Danka Business Systems (DANKY)

Annual and long term incentives

Annual performance based incentive compensation for executives, including our named executive officers, is based on pre-established performance goals, which are determined annually by the Human Resources Committee, working with our chief executive officer with respect to performance goals for named executive officers other than the chief executive officer. Both the Audit Committee and the Human Resources Committee are responsible for goal establishment within the scope of each committee’s specific charter approved by the Board. The Audit Committee is primarily responsible for ensuring Company financial, process and systems viability, integrity and reporting. The Human Resources Committee is primarily responsible for establishing and overseeing executive incentive programs to facilitate optimum Company goal congruence and achievement. Objective goal achievement is easy to measure as there is generally a specific measurable objective while subjective objectives may be more difficult to measure and may consist of other measurement processes.

In the year to 31^st March, 2007, the performance objectives were principally comprised of earnings per share, working capital and total revenue growth. The incentive compensation is payable quarterly in cash. The annual performance based incentive compensation for certain executives may also be based in part on one or both of business unit operating performance and achievement of personal goals as approved by the Human Resources Committee. The maximum annual incentives for named executive officers range from 30% to 160% of base salary based on performance metrics that are pre-determined or approved by the Human Resources Committee. For each fiscal year, the Human Resources Committee also determines the extent to which performance targets have been met, subject to any extraordinary items or material unusual charges that may occur (which are

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excluded from bonus calculations) and ultimately makes awards based on its assessment, with input from our chief executive officer, with respect to named executive officers other than the chief executive officer. While our specific performance targets include certain of the Company’s confidential business information, we believe that the performance targets appropriately align the interests of our named executive officers with those of our shareholders. However, the targets are intended to be ambitious and challenging for our named executive officers to achieve, as demonstrated by the fact that over the past three fiscal years (including fiscal year 2007) the targets have not been met.

Long term incentive compensation currently consists mainly of the award of share options. Awards made under our restricted share plan are generally not made to our named executive officers, although one award was granted in fiscal year 2007 to our chief executive officer as more fully explained in the footnotes to the “Grants of Plan-Based Award in Fiscal Year 2007” table. The purpose of our long term incentive program is to align the interests of our named executive officers with the interests of the shareholders and retain and reward them based on the achievement of longer-term goals. The number of share options awarded to an executive is based on the executive’s position within the organization. Option grants are typically considered each financial year by the Human Resources Committee upon recommendation by our chief executive officer with respect to incentive awards of the named executive officers other than himself. Share options to individuals are effectively limited under the current rules of our share option plans to awards of options to acquire up to 4,000,000 ordinary shares (or the equivalent thereof in ADSs) in total in any five-year period. Share options are granted at the fair market value on the date of the grant, have a 10-year maximum term and may generally be exercised as to one-third of the number of shares one year after the date of grant, the next one-third two years after the date of grant, and the final one-third three years after the date of the grant.

Annual and long term incentives

Annual performance based incentive compensation for executives, including our chief executive officer, which is based on pre-established performance goals, which are determined annually, and, in the year to March 31, 2006, principally comprised of EBIT (earnings before interest and taxes), and strategic growth initiative targets. The bonuses are payable quarterly in cash. Certain executives are eligible for incentive compensation based on business unit operating performance. In addition, performance compensation may be

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earned for achievement of personal goals as approved by the human resources committee. The maximum annual incentives for executives range from 50% to 200% of base salary based on performance metrics that are pre-determined or approved by the Human Resources Committee.

Long term incentive compensation currently consists mainly of the award of stock options. The number of stock options awarded to an executive is based on the executive’s position within the organization. Option grants are typically considered each financial year. Stock options to individuals are effectively limited under the current rules of our stock option plans to awards of options to acquire up to 4,000,000 ordinary shares (or the equivalent thereof in ADSs) in total in any five-year period. Stock options are granted at the fair market value on the date of the grant, have a 10-year maximum term and may generally be exercised as to one-third of the number of shares one year after the date of grant, the next one-third two years after the date of grant, and the final one-third three years after the date of the grant (although certain options have been granted on different vesting terms which generally provide for accelerated vesting in the achievement of certain performance objectives).

Annual and long term incentives

Annual performance based incentive compensation for executives, including our chief executive officer, which is based on pre-established performance goals, which are determined annually, and, in the year to March 31, 2005, principally comprised of EBIT (earnings before interest and taxes), and strategic growth initiative targets. The bonuses are payable quarterly in cash. Certain executives are eligible for incentive

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compensation based on business unit operating performance. In addition, performance compensation may be earned for achievement of personal goals as approved by the human resources committee. The maximum annual incentives for executives range from 50% to 200% of base salary based on performance metrics that are pre-determined or approved by the human resources committee.

Long term incentive compensation currently consists mainly of the award of stock options. The number of stock options awarded to an executive is based on the executive’s position within the organization. Option grants are typically considered each financial year. Stock options to individuals are effectively limited under the current rules of our stock option plans to awards of options to acquire up to 4,000,000 ordinary shares (or the equivalent thereof in ADSs) in total in any five-year period. Stock options are granted at the fair market value on the date of the grant, have a 10-year maximum term and may generally be exercised as to one-third of the number of shares one year after the date of grant, the next one-third two years after the date of grant, and the final one-third three years after the date of the grant (although certain options have been granted on different vesting terms which generally provide for accelerated vesting in the achievement of certain performance objectives).