<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
{x} Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended September 30, 1999
or
{ } Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ___________________ to
____________________
Commission file number 1-12842
ScanSource, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0965380
- -------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporated or organization)
6 Logue Court, Suite G
Greenville, SC 29615
- -------------------------------- ------------------------------------
(Address of principal executive (Zip Code)
offices)
(864)288-2432
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of September 30, 1999, 5,520,044 shares of the registrant's common stock, no
par value, were outstanding.
<PAGE>
SCANSOURCE, INC.
INDEX
FORM 10-Q
September 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION Page No.
Item 1. Consolidated Financial Statements (Unaudited)..................... 2
Condensed Consolidated Balance Sheets............................. 2
Condensed Consolidated Income Statements.......................... 4
Condensed Consolidated Statements of Cash Flows................... 5
Notes to Condensed Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 8
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.......................................................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 13
Item 2. Changes in Securities............................................. 13
Item 3. Defaults Upon Senior Securities................................... 13
Item 4. Submission of Matters to a Vote of Security-Holders............... 13
Item 5. Other Information................................................. 13
Item 6. Exhibits and Reports on Form 8-K.................................. 13
SIGNATURES................................................................................. 14
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
SCANSOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1999
--------- --------------
(Note 1) (Note 1)
(Unaudited)
Assets (In thousands)
--------
<S> <C> <C>
Current assets:
Cash............................................. $ 15,282 11,333
Receivables:
Trade, less allowance for doubtful accounts of
$5,002,000 at June 30, 1999 and
$5,588,000 at September 30, 1999............... 42,774 48,560
Other............................................ 2,443 2,080
-------- -------
45,217 50,640
Inventories...................................... 50,282 71,959
Prepaid expenses and other assets................ 464 560
Deferred income taxes............................ 5,197 6,753
-------- -------
Total current assets........................... 116,442 141,245
Property and equipment, net....................... 7,453 7,642
Intangible assets, net............................ 1,520 1,494
Other assets...................................... 312 339
-------- -------
Total assets................................... $125,727 150,720
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
SCANSOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
June 30, September 30,
Liabilities and Shareholders' Equity 1999 1999
- ------------------------------------ --------- --------------
(Note 1) (Note 1)
(Unaudited)
(In thousands)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt........................... $ 24 24
Trade accounts payable...................................... 59,728 82,272
Accrued compensation........................................ 1,147 567
Accrued expenses and other liabilities...................... 3,252 3,816
Income taxes payable........................................ 1,131 665
-------- -------
Total current liabilities............................... 65,282 87,344
Deferred income taxes....................................... 70 80
Long-term debt.............................................. 1,673 1,668
-------- -------
Total liabilities...................................... 67,025 89,092
Shareholders' equity:
Preferred stock, no par value; 3,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock, no par value; 10,000,000 shares
authorized, 5,503,512 and 5,520,044 shares issued and
outstanding at June 30, 1999 and
September 30, 1999, respectively....................... 40,161 40,353
Retained earnings........................................... 18,541 21,275
-------- -------
Total shareholders' equity............................. 58,702 61,628
-------- -------
Total liabilities and shareholders' equity............. $125,727 150,720
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
SCANSOURCE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1999
---- ----
(In thousands except per share data)
<S> <C> <C>
Net sales.................................... $60,719 113,179
Cost of goods sold........................... 53,732 102,159
------- -------
Gross profit............................... 6,987 11,020
Selling, general and administrative
expenses................................... 4,459 6,681
Amortization of intangibles.................. 33 34
------- -------
Total operating expenses..................... 4,492 6,715
Operating income........................... 2,495 4,305
Other income (expense):
Interest income (expense), net............. (43) 98
Other income, net.......................... 2 7
------- -------
Total other income (expense)............ (41) 105
Income before income taxes................. 2,454 4,410
Income taxes................................. 908 1,676
------- -------
Net income.............................. $ 1,546 2,734
======= =======
Basic EPS
Net income per share................. $.29 .50
======= =======
Weighted average shares outstanding 5,404 5,512
======= =======
Diluted EPS
Net income per share.................... $.28 .47
======= =======
Weighted average shares outstanding..... 5,585 5,850
======= =======
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
SCANSOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,546 2,734
Adjustments to reconcile net income to cash
(used in) provided by operating activities:
Depreciation 257 351
Amortization of intangible assets 33 34
Deferred taxes -- (1,546)
Changes in operating assets and liabilities:
Receivables (2,679) (5,786)
Other receivables 364 363
Inventories (5,764) (21,677)
Prepaid expenses and other (75) (96)
Accounts payable 17,628 22,544
Accrued compensation 478 (580)
Accrued expenses and other liabilities (73) 564
Income tax payable 363 (466)
Other noncurrent assets 31 (35)
------- -------
Net cash provided by (used in) operating activities 12,109 (3,596)
Cash flows from investing activities:
Capital expenditures, net (522) (540)
------- -------
Net cash used in investing activities (522) (540)
Cash flows from financing activities:
Payments on line of credit (4,861) --
Proceeds from option exercises 216 192
Payments on building loan (5) (5)
------- -------
Net cash (used in) provided by financing activities (4,650) 187
------- -------
Increase (decrease) in cash 6,937 (3,949)
Cash at beginning of period 88 15,282
------- -------
Cash at end of period $ 7,025 11,333
======= =======
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
SCANSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The interim financial information included herein is unaudited. Certain
information and footnote disclosures normally included in the consolidated
financial statements have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC), although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. These financial statements should be
read in conjunction with the financial statements and related notes
contained in the Company's annual report on Form 10-K for the period ended
June 30, 1999. Other than as indicated herein, there have been no
significant changes from the financial data published in that report. In
the opinion of management, such unaudited information reflects all
adjustments, consisting only of normal recurring accruals and other
adjustments as disclosed herein, necessary for a fair presentation of the
unaudited information.
Results for interim periods are not necessarily indicative of results
expected for the full year, or for any subsequent period.
The condensed consolidated balance sheet for June 30, 1999 has been
derived from the audited consolidated balance sheet for that date.
(2) Significant Accounting Policies
Revenue Recognition - The Company records revenue when products are
shipped.
Inventories - Inventories consisting of point of sale and bar code
equipment are stated at the lower of cost (first-in, first-out method) or
market.
Net Income Per Share - Basic net income per share is computed by dividing
net income by the weighted average number of common shares outstanding.
Diluted net income per share is computed by dividing net income by the
weighted average number of common and potential common shares outstanding.
Diluted weighted average common and potential common shares include common
shares and stock options using the treasury stock method. Basic and diluted
weighted average shares differed only by the effect of dilutive stock
options. There were no differences between the net income used to calculate
basic and diluted net income per share for the three months ended September
30, 1998 and 1999.
(3) Line of Credit
The Company has a line of credit agreement with a bank extending to October
31, 2001 with a borrowing limit of $35 million, based upon 80% of eligible
accounts receivable and 40% of eligible inventory at the 30 day LIBOR rate
of interest plus a rate varying from 1.50% to 2.00%
6
<PAGE>
tied to the Company's debt-to-net worth ratio ranging from .75:1 to 2:1.
The loan base would have provided borrowings up to $35 million at September
30, 1999. The revolving credit facility is collateralized by accounts
receivable and eligible inventory. The agreement contains certain financial
covenants including minimum net worth and capital expenditure requirements
and a maximum debt to tangible net worth ratio. The Company was either in
compliance with the various covenants or had obtained waivers of
noncompliance at September 30, 1999.
7
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net Sales. Net sales for the quarter ended September 30, 1999 increased
86.4% to $113.2 million from $60.7 million for the comparable prior year
quarter. Growth of net sales resulted primarily from additions to the Company's
sales force, competitive product pricing, selective expansion of its product
line, and increased marketing efforts to specialty technology resellers.
Gross Profit. Gross profit for the quarter ended September 30, 1999
increased 57.7% to $11.0 million from $7.0 million for the comparable prior year
quarter. Gross profit as a percentage of sales was 9.7% for the quarter ended
September 30, 1999, compared to 11.5% for the comparable prior year quarter. The
decrease in gross profit as a percentage of sales is the result of a change in
the mix of sales to more lower-margin products and the volume discounts provided
to resellers on large orders.
