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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
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SCANSOURCE, INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
[ X ] No Fee Required.
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SCANSOURCE, INC.
6 LOGUE COURT, SUITE G
GREENVILLE, SOUTH CAROLINA 29615
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 4, 1997
The Annual Meeting of Shareholders of ScanSource, Inc. will be held in the
Ballroom of the Marriott Hotel, One Parkway East, Greenville, South Carolina on
Thursday, December 4, 1997, at 10:00 a.m., for the following purposes:
(1) To elect four members to the Board of Directors;
(2) To ratify the adoption of the ScanSource, Inc.1997 Stock Incentive
Plan;
(3) To ratify the grants of stock options to certain executive officers;
(4) To ratify the appointment of the Company's independent auditors; and
(5) To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only shareholders whose names appeared of record on the books of the
Company at the close of business on October 23, 1997 will be entitled to notice
of and to vote at the Annual Meeting or at any adjournments thereof.
You are cordially invited and urged to attend the Annual Meeting in person,
but if you are unable to do so, please date, sign and promptly return the
enclosed proxy card in the enclosed postage paid envelope. If you attend the
Annual Meeting and desire to revoke your proxy and vote in person, you may do
so. In any event, you remain entitled to revoke your proxy at any time before
it is exercised.
Steven H. Owings
Chairman of the Board
October 23, 1997
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SCANSOURCE, INC.
6 LOGUE COURT, SUITE G
GREENVILLE, SOUTH CAROLINA 29615
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of ScanSource, Inc. (the "Company") to be used
in voting at the Annual Meeting of Shareholders of the Company to be held in the
Ballroom of the Marriott Hotel, One Parkway East, Greenville, South Carolina, on
Thursday, December 4, 1997, at 10:00 a.m., and at any adjournments thereof.
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders commencing on or about October 27, 1997.
Any shareholder who executes the form of proxy referred to in this Proxy
Statement may revoke it at any time before it is exercised. The proxy may be
revoked by either giving written notice to the Secretary of the Company of such
revocation, or by executing and delivering to the Secretary of the Company a
proxy bearing a later date. The voting of such proxy will be suspended if the
shareholder executing the proxy attends the Annual Meeting and elects to vote in
person. Whether or not you plan to attend, you are urged to sign and return the
enclosed proxy.
The cost of preparing, assembling and mailing this Proxy Statement and the
form of proxy will be borne by the Company. Directors, officers and employees
of the Company may also solicit proxies personally or by mail, telephone or
telegram. No compensation will be paid for such solicitations. In addition,
the Company will bear the reasonable expenses of brokerage houses and other
custodians, nominees and fiduciaries who, at the request of the Company, may
send proxies and proxy solicitation material to their clients and principals.
VOTING SECURITIES OUTSTANDING
The Board of Directors has fixed the close of business on October 23, 1997
as the record date and time for the determination of shareholders entitled to
notice of, and to vote at, the Annual Meeting and at any adjournments thereof.
As of such date 4,650,183 shares of the company's no par value common stock (the
"Common Stock") were outstanding. All of such shares are eligible to be voted on
each matter currently scheduled to come before the Annual Meeting, and no other
outstanding shares of capital stock of the Company are eligible to be voted at
the Annual Meeting. Cumulative voting for the election of directors is not
available under the Company's Articles of Incorporation. Consequently, each
eligible share of Common Stock is entitled to one vote on each matter to be
voted upon at the Annual Meeting. Except for the election of directors, for
each matter specified in this Proxy Statement to be submitted for shareholder
approval at the Annual Meeting, the affirmative vote of a majority of the shares
of Common Stock present at the Annual Meeting in person or by proxy and entitled
to vote on such matter is required for approval. Abstentions will be considered
shares present in person or by proxy and entitled to vote and therefore will
have the effect of a vote against any matter requiring the affirmative vote of a
majority of the shares present and entitled to vote at the Annual Meeting.
Broker non-votes will be considered shares present but not entitled to vote and
therefore will have no effect on the outcome of the vote.
The Bylaws of the Company provide that the presence in person or by proxy
of the holders of a majority of the outstanding shares of Common Stock entitled
to vote at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting and at any adjournments thereof. Directions to withhold authority to
vote for directors, abstentions and broker non-votes will be counted for
purposes of determining if a quorum is present at the Annual Meeting. If a
quorum is not present or represented at the Annual Meeting, the chairman of the
meeting or the shareholders holding a majority of the shares of Common Stock
entitled to vote, present in person or represented by proxy, have the power to
adjourn the meeting from time to time without notice, other than an announcement
at the meeting, until a quorum is present or represented. Directors, officers
and employees of the Company may solicit proxies for the reconvened meeting in
person or by mail, telephone or telegram. At any such reconvened meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally scheduled.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Four directors are to be elected at the Annual Meeting. Pursuant to the
authority granted to it by the Company's Bylaws, the Board of Directors has set
the size of the Board of Directors at five members. A vacancy currently exists
on the Board of Directors which the Board of Directors has indicated it does not
expect to have filled at the Annual Meeting. Consequently, immediately following
the Annual Meeting, the Board of Directors will continue to consist of four
members. Pursuant to the Company's Bylaws and applicable South Carolina
corporate law, the four directors who will serve following the Annual Meeting
may elect a director to fill the vacancy that will exist on the Board of
Directors.
The Board of Directors has recommended each of the four existing members of
the Board of Directors as the four nominees for election as directors at the
Annual Meeting to serve until the next annual meeting of shareholders or until
their respective successors shall have been elected and shall have qualified.
The following are the Company's nominees for election as directors at the Annual
Meeting: Michael L. Baur, Steven R. Fischer, James G. Foody and Steven H.
Owings.
In accordance with the Bylaws of the Company, those nominees receiving the
greatest number of votes cast (although not necessarily a majority of the votes
cast) will be elected to the Board of Directors. Abstentions and shares held in
street name that are not voted in the election of directors will not be included
in determining the number of votes cast in the election of directors. The
proxies solicited for the Annual Meeting cannot be voted for a greater number of
persons than four, the number of nominees named. Cumulative voting in the
election of directors is not permitted by the Company's Articles of
Incorporation. If any nominee shall become unavailable for any reason, the
persons named in the form of proxy shall vote for a substitute nominee or vote
to reduce the number of directors to be elected as directed by the Board of
Directors. The Board of Directors has no reason to believe that any of the four
nominees listed above will not be available for election as a director.
THE PERSONS NAMED IN THE FORM OF PROXY WILL VOTE THE PROXY AS SPECIFIED. IF
NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES SET FORTH ABOVE.
PROPOSAL TWO
APPROVAL OF THE SCANSOURCE, INC. 1997 STOCK INCENTIVE PLAN
General. The Board of Directors approved the adoption of the ScanSource,
Inc. 1997 Stock Incentive Plan (the "Stock Plan") on October 16, 1997, subject
to the approval of the Stock Plan by the shareholders at the Annual Meeting. The
Board of Directors approved the Stock Plan to be effective October 16, 1997. The
approval of the Stock Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented by properly
executed and delivered proxies at the Annual Meeting. The following discussion
of the Stock Plan is qualified in its entirety by reference to the Stock Plan.
The Company will provide promptly, upon request and without charge, a copy of
the full text of the Stock Plan to each shareholder to whom a copy of this Proxy
Statement is delivered. Requests should be directed to: Mr. Jeffery A. Bryson,
Chief Financial Officer, ScanSource, Inc., 6 Logue Court, Suite G, Greenville,
South Carolina 29615 (803) 288-2432.
Purpose. The Stock Plan is intended to provide the Company with maximum
flexibility to meet the evolving needs of the Company and its subsidiaries over
the next ten years in providing stock-based incentives and rewards to officers,
directors and employees of the Company, and to consultants and advisors to the
Company, who are and have been in a position to contribute materially to
improving the Company's profits. The enhanced employment incentives available
through the Stock Plan are expected to promote the interests of the Company and
its shareholders by strengthening the Company's ability to attract and retain
key officers and employees. Through the operation of the Stock Plan, such
present and future officers and employees may be encouraged to acquire, or to
increase their acquisition of, Common Stock, thus maintaining their personal and
proprietary interests in the Company's continued success and progress.
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Administration. The Board of Directors will establish one or more
Committees (the "Committee") to oversee and carry out the provisions of the
Stock Plan, and to assume such other duties as are contemplated for any of such
Committees under the terms of the Stock Plan. The Committee will be responsible
to the Board of Directors for the operation of the Stock Plan and will make
recommendations to the Board of Directors with respect to participation in the
Stock Plan by officers, directors and employees of, and consultants and advisors
to, the Company and its subsidiaries, and with respect to the extent of that
participation. The interpretation and construction by the Committee of any
provisions of the Stock Plan or of any award granted under it will be final.
All awards made under the Stock Plan will be evidenced by written agreements
between the Company and the participant.
Operation. The Stock Plan provides for the grant of incentive stock
options ("ISOs"), nonqualified stock options ("NSOs"), stock appreciation rights
("SARs") and restricted stock awards ("Restricted Stock"). The Stock Plan will
be effective for a term of ten years after the effective date of its adoption by
the Board of Directors. A maximum of 200,000 shares of Common Stock may be
issued pursuant to awards granted under the Stock Plan, and the Board of
Directors has reserved 200,000 shares for this purpose. The number of shares
reserved for issuance under the Stock Plan will be adjusted in the event of an
adjustment in the capital stock structure of the Company affecting the Common
Stock (in connection with a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split or similar event),
and the Committee is authorized to adjust the terms of awards under the Stock
Plan in the event of a change in the capital stock in order to prevent dilution
or enlargement of awards under the Stock Plan. The Company intends to register
the shares of Common Stock reserved under the Stock Plan under the Securities
Act of 1933.
