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REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION FOR FISCAL YEAR
2000
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for approval or recommendation to the Board of Directors of the
compensation arrangements for the Company's senior executive officers. During
fiscal year 2000, the members of the Committee were Timothy M. Murray and James
F. Reilly who are non-employee directors. Such persons also served as the
Compensation Committee of the Board of Directors of Daisytek.
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 2000 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 2000 and for services rendered to Daisytek and the Company,
the base salary of Mr. Mark Layton, Chairman of the Board of Directors,
President and Chief Executive Officer, was $337,857, which approximated his base
salary of $337,818 for the prior fiscal year. The Committee believes that this
amount appropriately reflected Mr. Layton's services to Daisytek and the
Company, although such determination was not based upon any specific qualitative
or quantitative formula.
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 on the date of grant. During fiscal year 2000, Mr. Layton
received options to purchase 90,000 shares of Company common stock at an
exercise price of $10.45 per share.
As part of its overall consideration of executive compensation, the
Committee considers the anticipated tax treatment of various payments and
benefits, including the applicability of Section 162(m) of the Internal Revenue
Code which provides a limit on the deductibility of compensation for certain
executive officers in excess of $1,000,000 per year. The Committee believes that
no named officer in the Summary Compensation Table had taxable compensation for
fiscal year 2000 in excess of the deduction limit. The Committee intends to
continue to evaluate the impact of this Code provision.
The Committee believes that the policies and programs described above have
supported the Company's business objectives and have contributed to the
Company's performance.
COMPENSATION COMMITTEE
Timothy M. Murray
James F. Reilly
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