Operating Expenses. Operating expenses, which include selling, general
and administrative expenses and amortization, for the quarter ended September
30, 1999 increased 49.5% to $6.7 million compared to $4.5 million for the
comparable prior year period. Operating expenses as a percentage of sales were
5.9% for the quarter ended September 30, 1999, compared to 7.4% for the
comparable prior year period. Generally, lower gross margin sales require the
Company to provide fewer value-added services causing a corresponding decrease
in operating expenses. The general and administrative portion of operating
expenses also decreased as a percentage of sales due to efficiencies gained
through increased sales volume.
Operating Income. Operating income for the quarter ended September 30,
1999 increased 72.5% to $4.3 million from $2.5 million for the same period in
1998, driven by the improvement in gross profit as described above. Operating
income as a percentage of sales was 3.8% for the quarter ended September 30,
1999, compared to 4.1% for the comparable prior year period.
Other Income (Expense). Total other income (expense) net consists of
interest income (expense), net, and other expense, net. Interest income for the
quarter ended September 30, 1999 of $98,000 resulted from interest income from
invested cash offset by interest paid on the building loan. Net interest expense
for the quarter ended September 30, 1998 of $43,000 resulted from interest paid
on borrowings from the Company's line of credit and the building loan.
Income Taxes. Tax expense was provided at an effective rate of 38% and
37%, respectively, for the quarter ended September 30, 1999 and 1998,
respectively, and represented the state and federal tax expected to be due after
annualizing income to the fiscal year end.
Net Income. Improved operating income caused net income to increase
76.8% to $2.7 million for the quarter ended September 30, 1999 from $1.5 million
for the year-earlier quarter. Net income as a percentage of sales was 2.4% for
the quarter ended September 30, 1999 compared to 2.5% for the quarter ended
September 30, 1998.
8
<PAGE>
Liquidity and Capital Resources
The Company's primary sources of liquidity are results of operations,
borrowings under its revolving credit facility, and proceeds from the sales of
securities. In October 1997 the Company completed a secondary offering of stock
which provided the Company approximately $26 million for general corporate
purposes.
The Company has a line of credit agreement with a bank extending to
October 31, 2001 with a borrowing limit of $35.0 million at an interest rate
equal to the 30 day LIBOR rate plus a rate varying from 1.50% to 2.00% tied to
the Company's debt-to-net worth ratio ranging from .75:1 to 2:1. The borrowing
base available under the credit facility is limited to 80% of eligible accounts
receivable and 40% of eligible inventory. The borrowing base at June 30, 1999
supported borrowings under the line of credit of up to $35 million. There were
no amounts outstanding under the line of credit at September 30, 1999.
For the quarter ended September 30, 1999 net cash of $3.6 million was
used in operating activities compared to $12.1 million provided by operations
for the quarter ended September 30, 1998. Cash used in operations in 1999 was
primarily from increases in receivables and inventory partially offset by growth
in trade payables. Cash provided by operations in 1998 was primarily from an
increase in accounts payable, which exceeded the amount needed to fund,
increases in receivables and inventory.
Cash used in investing activities of over $500,000 for each
quarter ended September 30, 1999 and 1998 was for capital expenditures.
Cash provided by financing activities for the quarter ended March 31,
1999 was $187,000, primarily proceeds from option exercises. Cash used in
financing activities for the quarter ended September 30, 1998 was $4.7 million,
primarily from payments on the Company's line of credit.
The Company's current ratios at September 30, 1999 and at June 30, 1999
were 1.63 and 1.78, respectively.
Year 2000
Introduction. The Year 2000 ('Y2K") issues as they relate to the Company
have arisen because many computer systems, software and devices used either
directly by the Company or indirectly by the Company's vendors and customers
will not handle dates after 1999. This issue has been caused by the practice of
storing the year as the last two digits, and assuming the first two digits as
"19" (i.e., the number "99" for the year "1999"). Systems, software and devices
that do not adequately address Y2K could cause an interruption of services. The
following outlines the Company's approach to the Y2K issue.
State of Readiness. With the assistance of an outside consultant, the
Company formed a Y2K Project Team to oversee the Company's Y2K readiness
activities in the information technology (IT) and non-IT areas, assess Y2K risks
in connection with third-party relationships and develop contingency plans. The
Y2K Project Team has conducted a review of the Company's computer
9
<PAGE>
systems, including its primary business software, and believes that such
computer systems and software are Y2K compliant. The Y2K project team has the
involvement of members of senior management, who have kept the Board of
Directors advised as to all developments and progress.
IT Systems. Since early 1996, ScanSource, in support of its long-term
plans, has significantly upgraded and continues to upgrade its IT and
communication systems. These upgrades include: enterprise-wide application
system, a Digital Alpha Server, personal computers (PCs), PC software
(standardized on Windows NT, Windows 9x, Microsoft Office Suite and Lotus
Notes), local area networks (LAN's), LAN software (Novell NetWare, Windows NT),
wide area networks (WAN's) and network integration of advanced fax, printer, and
copier systems. The Company has tested its enterprise-wide application system
and PC's for Y2K compliance and obtained certification from the manufacturers of
the equipment and systems not included in the tests. As a result, ScanSource
believes its IT and voice and data communication systems are now Y2K compliant.
Non-IT Systems. ScanSource has assessed the Y2K readiness of non-IT systems
such as intelligent office equipment used in a stand-alone mode including fax
machines, copiers and printers by obtaining certification from manufacturers
that these products are not impacted by the Y2K date transition or will continue
to operate on and after January 1, 2000, just as they did prior to such date.
Third Party Interface. The Company has also surveyed and considered the
readiness of significant vendors and resellers with respect to their progress in
identifying and addressing Y2K issues. Substantially all vendors and resellers
have indicated to the Company an expectation to be Y2K compliant. However,
disruptions in the computer systems of the Company's vendors could impair the
ability of the Company to obtain necessary products or provide services to its
customers. Management has further addressed the issues of non-compliant and/or
non-responding vendors in its contingency and inventory planning.
Contingency Planning and Risks. The Y2K Project Team has developed
contingency plans to address disruptions in the Company's business functions as
a result of Y2K issues and various other potential business interruptions. The
Company's contingency plan addresses alternative providers and processes to deal
with business interruptions that may be caused by internal system or third party
failure to be Y2K ready, to the extent it is possible. There can be no assurance
that the Company's systems will avoid all Y2K problems, that its current and
ongoing efforts will identify all such problems in its own computer systems or
those of its vendors or resellers in advance of their occurrence, or that the
Company will be able to successfully remedy any problems that are discovered.
The Company's operating results could be materially adversely affected if the
Company were to be held responsible for the failure of any products sold by it
to be Y2K ready, despite the Company's disclaimer of product warranties and the
limitation of liability contained in sales terms and conditions. The Company
continues to review potential or possible causes of loss and institute plans for
the mitigation of the same. In addition, the purchasing patterns of existing and
potential customers may be affected by Y2K problems, which could cause
fluctuations in the Company's sales volumes. Maintenance or modification costs
have been and will continue to be expensed as incurred.
Products. The Company has informed its active customers by mail and all
customers by Internet web postings that it does not make any representations or
warranties that the products it distributes are or will be Y2K ready or
compliant. The Company has assisted its customers by making it easy for them to
learn about product readiness directly from manufacturers by publicizing the
manufacturer's web sites and telephone numbers.
10
<PAGE>
Costs of Project. To date, the expenses of the Company's efforts to
identify and address potential Y2K problems have not exceeded $75,000 (excluding
costs of systems upgrades that would normally have been made on a similar
timetable) and anticipates that its total expenditures in this area will not
exceed $100,000. However, the expenses or liabilities to which the Company may
become subject as a result of any such problems that may arise could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Forward Looking Statements
Certain of the statements contained in this report to shareholders as
well as in the Company's other filings with the Securities and Exchange
Commission that are not historical facts are forward-looking statements subject
to the safe harbor created by the Private Securities Litigation Reform Act of
1995. The Company cautions readers of this report that a number of important
factors could cause the Company's activities and/or actual results in fiscal
2000 and beyond to differ materially from those expressed in any such
forward-looking statements. These factors include, without limitation, the
Company's dependence on vendors, product supply, senior management, centralized
functions, and third-party shippers, the Company's ability to compete
successfully in a highly competitive market and manage significant additions in
personnel and increases in working capital, the Company's entry into new
products markets in which it has no prior experience, the Company's
susceptibility to quarterly fluctuations in net sales and operations results,
the Company's ability to manage successfully price protection or stock rotation
opportunities associated with inventory value decreases, and other factors
described in other reports and documents filed by the Company with the
Securities and Exchange Commission.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
The Company is exposed to changes in financial market conditions in the
normal course of its business as a result of its selective use of bank debt as
well as transacting in Canadian currency in connection with its Canadian
operations.
