10-K/A

Large accelerated filer

Smaller reporting company

Accelerated filer

Emerging growth company

Non-accelerated filer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-K/A

Amendment No. 1 to Form

10-K

Annual Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For the fiscal year ended

June 30, 2021

Commission File Number:

000-26926

ScanSource, Inc.

South Carolina

(State of Incorporation)

57-0965380

(I.R.S. Employer Identification No.)

6 Logue Court

Greenville, South Carolina 29615

(864)

288-2432

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol:	Name of exchange on which registered:
Common stock, no par value	SCSC	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes

☒

No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No

☒

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 (the “Exchange Act”) 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

☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No

☒

The aggregate market value of the voting common stock of the Registrant held by

non-affiliates

of the Registrant at December 31, 2020 was $662,188,887, as computed by reference to the closing price of such stock on such date. For this purpose, directors, officers and 10% shareholders (other than institutional shareholders) have been assumed to be affiliates.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at October 15, 2021
Common Stock, no par value per share		25,540,209

EXPLANATORY NOTE

This Form

10-K/A

(“Amendment No.1”) amends the annual report on Form

10-K

of ScanSource, Inc. for the fiscal year ended June 30, 2021, filed with the Securities and Exchange Commission (the “SEC”) on August 24, 2021 (the “2021 Form

10-K”).

The primary purpose of Amendment No. 1 is to provide the information required by Items 10 through 14 of Part III of the 2021 Form

10-K.

This Amendment No. 1 speaks as of the original filing date of the 2021 Form

10-K

and reflects only the changes to the cover page and Items 10, 11, 12, 13 and 14 of Part III and inclusion of the certifications required under Section 302 of The Sarbanes-Oxley Act of 2002 in Item 15 of Part IV. No other information included in the 2021 Form

10-K,

including the information set forth in Part I and Part II, has been modified or updated in any way. The 2021 Form

10-K

continues to speak as of the date of the original filing, and the Company has not updated the disclosures contained therein to reflect any events that occurred after the original filing other than as expressly indicated in this Amendment No. 1. Accordingly, this Amendment No. 1 should be read in conjunction with the 2021 Form

10-K

and the Company’s other SEC filings.

As used herein, the terms “ScanSource,” the “Company,” “we,” “us,” and “our” refer to ScanSource, Inc., a South Carolina corporation, and its consolidated subsidiaries as a combined entity, except where the terms mean only ScanSource, Inc. The term “common stock” means shares of our common stock, no par value per share.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Board of Directors of the Registrant



Michael L. Baur AGE 64 DIRECTOR SINCE December 1995 COMMITTEES None		Experience Michael L. Baur is our Chairman, Chief Executive Officer and President. Mr. Baur has served as our President or CEO since our inception, as a director since December 1995, and as Chairman of the Board since February 2019. Mr. Baur has been employed with the Company since its founding in December 1992. Qualifications Mr. Baur has served the Company since its inception and has developed a deep institutional knowledge and perspective regarding the Company’s strengths, challenges and opportunities. Mr. Baur has more than 30 years of experience in the IT industry, having served in various leadership and senior management roles in the technology and distribution industries before joining ScanSource. Mr. Baur brings strong leadership, entrepreneurial, business building and development skills and experience to the Board.



Peter C. Browning AGE 80 DIRECTOR SINCE June 2014 COMMITTEES Lead Independent Director and Chair of Nominating and Corporate Governance Committee and serves on all committees		Experience Peter C. Browning has served as a director of the Company since June 2014 and as Lead Independent Director since February 2019. He has extensive experience in business, serving as an executive officer of numerous public companies, including Continental Can Company, National Gypsum Company and Sonoco Products Company. He also has served on more than 14 public-company boards, including Acuity Brands from 2001 to 2021, Wachovia from 2002 to 2008, Nucor Corporation from 1999 to 2015, Lowe’s Companies from 1997 to 2014, EnPro Industries, Inc. from 2001 to 2015, and The Phoenix Companies from 1988 to 1999 and from 2000 to 2009, and in a variety of board leadership roles, including serving as non-executive chair, lead director and chair of audit, compensation and governance/nominating committees. Mr. Browning currently serves on the board of GMS, Inc. He also serves as lead independent director of the board of Equilar, a private company that is a leading provider of corporate data. Qualifications Mr. Browning is a well-known authority on board governance and his knowledge and experience in that area are invaluable to our Board. He was the Dean of the McColl Graduate School of Business at Queens University of Charlotte from 2002 to 2005 and has served as the Managing Partner of Peter Browning Partners, a board advisory consulting firm, since 2009. Mr. Browning was selected for the “2011 and 2012 NACD Director 100 List” (a list of the most influential people in corporate governance in the boardroom). He co-authored a book on governance guidance, titled The Directors Manual: A Framework for Board Governance , which offers practical advice on leading an organization’s board.



Frank E. Emory, Jr. AGE 64 DIRECTOR SINCE October 2020 COMMITTEES Serves on all committees		Experience Frank E. Emory, Jr. has served as a director of the Company since October 2020. Mr. Emory has served as Executive Vice President and Chief Administrative Officer of Novant Health since 2019. From June 2001 to December 2018, he served as a partner with Hunton Andrews Kurth LLP, an international law firm. Qualifications As a former partner of Hunton Andrews Kurth LLP, a former Chair of EDPNC, Inc., and executive of Novant Health (including serving as its Chief Administrative Officer), as well as service on numerous non-profit boards, Mr. Emory brings considerable experience overseeing legal, government relations, risk management, corporate audit, compliance, human resources and diversity, inclusion and health equity teams to the Board.



Michael J. Grainger AGE 69 DIRECTOR SINCE October 2004 COMMITTEES Serves on all committees		Experience Michael J. Grainger has served as a director of the Company since October 2004. Mr. Grainger served as President and Chief Operating Officer of Ingram Micro, Inc., a technology distributor, from January 2001 to April 2004. From May 1996 to July 2001, he served as Executive Vice President and Chief Financial Officer of Ingram Micro, and from July 1990 to October 1996 as Vice President and Controller of Ingram Industries, Inc. Mr. Grainger currently serves on the board of directors of Ingram Industries, Inc., a multinational diversified private company. Qualifications As a former executive of Ingram Micro (including serving as its Chief Financial Officer), Mr. Grainger brings extensive knowledge of our industry and our competitive environment to the Board. He also brings extensive accounting and financial skills important in the understanding and oversight of our financial reporting, enterprise and operational risk management and corporate finance, tax and treasury matters.



Charles A. Mathis AGE 61 DIRECTOR SINCE August 2021 COMMITTEES None		Experience Charles A. Mathis served as executive vice president and chief financial officer for Science Applications International Corporation (“SAIC”), a U.S. government IT services provider, from 2016 to 2021. Prior to joining SAIC, Mr. Mathis served as chief financial officer at the Company, from 2012 to 2016. Prior to joining the Company, Mr. Mathis was chief financial officer from 2008 to 2012 for Force Protection Inc., a global defense company. He also served as the chief financial officer for Fort Worth-based EFW, Inc., the U.S.-based subsidiary of the Israeli defense contractor, Elbit Systems, from 2006 to 2008. Qualifications As a former executive at SAIC, a Fortune 500 company (including serving as its Chief Financial Officer), Mr. Mathis has extensive experience in mergers and acquisitions, finance and accounting, financial controls, and U.S. government contracting and compliance. Mr. Mathis also brings an understanding of our Company and business, previously serving as Chief Financial Officer. Mr. Mathis completed his MBA from the University of Chicago.



Dorothy F. Ramoneda AGE 62 DIRECTOR SINCE November 2019 COMMITTEES Serves on all committees		Experience Dorothy F. Ramoneda has served as a director of the Company since November 2019. Ms. Ramoneda has been in the role of Executive Vice President and Chief Information Officer of First-Citizens Bank since January 2014. She also has served as Chief Information Officer and Vice President of Information Technology and Telecommunications at Progress Energy. Qualifications Ms. Ramoneda has extensive leadership experience serving as the Chief Information Officer of a Fortune 500 Company and in multiple industries. Ms. Ramoneda started her career at Arthur Andersen doing system integration, business process outsourcing and practice management. Over Ms. Ramoneda’s career, she has provided leadership for the continued development of innovative, robust, and secure information technology environments, giving her an understanding of the challenges and issues in our industry and the industries of many of our vendors and customers.