All obligations of the Company under the Stock Plan or under any award
granted under the Stock Plan will be binding upon any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase of all or substantially all of the business or assets of the Company,
or a merger, consolidation or otherwise. Unless otherwise specifically
prohibited by the terms of any award or under any applicable laws, rules or
regulations, upon the occurrence of a change in control of the Company, each
then outstanding option and SAR that is not otherwise exercisable will become
immediately and fully exercisable, and any restrictions imposed on Restricted
Stock will lapse. Under the Stock Plan, events constituting a change in control
include the acquisition by any third party or group of 50% or more of the
outstanding Common Stock; the change over a two-year period of the makeup of a
majority of the members of the Board of Directors; a tender offer to acquire
control of the outstanding Common Stock; and shareholder approval of the
liquidation of the Company, the sale of substantially all of its assets, or the
merger, consolidation or reorganization of the Company where the voting
securities of the Company prior to such event do not continue to constitute at
least 75% of the voting securities of the surviving entity.
Eligibility. Each officer, director and employee of the Company or any of
its subsidiaries is eligible to participate in the Stock Plan, and awards under
the Stock Plan may also be granted from time to time to persons serving as
consultants or advisors to the Company or any of its subsidiaries. The
Committee will select the individuals who will participate in the Stock Plan,
and members of the Committee will not be restricted under the terms of the Stock
Plan from participating in the Stock Plan while serving as members of the
Committee. On the date of this Proxy Statement, four directors, approximately
150 employees and approximately two consultants and advisors were eligible to
participate in the Stock Plan. The Board of Directors, upon recommendation of
the Committee, may grant awards under the Stock Plan to any officer, director or
other employee of, or any consultant or advisor to, the Company or any of its
subsidiaries. Awards that are granted at the same or at different times under
the Stock Plan are not required to contain similar provisions.
No awards may be granted under the Stock Plan after October 17, 2007. The
Board of Directors may terminate the Stock Plan sooner without further action by
the shareholders. The Board of Directors also may amend the Stock Plan without
shareholder approval, except that no amendment that increases the number of
shares of Common Stock that may be issued under the Stock Plan or changes the
class of individuals who may be selected to participate in the Stock Plan will
become effective until it is approved by the shareholders.
Stock Options. The Stock Plan permits the granting of non-transferable
ISOs that qualify as incentive stock options under Section 422A(b) of the
Internal Revenue Code and non-transferable NSOs that do not qualify. The option
exercise price of each option will be determined by the Committee in its sole
discretion, but may not be less than the fair market value of the Common Stock
on the date the option is granted in the case of ISOs and may not be less than
50% of such fair market value in the case of NSOs. On October 21, 1997, the
reported last sale price of the Common Stock on the Nasdaq National Market was
$20.00 per share.
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The term of each option will be fixed by the Committee, but may not exceed
ten years from the date of grant. The Committee will determine at what time or
times each option may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
Committee. The option exercise price of options granted under the Stock Plan
must be paid in cash or by delivery of shares of Common Stock or a combination
of cash and shares.
Except as otherwise provided below, upon termination of a participant's
employment, an option will terminate upon the earliest to occur of the full
exercise of the option, the expiration of the option by its terms, and the date
three months following the date of employment termination. Should termination of
employment (a) result from the death or permanent and total disability of a
participant, such three-month termination period shall extend to one year, or
(b) be for cause, the option will terminate on the date of employment
termination. The employment of a consultant or advisor will be deemed
terminated upon the Company's notice to the participant that the Company will no
longer transact business with the consultant or advisor.
To qualify as ISOs, options must currently meet additional Federal tax
requirements, including limits on the value of shares subject to ISOs first
exercisable annually to any participant, and a shorter exercise period and
higher minimum exercise price in the case of certain large shareholders. To the
extent these special requirements are changed or eliminated, the Stock Plan will
be amended accordingly.
Stock Appreciation Rights. The Committee may also grant non-transferrable
rights, alone or in conjunction with options, entitling the holder upon exercise
to receive an amount in any combination of cash or shares of Common Stock (in
the sole discretion of the Committee) equal to the increase since the date of
grant in the fair market value of the shares covered by such SAR over the SAR
price for such shares. The SAR price will be established at the date of grant
of the SAR and will be determined by the Committee in its sole discretion,
except that the SAR price may not be less than the fair market value of the
Common Stock on the date the SAR is granted in the case of an SAR issued in
tandem with an ISO, and may not be less than 50% of such fair market value in
the case of all other SARs. The restrictions applicable to the exercise of SARs
under the Stock Plan in the context of termination of employment with the
Company are the same as those restrictions applicable to the exercise of stock
options under the Stock Plan as discussed above.
Restricted Stock Awards. The Committee may also award shares of Common
Stock subject to such conditions and restrictions, if any, as the Committee may
determine. The purchase price, if any, of shares of Restricted Stock shall be
determined by the Committee. Recipients of Restricted Stock may be required to
enter into a Restricted Stock award agreement with the Company in such form as
the Committee may determine, setting forth the restrictions to which the shares
are subject and the date or dates on which the restrictions will lapse. The
Committee may at any time waive such restrictions or accelerate such dates.
Shares of Restricted Stock will be non-transferable. If a participant who holds
shares of Restricted Stock terminates employment for any reason (including
death) prior to the lapse or waiver of any restrictions, then the shares shall
be forfeited to the Company for no payment. Prior to the lapse of any
restrictions on shares of Restricted Stock, the participant will have all rights
of a shareholder with respect to the shares, including voting and dividend
rights, subject only to the conditions and restrictions generally applicable to
Restricted Stock or specifically set forth in any Restricted Stock award
agreement.
No Current Awards. The number and value of awards that may be granted
under the Stock Plan in the future to officers, directors and employees of, and
consultants and advisors to, the Company or any of its subsidiaries cannot
currently be determined and will be within the discretion of the Committee. As
of the date of this Proxy Statement, no grant of any award has been approved
under the Stock Plan.
Federal Income Tax Consequences. The Company has been advised that under
the Federal income tax laws currently in effect:
Incentive Stock Options: For regular income tax purposes, no taxable
income is realized by the optionee upon the grant or exercise of an ISO. As
long as no disposition of shares issued upon exercise of the ISO is made by the
optionee within two years from the date of grant or within one year after the
transfer of such shares to the optionee, then (a) upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
long-term capital gain, and any loss sustained will be a long-term capital loss,
and (b) no deductions will be allowed to the Company for Federal income tax
purposes. However, the exercise of an ISO will give rise to an item of tax
preference that may result in alternative minimum tax liability for the
optionee.
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If shares acquired upon the exercise of an ISO are disposed of prior to the
expiration of the holding periods described above (a "disqualifying
disposition"), generally (a) the optionee will realize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of the shares at exercise (or, if less, the amount realized on a sale of
such shares) over the option price thereof, and (b) the Company will be entitled
to deduct such amount. Any further gain realized will be taxed as short-term or
long-term capital gain and will not result in any deduction by the Company.
Special rules apply when all or a portion of the exercise price of the ISO is
paid by tendering shares of Common Stock, and special rules may also apply where
the optionee is subject to Section 16(b) of the Securities Exchange Act of 1934.
A disqualifying disposition will eliminate the item of tax preference associated
with the exercise of the ISO if it occurs in the same taxable year as the
exercise of the ISO.
Nonqualified Stock Options: No income is realized by the optionee at the
time an NSO is granted. Generally, (a) at exercise, ordinary income is realized
by the optionee in an amount equal to the difference between the option price
and the fair market value of the shares on the date of exercise, and the Company
receives a tax deduction for the same amount, and (b) at disposition,
appreciation or depreciation after the date of the exercise is treated as either
short-term or long-term capital gain or loss, depending on how long the shares
have been held. Special rules could apply in some situations if the optionee is
subject to Section 16(b) of the Securities Exchange Act of 1934.
Stock Appreciation Rights: No income will be realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, or when a
participant receives payment in cancellation of an SAR, the participant will
generally be required to include as taxable ordinary income in the year of such
exercise or payment an amount equal to the amount of cash received and the fair
market value of any stock received. The Company will generally be entitled at
the same time to a deduction for Federal income tax purposes equal to the amount
includable as ordinary income by such participant.
Restricted Stock Awards: The recipient of Restricted Stock generally will
realize ordinary income equal to the fair market value of the stock at the time
the stock is no longer subject to forfeiture, minus any amount paid for such
stock, and the Company will receive a corresponding deduction. However, unless
prohibited by any award agreement, a recipient may elect under Section 83(b) of
the Internal Revenue Code to realize ordinary income on the date of issuance
equal to the fair market value of the shares of Restricted Stock at that time
(measured as if the shares were unrestricted and could be sold immediately),
minus any amount paid for such stock. If the shares are forfeited, the recipient
will not be entitled to any deduction, refund or loss for tax purposes with
respect to the forfeited shares. Upon sale of the shares after the forfeiture
period has expired, the holding period to determine whether the recipient has
long-term or short-term capital gain or loss begins when the restriction period
expires (or upon earlier issuance of the shares, if the recipient elected
immediate recognition of income under Section 83(b) of the Internal Revenue
Code). If Restricted Stock is received in connection with another award under
the Stock Plan, the income and the deduction, if any, associated with such award
may be deferred in accordance with the rules described above for Restricted
Stock.
The foregoing discussion is provided for the information of shareholders
and is not a complete description of the Federal tax consequences in respect of
transactions under the Stock Plan, nor does it describe state or local tax
consequences.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPANY'S
1997 STOCK INCENTIVE PLAN. THE PERSONS NAMED IN THE FORM OF PROXY WILL VOTE THE
PROXY AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED "FOR"
THE APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN.
PROPOSAL THREE
APPROVAL OF STOCK OPTION GRANTS TO EXECUTIVE OFFICERS
In accordance with Nasdaq listing regulations, the Board of Directors is
submitting for shareholder approval and ratification the following grants to
certain of the Company's executive officers of compensatory options for the
purchase of shares of Common Stock.