The Company is exposed to changes in interest rates primarily as a
result of its borrowing activities, which includes a revolving credit facility
with a bank used to maintain liquidity and fund the Company's business
operations. The nature and amount of the Company's debt may vary as a result of
future business requirements, market conditions and other factors. The
definitive extent of the Company's interest rate risk is not quantifiable or
predictable because of the variability of future interest rates and business
financing requirements, but the Company does not believe such risk is material.
The Company does not currently use derivative instruments to adjust the
Company's interest rate risk profile.
The table below presents principal amounts and related weighted average
rates by year of maturity for the Company's debt obligations at September 30,
1999:
<TABLE>
<CAPTION>
(In thousands) 2000 2001 2002 2003 Thereafter Total Fair Value
---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt 19 26 29 31 1,587 1,692 1,856
Average interest
rate (fixed) 9.19% 9.19% 9.19% 9.19% 9.19% 9.19% 9.19%
</TABLE>
The Company is exposed to changes in foreign exchange rates in
connection with its Canadian operations. It is the Company's policy to enter
into foreign currency transactions only to the extent considered necessary to
support its Canadian operations. The amount of the Company's cash deposits
denominated in Canadian currency has not been, and is not expected to be,
material. Furthermore, the Company has no capital expenditure or other purchase
commitments denominated in foreign currency. The Company does not utilize
forward exchange contracts, currency options or other traditional hedging
vehicles to adjust the Company's foreign exchange rate risk profile. The Company
does not enter into foreign currency transactions for speculative purposes.
The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. On
the basis of the fair value of the Company's market sensitive instruments at
September 30, 1999, the Company does not consider the potential near-term losses
in future earnings, fair values and cash flows from reasonable possible
near-term changes in interest rates and exchange rates to be material.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable
Item 2. Changes in Securities.
Not applicable
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Submission of Matters to a Vote of Security-Holders.
Not applicable
Item 5. Other information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Exhibit 10.28 - Employment Agreement dated as of July 1,
1999 between the Registrant and Steven H. Owings.
Exhibit 10.29 - Employment Agreement dated as of July 1,
1999 between the Registrant and Michael L. Baur.
Exhibit 10.30 - Employment Agreement dated as of July 1,
1999 between the Registrant and Jeffery A. Bryson.
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCANSOURCE, INC.
/s/ Steven H. Owings
---------------------------------
STEVEN H. OWINGS
Chief Executive Officer
/s/ Jeffery A. Bryson
---------------------------------
JEFFERY A. BRYSON
Chief Financial Officer
Date: November 15, 1999
14
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Exhibit 10.28
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is effective as of the 1st day of July, 1999
("Effective Date"), by and between SCANSOURCE, INC., a South Carolina
corporation ("Employer"), and STEVEN H. OWINGS ("Employee").
WHEREAS, Employer desires to employ Employee, and Employee desires to be
employed by Employer, in accordance with the terms and conditions hereinafter
set forth:
NOW, THEREFORE, in consideration of the mutual promises herein set forth,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Term of Employment. Employer hereby agrees to employ Employee to
------------------
perform the duties described in Section 2 below subject to and in accordance
---------
with the terms and conditions hereof, and Employee hereby accepts such
employment. The term of employment hereunder shall commence on the Effective
Date and shall continue through June 30, 2002.
2. Duties of Employee.
------------------
A. In accepting employment by Employer, Employee shall undertake and
assume the responsibility of performing for and on behalf of Employer the duties
of Chief Executive Officer of Employer in Greenville, South Carolina. Except
with his written consent, Employee shall not be permanently assigned to (i) any
position of lower professional status, or (ii) a location outside of Greenville
County, South Carolina. It is further understood and agreed that any expansion,
contraction or other modification of Employee's duties shall not result in any
change in Employee's compensation as stated in Section 3, unless Employer and
---------
Employee specifically shall agree otherwise in a duly executed amendment of this
Agreement.
B. During the term of this Agreement, Employee shall be a full-time
employee of Employer and shall devote sufficient time and efforts to his duties
to satisfy the needs of Employer and as Employer reasonably directs. Employee
shall perform all of his duties hereunder to the best of his ability and shall
not, directly or indirectly, engage or participate in any activities in conflict
with the best interests of Employer and will conduct all of Employee's
activities in strict loyalty to Employer.
3. Compensation. As compensation for the services to be rendered by
------------
Employee for Employer under this Agreement, Employee shall be compensated on the
following basis:
A. Base Salary. An annual Base Salary of Two Hundred Thousand and
-----------
No/100 ($200,000.00) Dollars, plus any raises or other compensation approved by
the Board of Directors of Employer, payable in pay periods as determined by
Employer, but in no event less frequently than monthly.
<PAGE>
B. Vacation. Twenty (20) business days of paid vacation time each
--------
year during the term of this Agreement. Such vacation days are to be taken at
such time or times as Employee may reasonably request, subject to the Employer's
convenience and prior approval, which approval shall not be unreasonably
withheld. Vacation time shall not accumulate year to year.
---
C. Incentive Bonus. An "Incentive Bonus" in an amount and in the
---------------
manner determined as follows:
At the election of the Employee, a cash bonus payable with respect to the
Employer's fiscal years ending June 30, 2000, 2001, and 2002, up to 1.5% of the
Operating Income of the Employer, as defined below.
For purposes of this Agreement, "Operating Income" shall mean the amount
reflected for the line item identified as Operating Income on the Employer's
audited financial statements for the fiscal years ended June 30, 2000, 2001 and
2002. The Employer's calculation of Operating Income and the Incentive Bonus
amount shall be conclusive and binding absent fraud or manifest and material
error.
The Incentive Bonus may be paid to the Employee (as Employee shall direct)
in monthly installments with any monthly installment being not more than Seventy
percent (70%) of the Incentive Bonus computed using the Operating Income
determined by the financial statement prepared for such month during the term of
this Agreement. The balance of the Incentive Bonus shall be paid with respect
to each fiscal year immediately following the auditor's approval of the release
of Employer's year end earnings and in such amount as Employee shall direct
(provided the total Incentive Bonus paid with respect to each fiscal year shall
not exceed 1.5% of the Operating Income of the Employer). Employer shall have
no right of reimbursement in the event the amount advanced in monthly
installments exceeds the Incentive Bonus as finally computed.
D. Other Benefits. Other benefits (including life insurance,
--------------
disability insurance, health insurance, participation in pension, profit sharing
and other retirement plans, paid leave, etc.) reasonably comparable to those
benefits, if any, generally provided to other senior executives of Employer.
The compensation stated above is intended to be the total compensation paid
to Employee pursuant to this Agreement.
4. Confidentiality and Secrecy. Employee acknowledges that in, and as a
---------------------------
result of, his employment hereunder, he will be making use of, acquiring, and/or
adding to confidential information of a special and unique nature and value
relating to Employer's business, including without limitation, copyrights,
proprietary information, trade secrets, systems, procedures, manuals,
confidential reports, records, lists of customers and projects, the nature and
type of services rendered by Employer, the equipment and methods used and
preferred by Employer's
<PAGE>
customers, and the fees paid by them (all of which are deemed for all purposes
to be confidential and proprietary). As a material inducement to Employer to
enter into this Agreement and to pay to Employee the compensation stated in
Section 3, Employee covenants and agrees that during the term of his employment
- ---------
hereunder, and for two (2) years after the termination thereof, he shall not,
directly or indirectly, make use of, or disclose to any person, any confidential
information of Employer or its affiliates. Employee's obligations under this
Section 4 shall only apply with respect to non-public information, and the term
"confidential information" shall not include: (i) information already known to
the public or within the industry generally; and (ii) information which
subsequently becomes known to the public or within the industry through no fault
of Employee.