John P. Reilly AGE 73 DIRECTOR SINCE June 2001 COMMITTEES Serves on all committees		Experience John P. Reilly has served as a director of the Company since June 2001. Mr. Reilly served as a partner of Ares Management, LLC, a global alternative asset manager, until June 2016. Ares acquired Keltic Financial Services, LLC in 2014, where Mr. Reilly was President and CEO from 1999 to June 2014. Prior to that, from 1977 to 1999, he held senior management positions in the Leveraged Buy-Out, Leasing, Corporate Finance and Private Banking divisions at Citibank, N.A. Mr. Reilly also serves on the Board of Directors of Chimera Investment Corporation, a public real estate investment trust. Qualifications Mr. Reilly brings to the Board extensive financial skills important in the understanding and oversight of our financial reporting, enterprise and operational risk management and corporate finance matters. His long career in the financial services industry, including serving as Chief Executive Officer for a finance company along with his MBA in Finance from Farleigh Dickinson University, also provides Mr. Reilly with financial management expertise which he brings to our Board.



Jeffrey R. Rodek AGE 68 DIRECTOR SINCE May 2020 COMMITTEES Serves on all committees		Experience Jeffrey Rodek has served as a director of the Company since May 2020. Mr. Rodek has served as an Executive Network Advisor and Limited Partner of Tensility Venture Partners, a venture capital firm investing in early-stage AI startups, since October 2017, as well as Executive Advisor and member of the Leadership Council for Pathr.ai Inc. since September 2021. From July 2007 to May 2018, Mr. Rodek served as a Senior Lecturer at the Fisher College of Business at The Ohio State University. Prior to that, Mr. Rodek served as Senior Advisor and Executive Partner at Accretive, LLC from July 2007 to December 2009; as Executive Chairman, Chairman and Chief Executive Officer of Hyperion Solutions Corporation from October 1999 to April 2007; and as President and Chief Operating Officer of Ingram Micro Corporation from 1995 to 1999. Qualifications Mr. Rodek has over 40 years of business and leadership experience spanning across multiple industries. Over Mr. Rodek’s career, he has driven performance growth and improved corporate governance strategies in the logistics, enterprise software and technology solutions industries, giving him a keen understanding of the challenges and issues present in our industry.



Elizabeth O. Temple AGE 56 DIRECTOR SINCE September 2017 COMMITTEES Chair of Compensation Committee and serves on all committees		Experience Elizabeth O. Temple has served as a director of the Company since September 2017. Ms. Temple has served as the Chair and Chief Executive Officer of Womble Bond Dickinson (US) LLP since January 1, 2016 She has been a practicing corporate and securities attorney at the firm since 1989. Prior to serving as Chair and Chief Executive Officer, Ms. Temple served in a number of leadership roles at the firm over the past decade and has been a partner at the firm since 1997. Qualifications Ms. Temple has extensive leadership experience serving as the Chief Executive Officer of a Global Top 100 law firm. Over Ms. Temple’s legal career, she has counseled public and private companies on their highest strategic priorities, giving her an understanding of the challenges and issues in the Company’s industry and the industries of many of its vendors and customers. Her background as a legal advisor to public companies and boards provides the Board with additional expertise in the areas of risk management, corporate governance, acquisitions and securities regulation.



Charles R. Whitchurch AGE 75 DIRECTOR SINCE February 2009 COMMITTEES Chair of Audit Committee and serves on all committees		Experience Charles R. Whitchurch has served as a director of the Company since February 2009. Mr. Whitchurch served as the Chief Financial Officer of Zebra Technologies Corporation from September 1991 to June 2008. Mr. Whitchurch previously served on the boards of directors of SPSS, Inc., a publicly-held provider of predictive analytic software, from October 2003 to October 2009, Landmark Aviation, a privately-held operator of fixed-base aviation operations throughout the United States and Europe, from October 2008 to October 2012, Tricor Braun Holdings, a privately-held distributor of rigid packaging materials, from July 2010 to November 2016, and Ashworth College, a provider of nationally accredited on-line education, from June 2010 to December 2019. On all boards, he served as Chairman of the Audit Committee. Qualifications Mr. Whitchurch’s executive career brings in-depth knowledge of business operations and strategy and broad experience related to financial and corporate governance matters through his tenure serving on the boards of directors of public companies, including serving as the chairman of audit committees. With over three decades of service as a Chief Financial Officer, more than half of which was with a public company, Mr. Whitchurch has a deep understanding of the complex accounting issues often faced by public companies.

Executive Officers of the Registrant



Name	Experience and Qualifications	Age
Michael L. Baur	Michael L. Baur is our Chairman, Chief Executive Officer and President. Mr. Baur has served as our President or CEO since our inception in December 1992, as a director since December 1995, and as Chairman of the Board since February 2019.	64
Stephen T. Jones	Stephen T. Jones has served as our Senior Executive Vice President, Chief Financial Officer since December 2020. Prior to joining the Company, Mr. Jones served as the International Chief Financial Officer of Blackbaud, Inc., a leading cloud software company, from 2016 to 2020. Prior to that, Mr. Jones served in finance and management positions at Lexmark International, an imaging solutions and technologies company, from 2000 until 2016.	50



Name	Experience and Qualifications	Age
Matthew S. Dean	Matthew S. Dean joined the Company in January 2018 and serves as Senior Executive Vice President, Chief Legal Officer. Matt is responsible for all legal aspects of the Company, including providing legal counsel to the Board of Directors, CEO, and other global senior leadership. With more than 20 years of corporate legal and strategy experience, Matt previously served as Vice President, General Counsel, and Secretary for Vertiv Inc. (formerly Emerson Network Power), a global manufacturer and provider of equipment and services for data centers from 2011 through 2017.	52
John Eldh	John Eldh joined the Company as Senior Executive Vice President, Chief Revenue Officer in October 2019 and has served as an executive officer since November 2020. Prior to joining the Company, Mr. Eldh served as Senior Vice President of the Global Partner Organization at CA Technologies, a leading provider of application development, management, and security solutions, from September 2014 to November 2018. Prior to that Mr. Eldh served in various leadership capacities at Symantec Corporation, a cybersecurity and identity protection company, from January 2005 to August 2014.	53

Rachel Hayden	Rachel Hayden joined the Company as Senior Executive Vice President, Chief Information Officer in June 2021. Prior to joining the Company, Ms. Hayden served as Chief Information Officer of Just Born, Inc., a family-owned confectionary company, from 2016 to 2021. Prior to that, Ms. Hayden served five years with Berry Global, a manufacturer of innovative packaging and engineered products, in various leadership roles, including Senior Director of IT, Global Business Systems.	45

Code of Conduct

Our Code of Conduct applies to all of our executive officers, including our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”), directors and employees. We have posted the Code of Conduct on the “Investors” page of our website,

www.scansource.com

, under the “Governance” tab. We will provide a copy of the Code of Conduct upon request to any person without charge. Such requests may be transmitted by regular mail in the care of the Corporate Secretary.

We will post on our website,

www.scansource.com

, under the “Corporate Governance” tab, or will disclose on a Form

8-K

filed with the SEC, any amendments to, or waivers from, any provision of the Code of Conduct that applies to our CEO and our CFO, or persons performing similar functions, and that relate to (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us, (iii) compliance with applicable

governmental laws, rules and regulations, (iv) the prompt internal reporting of violations of the Code of Conduct to an appropriate person or persons identified in the Code of Conduct, or (v) accountability for adherence to the Code of Conduct. Any waiver granted to an executive officer or a director may only be granted by the Board and will be disclosed, along with the reasons therefor, on a Form

8-K

filed with the SEC. No waivers were sought or granted in fiscal 2021.

Audit Committee and Audit Committee Financial Expert

The Board has a standing Audit Committee. The Audit Committee currently is composed of Chair Whitchurch and directors Browning, Emory, Grainger, Ramoneda, Reilly, Rodek and Temple. The functions of the Audit Committee include selecting the independent auditor, reviewing the scope of the annual audit undertaken by our independent auditor and the progress and results of its work, reviewing our financial statements and our internal accounting and auditing procedures and overseeing our internal audit function. The Audit Committee met four times during the 2021 fiscal year. Each member of the Audit Committee meets the definition of independence for audit committee members as set forth in the NASDAQ listing standards and Exchange Act. The Board has determined that Chair Whitchurch and directors Browning, Grainger, Reilly, Rodek and Temple meet the requirements of an “audit committee financial expert” as defined in SEC rules and regulations.

Procedures for Shareholder Recommendations of Nominees to the Board of Directors

There were no material changes to the procedures described in our Proxy Statement relating to the 2021 annual meetings of shareholders by which shareholders may recommend nominees to our Board of Directors.