Options to Chief Executive Officer. In December 1996, the Board of
Directors approved the grant on December 3, 1996 of a non-qualified stock option
to Steven H. Owings for the purchase of 30,000 shares of Common Stock,
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exercisable for a period of ten years at an exercise price of $14.50 per share,
all of which vested upon grant. In January 1997, the Board of Directors
approved the grant on January 17, 1997 of a non-qualified stock option to Mr.
Owings for the purchase of 70,000 shares of Common Stock, exercisable for a
period of ten years at an exercise price of $16.50 per share, all of which
vested upon grant.
Options to President. In December 1996, the Board of Directors approved
the grant on December 3, 1996 of a non-qualified stock option to Michael L. Baur
for the purchase of 16,000 shares of Common Stock, exercisable for a period of
ten years at an exercise price of $14.50 per share, and vesting in annual one-
third increments commencing one year after the grant date. In January 1997, the
Board of Directors approved the grant on January 17, 1997 of a non-qualified
stock option to Mr. Baur for the purchase of 10,000 shares, exercisable for a
period of ten years at an exercise price of $16.50 per share, all of which
vested upon grant.
Options to Chief Financial Officer and Treasurer. In January 1997, the
Board of Directors approved the grant on January 17, 1997 of a non-qualified
stock option to Jeffery A. Bryson for the purchase of 5,000 shares of Common
Stock, exercisable for a period of ten years at an exercise price of $16.50 per
share, all of which vested upon grant.
Each of the three executive officers identified above has agreed not to
sell or otherwise dispose of any shares of Common Stock issuable to him under
the indicated options, if exercised, prior to the ratification by the
shareholders of the grants of such options. On October 21, 1997, the reported
last sale price of the Common Stock on the Nasdaq National Market was $ 20.00
per share.
Each of the options identified above is a nonqualified stock option for tax
treatment purposes. The Company has been advised that under Federal income tax
laws as currently in effect, no income is realized by the optionee at the time a
nonqualified stock option is granted. Generally, (a) at exercise, ordinary
income is realized by the optionee in an amount equal to the difference between
the option price and the fair market value of the shares on the date of
exercise, and the Company receives a tax deduction for the same amount, and (b)
at disposition, appreciation or depreciation after the date of the exercise is
treated as either short-term or long-term capital gain or loss, depending on how
long the shares have been held. Special rules could apply in some situations if
the optionee is subject to Section 16(b) of the Securities Exchange Act of 1934.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE STOCK
OPTION GRANTS TO THE COMPANY'S EXECUTIVE OFFICERS DESCRIBED ABOVE. THE PERSONS
NAMED IN THE FORM OF PROXY WILL VOTE THE PROXY AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED "FOR" THE RATIFICATION OF SUCH
STOCK OPTION GRANTS.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the firm of KPMG Peat Marwick LLP, certified public accountants, as
independent auditors to make an examination of the accounts of the Company for
the fiscal year ending June 30, 1998. If the shareholders do not ratify this
appointment, other certified public accountants will be considered by the Board
of Directors upon recommendation of the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
APPOINTMENT OF KPMG PEAT MARWICK LLP. THE PERSONS NAMED IN THE FORM OF PROXY
WILL VOTE THE PROXY AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXY WILL
BE VOTED "FOR" THE APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP.
A representative of KPMG Peat Marwick LLP is expected to be in attendance
at the Annual Meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.
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OTHER BUSINESS
The Board of Directors of the Company knows of no other matter to come
before the Annual Meeting. However, if any matter requiring a vote of the
shareholders should be duly presented for a vote, then the persons named in the
enclosed form of proxy intend to vote such proxy in accordance with their best
judgment.
PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 Annual Meeting
of Shareholders must be received by the Company by June 25, 1998 for possible
inclusion in the proxy material relating to such meeting.
EXECUTIVE OFFICERS AND DIRECTORS
The following sets forth certain information regarding the Company's
executive officers and directors:
STEVEN H. OWINGS, 44, has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since its inception in December 1992.
From 1991 to 1992 Mr. Owings served as Chairman of the Board, Chief Executive
Officer and the sole shareholder of Argent Technologies, Inc. ("Argent"), a
personal computer manufacturer. From 1983 to 1991 Mr. Owings held various
positions with Gates/FA Distributing, Inc. and its predecessors ("Gates"),
including serving as President from December 1987 until December 1990, Chief
Executive Officer from December 1987 to December 1991, and Chairman of the Board
of Directors from December 1990 to December 1991. From December 1987 to
September 1994 Mr. Owings served as a director of Gates. From July 1996 to
April 1997, he served as a director of Globelle Corporation, an international
distributor of personal computer products.
MICHAEL L. BAUR, 40, has served as President of the Company since its
inception and as a director of the Company since December 1995. Prior to joining
the Company, from April 1991 to November 1992, Mr. Baur served in various
positions at Argent, including President and General Manager. In September 1989,
Mr. Baur joined Gates as Product Manager and served as Merchandising Director
from February 1990 to March 1991.
JEFFERY A. BRYSON, 37, has served as Chief Financial Officer and Treasurer
of the Company since December 1993. Prior to joining the Company, from 1990 to
1993, Mr. Bryson served as a senior manager with the accounting firm of KPMG
Peat Marwick LLP, where he was employed for more than seven years. Mr. Bryson is
a certified public accountant.
ROBERT S. MCLAIN, JR., 37, has served as the Company's Vice President of
Marketing since September 1997. Prior to joining the Company, from July 1995 to
September 1997, Mr. McLain served as President of Transition Marketing, Inc., a
majority-owned subsidiary of the Company. From July 1993 to June 1995, Mr.
McLain was Director of Marketing with Gates, and from July 1991 to June 1993 he
was a senior account executive with a broadcasting firm in Greenville, South
Carolina.
STEVEN R. FISCHER, 52, has served as a director of the Company since
December 1995. Mr. Fischer has served as Senior Vice President and Regional
Manager of Transamerica Business Credit Corporation since March 1992. From
February 1981 to March 1992, Mr. Fischer served as Vice President and Regional
Manager of Citibank, N.A.
JAMES G. FOODY, 67, has served as a director of the Company since December
1995. Mr. Foody has served as a business consultant in Greenville, South
Carolina since October 1990. Prior to that time, he served as a partner in the
accounting firm of Ernst & Young LLP.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
the Company's fiscal year ended June 30, 1997. No director attended fewer than
75% of the total of such meetings and the meetings of the committees upon which
he served.
7
<PAGE>
Pursuant to the Bylaws of the Company, the Board of Directors has
established an Audit Committee and a Compensation Committee. The Board of
Directors has not established a committee performing the functions traditionally
performed by a Nominating Committee. Such functions are currently performed by
the Board of Directors acting as a whole.
The Audit Committee is composed of Messrs. Fischer and Foody. The
functions of the Audit Committee include recommending to the Board of Directors
the retention of independent auditors, reviewing the scope of the annual audit
undertaken by the Company's independent auditors and the progress and results of
their work, and reviewing the financial statements of the Company and its
internal accounting and auditing procedures. No directors of the Company who
are also executive officers may serve on the Audit Committee. This committee
met three times during the fiscal year ended June 30, 1997.
The Compensation Committee is composed of Messrs. Fischer and Foody.
During the fiscal year ended June 30, 1997, the seat on the Compensation
Committee currently held by Mr. Fischer was held by Mr. Owings who was replaced
on the Committee by Mr. Fischer on January 15, 1997. The functions of the
Compensation Committee include reviewing and approving executive compensation
policies and practices, reviewing salaries and bonuses for certain officers of
the Company, administering the Company's stock option plans, and considering
such other matters as may from time to time be referred to the Compensation
Committee by the Board of Directors. No directors of the Company who are also
executive officers of the Company participate in deliberations of such committee
concerning the compensation of such executive officers. During the period of
Mr. Owing's participation on the Compensation Committee, his compensation was
approved by a vote of the disinterested directors of the full Board of
Directors. This committee met once during the fiscal year ended June 30, 1997.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued to the
Company's Chief Executive Officer, President, and Chief Financial Officer and
Treasurer (the "Named Executive Officers") for the fiscal years ended June 30 in
each of 1997, 1996 and 1995. No other executive officer of the Company earned
compensation in excess of $100,000 for services provided to the Company during
such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG - TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- -------------------------
AWARDS
-------------------------
FISCAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ------------------------------ ------ -------- -------- ----------------------
<S> <C> <C> <C> <C>
Steven H. Owings 1997 $96,000 $ 16,225 107,500
Chairman of the Board and 1996 77,532 - -
Chief Executive Officer 1995 72,000 - -
Michael L. Baur 1997 87,000 109,327 51,000
President 1996 87,000 46,554 -
1995 72,000 57,550 30,000
Jeffery A. Bryson 1997 60,000 73,434 17,500
Chief Financial Officer and 1996 60,000 16,580 -
Treasurer 1995 60,000 11,096 8,000
</TABLE>
EMPLOYMENT AGREEMENTS
Effective January 1, 1997, and for a term extending through June 30, 1999,
the Company entered into employment agreements with each of Steven H. Owings,
Michael L. Baur and Jeffery A. Bryson, pursuant to which Mr. Owings serves as
Chief Executive Officer, Mr. Baur serves as President, and Mr. Bryson serves as
Chief Financial Officer and Treasurer of the Company. These agreements provide
for annual salaries of $96,000, $87,000 and $60,000 for Messrs. Owings, Baur and
Bryson, respectively, plus incentive bonuses based upon a percentage of the
Company's
8
<PAGE>
operating income. The agreements also include non-competition provisions for two
years following the expiration of the agreements or the earlier termination of
employment.
