0000950134-01-504445.txt : 20011018
0000950134-01-504445.hdr.sgml : 20011018
ACCESSION NUMBER: 0000950134-01-504445
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010830
FILED AS OF DATE: 20010730
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: DAISYTEK INTERNATIONAL CORPORATION /DE/
CENTRAL INDEX KEY: 0000887403
STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110]
IRS NUMBER: 752421746
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0331
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-25400
FILM NUMBER: 1692451
BUSINESS ADDRESS:
STREET 1: 1025 CENTRAL EXPRESSWAY SOUTH STE 200
CITY: ALLEN
STATE: TX
ZIP: 75013
BUSINESS PHONE: 9728814700
MAIL ADDRESS:
STREET 1: 1025 CENTRAL EXPRESSWAY SOUTH STE 200
CITY: ALLEN
STATE: TX
ZIP: 75013
DEF 14A
1
d89111ddef14a.txt
DEFINITIVE PROXY STATEMENT
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Daisytek International Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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2
DAISYTEK INTERNATIONAL CORPORATION
1025 CENTRAL EXPRESSWAY SOUTH, SUITE 200
ALLEN, TEXAS 75013
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
Crescent Club, 200 Crescent Court, 17th Floor, Dallas, Texas 75201, on Thursday,
August 30, 2001 at 10:00 a.m. (central time).
At the Annual Meeting, stockholders will be asked to elect directors, to
ratify the appointment of Ernst & Young LLP as the Company's independent
auditors and to approve an amendment to the Daisytek International Corporation
1998 Employee Stock Purchase Plan. 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 30, 2001.
Sincerely,
/s/ JAMES R. POWELL
James R. Powell
President, Chief Executive Officer
August 6, 2001
3
DAISYTEK INTERNATIONAL CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 30, 2001
---------------------
To the Stockholders of Daisytek International Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Daisytek
International Corporation (the "Company") will be held on Thursday, August 30,
2001 at 10:00 a.m. (central time) at the Crescent Club, 200 Crescent Court, 17th
Floor, Dallas, Texas 75201, for the following purposes:
1. To elect three Class I Directors;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 2002;
3. To approve an amendment to the Daisytek International Corporation
1998 Employee Stock Purchase Plan to increase the number of shares
available for issuance under the plan from 250,000 to 500,000; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 18, 2001 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting. Only holders of record of the Company's common
stock on that date are entitled to vote on matters coming before the Annual
Meeting and any adjournment or postponement thereof. A complete list of
stockholders entitled to vote at the Annual Meeting will be maintained in the
Company's current offices at 1025 Central Expressway South, Suite 200, Allen,
Texas 75013 for ten days prior to the Annual Meeting and will be open to the
examination of any stockholder during ordinary business hours of the Company.
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/ R.W.DOHERTY,JR.
R.W. Doherty, Jr.
Secretary
Allen, Texas
August 6, 2001
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DAISYTEK INTERNATIONAL CORPORATION
1025 CENTRAL EXPRESSWAY SOUTH, SUITE 200
ALLEN, TEXAS 75013
(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 Crescent Club,
200 Crescent Court, 17th Floor, Dallas, Texas 75201, on Thursday, August 30,
2001, at 10:00 a.m. (central time), 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 2001 Annual Report are being mailed to
stockholders on or about August 6, 2001. Only one Annual Report and Proxy
Statement is being delivered to multiple security holders sharing an address
unless the Company has received contrary information from one or more of the
security holders.
The shares represented by a proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting, will be voted in accordance with the specifications made thereon.
Proxies on which no specification has been made by the stockholder will be
voted:
(i) in favor of the election of the three Class I nominees to the
Board of Directors listed in this Proxy Statement;
(ii) to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 2002; and
(iii) to approve an amendment to the Daisytek International
Corporation 1998 Employee Stock Purchase Plan to increase the number of
shares available for issuance under the plan from 250,000 to 500,000.
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 18, 2001 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, the outstanding voting securities of the Company consisted of
15,419,359 shares of common stock (excluding 3,352,305 shares of common stock in
treasury), par value $.01 per share, 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. 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.
An affirmative vote of a majority of the votes present at the Annual
Meeting, in person or by proxy, is required to approve (i) the election of the
nominees to the Board of Directors, (ii) the appointment of Ernst & Young LLP as
the Company's independent auditors and (iii) the amendment to the Daisytek
International Corporation 1998 Employee Stock Purchase Plan to increase the
number of shares available for issuance under the plan from 250,000 to 500,000.
Abstentions on these proposals will have the same effect as a vote
5
against such proposals. Broker non-votes will neither count for nor against
these proposals and as a result will have no effect on the vote with respect
thereto.
EXPLANATORY NOTE
All references in this Proxy Statement to the Company's fiscal year mean
the 12-month period ending on March 31 of such year.
During October 2000, the Company announced the resignations from the Board
of Directors of Mark C. Layton, Timothy M. Murray, James F. Reilly and Chris
Yates, who were each associated with PFSweb, Inc. ("PFSweb"). Mr. Murray had
been a member of both the Compensation Committee and the Audit Committee of the
Company and Mr. Reilly had been a member of the Compensation Committee of the
Company.
ITEM 1. 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 Board of Directors is
currently seeking a candidate to fill the vacancy in Class II.
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 James R. Powell, Daniel T.
Owen and Peter D. Wharf, who have been nominated and recommended by the Board of
Directors. If elected, Messrs. Powell, Owen and Wharf are expected to serve
until the Company's 2004 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
present 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.
The Board of Directors of the Company unanimously recommends a vote FOR the
nominees set forth below.
DIRECTORS STANDING FOR ELECTION
CLASS I
TERM EXPIRES AT THE 2004 ANNUAL MEETING
James R. Powell, age 40, has held several senior management positions in
his 13 years with the Company. Mr. Powell was named President and Chief
Executive Officer of the Company during February 2000 after most recently
serving as Senior Vice President. Mr. Powell was primarily responsible for the
Company's largest division -- United States computer supplies -- for more than
five years. Before that, he was Daisytek's Vice President of Sales and served in
various other management positions in the Company. Mr. Powell has been a
Director of Daisytek since 1996.
Daniel T. Owen, age 53, has served as a non-employee Director of the
Company since July 2000. Mr. Owen is an interactive television pioneer who
transitioned to technology venture investing in 1996. Since 1997, Mr. Owen has
been General Partner and co-founder of HO2 Partners, a venture capital firm
focusing on early-stage Internet companies. Mr. Owen also founded Focus
Networks, Inc., in 1989, a provider of satellite-delivered video sales training
programs, and sold the company in 1995. Mr. Owen was a founding executive of
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Spectradyne Inc., developing one of the world's largest pay movie systems,
Spectravision, and served as Chief Operating Officer from 1987 to 1989. Mr. Owen
currently serves on the board of directors of Power Up Networks, Inc., a network
deployment and configuration software company, and Inner Wireless, Inc., an in-
building wireless antenna company. Mr. Owen is on the Executive Committee of the
Board of Directors of North Texas Public Broadcasting, Inc. (Channel 13, Channel
2 and 90.1 FM) and a senior advisor to the "Learning Village" Internet
initiative at the University of Dayton, Ohio.