Delinquent Section 16(a) Reports

To our knowledge, based solely on a review of the copies of Section 16 reports furnished to us and written representations that no other reports were required, during the fiscal year ended June 30, 2021, all Section 16(a) filing requirements applicable to directors, executive officers and greater than ten percent beneficial owners were complied with by such persons, except that a late Form 4 for Mr. Rodek was filed for one open-market transaction on December 16, 2020 and a late Form 4 for Mr. Baur was filed for one open-market transaction pursuant to a Rule

10b5-1

plan on October 15, 2020.

Item 11. Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis outlines our executive compensation program for our named executive officers (NEOs) listed below. The CD&A provides information about our compensation objectives and practices for our NEOs and explains how the Compensation Committee of the Board of Directors arrived at the compensation decisions for fiscal 2021.



Name		Title
Michael L. Baur		Chairman, Chief Executive Officer and President
Stephen T. Jones		Senior Executive Vice President and Chief Financial Officer
Matthew S. Dean		Senior Executive Vice President and Chief Legal Officer
John Eldh		Senior Executive Vice President and Chief Revenue Officer
Rachel Hayden		Senior Executive Vice President and Chief Information Officer
Gerald Lyons		Former Senior Executive Vice President and Chief Financial Officer

Executive Summary

2021 Business Highlights

Our talented team of sales, marketing, services and development professionals have continued to make progress on our strategic plan of offering hybrid distribution solutions that allow our channel partners to meet the technology demands of

end-user

customers. We are enabling our sales partners to accelerate their transformation to the digital world of opportunity. Our hybrid distribution model delivered strong results in fiscal year 2021 as a result of increased sales volumes and decreased costs. For fiscal year 2021, net sales increased 3.4% to $3.2 billion, or a 5.5% year-over-year increase on an organic basis. Fiscal year 2021 GAAP operating income increased to $61.5 million, and

non-GAAP

operating income increased to $93.1 million, up 18.0% year-over-year. On a GAAP basis, net income for fiscal year 2021 totaled $45.4 million, or $1.78 per diluted share.

Non-GAAP

net income totaled $69.9 million, or $2.74 per diluted share. For more information on our

non-GAAP

measures and reconciliations to GAAP measures, see

“Non-GAAP

Financial Information” beginning on page 31 of our Annual Report on Form

10-K

filed on August 24, 2021.

COVID-19

and the pandemic related containment measures have had an impact on our business, suppliers’ businesses and sales partners’ businesses. The negative impacts to net sales from the pandemic, including declines in customer demand and supply chain disruptions, were most pronounced during the fourth quarter of fiscal year 2020, and recovered throughout fiscal year 2021. We have also experienced increased employee related healthcare and prevention costs. While we are unable to predict the ultimate impact that

COVID-19

will have on our business, certain technologies have benefited from the widespread adoption of work-from-home, such as unified communication solutions (UCaaS) and other collaboration solutions and associated peripherals, as well as the accelerated shift to digitize and automate processes. In July 2020, we initiated a $30 million expense reduction plan designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of the

COVID-19

pandemic. The expense reduction plan included salary reductions for our executive team through December 31, 2020 and elimination of cash retainers for the Board through December 31, 2020, along with other cost saving measures. During the fiscal year ended June 30, 2021, we recognized approximately $9.3 million for restructuring and other charges, largely for severance and employee benefits for employees who left the Company as part of this plan.

Fiscal 2021 Pay Mix

The Compensation Committee strives to provide our NEOs with a compensation package that balances short-term and long-term compensation. We believe that our current executive compensation program, consisting of a mix of base salary, retirement contributions, annual performance-based cash incentive awards and both performance-based and service-based grants of equity, (i) provides a predictable and transparent structure for executive compensation, (ii) provides a significant percentage of a NEO’s compensation through variable performance-based vehicles and (iii) attracts, retains and motivates our NEOs.

Our executive compensation program emphasizes performance-based pay. The elements of compensation and the general mix of compensation among the various elements remained largely unchanged from the previous year, except, for fiscal 2021, to update the mix of equity awards to the NEOs to reintroduce stock options in place of performance-based restricted stock. In fiscal 2022, the Compensation Committee determined to reintroduce performance-based restricted stock into the mix of equity awards. In addition, our fiscal 2021 cash incentive plan was updated to provide for two

six-month

measurement periods and updated metrics for performance, considering the ongoing uncertainty in the market.

Our financial performance during fiscal 2021 is reflected in the compensation of each of our NEOs for fiscal 2021, particularly with respect to payouts pursuant to our annual cash incentive program. Our cash incentive opportunity is designed so that, if our financial results, as measured by certain

non-GAAP

operating income and revenue numbers, reflect an increase in the financial performance of the Company, then our executives should realize a greater cash incentive. In addition, individual performance also is taken into account by the Compensation Committee. Awards are also capped at 200% of each executive’s target bonus regardless of our financial performance.

For fiscal year 2021, the cash incentives paid to our CEO increased from fiscal 2020 and fiscal 2019 based on (i) our financial performance and (ii) the Compensation Committee’s

pre-established

Management Incentive Plan (“MIP”) operating targets for the cash incentive opportunity. The value of the equity awarded to our CEO also increased in fiscal 2021, following a review by the Compensation Committee of realizable value of existing equity awards, a review of the CEO’s compensation against the market and in light of the extraordinary efforts of the CEO during our transformation and period of economic uncertainty. We believe this result is appropriately aligned with the Company’s fiscal 2021 financial performance.

In addition, the total compensation of our CEO generally has increased or decreased during the past five fiscal years as our

non-GAAP

operating results have increased or decreased. We believe this correlation between the Company’s performance and pay appropriately motivates and rewards our CEO and is beneficial to our shareholders.

In addition, we believe that it is important to link each of our NEO’s compensation and personal financial interests with long-term shareholder value creation. Accordingly, 56% of our CEO’s total compensation, 55% of Mr. Jones’ total compensation, 44% of Mr. Dean’s total compensation, and 49% of Mr. Eldh’s total compensation for fiscal 2021 was in the form of long-term equity incentives. For fiscal 2021, variable performance-based compensation in the form of cash and long-term equity incentives constituted 86% of our CEO’s total compensation, 79% of Mr. Jones’ total compensation, 71% of Mr. Dean’s total compensation, and 83% of Mr. Eldh’s total compensation (each as reported in the Summary Compensation Table). Ms. Hayden did not join the Company until June 2021.

Greater detail regarding the compensation of our NEOs can be found within the 2021 Summary Compensation Table.

Consideration of Results of Shareholder Advisory Votes in Executive Compensation

The Compensation Committee monitors the results of the

“Say-on-Pay”

vote and considers those results along with the objectives listed below in determining compensation policies. A substantial majority (82.7%) of our shareholders voting at the 2021 Annual Meeting approved the compensation described in our 2020 proxy statement. The Compensation Committee interpreted this vote result as a strong indication of support for our fiscal 2021 compensation program. We have conducted a variety of shareholder engagement activities this year, including investor conferences and direct meetings with many of our top shareholders. These engagements have focused on deepening the dialogue with our current shareholder base about our business strategy and performance, culture, governance, executive compensation practices, and ESG efforts. Our Lead Independent Director has participated in several of these dialogues, demonstrating accountability with our shareholders and our commitment to strong governance practices.

Fiscal 2022 Pay Mix Changes

As mentioned, in fiscal 2022, the Compensation Committee reintroduced performance-based restricted stock to replace stock options in the pay mix (a 50/50 split of time-vested restricted stock units (RSUs) and performance-based RSUs). These performance-based restricted stock awards included the following changes from the performance-based awards granted in previous years: (i) elimination of a single performance metric, as performance metrics will include

non-GAAP

earnings per share metric and adjusted ROIC as compared to WACC, (ii) introduce a modifier based on relative total shareholder return, (iii) provide for a three-year performance period and (iv) minimize overlapping performance conditions with our short-term incentives. In addition, for fiscal 2022 awards, the Compensation Committee determined to change the vesting period for time-based restricted stock awards from three years to four years. These changes were designed to more accurately reflect the overall health of the company and more closely associate executive pay with company performance.

Objectives of the Compensation Program

Our executive compensation program is designed to attract, retain and motivate executives through achieving the following three objectives:

•

Pay-for-Performance

•

Align Interests of Executives with Shareholders

•

Retain Talented Leadership

Pay-for-Performance

The guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of executives and shareholders should be aligned. Our compensation program is designed to provide significant performance-based compensation through our cash incentive plan, and a large portion of the compensation is in the form of equity awards. As a result, a significant portion of our NEOs’ compensation is directly contingent on our operating results and/or aligned with shareholder interests.