OPTION GRANTS
The following table sets forth the stock options granted to the Named
Executive Officers during the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
--------------------------------------------------- -----------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ---- ------------ ------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven H. Owings
Incentive Stock Option 7,500 2.9 $14.50 12/06 $ 68,400 $ 173,325
Non-Qualified Option 30,000 11.7 14.50 12/06 273,600 693,300
Non-Qualified Option 70,000 27.4 16.50 1/07 726,600 1,841,000
Michael L. Baur
Incentive Stock Option 25,000 9.8 11.25 7/06 177,000 448,250
Non-Qualified Option 16,000 6.3 14.50 12/06 145,920 369,760
Non-Qualified Option 10,000 3.9 16.50 1/07 103,800 263,000
Jeffery A. Bryson
Incentive Stock Option 5,000 2.0 11.25 7/06 35,400 89,650
Incentive Stock Option 7,500 2.9 14.50 12/06 68,400 173,325
Non-Qualified Option 5,000 2.0 16.50 1/07 51,900 131,500
</TABLE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
unexercised stock options held by the Named Executive Officers at June 30, 1997.
No options granted by the Company were exercised by any Named Executive Officers
during the fiscal year ended June 30, 1997.
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT
FISCAL YEAR-END
-------------------------------
NAME
- ---- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Steven H. Owings 100,000 7,500 $ - $ -
Michael L. Baur 50,000 51,000 370,473 137,652
Jeffery A. Bryson 20,334 15,166 147,349 31,776
</TABLE>
________
(1) Based on a per share price of $14.375, the closing price of the Common Stock
as reported on The Nasdaq National Market on June 30, 1997, the last trading
day of the fiscal year.
COMPENSATION OF DIRECTORS
All directors are reimbursed for their expenses incurred in connection with
the performance of their services as directors. In addition, directors who are
not otherwise compensated as officers of the Company receive a fee of
9
<PAGE>
$1,000 per calendar quarter for their service on the Board of Directors and are
also eligible to be granted on an annual basis five-year options to purchase
5,000 shares of Common Stock under the terms of the Company's stock option plan
for outside directors (the "Director Plan"). Grants of options under the
Director Plan are automatic and are made each year to each non-employee
director. The exercise price of all options so granted is the fair market value
of the Common Stock on the date of grant. Options granted under the Director
Plan are exercisable beginning six months after the option is granted. Options
may be exercised only during the period in which the option holder remains a
director of the Company and for one year thereafter, unless the director's
membership on the Board of Directors is terminated for cause, in which case all
options granted to such director expire upon such termination.
On December 4, 1996, the day following the 1996 Annual Meeting of
Shareholders, automatic grants of options for the purchase of 5,000 shares of
Common Stock pursuant to the Director Plan were made to each of Messrs. Fischer
and Foody, the two non-employee directors. No other compensation was paid or
awarded during the fiscal year ended June 30, 1997 to any director for service
on the Board of Directors. Effective on December 5, 1997, the day following the
Annual Meeting, automatic grants of options for the purchase of 5,000 shares of
Common Stock pursuant to the Director Plan are scheduled to be made to each of
the non-employee directors elected at the Annual Meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1997, matters of executive
compensation were decided by the Compensation Committee of the Board of
Directors. The Compensation Committee is currently composed of Messrs. Fischer
and Foody. Mr. Foody served throughout the fiscal year and Mr. Fischer replaced
Mr. Owings as a member of the Committee on January 15, 1997. Mr. Owings is an
executive officer of the Company. Mr. Owings had no participation in any
deliberations regarding his compensation, all of which was approved by a vote of
the disinterested directors of the full Board of Directors. See "Certain
Transactions."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is generally
determined by the Compensation Committee of the Board of Directors. The
following report with respect to certain compensation paid or awarded to the
Company's executive officers during the fiscal year ended June 30, 1997 is
furnished by the directors who comprise the Compensation Committee.
General Policies. The Company's compensation program is intended to enable
the Company to attract, motivate, reward and retain the management talent to
achieve corporate objectives, and thereby increase shareholder value. It is the
Company's policy to provide incentives to senior management to achieve both
short-term and long-term objectives. To attain these objectives, the Company's
executive compensation program is composed of a base salary and bonus, which is
generally established for the Named Executive Officers in an employment
agreement.
Base Salary. Base salaries for each of the Named Executive Officers as
established in his employment agreement are determined by a subjective
assessment of the executive officer's performance, in light of the officer's
responsibilities and position with the Company and the Company's performance
during prior periods. In evaluating overall Company performance, the primary
focus is upon financial performance for the relevant annual period measured by
operating income. Base salaries are reviewed periodically and from time to time
by the Compensation Committee and adjusted appropriately.
Incentive Compensation. Incentive compensation for each of the Named
Executive Officers is established in his employment agreement as a percentage of
the Company's operating income. Incentive compensation is reviewed
periodically and from time to time by the Compensation Committee and adjusted
accordingly.
Stock Options. Executive compensation includes the grant of stock options
in order to more closely align the interests of the executive with the long-term
interests of the shareholders.
10
<PAGE>
Chief Executive Officer Compensation. Steven H. Owings is the original
founder of the ScanSource concept and has devoted his career to this concept
since the inception of the Company in December 1992. The Compensation Committee
believes that Mr. Owings' entrepreneurial drive, dedication, commitment and
knowledge have been vitally important to the successful and ongoing growth of
the Company. Mr. Owings' overall compensation for the fiscal year ended June
30, 1997 consisted of base salary, bonus and stock options. In determining Mr.
Owings' compensation, the Compensation Committee evaluated Mr. Owings' personal
performance, the performance of the Company and Mr. Owings' long-term commitment
to the success of and ownership position in the Company.
Report of Compensation Committee
Steven R. Fischer
James G. Foody
PERFORMANCE GRAPH
The graph below compares cumulative total shareholder return of the Common
Stock for the period from March 31, 1994 (the month-end following the
commencement on March 18, 1994 of the Company's initial public offering of
Common Stock) to June 30, 1997 (the Company's 1997 fiscal year-end), with the
Nasdaq Stock Market (US) Index and with a Peer Group of companies for the same
period. Total shareholder return represents stock price changes and assumes the
reinvestment of dividends. The graph assumes the investment of $100 on March
18, 1994.
<TABLE>
<S> <C> <C> <C> <C> <C>
3/94 6/94 6/95 6/96 6/97
- -------------------------------------------------------------------------
SCANSOURCE, INC. $100.00 $118.18 $138.18 $203.64 $209.09
- -------------------------------------------------------------------------
NASDAQ MARKET INDEX (US) 100.00 99.15 116.29 146.39 176.34
- -------------------------------------------------------------------------
PEER GROUP* 100.00 85.96 112.10 130.68 146.34
- -------------------------------------------------------------------------
</TABLE>
* The members of the Peer Group are Eltron International, Inc., Ingram Micro,
Inc., Symbol Technologies, Inc., Tech Data Corp., and Zebra Technologies
Corporation. The returns of each company in the Peer Group have been weighted
according to their respective stock market capitalization for purposes of
arriving at a Peer Group average.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock at September 30, 1997 of: (i) each person known by
the Company to beneficially own five percent or more of the Common Stock; (ii)
each director of the Company who beneficially owns Common Stock; (iii) each
executive officer who beneficially owns Common Stock; and (iv) all directors and
executive officers of the Company, as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
--------------------
NAME NUMBER PERCENTAGE
- ---- ------- -----------
<S> <C> <C>
Steven H. Owings(2).......................................... 312,300 6.6 %
Richard Kaufman(3)........................................... 287,000 6.2
Walter Scheuer(3)............................................ 269,000 5.7
Wayne S. Reisner(3).......................................... 209,000 4.5
Michael L. Baur(4)........................................... 65,000 1.4
Jeffery A. Bryson(5)......................................... 20,734 *
James G. Foody(6)............................................ 17,500 *
Steven R. Fischer(7)......................................... 16,000 *
Robert S. McLain, Jr.(8)..................................... 8,883 *
All directors and executive officers as a group (6 persons).. 444,217 9.0
* Amount represents less than 1.0%.
</TABLE>
(1) Applicable percentage of ownership is based upon 4,650,183 shares of Common
Stock outstanding. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes voting and
investment power with respect to shares shown as beneficially owned. Shares
of Common Stock subject to options currently exercisable or exercisable
within 60 days are deemed outstanding for computing the shares and
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person or
entity. Except as otherwise indicated, the persons or entities listed in the
table have sole voting and investment power with respect to all shares shown
as beneficially owned by them.
(2) The business address for the named individual is 6 Logue Court, Suite G,
Greenville, South Carolina 29615. Includes 100,000 shares issuable pursuant
to currently exercisable non-qualified options granted by the Company. Does
not include 7,500 shares issuable pursuant to options granted by the Company
which are not currently exercisable.
(3) The business address for the named individual is 635 Madison Avenue, New
York, New York 10022. Schedules filed with the Securities and Exchange
Commission reflect: (i) Walter Scheuer, Richard Kaufman, and Wayne S.
Reisner as three of the trustees of certain trusts for the benefit of Mr.
Scheuer's children and grandchildren, which trusts hold an aggregate of
159,000 shares; (ii) Mr. Scheuer and Mr. Kaufman as executive officers of
two foundations holding an aggregate of 12,000 shares; (iii) Mr. Scheuer as
the general partner of a limited partnership holding 98,000 shares; (iv) Mr.
Kaufman and Mr. Reisner as two of the trustees of a trust for the benefit of
Mr. Scheuer and Mr. Scheuer's wife holding 50,000 shares; and (v) Mr.
Kaufman as one of the trustees of a trust for the benefit of Mr. Scheuer's
children holding 66,000 shares. While such schedules relate to an aggregate
of 385,000 shares of Common Stock, the aggregate beneficial ownership
reflected in the table for these individuals is greater than such amounts
because more than one individual may be deemed to be the beneficial owner of
the same securities. Each of Mr. Scheuer, Mr. Kaufman, and Mr. Reisner
disclaims beneficial ownership of all shares held by the aforementioned
entities.