Peter D. Wharf, age 42, has served as a Director of the Company since
September 2000 and as Executive Vice President -- Worldwide Supplies of the
Company since May 2000. Mr. Wharf previously served as Vice
President -- International Operations since 1997 and as
Director -- International Operations of the Company from 1992 to 1997. Prior to
joining the Company in 1992, Mr. Wharf served in various sales capacities for
ISA International plc ("ISA"), a distributor of computer supplies and related
products in Western Europe.
DIRECTORS CONTINUING IN OFFICE
CLASS II
TERM EXPIRES AT THE 2002 ANNUAL MEETING
John D. (Jack) Kearney, age 47, has served as a Director of the Company
since July 2000. He presently serves as Executive Vice President -- Corporate
Development of the Company, a position he has held since February 2000. From
March 1999 to February 2000, Mr. Kearney served as Vice President -- Corporate
Development of the Company. From January 1998 to March 1999, Mr. Kearney served
as Vice President of Corporate Development of F.Y.I., Incorporated, a
single-source provider of document and information outsourcing solutions. Mr.
Kearney has significant experience in investment banking, having served as
Managing Director of Corporate Finance at Rauscher Pierce Refsnes, Inc. from
July 1995 to December 1997, and Senior Vice President of Corporate Finance at
Raymond James & Associates from September 1991 to July 1995.
DIRECTORS CONTINUING IN OFFICE
CLASS III
TERM EXPIRES AT THE 2003 ANNUAL MEETING
Peter P. J. Vikanis, age 50, has served as a non-employee 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.
Dale A. Booth, age 42, has served as a non-employee Director of the Company
since July 2000. Mr. Booth is Chairman and Chief Executive Officer of EngineX
Networks Inc., a professional services firm serving the telecommunications
industry. Mr. Booth joined EngineX Networks in September 2000, after more than
14 years of experience with Fujitsu Network Communications ("FNC"). At FNC, he
held a number of senior management positions. Most recently, Mr. Booth was
Senior Vice President and Chief Operating Officer of Fujitsu Network Services,
FNC's public network professional services subsidiary. Mr. Booth also served as
FNC's Chief Information Officer and the company's senior executive responsible
for knowledge management, workforce development and quality management. Mr.
Booth serves on the boards of the Texas Quality Foundation, the International
Engineering Consortium and the Telecom Corridor 20.
Nicholas A. Giordano, age 58, has served as a non-employee Director of the
Company since November 2000. Mr. Giordano currently serves on the board of
directors of Selas Corporation of America, Fotoball USA, Inc., WT Mutual Fund
and Kalamar Investment. Mr. Giordano served as the interim President of LaSalle
University from July 1998 to June 1999. Prior to August 1997, Mr. Giordano
served for over 16 years as president and Chief Executive Officer of the
Philadelphia Stock Exchange, and as Chairman of two of the exchange's
subsidiaries -- Stock Clearing Corporation of Philadelphia and the Philadelphia
Depository Trust Company. Mr. Giordano held several other positions at the
Philadelphia Stock Exchange prior to his appointment as Chief Executive Officer.
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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:
William F. Bergeron, Jr., age 40, has served as Executive Vice
President -- Information Technologies and Chief Information Officer of the
Company since March 2000. Mr. Bergeron previously served as Senior Vice
President and Chief Technology Officer for Aegis Communications Group, Inc., an
outsource provider of call center operations, since 1992.
John Cullen, age 39, was Executive Vice President -- U.S. Sales and
Marketing of the Company from 1998 until October 2000 before becoming Executive
Vice President and President of Virtual Demand. Prior to joining the Company,
Mr. Cullen served as Vice President of the Sony Recording Media and Energy Group
from 1987 to 1998.
Ralph W. Doherty, Jr., age 61, has served as Executive Vice
President -- Worldwide Team Development of the Company since March 2000 and has
served as Secretary since September 2000. Prior to joining the Company, Mr.
Doherty served as President of Pebblebrook Consulting, Inc., a management
consulting firm founded by him in 1993. Mr. Doherty also served a number of
years with International Business Machines Corporation, where he held a wide
variety of professional, managerial and senior staff positions.
Suzanne Garrett, age 36, has served as Executive Vice
President -- Merchandising of the Company since February 2000. Since joining the
Company in 1991, Ms. Garrett has served as Vice President of Product Management
and Marketing, Director of Product Management, Marketing Manager, and
New-Products Manager. Prior to joining the Company, Ms. Garrett served as an
account executive for United Media.
Ralph Mitchell, age 41, has served as Executive Vice President -- Finance
and Chief Financial Officer of the Company since March 2000. From 1997 until Mr.
Mitchell joined the Company, he served as Controller of McKesson HBOC's drug
distribution financial operations. Mr. Mitchell served as Chief Financial
Officer at Satra Industrial Holdings, a private, international group of trading
and distribution companies, during 1995 and 1996. Mr. Mitchell also worked as an
investment banker in London and as an accountant with KPMG in New York City and
Sydney, Australia.
MEETINGS OF THE BOARD
The Board of Directors held 11 meetings during the Company's 2001 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 and Compensation
Committees.
During fiscal year 2001, the general function of the Audit Committee was to
make recommendations to the Board of Directors as to the engagement or discharge
of the independent auditors, review the plan and results of the auditing
engagement with the independent auditors, review the adequacy of the Company's
system of internal accounting controls, monitor compliance with the Company's
business conduct policy and direct and supervise investigations into matters
within the scope of its duties. The Audit Committee met twice during fiscal year
2001. During fiscal year 2001, Messrs. Vikanis and Murray served on the Audit
Committee from the beginning of the fiscal year through October 2000, Messrs.
Vikanis and Owen served on the Audit Committee from October 2000 through
December 2000, and Messrs. Vikanis and Giordano have served on the Audit
Committee since December 2000. During May 2001, Mr. Owen was reappointed to the
Audit Committee, which now includes Messrs. Vikanis, Giordano and Owen. All
members of the Audit Committee during fiscal year 2001 were 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 2001, Timothy M.
Murray and James F. Reilly served on the Compensation Committee from the
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beginning of the fiscal year through October 2000 and Messrs. Booth and Owen
have served on the Compensation Committee since October 2000. All members of the
Compensation Committee during fiscal year 2001 were non-employee directors. The
Compensation Committee also administers the Company's employee stock option and
purchase plans. The Compensation Committee met 11 times in fiscal year 2001.
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 and an additional $1,000 fee
for each Board or Committee meeting he or she attends, in addition to
reimbursement of out-of-pocket expenses. 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. 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.
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, provided that no option may be exercised
within one year of the date of grant.
