations may be
made by personal interview or telephone. Arrangements have also been made with
brokerage firms and others for the forwarding of proxy solicitation materials to
the beneficial owners of Common Stock, and the Company will reimburse such
persons for reasonable out-of-pocket expenses incurred in connection therewith.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
A stockholder desiring to submit an otherwise eligible proposal for
inclusion in the Company's proxy statement for the 2000 annual meeting of
stockholders of the Company must deliver the proposal so that it is received by
the Company no later than March 2, 2000. The Company requests that all such
proposals be addressed to the Company's Secretary at the
15
<PAGE> 19
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,
1999 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.
16
<PAGE> 20
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,
/s/ HARVEY H. ACHATZ
Harvey H. Achatz
Secretary
Plano, Texas
July 14, 1999
17
<PAGE> 21
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DAISYTEK INTERNATIONAL CORPORATION
The undersigned hereby appoints David A. Heap, Mark C. Layton, and
Harvey H. Achatz as proxies, with power to act without the other and with power
of substitution, and hereby authorizes them to represent and vote, as designated
on the other side, all the shares of stock of Daisytek International Corporation
standing in the name of the undersigned with all powers which the undersigned
would possess if present at the Annual Meeting of Stockholders of the Company to
be held August 20, 1999 or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE> 22
Please mark
your votes as
indicated in
this example [ X ]
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS WITHHELD
FOR FOR ALL
[ ] [ ]
Nominees:
Mark C. Layton
Timothy M. Murray
WITHHELD FOR: (Write that nominee's
name in the space provided below).
- -----------------------------------
ITEM 2 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<TABLE>
<S> <C> <C>
Signature Signature Date
-------------------------------------- -------------------------------------- ----------
</TABLE>
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.