(4) Includes 50,000 shares issuable pursuant to currently exercisable options
granted by the Company. Includes 15,000 shares pledged to secure a loan from
the Company. Does not include 51,000 shares issuable pursuant to options
granted by the Company which are not currently exercisable.
(5) Includes 20,334 shares issuable pursuant to currently exercisable options
granted by the Company. Does not include 15,166 shares issuable pursuant to
options granted by the Company which are not currently exercisable.
(6) Includes 15,000 shares issuable pursuant to currently exercisable options
granted by the Company and 500 shares held in the estate of Mr. Foody's
wife, for which he is the personal representative.
(7) Includes 15,000 shares issuable pursuant to currently exercisable options
granted by the Company.
(8) Includes 8,333 shares issuable pursuant to currently exercisable options
granted by the Company.
12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
The Company believes that each of its officers and directors complied
with all requirements applicable to them during the fiscal year ended June 30,
1997 pursuant to Section 16(a) of the Securities Exchange Act of 1934.
CERTAIN TRANSACTIONS
In June 1994 the Company loaned $40,000 to Michael L. Baur, President
of the Company, at 7.25% interest, with interest-only payments for three years,
and the principal balance due in June 1997. During 1996 and 1997 the Company
renegotiated the loan to include additional advances of $43,000 and $100,000,
respectively, and extended the term of the note to June 2000. The loan bears
interest at 8.5% and is secured by a pledge of 15,000 shares of Common Stock
owned by Mr. Baur. The highest principal balance on the loan during the fiscal
year ended June 30, 1997 was $183,000, which is also the current principal
balance.
Steven H. Owings, Chairman of the Board and Chief Executive Officer of
the Company, was a member of the Board of Directors of Globelle Corporation
("Globelle"), an international distributor of personal computer products, from
July 1996 until April 1997 when he resigned. Through August 1996 the Company
paid approximately $12,000 per month to Globelle pursuant to a warehouse service
agreement. Subsequently, the Company subleased warehouse space from Globelle for
approximately $12,000 per month through January 1997, at which time Globelle
assigned its lease for the warehouse space to the Company and the Company
subleased approximately half of such space on a month-to-month basis to Globelle
for approximately $12,000 per month from January to March 1997. The Company
also has a software license agreement with Globelle and was informally assigned
non-exclusive rights to use Globelle's contract with FedEx until June 1997, when
the Company obtained a direct contract with FedEx. In July 1995 the Company and
Globelle formed Transition Marketing, Inc. ("Transition"), a joint venture to
provide certain marketing services such as the Company's "Solutions USA"
quarterly trade shows. In July 1997, Transition repurchased Globelle's
ownership interest, as a result of which the Company now owns 58% and Dennis B.
Gates owns the remaining 42% of Transition. The Company intends to exercise its
option to acquire Mr. Gates' 42% interest in Transition for a price not to
exceed $220,100. The Company purchased $123,000 of marketing services from
Transition during the fiscal year ended June 30, 1997. Mr. Owings is a member
of the Board of Directors of Transition. Management believes that the terms of
such transactions with Globelle and Transition are no less favorable to the
Company than terms which could be negotiated with other unrelated parties.
Globelle and Transition regularly engage in such activities as a part of their
normal businesses.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 1997, WHICH IS REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE MADE AVAILABLE TO SHAREHOLDERS TO WHOM THIS PROXY
STATEMENT IS MAILED, WITHOUT CHARGE, UPON WRITTEN REQUEST TO MR. JEFFERY A.
BRYSON, CHIEF FINANCIAL OFFICER, SCANSOURCE, INC., 6 LOGUE COURT, SUITE G,
GREENVILLE, SOUTH CAROLINA 29615.
By order of the Board of Directors,
Steven H. Owings
Chairman of the Board
October 23, 1997
13
<PAGE>
SCANSOURCE, INC.
1997 STOCK INCENTIVE PLAN
1. PURPOSES
1.1. The purposes of the ScanSource, Inc.1997 Stock Incentive Plan are to
(i) provide an incentive and reward to directors and employees of the Company
and any Parent or Subsidiary, and consultants and advisors to the Company and
any Parent or Subsidiary, who are and have been in a position to contribute
materially to improving the Company's profits, (ii) aid in the growth of the
Company, and (iii) encourage ownership of Shares by directors and employees of
the Company and any Parent or Subsidiary.
2. DEFINITIONS
2.1. For purposes of this Plan the following terms shall have the
definition which is attributed to them below, unless another definition is
clearly indicated by a particular usage and context.
(a) "Agreement" means the written document issued by the Committee to a
---------
Participant whereby an Award is made to that Participant.
(b) "Award" means the issuance pursuant to this Plan of an Option, an SAR
-----
or Restricted Stock.
(c) "Awarded Shares" means Shares subject to outstanding Awards.
--------------
(d) "Board" means the Company's Board of Directors.
-----
(e) "Cause" means theft or destruction of property of the Company, a Parent
-----
or Subsidiary, disregard of Company rules or policies, or conduct evidencing
willful or wanton disregard of the interest of the Company. Such
determination shall be made by the Committee based on information presented
by the Company and the Participant and shall be final and binding on all
parties to the Agreement.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Committee" means the Stock Incentive Plan Committee(s) appointed by
---------
the Board pursuant to Section .
(h) "Company" means ScanSource, Inc., a corporation incorporated under the
-------
laws of the state of South Carolina, and any successor thereto.
(i) "Consultant" means any person or entity that provides services to the
----------
Company as a consultant or advisor.
<PAGE>
(j) "Director" means any individual appointed or elected to the Board.
--------
(k) "Effective Date of Grant" means the effective date on which the
-----------------------
Committee makes an Award.
(l) "Employee" means any individual who performs services as a common law
--------
employee for the Company, a Parent or Subsidiary, and is included on the
regular payroll of the Company, a Parent or Subsidiary.
(m) "Fair Market Value" means the value established by the Committee based
-----------------
upon such factors as the Committee in its sole discretion shall decide
including, but not limited to, a valuation prepared by an independent third
party appraiser selected or approved by the Committee. If at any time the
Shares are traded on an established trading system, it means the last sale
price reported on any stock exchange or over-the counter trading system on
which Shares are trading on a specified date or, if not so trading, the
average of the closing bid and asked prices for a Share on a specified date.
If no sale has been made on the specified date, then prices on the last
preceding day on which any such sale shall have been made shall be used in
determining fair market value under either method prescribed in the previous
sentence.
(n) "Incentive Stock Option" means any option granted under this Plan which
----------------------
meets the requirements of Code (S)422A and any regulations or rulings
promulgated thereunder and is designated by the Committee as an Incentive
Stock Option.
(o) "Nonqualified Stock Option" means any Option granted under this Plan
-------------------------
which is not an Incentive Stock Option.
(p) "Option" means the right to purchase from the Company a stated number
------
of Shares at a specified price.
(q) "Option Price" means the purchase price per Share subject to an Option
------------
and shall be fixed by the Committee.
(r) "Parent" means any corporation (other than the Company) in an unbroken
------
chain of corporations ending with the Company if, at the time of the granting
of the Award, each of the corporations (other than the Company) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain within the meaning of
Code (S)425(e) and any regulations or rulings promulgated thereunder.
(s) "Participant" means a Director, an Employee or a Consultant who has
-----------
received an Award under this Plan.
(t) "Permanent and Total Disability" shall have the same meaning as given
------------------------------
to that term by Code (S)22(e)(3) and any regulations or rulings promulgated
thereunder.
2
<PAGE>
(u) "Plan" means this ScanSource, Inc. 1997 Stock Incentive Plan, as
----
evidenced herein and as amended from time to time.
(v) "Restricted Stock" means Shares issued to the Participant pursuant to
----------------
Section which are subject to the restrictions of this Plan and the
Agreement.
(w) "Restriction Period" means a period commencing on the Effective Date of
------------------
Grant and ending on such date or upon the achievement of such performance or
other criteria as the Committee shall determine. The Restriction Period may,
in the sole discretion of the Committee, be structured to provide for a
release of restrictions in installments.
(x) "SAR" means stock appreciation rights issued to a Participant pursuant
---
to Section 8.
(y) "SAR Price" means the base value established by the Committee for an
---------
SAR on the Effective Date of Grant used in determining the amount of benefit,
if any, paid to a Participant.
(z) "Share" means one share of the common stock of the Company.
-----
(aa) "Subsidiary" means any corporation in an unbroken chain of
----------
corporations beginning with the Company if, at the time of the granting of
the Award, each of the corporations (other than the last corporation) in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain,
within the meaning of Code (S) 425(f) and any regulations or rulings
promulgated thereunder.
(bb) "1933 Act" means the Securities Act of 1933, as amended.
--------
(cc) "1934 Act" means the Securities Exchange Act of 1934, as amended.
--------
3. ADMINISTRATION
3.1. This Plan shall be administered by a Committee, or by more than one
Committee if desired and deemed necessary by the Board in order to provide
separate Committee authority for the granting of Awards to separate categories
of eligible Participants. Any such Committee shall consist of not less than two
members. The members of the Committee shall be appointed by the Board. The
Board may from time to time remove members from or add members to the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by the Board.
3.2. The action of a majority of the Committee at which a quorum is
present, or an action approved in writing by a majority of the Committee, shall
be the valid action of the Committee.
3
<PAGE>
3.3. The Committee shall from time to time at its discretion designate the
Directors, Employees and Consultants who shall be Participants, determine all
the terms and conditions as set forth in Section or otherwise, including the
type of Award to be made to each, the exercise period, expiration date and other
applicable time periods for each Award, the number of Shares subject to each
Award, with respect to each Option whether it is an Incentive Stock Option or
Nonqualified Stock Option and, if applicable, the Option Price or SAR Price and
the general terms of the Award.