5. Covenants Against Competition. In view of the unique value to
-----------------------------
Employer of the services of Employee for which Employer has contracted
hereunder, because of the confidential information to be obtained by or
disclosed to Employee, as hereinabove set forth, and because Employee's
employment hereunder will result in Employee's development of a unique
relationship with customers, suppliers and employees, as a material inducement
to Employer to enter into this Agreement and to pay to Employee the compensation
stated in Section 3, Employee covenants and agrees as follows:
---------
A. During Employee's employment hereunder, and for a period of two
(2) years after the termination of Employee's employment with Employer for any
reason, Employee shall not directly or indirectly solicit or divert employment
of any employee of Employer's business or employ any person employed by Employer
if such person was employed by Employer within twelve (12) months of the last
day of employment of Employee by Employer.
B. During Employee's employment hereunder, and for a period of two
(2) years after the termination of Employee's employment with Employer for any
reason, Employee shall not directly or indirectly solicit, divert or convert, or
assist another person or entity to solicit, divert or convert, Employer's
customers or vendors to any other company or entity.
C. Employee shall not within the geographic area specified below (a)
during Employee's employment hereunder, engage in any business or perform any
services, directly or indirectly, in competition with the business of Employer
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any enterprise that shall so
engage; and (b) for a period of two (2) years after the termination of
Employee's employment with Employer for any reason, engage in any business or
perform any services, directly or indirectly, in competition with the business
of Employer as such business is being conducted on the date of such termination
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any enterprise that shall so
engage. Notwithstanding the above provisions of this Section 5(C), Employee
shall be permitted to own
<PAGE>
for investment purposes only, directly or beneficially, up to (but not more
than) 2% in the aggregate of the stock of a competing corporation which is
publicly-traded on a national stock exchange or the NASDAQ National Market
System, so long as Employee is not a controlling person of, or a member of a
group that controls, such corporation and Employee is not otherwise affiliated
in any capacity with such corporation. The restrictions of Section 5(C)(a) shall
---------------
apply anywhere within each state where an active customer of Employer is located
during the term of Employee's employment hereunder and the restrictions of
Section 5(C)(b) shall apply anywhere within each state where an active customer
- ---------------
of Employer is located at the time of the termination of Employee's employment
hereunder for any reason. The restrictions of Section 5(C) shall not apply to or
be deemed to prevent employment with a manufacturer of products then being sold
or distributed by Employer, except where such manufacturer is or becomes a
distributor of products in competition with Employer.
Employee's obligations under this Section 5 shall survive any termination
---------
of employment hereunder.
6. Reasonableness, Enforceability and Remedies.
-------------------------------------------
A. Employee has carefully read and considered the provisions of
Sections 4, 5, and 6, and, having done so, agrees that the restrictions set
- --------------------
forth in such Sections, including, but not limited to, the time period of
--------
restriction and geographic limitations set forth in Section 5, are fair and
---------
reasonable and are reasonably required for the protection of the interests of
Employer, its officers, directors, and other employees and its affiliates.
B. In the event that, notwithstanding the foregoing, any of the
provisions of Sections 4, 5, or 6 or any parts thereof shall be held to be
-------------------
invalid or unenforceable, the remaining provisions or parts thereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable portions or parts had not been included therein. In the event
that any provision of Sections 4 or 5 relating to the time period and/or
---------------
geographic restrictions and/or related aspects shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
reasonable and enforceable, the time period and/or geographic area and/or
related aspects deemed reasonable and enforceable by the court shall become and
thereafter be the maximum restriction in such regard, and the restriction shall
remain enforceable to the fullest extent deemed reasonable by such court.
C. Employee acknowledges that the services he is to render are of a
special and unusual character with a unique value to Employer, the loss of which
cannot adequately be compensated by damages in an action at law. In the event
of a breach or threatened breach by Employee of any of the provisions of
Sections 4 or 5, Employer, in addition to and not in limitation of, any other
- ---------------
rights, remedies, or damages available to Employer under this Agreement, shall
be entitled to a permanent injunction in order to prevent or restrain any such
breach by Employee or by Employee's partners, agents, representatives, servants,
employers, employees, consulting clients, and/or any and all persons directly or
indirectly acting for or with him.
<PAGE>
D. Employee covenants and agrees that if he shall violate any of his
covenants or agreements under Sections 4 or 5, Employer shall be entitled to:
---------------
(i) an accounting and repayment of all profits, compensation, commissions,
remuneration, or other benefits that Employee directly or indirectly has
realized and/or may realize as a result of, growing out of, or in connection
with, any such violation; (ii) recover actual damages incurred by Employer or
its affiliates as a result of any such violation; (iii) any injunctive relief to
which Employer is or may be entitled at law, in equity, or under this Agreement;
and (iv) exercise its other rights respecting a breach of this Agreement as set
forth herein. The remedies set forth herein shall be the sole and exclusive
remedies to which Employer is entitled for violation of Sections 4 or 5.
---------------
7. Termination.
-----------
A. For Cause by Employer. Notwithstanding any other provision
---------------------
hereof, Employer may terminate Employee's employment under this Agreement
immediately at any time for "cause." For purposes hereof the term "cause" shall
mean: Employee's commission of dishonesty, theft, or unethical business conduct;
indictment for a felony; indictment for a misdemeanor involving moral turpitude;
drug or alcohol addiction or abuse; death; disability which prevents Employee
from performing his duties hereunder for a continuous period of more than forty-
five (45) days; material incompetence in the performance of duties on behalf of
Employer which continues after reasonable written notice; material violation of
the terms and provisions of this Agreement which continues after reasonable
written notice; willful or recurring insubordination; or failure to attempt to
comply in good faith with the reasonable instructions of Employer. All
compensation (including without limitation the Base Salary, Incentive Bonus, and
all perquisites and fringe benefits) to which Employee would otherwise be
entitled (for periods after the effective date of such termination) shall be
discontinued following the effective date of termination and forfeited as of the
effective date of such termination.
B. Without Cause by Employer. Notwithstanding any other provision
-------------------------
hereof, Employer may terminate Employee's employment under this Agreement at any
time without cause. All compensation (including without limitation the Base
Salary, Incentive Bonus and all perquisites and fringe benefits) to which
Employee would otherwise be entitled shall continue to be paid to Employee
through the original expiration date of this Agreement as if Employee remained
employed under this Agreement.
C. By Employee. Employee may, with or without cause, terminate this
-----------
Agreement upon thirty (30) days prior written notice to Employer. In the event
of such termination, all compensation (including without limitation the Base
Salary, Incentive Bonus, and all perquisites and fringe benefits) to which
Employee would otherwise be entitled (for periods after the effective date of
such termination) shall be discontinued and forfeited as of the effective date
of such termination, but this provision shall not affect Employee's entitlement
to any Base Salary, Incentive Bonus or other fringe benefits accrued through the
effective date of
<PAGE>
termination. Employee shall be paid Employee's pro rata portion of the Incentive
Bonus, if any, based upon the number of days in the calendar year that the
Employee was a full-time employee of Employer. Such portion of the Incentive
Bonus shall be paid at the time and in the manner prescribed in Section 3.
---------
8. Burden and Benefit. This Agreement shall be binding upon, and shall
------------------
inure to the benefit of, Employer and Employee, and their respective heirs,
personal and legal representatives, successors and assigns.
9. Governing Law/Jurisdiction. The construction and interpretation of
--------------------------
this Agreement shall at all times and in all respects be governed by the laws of
the State of South Carolina. Employee and Employer hereby (i) agree that any
litigation, action or proceeding arising out of or relating to this Agreement
may be instituted in a state or federal court in the City and State of
Greenville, South Carolina, (ii) waives any objection which such party might
have now or hereafter to any such litigation, action or proceeding based upon
improper venue or inconvenient forum, and (iii) irrevocably submits to the
jurisdiction of such courts in any such litigation, action or proceeding. For
all purposes of this Agreement, Employee and Employer hereby submit to the venue
and jurisdiction of the courts in the State of South Carolina, irrevocably
consent to personal jurisdiction of such courts, and further agree that service
of process upon Employee and Employer may be effected pursuant to United States
mail.