Directors who are employees of the Company or any of its subsidiaries do
not receive additional compensation for service on the Board of Directors of the
Company.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer and to the other six most highly
compensated executive officers of the Company for services rendered to the
Company during the fiscal years ended March 31, 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPLE POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(2) COMPENSATION(3)
--------------------------- ---- -------- -------- ------------ ------------ ---------------
James R. Powell.................... 2001 $250,000 $360,723 $ -- 175,000 $ 3,589
President, Chief Executive 2000 191,385 51,014 -- 150,000 3,489
Officer 1999 184,690 57,803 -- 76,116 3,923
John Cullen........................ 2001 165,000 126,341 -- 75,000 2,539
Executive Vice President -- 2000 157,100 34,732 -- 25,000 2,539
U.S. Sales and Marketing 1999 82,923 3,750 -- 10,000 51,777(4)
Ralph W. Doherty, Jr. ............. 2001 165,000 126,341 -- 100,000 17,971
Executive Vice President -- 2000 3,173 -- -- -- --
Worldwide Development 1999 -- -- -- -- --
Suzanne Garrett.................... 2001 165,000 126,341 -- 75,000 3,118
Executive Vice President -- 2000 128,404 6,377 -- 75,000 2,772
Merchandising 1999 116,923 13,116 -- 110,840 2,941
John D. (Jack) Kearney............. 2001 175,000 126,341 -- 189,950 5,264
Executive Vice President -- 2000 175,000 100,000 -- -- 4,825
Corporate Development 1999 3,538 -- -- 40,000 --
Ralph Mitchell..................... 2001 165,000 126,341 10,000(1) 175,000 7,237
Executive Vice President -- 2000 5,355 -- 10,000(1) -- --
Finance and Chief 1999 -- -- -- -- --
Financial Officer
Peter D. Wharf..................... 2001 165,000 126,341 -- 75,000 7,768
Executive Vice President -- 2000 153,500 6,377 -- 100,000 7,768
Worldwide Supplies 1999 147,947 17,516 -- 181,465 7,999
---------------
(1) During March 2000, Ralph Mitchell joined the Company as Executive Vice
President -- Finance and Chief Financial Officer. As an incentive to take
the position, Mr. Mitchell was awarded a $20,000 bonus, $10,000 of which was
paid during fiscal year 2000 and $10,000 of which was paid during fiscal
year 2001.
(2) Information in this column reflects options granted during the stated fiscal
years and does not reflect the adjustment and conversion of such options
upon the effective date of the PFSweb spin-off.
(3) Unless otherwise noted, All Other Compensation represents compensation with
respect to life insurance premiums paid by the Company for the benefit of
the named executive officer and employer matching contributions to the
Company's 401(K) plan.
(4) Includes payments of $49,238 related to the relocation of Mr. Cullen during
fiscal year 1999.
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DAISYTEK OPTION GRANTS IN FISCAL YEAR 2001
The following table sets forth information with respect to grants of stock
options by the Company to purchase shares of the Company's common stock during
the year ended March 31, 2001 to the named executive officers reflected in the
Summary Compensation Table.
INDIVIDUAL GRANTS
-----------------------------------------------
% OF
TOTAL
OPTIONS POTENTIAL REALIZABLE VALUE
NUMBER OF GRANTED AT ASSUMED ANNUAL RATES
SECURITIES TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERMS(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------------
NAME GRANTS(1) YEAR SHARE DATE 5% 10%
---- ---------- --------- --------- ---------- ----------- -------------
James R. Powell............... 175,000 7.1% $6.3125 7/12/10 $694,732 $1,760,587
John Cullen................... 75,000 3.0% 6.3125 7/12/10 297,742 754,537
Ralph W. Doherty, Jr. ........ 100,000 4.1% 6.3125 7/12/10 396,990 1,006,050
Suzanne Garrett............... 75,000 3.0% 6.3125 7/12/10 297,742 754,537
John D. (Jack) Kearney........ 150,000 6.1% 6.3125 7/12/10 595,485 1,509,075
39,950 1.6% 6.6800 6/08/10 167,831 425,316
Ralph Mitchell................ 175,000 7.1% 6.3125 7/12/10 694,732 1,760,587
Peter D. Wharf................ 75,000 3.0% 6.3125 7/12/10 297,742 754,537
---------------
(1) Subject to three-year cumulative vesting schedule.
(2) The dollar amounts disclosed in these columns, which reflect appreciation of
the Company's common stock at the 5% and 10% rates of stock appreciation
prescribed by the rules of the Securities and Exchange Commission, are not
intended to be a forecast of the Company's common stock price and are not
necessarily indicative of the actual values which may be realized by the
named executive officers or the stockholders.
AGGREGATED DAISYTEK OPTION EXERCISES IN FISCAL YEAR 2001 AND DAISYTEK OPTION
VALUES ON MARCH 31, 2001
The following table sets forth information concerning the aggregate Company
stock option exercises during the fiscal year ended March 31, 2001 and Company
stock option values as of March 31, 2001 for unexercised Company stock options
held by each of the named executive officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE RECEIVED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
James R. Powell........... -- $ -- 226,392 420,889 $108,006 $582,868
John Cullen............... -- -- 21,827 92,981 28,281 147,757
Ralph W. Doherty, Jr. .... -- -- 16,667 83,333 25,000 125,000
Suzanne Garrett........... -- -- 168,895 236,282 76,965 307,937
John D. (Jack) Kearney.... -- -- 66,948 186,922 48,811 221,433
Ralph Mitchell............ -- -- 29,167 145,833 43,750 218,750
Peter D. Wharf............ -- -- 254,617 318,180 105,188 379,333
---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
values are calculated by subtracting the exercise price from the fair market
value of the underlying common stock. For purposes of this table, fair
market value is deemed to be $7.8125, the closing market price reported by
The Nasdaq National Market on March 31, 2001.
CHANGE IN CONTROL AND SEVERANCE AGREEMENTS
The Company and each of Messrs. Powell, Cullen, Doherty, Kearney, Mitchell,
Wharf and Ms. Garrett have entered into Change in Control and Severance
Agreements. Under these agreements, and in considera-
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tion of certain commitments of the officer to continue employment, upon the
occurrence of a change in control, all unvested options held by the officer
immediately vest and become exercisable. In addition, during the two year period
following a change in control, if the employment of the officer is terminated
(other than for cause, death, disability or retirement), or if there is a
material adverse change in the officer's responsibilities, compensation or
benefits to which the officer does not consent, then in each case, the officer
is entitled to receive from the Company all salary and bonus amounts accrued
through the date of termination plus a severance payment equal to twice the
officer's highest annual rate of salary during the 12-month period immediately
preceding the officer's termination date, and bonus. If applicable, the officer
is also entitled to receive an additional payment to compensate the officer for
any additional excise tax liability arising by reason of the receipt of such
severance payment.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION FOR FISCAL YEAR
2001
The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
officers with respect to the compensation paid to the officers for the fiscal
year ended March 31, 2001. The information contained in the Report of the
Compensation Committee shall not be deemed to be "soliciting material" or to be
"filed" with the SEC, nor shall such information be incorporated by reference
into any future filing under the Securities Act or the Exchange Act except to
the extent that the Company specifically incorporates it by reference into such
filing.