3.4. The interpretation and construction by the Committee of any provisions
of this Plan or of any Option granted under it and all actions of the Committee
shall be final and binding on all parties hereto. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any Award granted under it.
4. ELIGIBILITY
4.1. Each Participant shall be a Director, an Employee or a Consultant of
the Company, a Parent or a Subsidiary as selected by the Committee in its sole
discretion from time to time.
4.2. A Participant may hold more than one Award, but only on the terms and
subject to the restrictions set forth in this Plan.
5. SHARES SUBJECT TO AWARD
5.1. The securities subject to the Awards shall be 200,000 Shares. Such
number shall be adjusted as appropriate in order to give effect to changes made
in the number of outstanding Shares as a result of a merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock split, or
other relevant change.
5.2. In the event that any outstanding Award under this Plan expires or is
terminated for any reason, the Awarded Shares subject to that Award may again be
the subject of an Award under this Plan.
6. TERMS AND CONDITIONS
6.1. Awards granted pursuant to this Plan shall be authorized by the
Committee under terms and conditions approved by the Committee and shall be
evidenced by Agreements in such form as the Committee shall from time to time
approve, which Agreements shall contain or shall be subject to the following
terms and conditions, whether or not such terms and conditions are specifically
included therein:
(a) Number of Shares. Each Award shall state the number of Shares to which
----------------
it pertains.
4
<PAGE>
(b) Date. Each Award shall state the Effective Date of Grant.
----
(c) Price. With respect to each Award or portion thereof, which requires
-----
payment of an Option Price, it shall state the Option Price. With respect to
an SAR, it shall state the SAR Price.
(d) Method and Time of Payment. With respect to an Award, or portion
--------------------------
thereof, which requires payment of an Option Price, the Option Price shall be
payable on the exercise of the Award and shall be paid in (i) cash, (ii)
Shares, including Shares acquired pursuant to this Plan, or (iii) part in
cash and part in Shares. Shares transferred in payment of the Option Price
shall be valued as of date of transfer based on their Fair Market Value.
(e) Transfer of Option or Stock. No Award, Option, SAR, or Restricted
---------------------------
Stock (prior to the expiration of the Restriction Period) shall be
transferable by the Participant, except by will or the laws of descent and
distribution upon the Participant's death and subject to any other
limitations of this Plan. In addition to any other restriction hereunder or
otherwise provided in the Agreement with the Participant, no Shares acquired
pursuant to an Award of any type may be sold, transferred or otherwise
disposed of prior to the end of the six month period which begins on the
Effective Date of Grant of such Award.
(f) Recapitalization. The Committee shall make appropriate adjustments in
----------------
the number of Awarded Shares or in the Option Price or SAR Price in order to
give effect to changes made in the number of outstanding Shares as a result
of a merger, consolidation, recapitalization, reclassification, combination,
stock dividend, stock split, or other relevant change.
(g) Investment Purpose.
------------------
(i) The Company shall not be obligated to sell or issue any Shares
pursuant to any Award unless such Shares are at that time effectively
registered or exempt from registration under the 1933 Act. The determination
of whether a Share is exempt from registration shall be made by the Company's
legal counsel and its determination shall be conclusive and binding on all
parties to the Agreement.
(ii) Notwithstanding anything in this Plan to the contrary, each Award
under this Plan shall be granted on the condition that the purchases of
Shares thereunder shall be for investment purposes and not with a view
for resale or distribution except that in the event the Shares subject to
such Award are registered under the 1933 Act, or in the event of a resale
of such Shares without such registration that would otherwise be
permissible, such condition shall be inoperative if in the opinion of
counsel for the Company such condition is not required under the 1933 Act
or any other applicable law, regulation, or rule of any governmental
agency.
5
<PAGE>
(h) Other Provisions. Awards authorized under this Plan may contain any
----------------
other provisions or restrictions as the Committee in its sole and absolute
discretion shall deem advisable including, but not limited to:
(i) Offering Options in tandem with or reduced by other Options, SARs
or other employee benefits and reducing one Award by the exercise of another
Option, SAR or benefit; or
(ii) Providing for the issuance to the Participant upon exercise of an
Option and payment of the exercise price thereof with previously owned
Shares, of an additional Award for the number of shares so delivered,
having such other terms and conditions not inconsistent with this Plan as
the Committee shall determine.
(i) Duration of Award. Each Award shall be for a term of up to ten years
-----------------
from the Effective Date of Grant as determined in the sole discretion of the
Committee.
6.2. The Company may place such legends on stock certificates representing
the Shares as the Company, in its sole discretion, deems necessary or
appropriate to reflect restrictions under this Plan, the Agreement, the Code,
the securities laws or otherwise.
6.3. Notwithstanding any provision herein to the contrary, employment shall
be at the pleasure of the Board, of its designees, of the Company, a Parent or
Subsidiary, as the case may be, at such compensation as the appropriate board or
designee shall determine. Nothing contained in this Plan or in any Award
granted pursuant to it shall confer upon any Participant any right to continue
in the employ of the Company, Parent or Subsidiary, as the case may be, or to
interfere in any way with the right of the Company, Parent or Subsidiary to
terminate employment at any time. So long as the Participant shall continue to
be a Director, an Employee or a Consultant, the Award shall not be affected by
any change of the Participant's duties or position except to the extent the
Agreement with the Participant provides otherwise.
6.4. Any person entitled to exercise an Option or an SAR may do so in whole
or in part by delivering to the Company at its principal office, attention
Corporate Secretary, a written notice of exercise. The written notice shall
specify the number of Shares for which an Option or SAR is being exercised.
(a) With respect to an Option, the notice shall be accompanied by full
payment of the Option Price for the Shares being purchased.
(b) During the Participant's lifetime, an Option or SAR may be exercised
only by the Participant, or on the Participant's behalf by the Participant's
legal guardian.
6
<PAGE>
7. INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS
7.1. The Committee in its sole discretion may designate whether an Award to
an Employee is to be considered an Incentive Stock Option or a Nonqualified
Stock Option. AN AWARD TO A NON-EMPLOYEE DIRECTOR OR CONSULTANT MAY BE ONLY A
NONQUALIFIED STOCK OPTION. The Committee may grant both an Incentive Stock
Option and a Nonqualified Stock Option to the same Employee. However, where
both an Incentive Stock Option and a Nonqualified Stock Option are awarded at
one time, such Awards shall be deemed to have been awarded in separate grants,
shall be clearly identified, and in no event will the exercise of one such Award
affect the right to exercise the other such Award except to the extent the
Agreement with the Participant provides otherwise.
7.2. Any Award to an Employee designated by the Committee as an Incentive
Stock Option will be subject to the general provisions applicable to all Awards
granted under this Plan. In addition, the aggregate Fair Market Value of Shares
(determined at the Effective Date of Grant) with respect to which Incentive
Stock Options granted under all Incentive Stock Option Plans of the Company, a
Parent or Subsidiary, are exercisable by the Employee for the first time during
any calendar year shall not exceed $100,000.
7.3. The Option Price shall be established by the Committee in its sole
discretion. With respect to an Incentive Stock Option, the Option Price shall
not be less than 100% of the Fair Market Value of a Share on the Effective Date
of Grant. With respect to a Nonqualified Stock Option, the Option Price shall
not be less than 50% of the Fair Market Value of a Share on the Effective Date
of Grant.
7.4. Any Award to an Employee will be considered to be a Nonqualified Stock
Option to the extent that any or all of the grant is in conflict with Section
7.2 or with any requirement for Incentive Stock Options pursuant to Code (S)422A
and the regulations issued thereunder.
7.5. An Option may be terminated as follows:
(a) During the period of continuous employment with the Company, Parent or
Subsidiary, an Option will be terminated only if it has been fully exercised
or it has expired by its terms.
(b) Upon termination of employment, the Option will terminate upon the
earliest of (i) the full exercise of the Option (ii) the expiration of the
Option by its terms, and (iii) not more than three months following the date
of employment termination; provided, however, should termination of
employment (A) result from the death or Permanent and Total Disability of the
Participant, such period shall be one year or (B) be for Cause, the Option
will terminate on the date of employment termination. For purposes of this
Plan, a leave of absence approved by the Company shall not be deemed to be
termination of employment except with respect to an Incentive Stock Option as
required to comply with Code (S)422A and the regulations issued thereunder.
7
<PAGE>
(c) Subject to the terms of the Agreement with the Participant, if a
Participant shall die or becomes subject to a Permanent and Total Disability
prior to the termination of employment with the Company, Parent or Subsidiary
and prior to the termination of an Option, such Option may be exercised to
the extent that the Participant shall have been entitled to exercise it at
the time of death or disability, as the case may be, by the Participant, the
estate of the Participant or the person or persons to whom the Option may
have been transferred by will or by the laws of descent and distribution.
7.6. Except as otherwise expressly provided in the Agreement with the
Participant, in no event will the continuation of the term of an Option beyond
the date of termination of employment allow the Participant, or the
beneficiaries or heirs of the Participant, to accrue additional rights under
this Plan, or to purchase more Shares through the exercise of an Option than
could have been purchased on the day that employment was terminated.
7.7. A Participant shall have no rights as a stockholder with respect to
any Shares subject to an Option until the date of the issuance of a stock
certificate to such Participant for such Shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 6.1(f).
7.8. The continuous employment of a Consultant will be deemed terminated
for purposes of this Plan upon receipt of written notice from the Company to the
effect that the Company will no longer transact business with the Consultant.
8. STOCK APPRECIATION RIGHTS
8.1. The Committee, in its sole discretion, may grant to a Participant an
SAR.
8.2. The SAR Price shall be established by the Committee in its sole
discretion. The SAR Price shall not be less than 100% of Fair Market Value of a
Share on the Effective Date of Grant for a SAR issued in tandem with an
Incentive Stock Option and for other SARs, shall not be less than 50% of Fair
Market Value of a Share on the Effective Date of Grant.