10. Usage. The section and paragraph headings contained in this Agreement
-----
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Terms such as "hereof", "hereunder",
"hereto", "herein" and words of similar import shall refer to this Agreement in
its entirety and all references shall refer to specified portions of this
Agreement, unless the context clearly requires otherwise.
11. Severability. The provisions of this Agreement shall be deemed
------------
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions. Without limiting the generality of the foregoing or of
Section 6, each provision, sub-provision, part, and sub-part of Sections 4, 5
- --------- -------------
and 6 shall be deemed severable.
- -----
12. Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding by and between Employer and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the party intended to be bound. No waiver
of any provision of this Agreement shall be valid unless it is in writing and
signed by the party against whom the waiver is sought to be enforced. No valid
waiver of any provision of this Agreement at any time shall be deemed a waiver
of any other provision of this Agreement at such time or at any other time.
<PAGE>
13. Notice. Any notice, request, approval, consent, demand or other
------
communication hereunder shall be effective if in writing and upon the first to
occur of the following: (i) upon receipt by the party to whom such notice,
request, approval, consent, demand or other communication is being given; or
(ii) three (3) business days after being duly deposited in the U.S. Mail,
certified, return receipt requested, and addressed as follows:
Employee: Steven H. Owings
--------- 116 Tuscany Way
Greer, South Carolina 29650
Employer: ScanSource, Inc.
-------- 6 Logue Court, Suite G
Greenville, South Carolina 29615
Attn: Jeffery A. Bryson
The parties hereto may change their respective addresses by notice in writing
given to the other party to this Agreement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
under seal to be effective as of the day and year first above written.
EMPLOYER:
SCANSOURCE, INC.
By: /s/ Michael A. Baur
--------------------
Its: President
EMPLOYEE:
/s/ Steven H. Owings
--------------------
Steven H. Owings
<PAGE>
Exhibit 10.29
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is effective as of the 1st day of July, 1999
("Effective Date"), by and between SCANSOURCE, INC., a South Carolina
corporation ("Employer"), and MICHAEL L. BAUR ("Employee").
WHEREAS, Employer desires to employ Employee, and Employee desires to be
employed by Employer, in accordance with the terms and conditions hereinafter
set forth:
NOW, THEREFORE, in consideration of the mutual promises herein set forth,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Term of Employment. Employer hereby agrees to employ Employee to
------------------
perform the duties described in Section 2 below subject to and in accordance
---------
with the terms and conditions hereof, and Employee hereby accepts such
employment. The term of employment hereunder shall commence on the Effective
Date and shall continue through June 30, 2002.
2. Duties of Employee.
------------------
A. In accepting employment by Employer, Employee shall undertake and
assume the responsibility of performing for and on behalf of Employer the duties
of President of Employer in Greenville, South Carolina. Except with his written
consent, Employee shall not be permanently assigned to (i) any position of lower
professional status, or (ii) a location outside of Greenville County, South
Carolina. It is further understood and agreed that any expansion, contraction
or other modification of Employee's duties shall not result in any change in
Employee's compensation as stated in Section 3, unless Employer and Employee
---------
specifically shall agree otherwise in a duly executed amendment of this
Agreement.
B. During the term of this Agreement, Employee shall be a full-time
employee of Employer and shall devote sufficient time and efforts to his duties
to satisfy the needs of Employer and as Employer reasonably directs. Employee
shall perform all of his duties hereunder to the best of his ability and shall
not, directly or indirectly, engage or participate in any activities in conflict
with the best interests of Employer and will conduct all of Employee's
activities in strict loyalty to Employer.
3. Compensation. As compensation for the services to be rendered by
------------
Employee for Employer under this Agreement, Employee shall be compensated on the
following basis:
A. Base Salary. An annual Base Salary of One Hundred Twenty-five
-----------
Thousand and No/100 ($125,000.00) Dollars, plus any raises or other compensation
approved by the Board of Directors of Employer, payable in pay periods as
determined by Employer, but in no event less frequently than monthly.
<PAGE>
B. Vacation. Fifteen (15) business days of paid vacation time each
--------
year during the term of this Agreement. Such vacation days are to be taken at
such time or times as Employee may reasonably request, subject to the Employer's
convenience and prior approval, which approval shall not be unreasonably
withheld. Vacation time shall not accumulate year to year.
---
C. Incentive Bonus. An "Incentive Bonus" in an amount and in the
---------------
manner determined as follows:
A cash bonus payable with respect to the Employer's fiscal years ending
June 30, 2000, 2001, and 2002, equal to 2.5% of the Operating Income of the
Employer, as defined below.
For purposes of this Agreement, "Operating Income" shall mean the amount
reflected for the line item identified as Operating Income on the Employer's
audited financial statements for the fiscal years ended June 30, 2000, 2001 and
2002. The employer's calculation of Operating Income and the Incentive Bonus
amount shall be conclusive and binding absent fraud or manifest and material
error.
The Incentive Bonus shall be paid to the Employee in monthly installments
with each monthly installment being equal to Seventy percent (70%) of the
Incentive Bonus computed using the Operating Income determined by the financial
statement prepared for each month during the term of this Agreement. The
balance of the Incentive Bonus shall be paid with respect to each fiscal year
immediately following the auditor's approval of the release of Employer's year
end earnings. Employer shall have no right of reimbursement in the event the
amount advanced in monthly installments exceeds the Incentive Bonus as finally
computed.
D. Other Benefits. Other benefits (including life insurance,
--------------
disability insurance, health insurance, participation in pension, profit sharing
and other retirement plans, paid leave, etc.) reasonably comparable to those
benefits, if any, generally provided to other senior executives of Employer.
The compensation stated above is intended to be the total compensation paid
to Employee pursuant to this Agreement.
4. Confidentiality and Secrecy. Employee acknowledges that in, and as a
---------------------------
result of, his employment hereunder, he will be making use of, acquiring, and/or
adding to confidential information of a special and unique nature and value
relating to Employer's business, including without limitation, copyrights,
proprietary information, trade secrets, systems, procedures, manuals,
confidential reports, records, lists of customers and projects, the nature and
type of services rendered by Employer, the equipment and methods used and
preferred by Employer's customers, and the fees paid by them (all of which are
deemed for all purposes to be confidential and proprietary). As a material
inducement to Employer to enter into this Agreement and to pay to Employee the
compensation stated in Section 3, Employee covenants and agrees that during the
---------
term of his employment hereunder, and for two (2) years after the
<PAGE>
termination thereof, he shall not, directly or indirectly, make use of, or
disclose to any person, any confidential information of Employer or its
affiliates. Employee's obligations under this Section 4 shall only apply with
respect to non-public information, and the term "confidential information" shall
not include: (i) information already known to the public or within the industry
generally; and (ii) information which subsequently becomes known to the public
or within the industry through no fault of Employee.
5. Covenants Against Competition. In view of the unique value to
-----------------------------
Employer of the services of Employee for which Employer has contracted
hereunder, because of the confidential information to be obtained by or
disclosed to Employee, as hereinabove set forth, and because Employee's
employment hereunder will result in Employee's development of a unique
relationship with customers, suppliers and employees, as a material inducement
to Employer to enter into this Agreement and to pay to Employee the compensation
stated in Section 3, Employee covenants and agrees as follows:
---------
A. During Employee's employment hereunder, and for a period of two
(2) years after the termination of Employee's employment with Employer for any
reason, Employee shall not directly or indirectly solicit or divert employment
of any employee of Employer's business or employ any person employed by Employer
if such person was employed by Employer within twelve (12) months of the last
day of employment of Employee by Employer.
B. During Employee's employment hereunder, and for a period of two
(2) years after the termination of Employee's employment with Employer for any
reason, Employee shall not directly or indirectly solicit, divert or convert, or
assist another person or entity to solicit, divert or convert, Employer's
customers or vendors to any other company or entity.