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. The
members of the Committee are Dale A. Booth and Daniel T. Owen, both of whom are
non-employee 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 2001 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.
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 2001 the base salary of Mr. James R. Powell, who served as
Chief Executive Officer, was $250,000. The Committee believes that this amount
appropriately reflected Mr. Powell's services to the Company and its
subsidiaries, 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 approved a
bonus program pursuant to which bonus compensation is subject to the Company's
net income being equal to or greater than net income projected by analysts and
an approved budgeted net income amount. Under this program, Mr. Powell is
entitled to receive a cash bonus equal to (i) .80% of the Company's quarterly
earnings before taxes paid if the Company achieves certain estimates for
quarterly net income and (ii) $150,000 if the Company meets the approved
budgeted
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annual net income amount. Other selected officers are entitled to receive a cash
bonus equal to (i) .10% of the Company's quarterly earnings before taxes paid if
the Company achieves certain estimates for quarterly net income and (ii)
$100,000 if the Company meets the approved budgeted annual net income amount.
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
multi-year cumulative vesting schedule and have an exercise price not less than
the fair market value of the Company's stock on the date of grant. During fiscal
year 2001, Mr. Powell received options to purchase 175,000 shares of the Company
common stock.
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 executive officer in the Summary Compensation Table had taxable
compensation for fiscal year 2001 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
Dale A. Booth
Daniel T. Owen
REPORT OF THE AUDIT COMMITTEE
The Securities and Exchange Commission rules now require the Company to
include in its proxy statement a report from the Audit Committee of the Board.
The following report concerns the Audit Committee's activities regarding
oversight of the Company's financial reporting and auditing process. The
information contained in the Report of the Audit Committee shall not be deemed
to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act except to the extent that the Company
specifically incorporates it by reference into such filing.
The Audit Committee is comprised solely of independent directors, as
defined in the Marketplace Rules of the Nasdaq Stock Market, and it operates
under a written charter adopted by the Board of Directors, which is included as
Annex A to this proxy statement. The composition of the Audit Committee, the
attributes of its members and the responsibilities of the Committee, as
reflected in its charter, are intended to be in accordance with applicable
requirements for corporate audit committees.
The purpose of the Audit Committee is to assist the Board of Directors in
its general oversight of the Company's financial reporting, internal control and
audit functions. The Company's management is responsible for the preparation,
presentation and integrity of the Company's financial statements, accounting and
financial reporting principles, internal controls and procedures designed to
ensure compliance with accounting standards, applicable laws and regulations.
Ernst & Young LLP, which replaced Arthur Andersen LLP as the Company's
independent auditors on December 18, 2000, is responsible for performing an
independent audit of the consolidated financial statements in accordance with
generally accepted auditing standards. The functions of the Audit Committee are
not intended to duplicate or to certify the activities of management and the
independent auditors, and are in no way designed to supersede or alter the
traditional responsibilities of the Company's management and the independent
auditors. The Audit Committee's role does not provide any special assurances
with regard to the Company's financial statements, nor does it involve a
professional evaluation of the quality of the audits performed by the
independent auditors.
The Audit Committee has reviewed and discussed the audited financial
statements with management.
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13
The Audit Committee has discussed with Ernst & Young LLP the matters
required to be discussed by Statement of Auditing Standards No. 61,
Communication with Audit Committees. The Audit Committee has received the
written disclosures and the letter from Ernst & Young LLP required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, and has considered the compatibility of nonaudit services with the
auditors' independence, and has discussed with the auditors the auditors'
independence.
Fees Paid to Auditors
The Board of Directors has reappointed Ernst & Young LLP as independent
auditors to audit the financial statements of the Company for the current fiscal
year. Fees for the last annual audit were $220,000 and all other fees were
$634,000, including audit related services of $555,000 and nonaudit services of
$79,000. On December 18, 2000, the Company dismissed Arthur Andersen LLP as its
independent public accountants. Fees paid to Arthur Andersen during fiscal year
2001 totaled $145,000 related to reviews of interim financial information and
$292,000 related to nonaudit services.
Based on the review and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2001 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Nicholas Giordano
Peter P.J. Vikanis
Daniel T. Owen
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 18, 2001, certain information
regarding the beneficial ownership of the Company's 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, the Director nominees and the named
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") and, as such, also
includes shares acquirable within 60 days. 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. Information in this table
regarding options to purchase shares of the Company's common stock reflects the
adjustment and conversion of such options upon the effective date of the
spin-off of PFSweb. See "Certain Relationships and Related Transactions."
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT(1)
------------------------------------ --------- ----------
Advisory Research........................................... 1,389,350 9.0%
180 North Stetson Avenue, Suite 378
Chicago, Illinois 60601
David A. Heap(2)............................................ 1,120,629 7.3%
66/70 Vicar Lane
Bradford, West Yorkshire BD15AG, England
J.P. Morgan and Company Incorporated........................ 1,088,527 7.1%
522 Fifth Ave
New York, New York 10036
Pequot Capital Management................................... 909,500 5.9%
500 Nyla Farm Road
Westport, Connecticut 06880
Dale A. Booth(3)............................................ 18,764 *
John Cullen(4).............................................. 56,662 *
Ralph W. Doherty, Jr.(5).................................... 42,970 *
Suzanne Garrett(6).......................................... 242,627 1.6%
Nicholas A. Giordano(7)..................................... 17,500 *
John D. Kearney(8).......................................... 117,911 *
Ralph Mitchell(9)........................................... 80,528 *
Daniel T. Owen(10).......................................... 16,667 *
James R. Powell(11)......................................... 364,276 2.4%
Peter P.J. Vikanis(12)...................................... 35,090 *
Peter D. Wharf(13).......................................... 349,472 2.3%
All directors and executive officers as a group (12
persons)(14).............................................. 1,383,400 9.0%
---------------
* Represents less than 1%
(1) This table is based on 15,419,359 shares of common stock outstanding on
July 18, 2001, excluding 3,352,305 shares of common stock held in treasury.
The addresses for Messrs. Booth, Cullen, Doherty, Giordano, Kearney,
Mitchell, Owen, Powell, Vikanis, Wharf and Ms. Garrett is c/o Daisytek
International Corporation, 1025 Central Expressway South, Suite 200, Allen,
Texas 75013.
(2) Does not include 900 shares held by Mr. Heap's spouse as custodian for
minor children as to which beneficial ownership is disclaimed.
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15
(3) Includes outstanding options to purchase 16,667 shares of common stock,
which are fully vested and exercisable.
(4) Includes outstanding options to purchase 50,948 shares of common stock,
which are fully vested and exercisable.
(5) Includes outstanding options to purchase 33,333 shares of common stock,
which are fully vested and exercisable.
(6) Includes outstanding options to purchase 235,327 shares of common stock,
which are fully vested and exercisable.
(7) Includes outstanding options to purchase 12,500 shares of common stock,
which are fully vested and exercisable.