Align Interests of Named Executive Officers and Shareholders

The following compensation policies and practices are designed to align the interests of our NEOs and our shareholders:



ScanSource Does
✓	Require significant stock ownership.	We have adopted minimum ownership guidelines for our CEO. He is required to retain 50% of the net shares resulting from vesting or exercises of equity awards until he owns Company common stock in an amount equal to three times his base salary.

✓	Mandate a claw-back policy tied to a compensation program.	We maintain a “claw-back policy,” which would allow us to recover certain incentive compensation based on financial results in the event those results were restated due at least partially to the recipient’s misconduct.

✓	Seek our shareholders’ input on executive compensation.	We value our shareholders’ input on our executive compensation, and we seek an annual non-binding vote on our executive compensation policies.

✓	Prohibit pledging of our securities by our Named Executive Officers or Board of Directors.	We have a policy that prohibits officers and directors from pledging Company securities in margin accounts or as collateral for a loan.

✓	Prohibit hedging of our securities by our Named Executive Officers or Board of Directors.	We have a policy that prohibits employees (including the NEOs) and directors from trading in options, warrants, puts, calls or similar instruments in connection with our securities, or selling our securities “short.”

✓	Require a “double trigger” for cash severance benefits upon a change in control.	Our employment arrangements with our NEOs provide cash severance only upon a “double trigger.”

✓	Not provide golden parachute tax gross ups or excessive perquisites.	We do not provide excise tax gross-ups for severance benefits received by our NEOs under their employment arrangements. We only provide limited perquisites to our NEOs.

Retain Talented Leadership

We operate in a marketplace characterized by significant competition for talented executives. Our executive compensation program is designed to enable us to attract, motivate, reward and retain the management talent necessary to achieve both long-term and short-term corporate objectives and enhance shareholder value. We also aim to establish executive compensation levels that correlate directly to the NEO’s level of responsibility, with the compensation of our NEOs being tied both to our performance as a whole and to individual performance. To do this effectively, our philosophy is that our compensation program must provide our NEOs with a total compensation package that is reasonable in relation to our performance, and sufficiently competitive with the packages offered by similarly sized companies within or outside our industry.

Material Elements of Our Compensation Programs

In determining the compensation of our NEOs, the Compensation Committee uses the following specific compensation elements, which it believes support our compensation objectives.



		Compensation Objectives
Compensation Element	Description	Reward Performance	Attract and Retain	Align with Shareholders
Base Salary	Fixed level of compensation		✓
Annual Variable Cash Incentive Awards	Performance-based cash incentives reward Company and individual performance	✓	✓	✓

Time-Vesting Restricted Stock or Restricted Stock Units	Long-term equity award, with three-year vesting (four years for awards granted in fiscal 2022)	✓	✓	✓

Performance- and Time-Vesting Restricted Stock or Restricted Stock Units	Rewards Company performance; three-year vesting, in addition to performance criteria	✓	✓	✓

Stock Options	Rewards Company performance above a threshold	✓	✓	✓

Health, Welfare & Retirement Plans	401(k) Savings Plan		✓	✓
Health, Welfare & Retirement Plans	Employee Stock Purchase Plan		✓
	Deferred Compensation Plan		✓
	Executive Severance Plan		✓

CEO Stock Ownership Guidelines, Anti- Hedging Policy, Anti-Pledging Policy and Claw-Back Policy	Compensation risk mitigators			✓

The Compensation Committee determines the amounts of each element and the aggregate compensation for our NEOs without using any specific formula or attempting to satisfy any specific ratio for compensation among our NEOs; however, the differences in the aggregate compensation between our CEO and the other NEOs are intended to reflect the individual responsibilities with respect to their respective positions, experience in the applicable role, experience in our industry and market compensation data for peer companies. In determining compensation for our NEOs, the Compensation Committee considers the amount of compensation they receive in cash versus equity, along with the status of outstanding equity awards. A portion of certain of our NEOs’ compensation is in the form of stock options, which are valued at the time of grant using the Black-Scholes model, despite that this form of compensation may never result in value for those NEOs. As a result, there can be a significant difference between what is reported as those NEOs’ total compensation for a given year and what they actually receive.

The Compensation Committee views the components of compensation as related, but distinct, and therefore regularly reevaluates the appropriate mix of elements, including the appropriate targets for incentive awards. The Compensation Committee also relies on the independent expertise compiled from the general knowledge, experience and good judgment of its members, both with regard to competitive compensation levels and the relative success that our Company has achieved. The Compensation Committee also retains, and relies on information provided by, compensation consultants.

Base Salary

Base salary generally provides a fixed base level of compensation for our executives for the services they render during the year. The purpose of base salary is to compensate our NEOs in light of their respective roles and responsibilities over time. Base salary is essential to allow us to compete in the employment marketplace for talent and is an important component of total compensation for the NEOs. It is vital to our goal of recruiting and retaining NEOs with proven abilities. A NEO’s base salary is initially set in accordance with the terms of his or her

employment agreement or letter and is reviewed annually. Increases, if any, to base salary are based generally upon a subjective assessment of overall individual performance, market trends and the Company’s performance. In evaluating the Company’s performance in fiscal 2021, the primary consideration was our financial performance for the relevant annual period, with a focus on

non-GAAP

operating income, technology solutions operating income and Intelisys revenue. In evaluating the Company’s performance in fiscal 2022, the focus will be on Adjusted EBITDA which we believe aligns executive and shareholder interests and which we consider to have a strong correlation with shareholder value creation.

Annual Variable Performance-Based Cash Incentive Awards

Annual variable performance-based cash incentive awards are designed to encourage the achievement of various

pre-determined

Company financial and operating performance goals. Given the uncertainty surrounding the economic environment at the time, in August 2020 the Compensation Committee adopted two

six-month

performance periods under the cash incentive plan for fiscal 2021. In addition, the performance metrics were updated to include

non-GAAP

operating income, technology solutions operating income and Intelisys revenue as the primary measurements of performance for cash incentive awards, because of our belief that each such measurement has a strong correlation with shareholder value. Our management emphasizes these measures in evaluating and monitoring the Company’s financial condition and operating performance. These metrics assist us in comparing our performance over various reporting periods on a consistent basis because they remove from our operating results the impact of items that do not reflect our core operating performance. The Compensation Committee has the discretion to adjust these measurements for extraordinary

one-time

events, or other items beyond management’s control, and to award cash incentives based on other criteria. In fiscal 2021, no such adjustments or additional awards were made under the performance-based cash incentive program.

Annual Performance-Based and Service-Based Equity Awards

The Compensation Committee annually grants equity to our NEOs, since it believes this element of our compensation program provides our NEOs with the opportunity to develop a significant ownership stake in the Company and directly aligns their interests with the long-term interests of our shareholders. In addition, equity awards serve as a retention vehicle for the NEOs because, if the applicable criteria is met, they typically vest over three years and generally are forfeited if not vested upon termination of employment. In fiscal 2022, the Compensation Committee updated the form of time-based restricted stock units to provide for vesting over four years, increasing the retention value of the award. In November 2020, against the backdrop of our continuing transformation and impact of the

COVID-19

pandemic, the Compensation Committee concluded that it would be extraordinarily difficult to accurately gauge and set multi-year performance targets for performance-based equity awards. As such, and to keep the Company focused on operating efficiently and safely, the Compensation Committee approved a change in the mix of equity, replacing performance-based restricted stock unit grants with stock options for fiscal 2021 for our NEOs. The Compensation Committee replaced performance-based restricted stock with stock options, as opposed to other forms or mixes of incentive compensation, because of the long-term nature of options and their direct alignment with share price appreciation. This shift in the mix of equity was intended to apply to fiscal 2021 only and, in fiscal 2022, the Compensation Committee once again eliminated stock options and reintroduced performance-based equity awards into the compensation mix.

In approving long-term equity incentives, the Compensation Committee focuses on our overall performance, the value of the proposed award, the amount and value of awards granted in prior years, and the overall compensation package of the NEO with the ultimate goal of aligning the interests of the executives with our shareholders’ interests and motivating and retaining critical leadership through the use of equity. The Compensation Committee also believes that linking the personal financial interests of our NEOs to our long-term performance discourages excessive risk taking and supports sustainable shareholder value creation.