C. Employee shall not within the geographic area specified below (a)
during Employee's employment hereunder, engage in any business or perform any
services, directly or indirectly, in competition with the business of Employer
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any enterprise that shall so
engage; and (b) for a period of two (2) years after the termination of
Employee's employment with Employer for any reason, engage in any business or
perform any services, directly or indirectly, in competition with the business
of Employer as such business is being conducted on the date of such termination
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any enterprise that shall so
engage. Notwithstanding the above provisions of this Section 5(C), Employee
shall be permitted to own for investment purposes only, directly or
beneficially, up to (but not more than) 2% in the aggregate of the stock of a
competing corporation which is publicly-traded on a national stock exchange or
the NASDAQ National Market System, so long as Employee is not a controlling
person of, or a member of a group that controls, such corporation and Employee
is not
<PAGE>
otherwise affiliated in any capacity with such corporation. The restrictions of
Section 5(C)(a) shall apply anywhere within each state where an active customer
- --------------
of Employer is located during the term of Employee's employment hereunder and
the restrictions of Section 5(C)(b) shall apply anywhere within each state where
---------------
an active customer of Employer is located at the time of the termination of
Employee's employment hereunder for any reason. The restrictions of Section 5(C)
shall not apply to or be deemed to prevent employment with a manufacturer of
products then being sold or distributed by Employer, except where such
manufacturer is or becomes a distributor of products in competition with
Employer.
Employee's obligations under this Section 5 shall survive any termination
---------
of employment hereunder.
6. Reasonableness, Enforceability and Remedies.
-------------------------------------------
A. Employee has carefully read and considered the provisions of
Sections 4, 5, and 6, and, having done so, agrees that the restrictions set
- --------------------
forth in such Sections, including, but not limited to, the time period of
--------
restriction and geographic limitations set forth in Section 5, are fair and
---------
reasonable and are reasonably required for the protection of the interests of
Employer, its officers, directors, and other employees and its affiliates.
B. In the event that, notwithstanding the foregoing, any of the
provisions of Sections 4, 5, or 6 or any parts thereof shall be held to be
-------------------
invalid or unenforceable, the remaining provisions or parts thereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable portions or parts had not been included therein. In the event
that any provision of Sections 4 or 5 relating to the time period and/or
---------------
geographic restrictions and/or related aspects shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
reasonable and enforceable, the time period and/or geographic area and/or
related aspects deemed reasonable and enforceable by the court shall become and
thereafter be the maximum restriction in such regard, and the restriction shall
remain enforceable to the fullest extent deemed reasonable by such court.
C. Employee acknowledges that the services he is to render are of a
special and unusual character with a unique value to Employer, the loss of which
cannot adequately be compensated by damages in an action at law. In the event
of a breach or threatened breach by Employee of any of the provisions of
Sections 4 or 5, Employer, in addition to and not in limitation of, any other
- ---------------
rights, remedies, or damages available to Employer under this Agreement, shall
be entitled to a permanent injunction in order to prevent or restrain any such
breach by Employee or by Employee's partners, agents, representatives, servants,
employers, employees, consulting clients, and/or any and all persons directly or
indirectly acting for or with him.
<PAGE>
D. Employee covenants and agrees that if he shall violate any of his
covenants or agreements under Sections 4 or 5, Employer shall be entitled to:
---------------
(i) an accounting and repayment of all profits, compensation, commissions,
remuneration, or other benefits that Employee directly or indirectly has
realized and/or may realize as a result of, growing out of, or in connection
with, any such violation; (ii) recover actual damages incurred by Employer or
its affiliates as a result of any such violation; (iii) any injunctive relief to
which Employer is or may be entitled at law, in equity, or under this Agreement;
and (iv) exercise its other rights respecting a breach of this Agreement as set
forth herein. The remedies set forth herein shall be the sole and exclusive
remedies to which Employer is entitled for violation of Sections 4 or 5.
---------------
7. Termination.
-----------
A. For Cause by Employer. Notwithstanding any other provision
---------------------
hereof, Employer may terminate Employee's employment under this Agreement
immediately at any time for "cause." For purposes hereof the term "cause" shall
mean: Employee's commission of dishonesty, theft, or unethical business conduct;
indictment for a felony; indictment for a misdemeanor involving moral turpitude;
drug or alcohol addiction or abuse; death; disability which prevents Employee
from performing his duties hereunder for a continuous period of more than forty-
five (45) days; material incompetence in the performance of duties on behalf of
Employer which continues after reasonable written notice; material violation of
the terms and provisions of this Agreement which continues after reasonable
written notice; willful or recurring insubordination; or failure to attempt to
comply in good faith with the reasonable instructions of Employer. All
compensation (including without limitation the Base Salary, Incentive Bonus, and
all perquisites and fringe benefits) to which Employee would otherwise be
entitled (for periods after the effective date of such termination) shall be
discontinued following the effective date of termination and forfeited as of the
effective date of such termination.
B. Without Cause by Employer. Notwithstanding any other provision
-------------------------
hereof, Employer may terminate Employee's employment under this Agreement at any
time without cause. All compensation (including without limitation the Base
Salary, Incentive Bonus and all perquisites and fringe benefits) to which
Employee would otherwise be entitled shall continue to be paid to Employee
through the original expiration date of this Agreement as if Employee remained
employed under this Agreement.
C. By Employee. Employee may, with or without cause, terminate this
-----------
Agreement upon thirty (30) days prior written notice to Employer. In the event
of such termination, all compensation (including without limitation the Base
Salary, Incentive Bonus, and all perquisites and fringe benefits) to which
Employee would otherwise be entitled (for periods after the effective date of
such termination) shall be discontinued and forfeited as of the effective date
of such termination, but this provision shall not affect Employee's entitlement
to any Base Salary, Incentive Bonus or other fringe benefits accrued through the
effective date of termination. Employee shall be paid Employee's pro rata
portion of the Incentive Bonus, if
<PAGE>
any, based upon the number of days in the calendar year that the Employee was a
full-time employee of Employer. Such portion of the Incentive Bonus shall be
paid at the time and in the manner prescribed in Section 3.
---------
8. Burden and Benefit. This Agreement shall be binding upon, and shall
------------------
inure to the benefit of, Employer and Employee, and their respective heirs,
personal and legal representatives, successors and assigns.
9. Governing Law/Jurisdiction. The construction and interpretation of
--------------------------
this Agreement shall at all times and in all respects be governed by the laws of
the State of South Carolina. Employee and Employer hereby (i) agree that any
litigation, action or proceeding arising out of or relating to this Agreement
may be instituted in a state or federal court in the City and State of
Greenville, South Carolina, (ii) waives any objection which such party might
have now or hereafter to any such litigation, action or proceeding based upon
improper venue or inconvenient forum, and (iii) irrevocably submits to the
jurisdiction of such courts in any such litigation, action or proceeding. For
all purposes of this Agreement, Employee and Employer hereby submit to the venue
and jurisdiction of the courts in the State of South Carolina, irrevocably
consent to personal jurisdiction of such courts, and further agree that service
of process upon Employee and Employer may be effected pursuant to United States
mail.
10. Usage. The section and paragraph headings contained in this Agreement
-----
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Terms such as "hereof", "hereunder",
"hereto", "herein" and words of similar import shall refer to this Agreement in
its entirety and all references shall refer to specified portions of this
Agreement, unless the context clearly requires otherwise.
11. Severability. The provisions of this Agreement shall be deemed
------------
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions. Without limiting the generality of the foregoing or of
Section 6, each provision, sub-provision, part, and sub-part of Sections 4, 5
- --------- -------------
and 6 shall be deemed severable.
- -----
12. Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding by and between Employer and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the party intended to be bound. No waiver
of any provision of this Agreement shall be valid unless it is in writing and
signed by the party against whom the waiver is sought to be enforced. No valid
waiver of any provision of this Agreement at any time shall be deemed a waiver
of any other provision of this Agreement at such time or at any other time.
<PAGE>
13. Notice. Any notice, request, approval, consent, demand or other
------
communication hereunder shall be effective if in writing and upon the first to
occur of the following: (i) upon receipt by the party to whom such notice,
request, approval, consent, demand or other communication is being given; or
(ii) three (3) business days after being duly deposited in the U.S. Mail,
certified, return receipt requested, and addressed as follows:
Employee: Michael L. Baur
--------- 102 High Plains Road
Simpsonville, South Carolina 29681
Employer: ScanSource, Inc.