(8) Includes outstanding options to purchase 109,023 shares of common stock,
which are fully vested and exercisable. Does not include 200 shares held by
Mr. Kearney's spouse as custodian for minor children as to which beneficial
ownership is disclaimed.
(9) Includes outstanding options to purchase 70,833 shares of common stock,
which are fully vested and exercisable.
(10) Represents outstanding options to purchase 16,667 shares of common stock,
which are fully vested and exercisable.
(11) Includes outstanding options to purchase 354,265 shares of common stock,
which are fully vested and exercisable.
(12) Includes outstanding options to purchase 22,145 shares of common stock,
which are fully vested and exercisable.
(13) Includes outstanding options to purchase 349,272 shares of common stock,
which are fully vested and exercisable.
(14) Includes outstanding options to purchase 1,304,313 shares of common stock,
which are fully vested and exercisable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2001, the Company completed the spin-off of PFSweb, the
Company's former wholly-owned subsidiary that is an international provider of
transaction management services to both traditional and e-commerce companies. In
December 1999, PFSweb completed an initial public offering of 3,565,000 shares
of its common stock (the "IPO"), thereby reducing the Company's ownership in
PFSweb to 80.1%. On July 7, 2000, the Company announced the completion of the
spin-off of PFSweb by means of a tax-free distribution of the Company's
remaining 80.1 percent ownership of PFSweb (the "Spin-off") after receiving a
favorable private letter ruling from the Internal Revenue Service regarding the
tax-free treatment of the distribution of the Company's remaining ownership in
PFSweb. At the time of both the IPO and the Spin-off, Mark C. Layton, who was
Chairman of the Board of the Company until October 2000, also served as Chairman
of the Board, President and Chief Executive Officer of PFSweb. In addition,
James F. Reilly and Timothy M. Murray, who were also members of the Board of
Directors of the Company until October 2000, also served as members of the board
of directors of PFSweb at the time of the IPO and the Spin-off. Finally,
Christopher Yates, who served as a member of the Board of Directors of the
Company until October 2000, served as served as Executive Vice President, Chief
Sales and Marketing Officer and a director of PFSweb at the time of the IPO and
the Spin-off.
As part of the IPO, PFSweb and the Company entered into various agreements
governing the transaction management services that PFSweb provided for the
Company, all of which agreements are described in the Company's 2000 Proxy
Statement. All of these agreements remain in full force and effect, except the
Transition Services Agreement, which expired according to its terms in June
2000, and except as described below. Additionally, in connection with the IPO,
PFSweb purchased from the Company certain fixed assets in the central
distribution complex in Memphis, Tennessee.
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16
On May 25, 2001, the Company completed a transaction to purchase certain
Memphis distribution assets from PFSweb (the "Asset Purchase"), including those
assets previously sold to PFSweb at the time of the IPO. The aggregate cost of
this transaction is estimated to be approximately $16 million, including $11
million payable to PFSweb and $5 million to implement segregated information
technology platforms and to expand fulfillment capabilities. The Company expects
to recognize a special charge of approximately $2.7 million after taxes during
the first quarter of fiscal year 2002 related to this transaction. Prior to
completion of the transaction, the Company received a favorable supplemental
ruling from the Internal Revenue Service that the acquisition of certain fixed
assets would not adversely affect the June 2000 Internal Revenue Service ruling.
As part of the Asset Purchase, the Company and PFSweb agreed to terminate
the Transaction Management Services Agreement and the Strategic Alliance
Services Agreement entered into in connection with the IPO. In addition, under a
new Transition Services Agreement, PFSweb has agreed to continue to offer
services to the Company for a six-month period to support the transfer of
fulfillment operations and transaction processing back to the Company, including
the transition to a separate information technology platform. Finally, pursuant
to an Assignment of Industrial Lease Agreement dated May 9, 2000, the Company
assigned PFSweb its interest in a lease covering approximately 371,233 square
feet of warehouse space used in connection with the Memphis facility.
All of the agreements between the Company and PFSweb were negotiated in the
overall context of the Spin-off and Asset Purchase. Although the Company
generally believes that the terms of these agreements are consistent with fair
market values, there can be no assurance that the prices charged to or by each
company under these agreements are not higher or lower than the prices that may
be charged to, or by, unaffiliated third parties for similar services.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
The Company makes available one-year and three-year loans to its executive
officers and non-employee directors. The one-year loans accrue interest at the
Company's effective borrowing rate and the three-year loans accrue interest at
the Company's effective borrowing rate plus one percent. At March 31, 2001, loan
amounts classified as short-term under these contracts were $0.5 million and
loan amounts classified as long-term under these contracts were $0.6 million.
During fiscal year 2001, Mr. Powell had maximum loans outstanding under these
programs of $0.4 million.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's common stock with that
of the cumulative total return of The Nasdaq Stock Market (U.S.) and The Nasdaq
Non-Financial Stocks Index for the five year period ended March 31, 2001. The
following information is based on an annual investment of $100, on March 31,
1996, in the Company's common stock, The Nasdaq Stock Market (U.S.) and The
Nasdaq Non-Financial Stocks Index.
The information in the Performance Graph shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act or
the Exchange Act except to the extent that the Company specifically incorporates
it by reference into such filing.
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------
3/31/96 3/31/97 3/31/98 3/31/99 3/31/00 3/31/01
--------------------------------------------------------------------------------
Daisytek 100.00 94.70 147.73 100.76 95.83 75.16
Nasdaq U.S.(a) 100.00 111.15 168.47 227.60 423.35 169.48
Nasdaq
Non-Financial(a) 100.00 107.86 161.78 226.02 442.11 165.21
(a) Prepared by the Center for Research in Security Prices.
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ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
CHANGE IN ACCOUNTANTS
On December 18, 2000, the Company dismissed Arthur Andersen LLP as its
independent public accountants. The decision to change accountants was
recommended by the Audit Committee of the Board of Directors of the Company and
approved by the Board of Directors of the Company.
The reports of Arthur Andersen LLP on the Company's financial statements
for the fiscal years ended March 31, 2000 and March 31, 1999 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles. In connection with the
audits of the Company's financial statements for each of the fiscal years ended
March 31, 2000 and March 31, 1999, and in the subsequent interim periods, there
were no disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures which, if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused Arthur Andersen LLP to make reference to such matter in
connection with its report. During fiscal years 2000 and 1999 and through the
date of dismissal there have been no reportable events (as defined in Regulation
S-K Item 304(a)(1)(v)).
On December 18, 2000, the Audit Committee of the Board of Directors
recommended the engagement of Ernst & Young LLP as the Company's independent
public accountants for its fiscal year ending March 31, 2001 and this decision
was approved by the Board of Directors of the Company on December 18, 2000.
During fiscal years 2000 and 1999 and through the date of engagement, the
Company has not consulted with Ernst & Young LLP on items regarding either: (1)
the application of accounting principles to a specified transaction, either
completed or proposed; (2) the type of audit opinion that might be rendered on
the financial statements; or (3) the subject matter of any disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or reportable event (as defined
in Item 304(a)(1)(v) of Regulation S-K) with the Company's former auditor.