We have historically granted annual equity awards to the NEOs at the November meeting of the Compensation Committee to align the timing more closely to the annual performance evaluations of those officers. In fiscal 2022, the annual performance of our officers was completed in August and the annual equity award grant date was also moved to that time. The equity award policy provides that the grant date will be the third trading date following the meeting at which the awards are approved, provided that the Company is in an open trading window, and otherwise on the first trading day of the next open window. Equity awards may also be made by the Compensation Committee from time to time to incentivize and reward certain performance and to provide additional retention value. See the “

Long-Term Equity Incentives

” section of this Compensation Discussion and Analysis for more information.

The Compensation Committee’s policy is to set the exercise price of stock option awards by using the closing price of our stock on the date of the grant. The Compensation Committee also determines the number of shares of a value-based restricted stock unit award by using the closing price of our stock on the grant date.

Process for Determining Named Executive Officer Compensation

Role of the Compensation Committee

The Compensation Committee is responsible for reviewing, approving, and monitoring compensation policies and programs that are consistent with our business strategy and aligned with shareholders’ interests. Specifically, the Compensation Committee is responsible for:

•

reviewing and approving the corporate goals and objectives relevant to the compensation of the CEO and other NEOs;

•

negotiating the employment agreement of the CEO;

•

reviewing and approving any employment letters or contracts and severance plans of all other NEOs;

•

reviewing and approving annual incentive awards to NEOs; and

•

reviewing and approving equity-based compensation plans and grants of equity awards under such plans and the Board-approved policies or guidelines applicable to them.

The Compensation Committee meets several times each year to review and approve executive compensation programs and performance and, if necessary, recommend approval to the Board.

Role of Management

The Compensation Committee regularly meets with the CEO to receive reports and recommendations regarding the compensation of our NEOs other than the CEO. In particular, the CEO recommends to the Compensation Committee annual base salaries, annual incentive awards and long-term or performance equity grants for the NEOs other than himself. The Compensation Committee then evaluates each NEO, including the CEO, sets performance criteria for annual cash incentive awards, and makes long-term equity grants, if any. At the beginning of each fiscal year and as necessary throughout the year, Management Incentive Plan (“MIP”) targets for certain financial measures are established following consultation with management with consideration for adjustments for

one-time

expenses or longer-term investments that are planned. As part of its evaluation process, the Compensation Committee considers our performance and consistency, the NEO’s individual performance over the prior year, changes in responsibilities and future potential as well as data available from compensation surveys and compensation consultants. Although the Compensation Committee considers the CEO’s recommendations, the final decisions regarding base salary, annual incentive awards and equity awards of the NEOs are made by the Compensation Committee.

Role of Compensation Consultant

The Compensation Committee has the authority to retain independent compensation consultants to provide counsel and advice. For fiscal 2021, the Compensation Committee retained Pearl Meyer. The Compensation Committee reviewed all factors relevant to the independence of Pearl Meyer, including:

•

The provision of services to the Company by the consultant other than those requested by the Compensation Committee;

•

The amount of fees received by the consultant as a percentage of its total revenue;

•

The policies and procedures adopted by the consultant that are designed to prevent conflicts of interest;

•

Any business or personal relationship between a consultant and a member of the Compensation Committee;

•

Any stock of the Company owned by a consultant; and

•

Any business or personal relationship between a consultant and an executive officer of the Company.

As a result of such evaluation, and a certification from Pearl Meyer regarding its consultant’s independence, the Compensation Committee determined that Pearl Meyer is independent.

The Compensation Committee regularly reviews benchmarking and market surveys in order to ensure that our compensation is competitive with that of our peers. The Compensation Committee also considers analysis and benchmarking by third parties, such as ISS and Equilar, and the different peer groups each firm uses for comparative purposes in order to gain a better understanding of compensation practices and trends in the market.

Our compensation consultants provide the Compensation Committee with general market surveys and other information related to the general market for executive compensation, including best practices and emerging trends. In addition, in fiscal 2021 Pearl Meyer provided information derived from proxy statements from peer companies and from surveys that include publicly traded and privately held technology distributors and other technology industry companies with similar revenues. The peer companies referred to for evaluation of fiscal 2021 compensation included the following:


Anixter International Inc.	Applied Industrial Technologies, Inc.	Benchmark Electronics, Inc.
Diebold Nixdorf, Inc.	ePlus, Inc.	Insight Enterprises, Inc.
Itron, Inc.	PC Connection, Inc.	WESCO International, Inc.
	Plexus Corp.	TTM Technologies, Inc.

The Compensation Committee reviewed compensation information from this peer group by comparable executive position and level to better understand the market for other participants in the market for all aspects of compensation. Note that PCM, Inc. was in the historical peer group but was acquired in 2019 and excluded from the fiscal 2021 analysis. Anixter International was also acquired in

mid-2020

but was included in the fiscal 2021 analysis. In a review of the applicable data, the Compensation Committee sought to ensure that the overall compensation to our NEOs was competitive and within norms for the industry and other companies of similar characteristics based on the executive’s position, level and job performance.

The Compensation Committee took this evaluation into account in determining all elements of NEO compensation for fiscal 2021, including the fiscal 2021 MIP design and equity awards.

Named Executive Officer Compensation in Fiscal 2021

Base Salary

The initial base salary for each NEO was established in the NEO’s employment agreement or employment letter. All NEO employment arrangements require an annual review of base salary by the Compensation Committee, and annual upward adjustments may be made by the Compensation Committee on a discretionary basis. In deciding whether to increase a NEO’s compensation, the Compensation Committee considers company performance, the consistency of the NEO’s individual performance over the prior year, changes in the NEO’s responsibilities and the NEO’s future potential. The Compensation Committee also considers data available from benchmarking studies obtained from a range of industry and general market sources, as well as information that may be provided by its compensation consultants, including comparisons of peer companies comprised of other participants in the industry and other similar companies based on size and other objective factors.

The Compensation Committee met in August of 2020 to determine Mr. Baur’s, Mr. Dean’s and Mr. Lyons’ base salaries for fiscal 2021. The Compensation Committee did not award any base salary increases to Mr. Baur, Mr. Dean or Mr. Lyons for fiscal 2021. Mr. Jones’ base salary was set in his employment letter at $400,000 and remained the same at the time he was hired and it remained the same when he was named an executive officer in December 2020. Mr. Eldh’s base salary was set at $500,000 at the time he was named an executive officer in November 2020. Ms. Hayden’s base salary was set in her employment letter at $350,000 and it remained the same when she was named an executive officer in June 2021.

Base salaries for Mr. Baur, Mr. Jones, Mr. Dean, Mr. Eldh, Ms. Hayden and Mr. Lyons, for fiscal 2021 were as follows:



Named Executive Officer	Base Salary (standard)
Mr. Baur	$	875,000
Mr. Jones	$	400,000
Mr. Dean	$	450,000
Mr. Eldh	$	500,000
Ms. Hayden	$	350,000
Mr. Lyons	$	367,500	1

This represents Mr. Lyons annualized salary as approved by the Compensation Committee. Mr. Lyons left the Company in January 2021 and received severance benefits as set forth in the Company’s Executive Severance Plan and described below.

In light of the impacts of

COVID-19,

we implemented an expense reduction plan effective July 1, 2020 which included a temporary salary reduction for each NEO serving at such time through December 31, 2020, with a reduction of 25% for the Chairman and Chief Executive Officer, 15% for the Chief Financial Officer in office at such time, and 10% for the Chief Legal Officer.

Annual Performance-Based Cash Incentives

The principal objective of our performance-based cash incentives is to motivate and reward our NEOs for performance in achieving our business objectives based upon annual attainment of certain financial measures. The Compensation Committee created a cash incentive design for the NEOs in fiscal 2013, which we refer to as the Management Incentive Plan (“MIP”). Annual performance-based cash incentives were set based on an analysis of market data and assessing the experience of the respective individual and his or her respective role. The design provides that each NEO’s cash incentive opportunity will be expressed as a percentage of his or her base salary and earned based on

non-GAAP

operating results as compared to

pre-established

threshold and stretch goals. For fiscal 2021, Mr. Baur’s and Mr. Eldh’s cash incentive opportunity was 150% of their base salary, Mr. Jones and Mr. Lyons’ cash incentive opportunity was 100% of their base salary, and Mr. Dean’s and Ms. Hayden’s cash incentive opportunity was 60% of his or her base salary. The cash incentive opportunities for Messrs. Baur, Dean and Lyons remained at the same level as fiscal 2020. The cash incentive opportunities for Messrs. Jones, Eldh and Hayden were provided in their employment arrangements at the time of their appointment as an NEO. Each NEO has a variable factor by role or position applied as a percentage against his or her respective base salary.