-------- 6 Logue Court, Suite G
Greenville, South Carolina 29615
Attn: Steven H. Owings
The parties hereto may change their respective addresses by notice in writing
given to the other party to this Agreement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
under seal to be effective as of the day and year first above written.
EMPLOYER:
SCANSOURCE, INC.
By: /s/ Steven H. Owings
------------------------
Its: CEO
EMPLOYEE:
/s/ Michael L. Baur
------------------------
Michael L. Baur
<PAGE>
Exhibit 10.30
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is effective as of the 1st day of July, 1999
("Effective Date"), by and between SCANSOURCE, INC., a South Carolina
corporation ("Employer"), and JEFFERY A. BRYSON ("Employee").
WHEREAS, Employer desires to employ Employee, and Employee desires to be
employed by Employer, in accordance with the terms and conditions hereinafter
set forth:
NOW, THEREFORE, in consideration of the mutual promises herein set forth,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Term of Employment. Employer hereby agrees to employ Employee to
------------------
perform the duties described in Section 2 below subject to and in accordance
---------
with the terms and conditions hereof, and Employee hereby accepts such
employment. The term of employment hereunder shall commence on the Effective
Date and shall continue through June 30, 2002.
2. Duties of Employee.
------------------
A. In accepting employment by Employer, Employee shall undertake and
assume the responsibility of performing for and on behalf of Employer the duties
of Chief Financial Officer of Employer in Greenville, South Carolina. Except
with his written consent, Employee shall not be permanently assigned to (i) any
position of lower professional status, or (ii) a location outside of Greenville
County, South Carolina. It is further understood and agreed that any expansion,
contraction or other modification of Employee's duties shall not result in any
change in Employee's compensation as stated in Section 3, unless Employer and
---------
Employee specifically shall agree otherwise in a duly executed amendment of this
Agreement.
B. During the term of this Agreement, Employee shall be a full-time
employee of Employer and shall devote sufficient time and efforts to his duties
to satisfy the needs of Employer and as Employer reasonably directs. Employee
shall perform all of his duties hereunder to the best of his ability and shall
not, directly or indirectly, engage or participate in any activities in conflict
with the best interests of Employer and will conduct all of Employee's
activities in strict loyalty to Employer.
3. Compensation. As compensation for the services to be rendered by
------------
Employee for Employer under this Agreement, Employee shall be compensated on the
following basis:
A. Base Salary. An annual Base Salary of Ninety Thousand and No/100
-----------
($90,000.00) Dollars, plus any raises or other compensation approved by the
Board of Directors of Employer, payable in pay periods as determined by
Employer, but in no event less frequently than monthly.
<PAGE>
B. Vacation. Fifteen (15) business days of paid vacation time each
--------
year during the term of this Agreement. Such vacation days are to be taken at
such time or times as Employee may reasonably request, subject to the Employer's
convenience and prior approval, which approval shall not be unreasonably
withheld. Vacation time shall not accumulate year to year.
---
C. Incentive Bonus. An "Incentive Bonus" in an amount and in the
---------------
manner determined as follows:
A cash bonus payable with respect to the Employer's fiscal years ending
June 30, 2000, 2001, and 2002, equal to 1.0% of the Operating Income of the
Employer, as defined below.
For purposes of this Agreement, "Operating Income" shall mean the amount
reflected for the line item identified as Operating Income on the Employer's
financial statements for the fiscal years ended June 30, 2000, 2001, and 2002.
The Employer's calculation of Operating Income and the Incentive Bonus amount
shall be conclusive and binding absent fraud or manifest and material error.
The Incentive Bonus shall be paid to the Employee in monthly installments
with each monthly installment being equal to Seventy percent (70%) of the
Incentive Bonus computed using the Operating Income determined by the financial
statement prepared for each month during the term of this Agreement. The
balance of the Incentive Bonus shall be paid with respect to each fiscal year
immediately following the auditor's approval of the release of Employer's year
end earnings. Employer shall have no right of reimbursement in the event the
amount advanced in monthly installments exceeds the Incentive Bonus as finally
computed.
D. Other Benefits. Other benefits (including life insurance,
--------------
disability insurance, health insurance, participation in pension, profit sharing
and other retirement plans, paid leave, etc.) reasonably comparable to those
benefits, if any, generally provided to other senior executives of Employer.
The compensation stated above is intended to be the total compensation paid
to Employee pursuant to this Agreement.
4. Confidentiality and Secrecy. Employee acknowledges that in, and as a
---------------------------
result of, his employment hereunder, he will be making use of, acquiring, and/or
adding to confidential information of a special and unique nature and value
relating to Employer's business, including without limitation, copyrights,
proprietary information, trade secrets, systems, procedures, manuals,
confidential reports, records, lists of customers and projects, the nature and
type of services rendered by Employer, the equipment and methods used and
preferred by Employer's customers, and the fees paid by them (all of which are
deemed for all purposes to be confidential and proprietary). As a material
inducement to Employer to enter into this Agreement and to pay to Employee the
compensation stated in Section 3, Employee covenants and agrees that during the
---------
term of his employment hereunder, and for two (2) years after the
<PAGE>
termination thereof, he shall not, directly or indirectly, make use of, or
disclose to any person, any confidential information of Employer or its
affiliates. Employee's obligations under this Section 4 shall only apply with
respect to non-public information, and the term "confidential information" shall
not include: (i) information already known to the public or within the industry
generally; and (ii) information which subsequently becomes known to the public
or within the industry through no fault of Employee.
5. Covenants Against Competition. In view of the unique value to
-----------------------------
Employer of the services of Employee for which Employer has contracted
hereunder, because of the confidential information to be obtained by or
disclosed to Employee, as hereinabove set forth, and because Employee's
employment hereunder will result in Employee's development of a unique
relationship with customers, suppliers and employees, as a material inducement
to Employer to enter into this Agreement and to pay to Employee the compensation
stated in Section 3, Employee covenants and agrees as follows:
---------
A. During Employee's employment hereunder, and for a period of two
(2) years after the termination of Employee's employment with Employer for any
reason, Employee shall not directly or indirectly solicit or divert employment
of any employee of Employer's business or employ any person employed by Employer
if such person was employed by Employer within twelve (12) months of the last
day of employment of Employee by Employer.
B. During Employee's employment hereunder, and for a period of two
(2) years after the termination of Employee's employment with Employer for any
reason, Employee shall not directly or indirectly solicit, divert or convert, or
assist another person or entity to solicit, divert or convert, Employer's
customers or vendors to any other company or entity.
C. Employee shall not within the geographic area specified below (a)
during Employee's employment hereunder, engage in any business or perform any
services, directly or indirectly, in competition with the business of Employer
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any enterprise that shall so
engage; and (b) for a period of two (2) years after the termination of
Employee's employment with Employer for any reason, engage in any business or
perform any services, directly or indirectly, in competition with the business
of Employer as such business is being conducted on the date of such termination
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any enterprise that shall so
engage. Notwithstanding the above provisions of this Section 5(C), Employee
shall be permitted to own for investment purposes only, directly or
beneficially, up to (but not more than) 2% in the aggregate of the stock of a
competing corporation which is publicly-traded on a national stock exchange or
the NASDAQ National Market System, so long as Employee is not a controlling
person of, or a member of a group that controls, such corporation and Employee
is not
<PAGE>
otherwise affiliated in any capacity with such corporation. The restrictions of
Section 5(C)(a) shall apply anywhere within each state where an active customer
- ---------------
of Employer is located during the term of Employee's employment hereunder and
the restrictions of Section 5(C)(b) shall apply anywhere within each state where
---------------
an active customer of Employer is located at the time of the termination of
Employee's employment hereunder for any reason. The restrictions of Section 5(C)
shall not apply to or be deemed to prevent employment with a manufacturer of
products then being sold or distributed by Employer, except where such
manufacturer is or becomes a distributor of products in competition with
Employer.
Employee's obligations under this Section 5 shall survive any termination
---------
of employment hereunder.