The Company previously provided Arthur Andersen LLP with a copy of the
disclosures made with respect to the change in accountants in connection with
filing the Current Report on Form 8-K filed December 22, 2000. Arthur Andersen
LLP furnished the Company with a letter addressed to the Securities and Exchange
Commission stating that it agreed with the statements made by the Company in
such Current Report. A copy of the letter from Arthur Andersen LLP was filed as
an exhibit to the Company's Current Report on Form 8-K filed December 22, 2000.
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR 2002
The Company has appointed Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending March 31, 2002. Ernst & Young LLP has
audited the Company's financial statements since December 18, 2000. Ratification
of the appointment of Ernst & Young 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.
Representatives of the firm of Ernst & Young LLP are expected to be present at
the Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
The Board of Directors of the Company recommends a vote FOR ratification of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending March 31, 2002.
ITEM 3. AMENDMENT TO THE DAISYTEK INTERNATIONAL CORPORATION 1998 EMPLOYEE STOCK
PURCHASE PLAN
Stockholders are being asked to approve an amendment to the Daisytek
International Corporation 1998 Employee Stock Purchase Plan (the "Plan") to
increase the number of shares of common stock reserved for issuance under the
Plan from 250,000 to 500,000 shares. The Board of Directors adopted the proposed
amendment to the Plan on July 16, 2001, subject to stockholder approval at this
meeting.
The Company believes that the amendment to increase the number of shares of
common stock reserved for issuance under the Plan is necessary to ensure that a
sufficient reserve of common stock is available under
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19
the Plan. The Company also believes that operation of the Plan is important in
attracting and retaining employees in a competitive labor market, which is
essential to the Company's long-term growth and success.
On July 16, 2001, the Board also adopted an amendment to the Plan (which
does not require stockholder approval) to provide for a new Section 12 to be
added to the Plan to address proposed changes in tax withholding with respect to
employee stock purchase plans. The Internal Revenue Service announced in January
2001 its intention to issue further guidance and decisions about the application
of FICA, FUTA and federal income tax withholdings and payment in connection with
options to purchase employer stock under employee stock purchase plans exercised
subsequent to January 1, 2003. In the event that such tax withholding
requirements are implemented by the Internal Revenue Service, the Company will
be in a position to comply with such requirements.
A copy of the amendments to increase the number of shares of common stock
reserved for issuance under the Plan and to address the proposed changes in tax
withholding and the Plan are attached to this proxy statement as Annex B. The
following is a summary of the principal features of the Plan.
History of the Plan. In August 1998, the Board of Directors adopted and
the stockholders approved the Plan and reserved 250,000 shares of common stock
for issuance under the Plan.
Purpose. The purpose of the Plan is to provide eligible employees of the
Company and designated subsidiaries an opportunity to purchase common stock
through accumulated payroll deductions to enhance such employees' sense of
participation in the Company's affairs and to provide an incentive for continued
employment.
Termination. Unless sooner terminated by the Board of Directors of the
Company, the Plan will 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 dissolution or liquidation of the Company, sale of all
or substantially all of the assets of the Company, merger or consolidation of
the Company into another corporation or entity (if the Company is not the
surviving corporation of such merger or consolidation) or the acquisition by
another person or entity of 80% or more of the Company's then outstanding voting
stock.
Administration. The Plan is to be administered by a committee of the Board
of Directors of the Company and must consist of non-employee Directors who are
appointed by the Board. The Board of Directors has designated the Compensation
Committee as administrator of the Plan.
Eligibility. All employees of the Company, or any subsidiary, are eligible
to participate in an offering period (discussed below) under the Plan except the
following:
- employees who are customarily employed for 20 hours or less each week;
- employees who have not completed 15 days of employment with the Company;
- employees who are customarily employed for five months or less in a
calendar year;
- employees who own stock or hold options to purchase stock or who, as a
result of participation in the Plan, would own stock or hold options to
purchase stock, possessing 5% or more of the total combined voting power
or value of all classes of the Company's capital stock; and
- employees belonging to a class or group of otherwise eligible employees
which the Compensation Committee deems ineligible for participation in
any offering.
As of July 18, 2001, approximately 690 persons were eligible to participate
in the Plan and 142,764 shares had been issued to the Company's employees
pursuant to the Plan. As of that date, 107,236 shares were available for future
issuance under the Plan, not including the proposed amendment to the Plan. No
shares have been issued to current directors who are not currently executive
officers under the Plan. The number of shares reserved for issuance under the
Plan is subject to proportional adjustment to reflect stock splits, stock
dividends and other similar events.
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20
No participating employee is permitted to purchase shares under the Plan at
a rate which, when aggregated with such employee's rights to purchase stock
under all similar plans of the Company, exceeds $25,000 in fair market value
determined at the time such option is granted for each calendar year in which a
participating employee participates in the Plan.
Offering Period. Each offering under the Plan is for a period as
determined by the Compensation Committee. The Compensation Committee has the
power to set the beginning of any offering period and to change dates or the
duration of offering periods without stockholder approval. The first day of each
offering period is the commencement date for such offering period and the last
day of each offering period is the purchase date for such offering period. On
the commencement date, each participating employee is granted a right to
purchase on the purchase date of such offering period, at the applicable
purchase price, shares of common stock. Every eligible employee on the
commencement date of an offering may participate in such offering provided such
individual remains an eligible employee until the purchase date. If the number
of shares calculated for purchase on an purchase date exceeds the number of
shares available for issuance under the Plan, the Company will make a pro rata
allocation of the shares among participating employees.
Purchase Price. The purchase price of shares that may be acquired in any
offering period under the Plan will be set by the Compensation Committee but
will not be less than 85% of the lower of: (1) the fair market value of the
shares on the commencement date or (2) the fair market value of the shares on
the purchase date. The fair market value of a share of the common stock is
deemed to be the closing sale price of the common stock on the principle
exchange on which shares of the common stock are then trading. As of July 18,
2001, the record date, the closing price of the Company's common stock as quoted
on the Nasdaq National Market was $16.14 per share.
Plan Benefits. During fiscal year 2001, Mr. Cullen purchased 357 shares of
common stock under the Plan. No other executive officer purchased shares of
common stock under the Plan during fiscal year 2001. The total number of shares
of common stock purchased under the Plan during fiscal year 2001 was 42,801, of
which 42,444 was purchased by the non-executive officer employee group.
FEDERAL INCOME TAX INFORMATION
The following is a general summary as of the date of this proxy statement
of the federal income tax consequences to the Company and employees
participating in the Plan. Federal tax laws may change and the federal, state
and local tax consequences for any participating employee will depend upon his
or her individual circumstances. Each participating employee has been and is
encouraged to seek the advice of a qualified tax adviser regarding the tax
consequences of participation in the Plan.
The Plan is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423 of the Internal Revenue Code.
Tax Treatment of the Participating Employee. Participating employees will
not recognize income for federal income tax purposes either upon enrollment in
the Plan or upon the purchase of shares. All tax consequences are deferred until
a participating employee disposes of the shares by sale, exchange or other
transfer of legal title.