Given the uncertainty surrounding the economic environment at the time, the Compensation Committee adopted two

six-month

performance periods under the MIP for fiscal 2021. The performance metrics for the first

six-month

period were set in August 2020 and include

non-GAAP

operating income (“SCSC OI”), technology solutions operating income (“Tech OI”) and Intelisys revenue (“Agency Revenue”). Tech OI represents

non-GAAP

operating income for all of our businesses, excluding the Intelisys business where we used Intelisys revenue for the MIP performance target. In January 2021, the Compensation Committee set updated targets for those same performance metrics for the second

six-month

period, including to remove revenues from a small,

non-material

part of the business in the calculation of the Intelisys revenue in the second half of the fiscal year. Each performance metric is adopted with certain adjustments to align management’s performance on focused strategic objectives. Individual performance results are also factored into the cash incentive opportunity. The maximum incentive award for any NEO is 200% of his or her target bonus.

For fiscal 2021, the Compensation Committee established MIP performance targets as set forth below. The payouts of the awards depend on our results in comparison to these targets, weighted as follows: SCSC OI, 30%; Tech OI, 25%; Agency Revenue, 25%; and individual performance, 20%. If performance of any measure does not meet the applicable threshold for that measure, no award will be earned for that measure. If the performance of a measure reaches the applicable threshold, the award earned for that measure will be 50% of the target. The award earned for results between the threshold and the maximum of 200% of the target is calculated using straight-line interpolation.



First Half Fiscal 2021 MIP Performance Targets
Standard	SCSC OI		Tech OI		Agency Revenue*		Individual Performance			Funding % of Target
Threshold	$	27.4	$	16.2	$	30.9					50	%
Target	$	32.2	$	19.0	$	33.4		100	%		100	%
Maximum	$	35.4	$	20.9	$	35.9					200	%
Actual Results	$	39.6	$	26.0	$	33.5		100	%		155.6	%
Weights		30%		25%		25%		20	%		100	%

*	The first half fiscal year 2021 for Agency Revenue includes revenues for the RPM business, which totaled approximately $2 million.



Second Half Fiscal 2021 MIP Performance Targets
Standard	SCSC OI		Tech OI		Agency Revenue		Individual Performance			Funding % of Target
Threshold	$	35.7	$	23.9	$	30.9					50	%
Target	$	42.0	$	28.1	$	33.4		100	%		100	%
Maximum	$	46.2	$	30.9	$	35.9					200	%
Actual Results	$	53.5	$	39.4	$	33.2		100	%		154.2	%
Weights		30%		25%		25%		20	%		100	%



Full Year Fiscal 2021 MIP Performance Targets
Standard	SCSC OI		Tech OI		Agency Revenue		Individual Performance			Funding % of Target
Threshold	$	63.10	$	40.10	$	61.80					50	%
Target	$	74.20	$	47.10	$	66.80		100	%		100	%
Maximum	$	81.60	$	51.80	$	71.80					200	%
Actual Results	$	93.10	$	65.40	$	66.70		100	%		154.9	%
Weights		30%		25%		25%		20	%		100	%

The individual performance was measured against annual goals set by the Compensation Committee for each of the NEOs relating to cost savings, execution of our strategic plan, planned divestitures, strategic partnerships, internal professional development and departmental improvements.

In determining the achievement of the individual performance metric, the Compensation Committee considered the individual’s performance against the following goals during fiscal 2021 for each NEO:

Mr. Baur

•

Achievement of $30 million in cost savings

•

Management succession planning

Mr. Jones

•

Achievement of $30 million in cost savings

•

Finance and accounting department optimization

Mr. Dean

•

Achievement of $30 million in cost savings

•

Company long-term strategic planning and implementation

Mr. Eldh

•

Top strategic VAR and partner outreach and presentations

•

Executive coaching program

The Compensation Committee determined that each of the NEOs achieved their individual performance goals at 100% of Target.

For fiscal 2021, the Compensation Committee elected not to make any discretionary modifications to the awards payable under the MIP. As a result of the SCSC OI, Tech OI and Agency Revenue results and individual performance for fiscal 2021, the cash incentive award earned by the NEOs under the MIP in fiscal 2021 was 154.9% of the target, as compared to 12.91% in fiscal 2020 and 28% in fiscal 2019.

The specific calculations, targets and cash awards for each NEO under the MIP for fiscal 2021 are detailed below.



Named Executive Officer	Base Pay		Variable Factor			Bonus Target		Bonus Maximum		% of Bonus Target			Amount of Cash Incentive
Mr. Baur	$	875,000		150	%	$	1,312,500	$	2,625,000		154.9	%	$	2,033,063
Mr. Jones (1)	$	400,000		100	%	$	400,000	$	800,000		154.9	%	$	360,500
Mr. Dean	$	450,000		60	%	$	270,000	$	540,000		154.9	%	$	418,230
Mr. Eldh	$	500,000		150	%	$	750,000	$	1,500,000		154.9	%	$	1,161,750
Ms. Hayden (1)	$	350,000		60	%	$	210,000	$	420,000		154.9	%	$	27,107
Mr. Lyons (1)	$	367,500		70	%	$	257,250	$	540,000		154.9	%	$	233,712

(1)	Mr. Jones’ award was pro-rated for seven months of service, Ms. Hayden’s award was pro-rated for one month of service and Mr. Lyons’ award was pro-rated for seven months of service.

In August 2020, Mr. Dean was awarded a bonus of $170,000 in recognition of Mr. Dean’s taking on additional duties, including oversight of the corporate development and strategy group, the software development group, and the divestment of our products distribution operations in Latin America, outside of Brazil, and in Europe and the UK. The award to Mr. Dean was made in the sole discretion of the Compensation Committee and was not a discretionary modification to the awards payable under the MIP.

Ms. Hayden’s employment arrangement provided that she would be paid a hiring bonus of $200,000 to offset the bonus she left behind at her previous employment. $100,000 of this bonus was paid in June 2021 and the other $100,000 was paid in September 2021.

Long-Term Equity Incentives

General Overview

Equity awards are a significant component of our NEO compensation. We grant equity awards, typically in the form of restricted stock awards and/or restricted stock units and performance-based restricted stock units or awards. In fiscal 2021, the Compensation Committee determined to replace performance-based restricted stock units with stock options in the mix of equity awards. In fiscal 2022, the Compensation Committee determined to resume awarding performance-based restricted stock and eliminate stock options. We maintain a formal Equity Award

Grant Policy, whereby equity awards to employees are made by, or with the oversight of, the Compensation Committee or the Board. Under the policy, the Compensation Committee must approve any equity awards to the NEOs. Under the policy, our Principal Accounting Officer and the Senior Executive Vice President of Worldwide Human Resources oversee the documentation of, and accounting for, equity award grants.

The Compensation Committee grants annual service-based equity awards to employees based on merit, which vest over a three-year period in the majority of instances, provided that the grantee remains employed with the Company through each vesting date. In fiscal 2022, the Compensation Committee determined to update the forms of time-based restricted stock unit awards to provide for a four-year vesting period. The grant date for annual equity awards provides that the grant date will be the third trading date following the meeting at which the awards are approved, provided that the Company is in an open trading window, and otherwise on the first trading day of the next open window. In addition, vesting of such awards accelerates on a change in control followed by termination in certain instances or upon death, disability or termination due to retirement. In certain circumstances, the vesting term may be reduced due to termination of employment, death or disability of a participant.

In addition to the annual service-based equity awards discussed above, the Compensation Committee also historically granted to certain employees, including our NEOs, performance-based restricted stock awards and/or restricted stock units that contain both performance and service vesting conditions over a multi-year period. For fiscal 2021, the performance-based restricted stock units were replaced with stock options. In fiscal 2022, the Compensation Committee determined that it was appropriate to reintroduce performance-based restricted stock.

The Compensation Committee may also make special grants of equity awards during the year in the case of the hiring or promotion of certain eligible persons, or in other situations not involving annual grants. The grant date for

non-annual

grants approved by the Compensation Committee on or before the 15th day of the second month of the quarter will be the first day of the third month of such quarter. For

non-annual

grants approved after the 15th day of the second month of the quarter, the grant date will be the first day of the third month of the following quarter. In any event, all equity awards must be made during an open trading window.

The number of shares subject to equity awards granted by the Compensation Committee to NEOs in a given year is based on, among other things, overall Company performance, the number of shares available for awards under the 2013 Plan or successor plan, the value of the proposed award, the amount and realizable value of equity awards awarded in prior years, total compensation and consideration of the competitive market practice for the respective position level and experience, with the ultimate objective of motivating, rewarding and retaining NEOs while maintaining efficient use of equity and preserving shareholder value.