6. Reasonableness, Enforceability and Remedies.
-------------------------------------------
A. Employee has carefully read and considered the provisions of
Sections 4, 5, and 6, and, having done so, agrees that the restrictions set
- --------------------
forth in such Sections, including, but not limited to, the time period of
--------
restriction and geographic limitations set forth in Section 5, are fair and
---------
reasonable and are reasonably required for the protection of the interests of
Employer, its officers, directors, and other employees and its affiliates.
B. In the event that, notwithstanding the foregoing, any of the
provisions of Sections 4, 5, or 6 or any parts thereof shall be held to be
-------------------
invalid or unenforceable, the remaining provisions or parts thereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable portions or parts had not been included therein. In the event
that any provision of Sections 4 or 5 relating to the time period and/or
---------------
geographic restrictions and/or related aspects shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
reasonable and enforceable, the time period and/or geographic area and/or
related aspects deemed reasonable and enforceable by the court shall become and
thereafter be the maximum restriction in such regard, and the restriction shall
remain enforceable to the fullest extent deemed reasonable by such court.
C. Employee acknowledges that the services he is to render are of a
special and unusual character with a unique value to Employer, the loss of which
cannot adequately be compensated by damages in an action at law. In the event
of a breach or threatened breach by Employee of any of the provisions of
Sections 4 or 5, Employer, in addition to and not in limitation of, any other
- ---------------
rights, remedies, or damages available to Employer under this Agreement, shall
be entitled to a permanent injunction in order to prevent or restrain any such
breach by Employee or by Employee's partners, agents, representatives, servants,
employers, employees, consulting clients, and/or any and all persons directly or
indirectly acting for or with him.
<PAGE>
D. Employee covenants and agrees that if he shall violate any of his
covenants or agreements under Sections 4 or 5, Employer shall be entitled to:
---------------
(i) an accounting and repayment of all profits, compensation, commissions,
remuneration, or other benefits that Employee directly or indirectly has
realized and/or may realize as a result of, growing out of, or in connection
with, any such violation; (ii) recover actual damages incurred by Employer or
its affiliates as a result of any such violation; (iii) any injunctive relief to
which Employer is or may be entitled at law, in equity, or under this Agreement;
and (iv) exercise its other rights respecting a breach of this Agreement as set
forth herein. The remedies set forth herein shall be the sole and exclusive
remedies to which Employer is entitled for violation of Sections 4 or 5.
---------------
7. Termination.
-----------
A. For Cause by Employer. Notwithstanding any other provision
---------------------
hereof, Employer may terminate Employee's employment under this Agreement
immediately at any time for "cause." For purposes hereof the term "cause" shall
mean: Employee's commission of dishonesty, theft, or unethical business conduct;
indictment for a felony; indictment for a misdemeanor involving moral turpitude;
drug or alcohol addiction or abuse; death; disability which prevents Employee
from performing his duties hereunder for a continuous period of more than forty-
five (45) days; material incompetence in the performance of duties on behalf of
Employer which continues after reasonable written notice; material violation of
the terms and provisions of this Agreement which continues after reasonable
written notice; willful or recurring insubordination; or failure to attempt to
comply in good faith with the reasonable instructions of Employer. All
compensation (including without limitation the Base Salary, Incentive Bonus, and
all perquisites and fringe benefits) to which Employee would otherwise be
entitled (for periods after the effective date of such termination) shall be
discontinued following the effective date of termination and forfeited as of the
effective date of such termination.
B. Without Cause by Employer. Notwithstanding any other provision
-------------------------
hereof, Employer may terminate Employee's employment under this Agreement at any
time without cause. All compensation (including without limitation the Base
Salary, Incentive Bonus and all perquisites and fringe benefits) to which
Employee would otherwise be entitled shall continue to be paid to Employee
through the original expiration date of this Agreement as if Employee remained
employed under this Agreement.
C. By Employee. Employee may, with or without cause, terminate this
-----------
Agreement upon thirty (30) days prior written notice to Employer. In the event
of such termination, all compensation (including without limitation the Base
Salary, Incentive Bonus, and all perquisites and fringe benefits) to which
Employee would otherwise be entitled (for periods after the effective date of
such termination) shall be discontinued and forfeited as of the effective date
of such termination, but this provision shall not affect Employee's entitlement
to any Base Salary, Incentive Bonus or other fringe benefits accrued through the
effective date of termination. Employee shall be paid Employee's pro rata
portion of the Incentive Bonus, if
<PAGE>
any, based upon the number of days in the calendar year that the Employee was a
full-time employee of Employer. Such portion of the Incentive Bonus shall be
paid at the time and in the manner prescribed in Section 3.
---------
8. Burden and Benefit. This Agreement shall be binding upon, and shall
------------------
inure to the benefit of, Employer and Employee, and their respective heirs,
personal and legal representatives, successors and assigns.
9. Governing Law/Jurisdiction. The construction and interpretation of
--------------------------
this Agreement shall at all times and in all respects be governed by the laws of
the State of South Carolina. Employee and Employer hereby (i) agree that any
litigation, action or proceeding arising out of or relating to this Agreement
may be instituted in a state or federal court in the City and State of
Greenville, South Carolina, (ii) waives any objection which such party might
have now or hereafter to any such litigation, action or proceeding based upon
improper venue or inconvenient forum, and (iii) irrevocably submits to the
jurisdiction of such courts in any such litigation, action or proceeding. For
all purposes of this Agreement, Employee and Employer hereby submit to the venue
and jurisdiction of the courts in the State of South Carolina, irrevocably
consent to personal jurisdiction of such courts, and further agree that service
of process upon Employee and Employer may be effected pursuant to United States
mail.
10. Usage. The section and paragraph headings contained in this Agreement
-----
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Terms such as "hereof", "hereunder",
"hereto", "herein" and words of similar import shall refer to this Agreement in
its entirety and all references shall refer to specified portions of this
Agreement, unless the context clearly requires otherwise.
11. Severability. The provisions of this Agreement shall be deemed
------------
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions. Without limiting the generality of the foregoing or of
Section 6, each provision, sub-provision, part, and sub-part of Sections 4, 5
- --------- -------------
and 6 shall be deemed severable.
- -----
12. Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding by and between Employer and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the party intended to be bound. No waiver
of any provision of this Agreement shall be valid unless it is in writing and
signed by the party against whom the waiver is sought to be enforced. No valid
waiver of any provision of this Agreement at any time shall be deemed a waiver
of any other provision of this Agreement at such time or at any other time.
<PAGE>
13. Notice. Any notice, request, approval, consent, demand or other
------
communication hereunder shall be effective if in writing and upon the first to
occur of the following: (i) upon receipt by the party to whom such notice,
request, approval, consent, demand or other communication is being given; or
(ii) three (3) business days after being duly deposited in the U.S. Mail,
certified, return receipt requested, and addressed as follows:
Employee: Jeffery A. Bryson
-------- 102 Robin Road
Greenville, South Carolina 29609
Employer: ScanSource, Inc.
-------- 6 Logue Court, Suite G
Greenville, South Carolina 29615
Attn: Steven H. Owings
The parties hereto may change their respective addresses by notice in writing
given to the other party to this Agreement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
under seal to be effective as of the day and year first above written.
EMPLOYER:
SCANSOURCE, INC.
By: /s/ Steven H. Owings
----------------------
Its:
EMPLOYEE:
/s/ Jeffery A. Bryson
----------------------
Jeffery A. Bryson
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET & INCOME STATEMENT FOR PERIOD ENDED 9/30/99.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 11,333
<SECURITIES> 0
<RECEIVABLES> 54,148
<ALLOWANCES> 5,588
<INVENTORY> 71,959
<CURRENT-ASSETS> 141,245
<PP&E> 10,645
<DEPRECIATION> 3,003
<TOTAL-ASSETS> 150,720
<CURRENT-LIABILITIES> 87,344
<BONDS> 0
0
0
<COMMON> 40,353
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 150,720
<SALES> 113,179
<TOTAL-REVENUES> 113,179
<CGS> 102,159
<TOTAL-COSTS> 6,715
<OTHER-EXPENSES> 34
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,410
<INCOME-TAX> 1,676
<INCOME-CONTINUING> 2,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,734
<EPS-BASIC> .50
<EPS-DILUTED> .47
</TABLE>