Holding Period Requirements Met. If shares are held more than one year
after the date of purchase and until more than two years from the beginning of
the applicable offering period, or if the participating employee dies while
owning the shares, the participating employee realizes ordinary income on a sale
or other disposition, to the extent of the lesser of: (1) the amount by which
the fair market value of the shares at the beginning of the offering period
exceeds the purchase price or (2) the actual gain (the amount by which the fair
market value of the shares on the date of sale or other disposition exceeds the
purchase price). All additional gain upon the sale of shares is treated as
long-term capital gain. If the shares are sold and the sale price is less than
the purchase price, there is no ordinary income and the participating employee
has a long-term capital loss for the difference between the sale price and the
purchase price.
Holding Period Requirements Not Met. If the shares are not held for more
than one year after the date of purchase and more than two years from the
beginning of the applicable offering period but are sold or are
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21
otherwise disposed of including by way of gift, but not death, bequest or
inheritance, which is referred to as a disqualifying disposition, the
participating employee may realize both ordinary income and capital gain at the
time of sale or other disposition. The excess of the fair market value of the
shares at the date of purchase over the purchase price will constitute ordinary
income (not currently subject to withholding) in the year of the sale or other
disposition. In addition to ordinary income, the excess, if any, of the proceeds
of sale over the fair market value of the shares at the date of purchase is a
capital gain. If the stock is sold for less than the fair market value at the
date of purchase, the participating employee will have a capital loss. Capital
gains may be offset by capital losses, and up to $3,000 of capital losses may be
used annually against ordinary income.
Tax Treatment of the Company. The Company will be entitled to a deduction
in connection with the disposition of shares acquired under the Plan only to the
extent that the participating employee recognizes ordinary income on a
disqualifying disposition of the shares. The Company will treat any transfer of
record ownership of shares as a disposition, unless the Company is notified to
the contrary. In order to enable the Company to learn of disqualifying
dispositions and ascertain the amount of the deductions to which the Company is
entitled, participating employees will be required to notify the Company in
writing of the date and terms of any disposition of shares purchased under the
Plan.
ERISA
The Plan is not subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, nor is it qualified under Section 401(a) of the
Internal Revenue Code.
New Plan Benefits
The amounts of future purchases under the Plan by the Company's executive
officers and employees are not determinable because under the terms of the Plan
such purchases are based on participant contributions. Future purchase prices
under the Plan are not determinable because they are based on the fair market
value of the Company's common stock at the beginning of each offering period and
on each purchase date.
The Board of Directors unanimously recommends a vote FOR approval of the
amendment to the Daisytek International Corporation 1998 Employee Stock Purchase
Plan.
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, telephone, email, fax or by telegram. 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.
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STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Proposals of the stockholders of the Company that are intended to be
presented by such stockholders at the Company's 2002 Annual Meeting must be
received by the Company, addressed to Ralph W. Doherty, Jr., the Company's
Secretary, 1025 Central Expressway South, Suite 200, Allen, Texas, 75013, no
later than April 5, 2002 (assuming that the Company's 2002 Annual Meeting of
stockholders is held on a date that is within 30 days from the date on which the
2001 Annual Meeting was held) for inclusion in the proxy statement and form of
proxy relating to that meeting. Such proposals must comply with the Bylaws of
the Company and the requirements of Regulation 14A of the Exchange Act.
Pursuant to Rule 14a-4 of the Exchange Act, the Company may exercise
discretionary voting authority at the 2002 Annual Meeting under proxies it
solicits to vote on a proposal made by a stockholder, unless the Company is
notified about the proposal no later than June 21, 2002 (assuming that the
Company's 2002 Annual Meeting of the stockholders is held on a date that is
within 30 days from the date on which the 2001 Annual Meeting was held).
With respect to business to be brought before the Annual Meeting to be held
on August 30, 2001, the Company has not received any notices from stockholders
that the Company was required to include in this Proxy Statement.
COMPLIANCE WITH CERTAIN REPORTING OBLIGATIONS
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file initial reports of ownership
and reports of changes of ownership of the Company's common stock with the SEC
and the Company.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the fiscal year ended March 31, 2001, all reports
required to be so filed were filed in accordance with the provisions of Section
16(a), except that Dale A. Booth reported two grants of stock late in a Form 5
filing on July 25, 2001 and Peter P. J. Vikanis will report two grants of stock
late in a Form 5 filing.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report on Form 10-K for the year ended March 31, 2001
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.
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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, and in accordance with Rule
14a-4 promulgated under the Exchange Act.
The Company will provide without charge a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2001, including the
financial statements, to each stockholder upon written request to Ralph W.
Doherty, Jr., Daisytek International Corporation, 1025 Central Expressway South,
Suite 200, Allen, Texas 75013.
By Order of the Board of Directors,
/s/ R.W. DOHERTY, JR.
R.W. Doherty, Jr.
Secretary
Allen, Texas
August 6, 2001
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ANNEX A
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation to
any governmental body or the public; the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Corporation's policies, procedures and practices
at all levels. The Audit Committee's primary duties and responsibilities are to:
(1) Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control system.
(2) Review and appraise the audit efforts of the Corporation's
independent accountants and internal auditing department.
(3) Provide an open avenue of communication among the independent
accountants, financial and senior management and the Board of Directors.
(4) The Audit Committee will primarily fulfill these responsibilities
by carrying out the activities enumerated in Section IV below of this
Charter.
II. COMPOSITION
Effective no later than June 2001, the Audit Committee shall be composed of
three or more directors as determined by the Board, each of whom shall be an
independent director, and free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment as a
member of the Committee. A director will not be considered "independent," for
purposes of serving as a member of the Committee if, among other things, he or
she has:
- Been employed by the Corporation or its affiliates in the current or past
three years;
- Accepted any compensation from the Corporation or its affiliates in
excess of $60,000 during the previous fiscal year (except for board
service, retirement plan benefits, or non-discretionary compensation);
- An immediate family member who is, or has been in the past three years,
employed by the Corporation or its affiliates as an executive officer;
- Been a partner, controlling shareholder or an executive officer of any
for-profit business to which the Corporation made, or from which it
received, payments (other than those which arise solely from investments
in the Corporation's securities) that exceed five percent of the
organization's consolidated gross revenues for the year, or $200,000,
whichever is more, in any of the past three years; or
- Been employed as an executive of another entity where any of the
Corporation's executives serve on that entity's compensation committee.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices, and at least one member of the Committee shall
have accounting or related financial management expertise. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or any outside consultant.
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The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership. The Audit Committee shall submit the minutes of all meetings of the
Audit Committee to, or discuss the matters discussed at each committee meeting
with, the Board of Directors.
III. MEETINGS
The Committee shall meet at least two times annually, or more or less
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with management and
the independent accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee or at least its Chair should meet with the
independent accountants and management annually to review the scope of the
current year audit, procedures to be utilized and conclusions therefrom, and to
review the Corporation's financials consistent with IV below.