8.3. Upon exercise of an SAR, the Participant shall be entitled, subject to
the terms and conditions of this Plan and the Agreement, to receive the excess
for each Share being exercised under the SAR (i) the Fair Market Value of a
Share on the date of exercise over (ii) the SAR Price for such Share.
8.4. At the sole discretion of the Committee, the payment of such excess
shall be made in (i) cash, (ii) Shares, or (iii) a combination of cash and
Shares. Shares used for this payment shall be valued at their Fair Market Value
on the date of exercise of the applicable SAR.
8.5. An Award of an SAR shall be considered an Award for purposes of the
number of Shares subject to an Award pursuant to Section , unless the Agreement
making the Award of
8
<PAGE>
the SAR provides that the exercise of an SAR results in the termination of an
unexercised Option for the same number of Shares.
8.6. An SAR may be terminated as follows:
(a) During the period of continuous employment with the Company, Parent or
Subsidiary, an SAR will be terminated only if it has been fully exercised or
it has expired by its terms.
(b) Upon termination of employment, the SAR will terminate upon the
earliest of (i) the full exercise of the SAR (ii) the expiration of the SAR
by its terms, and (iii) not more than three months following the date of
employment termination; provided, however, should termination of employment
(I) result from the death or Permanent and Total Disability of the
Participant, such three month period shall be one year or (II) be for Cause,
the SAR will terminate on the date of employment termination. For purposes
of this Plan, a leave of absence approved by the Company shall not be deemed
to be termination of employment unless otherwise provided in the Agreement or
by the Company on the date of the leave of absence.
(c) Subject to the terms of the Agreement with the Participant if a
Participant shall die or becomes subject to a Permanent and Total Disability
prior to the termination of employment with the Company, Parent or Subsidiary
and prior to the termination of an SAR, such SAR may be exercised to the
extent that the Participant shall have been entitled to exercise it at the
time of death or disability, as the case may be, by the Participant, the
estate of the Participant or the person or persons to whom the SAR may have
been transferred by will or by the laws of descent and distribution.
(d) Except as otherwise expressly provided in the Agreement with the
Participant, in no event will the continuation of the term of an SAR beyond
the date of termination of employment allow the Employee, or his
beneficiaries or heirs, to accrue additional rights under this Plan, have
additional SARs available for exercise or to receive a higher benefit than
the benefit payable as if the SAR was exercised on the date of employment
termination.
8.7. If an SAR which was considered an Award for purposes of Section is
terminated or unexercised for any reason, the number of Shares of such SAR that
were unexercised shall be again available for Award under this Plan.
8.8. The Participant shall have no rights as a stockholder with respect to
an SAR. In addition, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or rights except as provided in Section 6.1(f).
9
<PAGE>
9. RESTRICTED STOCK
9.1. The Committee may award to a Participant Restricted Stock under such
terms or conditions as the Committee, in its sole discretion, shall determine
and as otherwise provided herein.
9.2. Restricted Stock shall be Shares which are subject to a Restriction
Period.
9.3. Should the Participant terminate employment for any reason, all
Restricted Stock which is still subject to the Restriction Period shall be
forfeited and returned to the Company for no payment.
9.4. Upon such forfeiture, shares representing such forfeited restricted
Stock shall obtain become available for Award under the Plan.
9.5. The Committee may require under such terms and conditions as it deems
appropriate or desirable that the certificates for Restricted Stock awarded
under this Plan may be held by the Company or its designee until the Restriction
Period expires. In addition, the Committee may place upon such certificate such
legend as the Committee deems necessary or appropriate and may require as a
condition of any receipt of Restricted Stock that the Participant shall deliver
a stock power endorsed in blank relating to the Restricted Stock.
10. AMENDMENT OR DISCONTINUANCE OF PLAN
10.1. The Board may at any time amend, suspend, or discontinue this Plan;
provided, however, that without further approval of the shareholders of the
Company no amendments by the Board shall:
(a) Change the class of Employees eligible to participate; or
(b) Except as provided in Section 5, increase the number of Shares which
may be subject to Options granted under this Plan.
10.2. No amendment to this Plan shall alter or impair any Award granted
under this Plan without the consent of the holder of such Award.
11. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually incurred in connection with the defense of any pending,
threatened or possible action, suit or proceeding, or in connection
10
<PAGE>
with any pending, threatened or possible appeal therein, to which they or any of
them may be a party by reason of any actual or alleged action taken or failure
to act under or in connection with this Plan or any option granted thereunder,
and against all amounts paid by them in settlement thereof (provided such
settlement is approved by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for gross negligence or willful misconduct in the
performance of his duties: provided that within sixty days after institution of
any such action, suit or proceeding a Committee member shall in writing offer
the Company the opportunity, at its own expense, to handle and defend the same.
12. NO OBLIGATION TO EXERCISE OPTION OR SAR
The granting of an Option or SAR shall impose no obligation upon the
Participant to exercise such Option.
13. EFFECTIVE DATE; DURATION OF PLAN
13.1. This Plan shall become effective as of December 4, 1997.
13.2. No Award may be made after the tenth anniversary of the effective date
of this Plan.
14. EFFECT OF PLAN
The making of an Award under this Plan shall not give the Participant any
right to similar grants in future years or any right to be retained in the
employ of the Company, the Parent or a Subsidiary, but a Participant shall
remain subject to discharge to the same extent as if this Plan were not in
effect.
15. CHANGE IN CONTROL
15.1. Treatment of Outstanding Awards. Upon the occurrence of a Change In
-------------------------------
Control, as defined below, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governmental agencies or
national securities exchanges, or by the express provisions of any Agreement,
(a) each Option and each SAR then outstanding hereunder that is not otherwise
exercisable shall become immediately and fully exercisable, and shall remain
exercisable throughout their entire term, notwithstanding any provision in the
Agreement relating to such Option or SAR for the exercise of such Option or SAR
in installments or otherwise pursuant to a vesting schedule, and (b) any
Restriction Period and restrictions imposed on Restricted Stock shall lapse.
15.2. Change in Control Defined. For purposes of this Section, a Change In
-------------------------
Control shall mean that any of the following events shall have occurred:
11
<PAGE>
(i) A person, partnership, joint venture, corporation or other entity, or
two or more of any of the foregoing acting as a group (or a "person" within
the meaning of Section 13(d)(3) of the 1934 Act), other than the Company, a
majority-owned subsidiary of the Company, an employee benefit plan (or
related trust) of the Company or such subsidiary, become(s) after the
effective date of this Plan the "beneficial owner" (as defined in Rule
13(d)(3) under the 1934 Act) of 50% or more of the then outstanding voting
stock of the Company;
(ii) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Company's Board of Directors
(together with any new director whose election by the Company's Board of
Directors or whose nomination for election by the Company's shareholders, was
approved by the vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office;
(iii) The Company's Board of Directors determines that a tender
offer for the Company's shares indicates a serious intention by the offeror
to acquire control of the Company; or
(iv) The Shareholders of the Company approve (a) a plan of complete
liquidation of the Company; or (b) an agreement for the sale or disposition
of all or substantially all of the Company's assets; or (c) a merger,
consolidation, or reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or reorganization that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least seventy-
five percent (75%) of the combined voting power of the voting securities of
the Company (or such surviving entity) outstanding immediately after such
merger, consolidation or reorganization.
15.3. Termination, Amendment and Modifications of Change in Control
-------------------------------------------------------------
Provisions. Notwithstanding any other provision of this Plan or any Agreement,
- ----------
the provisions of this Section may not be terminated, amended or modified on or
after the effective date of a Change in Control to affect adversely the
operation of any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.
16. SUCCESSORS; CONSOLIDATION, MERGER AND OTHER EVENTS
16.1. All obligations of the Company under this Plan or any Agreement with
respect to any Award granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase of all or substantially all of the business and/or assets of
the Company, or a merger, consolidation or otherwise. Specifically, in case of
any capital reorganization of the Company, or of any reclassification of
12
<PAGE>
any Shares (other than a change as a result of subdivision or combination), or
in case of the consolidation of the Company with or the merger of the Company
with any other corporation (other than a consolidation or merger in which (i)
the Company is the continuing corporation and (ii) the holders of the Shares
immediately prior to such merger or consolidation continue as holders of Shares
after such merger or consolidation) or of the sale of the properties and assets
of the Company as, or substantially as, an entirety to any other corporation,
each Option and each SAR then outstanding shall after such reorganization,
reclassification, consolidation, merger or sale be exercisable, upon the terms
and conditions specified herein and in the Agreement relating to such Option or
SAR, for or with respect to the number of Shares or other securities or property
to which a holder of the number of Shares relating to such Option or SAR (at the
time of such reorganization, reclassification, consolidation, merger or sale)
upon exercise of such Option or SAR would have been entitled in connection with
such reorganization, reclassification, consolidation, merger or sale; and in any
such case, if necessary, the provisions set forth in this Section with respect
to the rights and interests thereafter of the holder of the Option or SAR shall
be appropriately adjusted so as to be applicable, as nearly as may reasonably
be, to any shares of stock or other securities or property thereafter
deliverable on the exercise of the Option or SAR.
13
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
This Agreement, dated as of __________________, ___________ implements the
grant of an incentive stock option pursuant to action of the committee
("Committee") appointed by the Board of Directors ("Board") of ScanSource, Inc.
("Company") to ("Optionee") subject to the terms and conditions of the
ScanSource, Inc. 1997 Stock Incentive Plan ("Plan") and the terms and conditions
set forth below. Terms defined in the Plan shall have the same meaning herein
as in the Plan.
The Committee desires to afford the Optionee the opportunity to acquire Shares
of the Company's common stock so the Optionee has a proprietary interest in the
Company, and the Optionee desires the opportunity to acquire Shares.