Vesting of Fiscal 2020 Performance-Based Equity Awards

Certain of our NEOs were granted performance-based restricted stock units in fiscal 2020, which had a performance period that ended in fiscal 2021. The performance-based restricted stock units had a performance cycle of one year ending on December 31, 2020. Vesting of the performance-based awards was subject to attainment of certain performance goals over calendar year 2020 in order for the awards to be earned in full, and other terms and conditions established by the Compensation Committee (including discretion of the Compensation Committee as to the extent, if any, to which the award is earned). The performance goal set for these awards was a 6% annual growth rate for

non-GAAP

operating income

(“non-GAAP

OI”). In addition to the requirement that this performance goal is met, the grantee must have been employed by the Company from the grant date until December 31, 2023

in order to receive the shares underlying the awards.

The

non-GAAP

OI for calendar 2019 was $117.549 million. Accordingly, factoring in 6% growth in

non-GAAP

OI, the performance target was as follows:


Calendar Year		Target (prior year x 1.06)
2020		$117.549 x 1.06 - $124.60 million

This yields the following in terms of potential shares earned:



	Achieved Non-GAAP OI		Shares Earned
Threshold (90%)	$	112.14 million		50	%
Target	$	124.60 million		100	%
Maximum (110%)	$	137.06 million		150	%

Non-GAAP

OI for calendar year 2020 was $(78.9) million. Therefore, no performance shares were earned, as follows: Mr. Baur – Target performance shares: 31, 915, Shares earned: 0; Mr. Dean – Target performance shares: 6,028, Shares earned: 0; and Mr. Lyons – Target performance shares: 4,256, Shares earned: 0.

Fiscal 2021 Equity Awards

In November 2020, against the backdrop of our continuing transformation and impact of the

COVID-19

pandemic, the Compensation Committee concluded that it would be extraordinarily difficult to accurately gauge and set multi-year performance targets for performance-based equity awards. As such, and to keep the Company focused on operating efficiently and safely, the Compensation Committee approved a change in the mix of equity, replacing performance-based restricted stock unit grants with stock options for the NEOs in service at such time for fiscal 2021. The Compensation Committee determined to replace performance-based restricted stock with stock options, as opposed to other forms of incentive compensation, because of the long-term nature of options and their direct alignment with share price appreciation. This shift in the mix of equity was intended to apply to fiscal 2021 only, and in fiscal 2022 the Compensation Committee reintroduced the use of performance-based restricted stock and eliminated stock options for the fiscal year.

The annual grant of long-term equity incentives was awarded to our NEOs in

mid-November

2020. In addition, later in November 2020 the Compensation Committee approved an additional grant of stock options to each of Mr. Baur and Mr. Dean. This additional grant was awarded after a review of the NEOs’ realizable equity value and the market compensation levels for our peer companies, along with consideration of the efforts of the NEOs during the pandemic and our ongoing transformation. The combination of these grants reflect a year-over-year increase in the value of the annual equity awards granted to Mr. Baur of $1 million and Mr. Dean of $200,000, in the form of stock options.

Each of the following equity awards generally vests and, if applicable, becomes exercisable in

one-third

increments on the anniversary of the grant date over three years, subject to the continued employment of the NEO on the applicable vesting date. The exercise price of all stock options granted by the Compensation Committee, including grants by our CEO pursuant to delegated authority, cannot be less than 100% of the fair market value (as determined under the applicable stock plan) of the common stock on the date of the grant. Stock options are subject to a

ten-year

term.

The long-term equity incentives awarded to our NEOs in fiscal 2021 are set forth below:



Named Executive Officer	Form of Equity Incentive Award	Amount of Shares Subject to Award
Mr. Baur	Time-Based Restricted Stock Units		51,136
	Stock Options		252,920
Mr. Jones	Time-Based Restricted Stock Units		27,482
	Stock Options		—
Mr. Dean	Time-Based Restricted Stock Units		9,659
	Stock Options		49,096
Mr. Eldh	Time-Based Restricted Stock Units		34,091
	Stock Options		89,266

Ms. Hayden joined the Company in June 2021 and did not receive any long-term equity incentive awards in fiscal 2021. Ms. Hayden’s employment arrangement provides for a

one-time

new hire grant of restricted stock units with a value of $275,000 which was granted in September 2021.

Other Important Compensation Policies Affecting the Named Executive Officers

Claw-Back Policy

If a NEO receives an award under our equity or cash incentive plans based on financial statements that subsequently are restated in a way that would decrease the amount of the award to which such NEO was entitled and the restatement is based in whole or in part on the misconduct of the NEO, then the NEO will be required to refund the Company the difference between what they received and what they should have received. In addition, this policy requires the recoupment of any compensation to the extent mandated by all applicable laws, rules, and regulations. The Compensation Committee monitors laws, rules and regulations on claw-back policies and will amend this policy as required to comply with any new claw-back rules or regulations.

Stock Ownership Requirements

The Compensation Committee has adopted minimum ownership requirements for Company stock for the CEO, as well as for the independent directors of the Board. The ownership target for the CEO has been established as three times his annual base compensation. Our CEO is expected to utilize grants under equity compensation plans to maintain the levels of ownership required by the policy. The policy also incorporates an equity retention requirement by requiring him to retain 50% of the net shares resulting from the vesting or exercise of certain awards to obtain the required ownership under the policy. The independent directors of our Board have an ownership target of five times their $85,000 annual board cash retainer in Company securities.

As of June 30, 2021, our CEO and all other members of our Board were in compliance with our stock ownership guidelines.

Anti-Hedging and Anti-Pledging Policy

Our NEOs and directors are prohibited from holding Company securities in margin accounts or pledging Company securities as collateral for a loan. All NEOs and directors are in compliance with this policy. Our NEOs and directors also are prohibited from hedging transactions.

Perquisites

We provide only limited perquisites to our NEOs, including the availability of a voluntary comprehensive physical examination once every fiscal year. The physical examinations help ensure our NEOs’ continued health and ability to render services to the Company. The physicals are provided to encourage senior leaders of the Company to set the example for living positively and active healthy living. We do not provide any other material perquisites to our NEOs.

Health and Insurance Plans

Our NEOs are entitled to participate in our health, vision, dental, paid time off, life, disability and employee stock purchase plans to the same degree that our other employees are entitled to participate. In addition, our NEOs participate in a supplemental long-term disability plan and each receives term life insurance in the amount of $1,000,000 (subject to underwriting) and $500,000 (subject to limited underwriting).

Deferred Compensation Plan

We maintain a deferred compensation plan pursuant to which NEOs may defer a portion of their annual compensation. These deferrals are matched to the extent specified in each NEO’s employment agreement or letter, and such contributions vest over a five-year period. Participants invest their deferrals and Company matching contributions among various funds designated by the plan administrator (and currently may not be invested in our common stock). Participants become fully-vested in any employer contributions as long as they are continuously employed until their death, total disability, reaching the date in which the sum of age and years of service equals or exceeds 65, or the occurrence of a change in control. We maintain the deferred compensation plan to provide a competitive benefit and to facilitate adequate savings for retirement on a tax efficient basis for our NEOs.

Retirement Benefits

The NEOs are eligible to participate in our 401(k) Plan, which is a Company-wide,

tax-qualified

retirement plan. The intent of this plan is to provide all employees with a

tax-advantaged

savings opportunity for retirement. We sponsor this plan to help employees at all levels save and accumulate assets for use during their retirement. Eligible pay under this plan is capped at Internal Revenue Code annual limits. We provide a match up to a total of $800 per year per employee plus an annual discretionary profit-sharing contribution. These Company contributions vest over a five-year period. For fiscal 2021, our NEOs did not receive a discretionary profit-sharing contribution.

Employee Stock Purchase Plan

Eligible employees may participate in our Employee Stock Purchase Plan (“ESPP”), which is a Company-wide employee stock purchase plan. The intent of the ESPP is to assist our employees in acquiring a stock ownership interest in the Company.

Employment Agreements and Employment Letters

We have determined that our Company’s and our shareholders’ interests are best served by entering into (i) an employment agreement with our CEO and (ii) employment letters with an accompanying severance plan with our other NEOs. Such agreements, letters and plans are the result of arms’ length negotiations between the Compensation Committee, the Company, the CEO and other NEOs, and all are approved by the Compensation Committee. We believe that these employment arrangements benefit us and our shareholders by permitting us to attract and retain NEOs with demonstrated leadership abilities and to secure their services over an extended period of time. In addition, the employment arrangements align executive interests with the long-term interests of the Company and serve our recruitment and retention goals by providing executive officers with security based on the knowledge of how they will be compensated over the course of their employment, while at the same time providing the Company with significant protections regarding

non-competition,

non-solicitation

of business and employees, and confidential business information.