The independent accountants shall be accountable to the Audit Committee and
ultimately to the Board of Directors.
IV. RESPONSIBILITIES AND DUTIES
To fulfill responsibilities and duties the Audit Committee shall:
Documents/Reports Review
(1) Review and update this Charter periodically, as conditions dictate.
(2) Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental body, or the public,
including any certification, report, opinion, or review rendered by the
independent accountants.
(3) Review the regular internal reports to management prepared by the
internal auditing department and management's response.
(4) Review with financial management and the independent accountants each
10-Q and 10-K prior to its filing or prior to the release of earnings. The Chair
of the Committee may represent the entire Committee for purposes of this review.
Independent Accountants
(5) Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the fees and
other compensation to be paid to the independent accountants. On an annual
basis, the Committee should review and discuss with the accountants all
significant relationships the accountants have with the Corporation to determine
the accountants' independence, including a review of management consulting and
other service fees not related to the provision of audit services.
(6) Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant,
and appoint any new independent accountants.
(7) Periodically consult with the independent accountants, out of the
presence of management, about internal controls and the truthfulness and
accuracy of the Corporation's financial statements.
Financial Reporting Processes
(8) In consultation with the independent accountants and the internal
auditors, review the integrity of the Corporation's financial reporting
processes, both internal and external.
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(9) Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in its
financial reporting.
(10) Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as suggested by
the independent accountants or management.
Process Improvement
(11) Establish regular and separate systems of reporting to the Audit
Committee by each of management and the independent accountants regarding any
significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgments.
(12) Following completion of the annual audit, review separately with each
of management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of work or access to required information.
(13) Review any significant disagreement among management and the
independent accountants in connection with the preparation of the financial
statements.
(14) Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented. (This review should be conducted
at an appropriate time subsequent to implementation of changes or improvements,
as decided by the Committee.)
Ethical and Legal Compliance
(15) Establish, review and update periodically a Code of Ethical Conduct
and ensure that management has established a system to enforce this Code.
(16) Review management's monitoring of the Corporation's compliance with
the Corporation's Ethical Code, and ensure that management has the proper review
system in place to ensure that the Corporation's financial statements, reports
and other financial information disseminated to governmental organizations and
the public satisfy legal requirements.
(17) Review activities, organizational structure, and qualifications of the
internal audit department.
(18) Review, with the Corporation's counsel, any legal matter that could
have a significant impact on the Corporation's financial statements.
(19) Perform any other activities consistent with this Charter, the
Corporation's Bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
V. GENERAL
To the extent not otherwise inconsistent herewith, the applicable
provisions of the Corporation's Bylaws shall be incorporated herein, and without
limitation of the specific duties and responsibilities set forth above, the
Committee shall:
- Consider and make recommendations to the Board with respect to the
employment of a firm of independent public accountants;
- Confer with the Corporation's independent public accountants to
determine the scope of the audit that such accountants will perform;
- Receive reports from the independent public accountants and transmit
such reports to the Board, and after the close of the fiscal year,
transmit to the Board the financial statements certified by such
accountants;
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- Inquire into, examine and make comments on the accounting procedures
of the Corporation and the reports of the independent public
accountants; and
- Consider and make recommendations to the Board upon matters
presented to it by the officers of the Corporation pertaining to the
audit practices and procedures adhered to by the Corporation.
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ANNEX B
PROPOSED AMENDMENT TO THE DAISYTEK INTERNATIONAL CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
It is proposed that Section 6(a) of the Daisytek International Corporation
1998 Employee Stock Purchase Plan (the "Plan") shall be restated in its entirety
as follows:
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 500,000 shares, which may be
authorized but unissued shares, treasury shares or shares purchased in
the open market.
AMENDMENT TO THE PLAN ADOPTED ON JULY 16, 2001
On July 16, 2001, the Board of Directors amended the Plan to add a new
Section 12 to the Plan, as follows:
12. Tax withholding
(a) As a condition to participation in the Plan, the Eligible
Employee shall make such arrangements as the Committee may require for
the satisfaction of any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the
purchase of Common Stock by an Eligible Employee pursuant to the Plan
and the issuance of shares of Common Stock by the Company. The Company
shall not be required to issue any shares of Common Stock under the Plan
until such obligations are satisfied.
(b) In the absence of any other arrangement, the Eligible Employee
shall be deemed to have directed the Company to withhold or collect from
his or her compensation an amount sufficient to satisfy such tax
obligations from the payroll payments otherwise payable after the
purchase by the Eligible Employee of Common Stock pursuant to the Plan.
Capitalized terms not defined herein shall have the meaning set forth in
the Plan.
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DAISYTEK INTERNATIONAL CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
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.
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.
(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.
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
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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.
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 laws.
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.
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(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.
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.
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.
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.
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.
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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.
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.
(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.
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DAISYTEK INTERNATIONAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2001 ANNUAL MEETING OF STOCKHOLDERS - AUGUST 30, 2001
The undersigned stockholder(s) of Daisytek International Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement and hereby appoints James R. Powell and Ralph
W. Doherty, and each of them, Proxies and Attorneys-in-Fact, with full power to
each of substitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Annual Meeting of Stockholders of Daisytek International
Corporation to be held at the Crescent Club, 200 Crescent Court, 17th Floor,
Dallas, Texas at 10:00 a.m. on August 30, 2001, and any adjournments thereof,
and to vote all shares of Common Stock that the undersigned is entitled to vote
on the matters set forth on the reverse side.
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE, FOR RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS AND FOR THE
AMENDMENT TO THE DAISYTEK INTERNATIONAL CORPORATION 1998 EMPLOYEE STOCK PURCHASE
PLAN AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE
THE MEETING.
(Continued on other side)
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FOLD AND DETACH HERE
34
Please mark
your votes as
indicated in [X]
this example
FOR WITHHELD
FOR ALL FOR AGAINST ABSTAIN
1. ELECTION OF CLASS I DIRECTORS [ ] [ ] ITEM 2-PROPOSAL TO RATIFY THE APPOINTMENT OF [ ] [ ] [ ]
Nominees: ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL
01 James R. Powell YEAR ENDING MARCH 31, 2002.
02 Daniel T. Owen and
03 Peter D. Wharf ITEM 3-PROPOSAL TO AMEND THE DAISYTEK [ ] [ ] [ ]
INTERNATIONAL CORPORATION 1998 EMPLOYEE
STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR ISSUANCE
UNDER SUCH PLAN FROM 250,000 TO 500,000.
(IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME ABOVE) In their discretion, the Proxies are
authorized to vote upon such other business
as may properly come before the meeting.
Signature
--------------------------------------------
Signature
--------------------------------------------
(To be signed if shares are held by joint
tenants as Community Property)
Title, if applicable:
--------------------------------
Dated: , 2001
-----------------------------------------
This proxy should be dated and signed by the
Stockholder(s) exactly as his or her name appears
thereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity as
attorney, executor, administrator, trustee or
guardian should so indicate. If shares are held by
joint tenants as community property, both should sign.