Accordingly, the Company and the Optionee agree as follows:
1. Grant of Option and Purchase Price. The Company, pursuant to action of the
----------------------------------
Committee, grants to the Optionee an Option to purchase _____________________
Shares at a price of $______________ per share ("Option Price"), which has been
determined to be not less than the Fair Market Value of a Share on the date of
grant of this option.
2. Expiration of the Option. This Option shall expire ("Expiration Date") on
------------------------
the earlier of (i) ________________________ (_________) years from the date
hereof; (ii) three months after the Optionee ceases to be an Employee of the
Company, a Parent or a Subsidiary (twelve months if termination of employment is
due to the Optionee's death or the Optionee having incurred a Permanent and
Total Disability or the date of termination of employment, if termination of
employment is due to Cause); (iii) the date this Option is fully exercised; or
(iv) the date mutually agreed to by the Committee and the Optionee.
3. Exercise of Option
------------------
3.1. Subject to any other conditions herein, this Option shall vest on the
_________ anniversary date of this Agreement. The Optionee's vested percentage
of the total grant hereunder shall be fixed as of the date the Optionee is no
longer an Employee of the Company, a Subsidiary or a Parent and shall not
increase during the additional period, if any, during which this Option may be
exercised under Section 2, 2 hereof. Vested portions of this Option may be
exercised at any time, in whole or in part, before the Expiration Date.
3.2. This Option may be exercised by mailing or delivering to the Company,
Attention: Corporate Secretary, 6 Logue Court, Suite G, Greenville, South
Carolina 29615, (i) a written signed notice of such exercise which specifies the
Effective Grant Date of this Option, and the number of Shares being purchased,
and (ii) payment for such Shares by check (which clears in due course) payable
to the Company and/or by surrender of Shares previously owned by the Optionee
valued at the Fair Market Value thereof on the date received by the Company.
The Option shall be deemed exercised and the Shares purchased thereby shall be
deemed issued as of the date such payment is received by the Company.
14
<PAGE>
4. Non-transferability of Option. This Option shall not be transferable by
-----------------------------
the Optionee other than by will or the laws of descent and distribution and
shall be exercisable during the Optionee's lifetime only by the Optionee.
5. Adjustment in Shares Subject to the Option. The Committee will make
------------------------------------------
appropriate adjustments in the number of Shares subject to this Option or the
Option Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change.
6. Rights as Shareholder or Employee.
---------------------------------
6.1. This Option shall not entitle the Optionee to any rights as a
shareholder of the Company with respect to any Shares subject to this Option
until it has been exercised and any such Shares issued.
6.2. This Option does not confer upon the Optionee any right with respect
to continuation of employment by the Company or a Subsidiary, nor does it in any
way interfere with or affect Optionee's right, the Company's right or a
Subsidiary's right to terminate such employment at any time.
7. Withholding. The Committee will make whatever arrangements the Company
-----------
deems necessary or appropriate to comply with all applicable withholding
requirements. The Committee and the Company shall have no obligation to deliver
a certificate evidencing the Shares purchased upon exercise of the Option unless
and until withholding arrangements satisfactory to the Company are made. The
Optionee's failure to comply with the required withholding arrangements shall
result in a forfeiture of any benefits hereunder.
8. Entire Agreement. This Agreement, together with the provisions of the Plan
----------------
which are incorporated herein by reference, constitutes the entire Agreement
between the Optionee and the Company with respect to the Option granted
hereunder.
9. Applicable Law. The Plan and this Agreement shall be governed by the laws
--------------
of the State of South Carolina.
SCANSOURCE, INC.
By:
-------------------------------
Its:
--------------------------
----------------------------------
Optionee
15
<PAGE>
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
This Agreement, dated as of __________________, _____________ implements the
grant of a nonqualified stock option pursuant to action of the committee
("Committee") appointed by the Board of Directors ("Board") of ScanSource, Inc.
("Company") to ("Optionee") subject to the terms and conditions of the
ScanSource, Inc.1997 Stock Incentive Plan ("Plan") and the terms and conditions
set forth below. Terms defined in the Plan shall have the same meaning herein
as in the Plan.
The Committee desires to afford the Optionee the opportunity to acquire Shares
of the Company's common stock so the Optionee has a proprietary interest in the
Company, and the Optionee desires the opportunity to acquire Shares.
Accordingly, the Company and the Optionee agree as follows:
1. Grant of Option and Purchase Price. The Company, pursuant to action of the
----------------------------------
Committee, grants to the Optionee an Option to purchase ___________________
Shares at a price of $____________ per share ("Option Price"), which has been
determined to be not less than the Fair Market Value of a Share on the date of
grant of this option.
2. Expiration of the Option. This Option shall expire ("Expiration Date") on
------------------------
the earlier of (i) ____________________________ (________) years from the date
hereof; (ii) three months after the Optionee ceases to be a Director, an
Employee or a Consultant of the Company, a Parent or a Subsidiary (twelve months
if termination of employment is due to the Optionee's death or the Optionee
having incurred a Permanent and Total Disability or the date of termination of
employment, if termination of employment is due to Cause); (iii) the date this
Option is fully exercised; or (iv) the date mutually agreed to by the Committee
and the Optionee.
3. Exercise of Option
------------------
3.1. Subject to any other conditions herein, this Option shall vest on the
_________ anniversary date of this Agreement. The Optionee's vested percentage
of the total grant hereunder shall be fixed as of the date the Optionee is no
longer a Director, an Employee or a Consultant of the Company, a Subsidiary or a
Parent and shall not increase during the additional period, if any, during which
this Option may be exercised under Section 2, 2 hereof. Vested portions of this
Option may be exercised at any time, in whole or in part, before the Expiration
Date.
3.2. This Option may be exercised by mailing or delivering to the Company,
Attention: Corporate Secretary, 6 Logue Court, Suite G, Greenville, South
Carolina 29615, (i) a written signed notice of such exercise which specifies the
Grant Effective Date of this Option, and the number of Shares being purchased,
and (ii) payment for such Shares by check (which clears in due course) payable
to the Company and/or by surrender of Shares previously owned by the Optionee
valued at the Fair Market Value thereof on the date received by the Company.
The Option shall be deemed exercised and the Shares purchased thereby shall be
deemed issued as of the date such payment is received by the Company.
16
<PAGE>
4. Non-transferability of Option. This Option shall not be transferable by
-----------------------------
the Optionee other than by will or the laws of descent and distribution and
shall b exercisable during the Optionee's lifetime only by the Optionee.
5. Adjustment in Shares Subject to the Option. The Committee will make
------------------------------------------
appropriate adjustments in the number of Shares subject to this Option or the
Option Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change.
6. Rights as Shareholder or Employee.
---------------------------------
6.1. This Option shall not entitle the Optionee to any rights as a
shareholder of the Company with respect to any Shares subject to this Option
until it has been exercised and any such Shares issued.
6.2. This Option does not confer upon the Optionee any right with respect
to continuation of employment by the Company or a Subsidiary, nor does it in any
way interfere with or affect Optionee's right, the Company's right or a
Subsidiary's right to terminate such employment at any time.
7. Withholding. The Committee will make whatever arrangements the Company
-----------
deems necessary or appropriate to comply with all applicable withholding
requirements. The Committee and the Company shall have no obligation to deliver
a certificate evidencing the Shares purchased upon exercise of the Option unless
and until withholding arrangements satisfactory to the Company are made. The
Optionee's failure to comply with the required withholding arrangements shall
result in a forfeiture of any benefits hereunder.
8. Entire Agreement. This Agreement, together with the provisions of the Plan
----------------
which are incorporated herein by reference, constitutes the entire Agreement
between the Optionee and the Company with respect to the Option granted
hereunder.
9. Applicable Law. The Plan and this Agreement shall be governed by the laws
--------------
of the State of South Carolina.
SCANSOURCE, INC.
By:
----------------------------
Its:
-----------------------
-------------------------------
Optionee
17
<PAGE>
SCANSOURCE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON THURSDAY, DECEMBER 4, 1997, IN THE BALLROOM OF THE
MARRIOTT HOTEL, ONE PARKWAY EAST, GREENVILLE, SOUTH CAROLINA AT 10:00 A.M.
LOCAL TIME.
The undersigned hereby appoints Michael L. Baur and Jeffery A. Bryson, or any
of them acting in the absence of the other, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the shares of the
common stock of ScanSource, Inc., a South Carolina corporation, held or owned
by the undersigned or standing in the name of the undersigned at the 1997
Annual Meeting of Shareholders of the Company and at any adjournment thereof,
and the undersigned hereby instructs said attorneys to vote as follows:
1. Election of Directors:
[_] FOR all nominees listed below (except as marked to the
contrary below)
(This is considered a vote for all nominees)
[_] WITHHOLD AUTHORITY to vote as to all nominees
NOTE: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below:
One-year term:
1. Michael L. Baur
2. Steven R. Fischer
3. James G. Foody
4. Steven H. Owings
2. Ratification of the adoption of the ScanSource, Inc. 1997 Stock Incentive
Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Ratification of grants of stock options to Chief Executive Officer,
President and Chief Financial Officer and Treasurer.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
4. Ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending June 30, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
5. In their discretion, upon any other business which may properly come before
the meeting or any adjournment thereof.
DATE
-----------------------------
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(Please sign exactly as shown on
envelope addressed to you. If se-
curities are jointly owned, each
should sign. If voting less than
all shares held, please so indi-
cate.)
THIS PROXY WILL BE VOTED AS INSTRUCTED. IN THE ABSENCE OF SUCH INSTRUCTIONS,
THIS PROXY WILL BE VOTED "FOR" MATTERS (1), (2), (3) AND (4) ABOVE, AND THE
PROXIES HEREIN NAMED WILL VOTE ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THEIR BEST JUDGMENT.