On June 15, 2017, we entered into a three-year employment agreement, effective July 1, 2017, with Mr. Baur. Mr. Baur’s employment agreement provides for:

•

a base salary of $875,000 per year;

•

an annual target variable compensation opportunity of 150% of his base salary (with a maximum opportunity of 200% of target) based upon performance and the attainment of performance goals set by the Compensation Committee;

•

consideration for inclusion in our annual equity grant program at a grant level opportunity of $2,250,000;

•

the opportunity to participate in our Nonqualified Deferred Compensation Plan by deferring up to 50% of base salary and/or up to 100% of annual variable compensation, with a match of 50% of deferred amounts to be made by the Company, up to a maximum of $200,000 per year; and

•

automatic

one-year

renewals unless 180 days’ prior notice of

non-renewal

is given to the other party following the initial term.

In addition, we will make additional payments to Mr. Baur’s deferred compensation account to cover the cost of future premiums for “access only” continuation coverage under our medical and dental plan following termination of employment until Mr. Baur attains age 65 and to cover the cost of coverage for years after age 65 assuming Mr. Baur is enrolled in Medicare Parts A, B and D, obtains a Medicare supplemental policy until age 80, and pays the full cost for such coverage.

Under Mr. Baur’s employment agreement, variable cash incentive opportunities will continue to be based upon the performance and attainment of performance goals to be established annually by the Compensation Committee, subject to maximum amounts that may be earned. Mr. Baur’s annual equity award opportunity is subject to the Compensation Committee’s discretion and the terms of our equity plan and related equity award agreements.

Mr. Baur’s employment agreement also provides for severance payments to Mr. Baur upon certain events, as further described in the “

Severance Plan

” section below.

On November 16, 2020, we entered into an employment letter with Mr. Jones in connection with his appointment as our Senior Executive Vice President and Chief Financial Officer, effective December 14, 2020. Under the employment letter, Mr. Jones will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. He also will receive other benefits, including relocation benefits of $75,000,

change-in-control

payments as a participant in the Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.

On January 11, 2018, we entered into an employment letter with Mr. Dean in connection with his appointment as our Vice President and General Counsel, effective January 12, 2018. Under the employment letter, Mr. Dean will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. He also will receive other benefits, including relocation benefits and

change-in-control

payments as a participant in the Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.

On September 27, 2019, we entered into an employment letter with Mr. Eldh in connection with his appointment as our Senior Executive Vice President and Chief Revenue Officer, effective October 1, 2019. Under the employment letter, Mr. Eldh will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. He also will receive other benefits, including relocation benefits,

change-in-control

payments as a participant in a Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.

On May 6, 2021, we entered into an employment letter with Ms. Hayden in connection with her appointment as our Senior Executive Vice President and Chief Information Officer, effective June 7, 2021. Under the employment letter, Ms. Hayden will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. She also will receive other benefits, including relocation benefits of $100,000,

change-in-control

payments as a participant in a Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.

See the “

Employment Arrangements and Potential Payments upon Certain Events

” section for more information on Mr. Baur’s, Mr. Jones’, Mr. Dean’s, Mr. Eldh’s, and Ms. Hayden’s employment arrangements that were in effect during fiscal 2021.

Severance Plan

We have established a severance plan to provide severance and other benefits to certain executives selected by the Compensation Committee to participate in the severance plan. The Company’s severance plan is uniform for the current executives selected by the Compensation Committee to participate at their respective levels, excepting Mr. Eldh, whose has several provisions that are individually tailored, as described below. We refer to the Company severance plan and Mr. Eldh’s severance plan collectively as the “Severance Plan.”

The employment arrangements with our NEOs and the Severance Plan provide that, if the employment of any participant in the Severance Plan is terminated by the Company without cause, or if the Executive resigns for good reason, we will be required to pay or provide the executive’s base salary earned through the date of termination. In addition, we will also be required to pay to the executive in such instances any other amounts or benefits the executive is eligible to receive under any Company plan, program, policy, practice, contract or agreement in accordance with their terms. In such instances, we will also be required to provide severance benefits to the executive, subject to the executive’s execution of a release, consisting of compensation equal to the average annual base salary and variable compensation earned by the executive, including any amounts earned but deferred,

in the last three fiscal years completed prior to the termination (the “Average Compensation Amount”), multiplied by a severance multiple, less withholdings. In the case of Mr. Baur, the severance multiple is equal to 2.5, in the case of Mr. Jones, Mr. Dean, Mr. Eldh, Ms. Hayden and Mr. Lyons the severance multiple is 1.5, and in the case of any other executive participating in the Severance Plan, the severance multiple will be set forth in a participation agreement between the Company and such executive (a “Participation Agreement”), but such multiple may not exceed 2.5. In the event the termination occurs within 12 months after or prior to and in contemplation of certain change in control events, Mr. Baur will receive three times his Average Compensation Amount, Mr. Jones, Mr. Dean, Mr. Eldh, and Ms. Hayden will receive two times their respective Average Compensation Amount

and, in the case of any other executive participating in the Severance Plan, such executive will receive his or her Average Compensation Amount multiplied by his or her change in control multiple, as set forth in a Participation Agreement. In addition, in the event that the executive’s employment is terminated by us without cause, or if the executive resigns for good reason, the executive will be entitled to receive a bonus equal to the

pro-rata

portion of the then current fiscal year annual variable compensation that otherwise would be payable to the executive based on actual performance. For a period of up to twenty-four months (or in the case of Mr. Eldh, for up to eighteen months) following the date of such a termination (or in the case of Mr. Baur, until he attains 65 years of age), the executives shall be entitled to participate in our medical and dental plans, with the executive paying the full premium charged for such coverage subject to the terms of the employment agreement, the employment letter, and/or the Severance Plan, as applicable.

If the executive’s employment is terminated for cause or if the executive voluntarily terminates his or her employment during the term of the agreement, other than for good reason, we will only be obligated to provide any accrued amounts payable on the executive’s annual base salary or any other amounts not previously paid, but earned, by the executive through the date of termination, and benefits under other plans in accordance with their terms. If the executive dies, becomes disabled, or retires during the term of the employment agreement, the employment letter, and/or the Severance Plan, as applicable, we will only be obligated to provide any accrued amounts payable on the executive’s annual base salary or any other amounts not previously paid, but earned, by the executive as of the date of termination, a bonus equal to the

pro-rata

portion of the then current fiscal year annual variable compensation that would otherwise be payable to the executive based on actual performance, and benefits under other plans in accordance with their terms.

If we do not renew the employment agreement, or enter into a new employment agreement with the same or similar terms after the end of the employment period, and Mr. Baur remains an employee of the Company in any capacity, Mr. Baur’s employment will be on an

at-will

basis, and Mr. Baur generally will be eligible to receive the same severance benefits set forth in the employment agreement.

In addition, each employment agreement, employment letter, and/or Severance Plan, as applicable, requires the executive not to, during the term of his or her employment and for a period of two years (or in the case of Mr. Eldh, for a period of 18 months) following the termination of such executive’s employment: (a) compete with the Company; (b) solicit certain customers or suppliers and certain prospective customers or suppliers of the Company; or (c) solicit employees to leave the Company. Each of the employment agreement, the employment letter, and/or the Severance Plan, as applicable, also requires the executive not to use or disclose our confidential information or trade secrets during the term of his or her employment and for a period of five years thereafter or for so long as the trade secrets remain protected. In addition, the Company and each executive agree not to disparage each other during the term of employment or for a period of five years thereafter. If an executive breaches or threatens to breach such restrictions on conduct, we may immediately cease any severance benefits or refuse such payment and shall be entitled to recover from any such executive any amounts previously paid as a severance benefit.

Post-Termination Restrictions and Compensation

The Compensation Committee believes that our NEOs should be provided with reasonable severance benefits in the event a NEO is terminated under certain circumstances. Severance benefits for NEOs reflect the fact that the NEO may not be able to find reasonably comparable employment within a reasonable period of time following a termination. In addition, the Compensation Committee believes that certain post-termination benefits such as change in control payments will allow the NEOs to focus their time on potential transactions that may be beneficial to the Company, rather than have concern for their own employment prospects following a change in control. Severance benefits are provided under our employment agreements, employment letters and/or the Severance Plan, as applicable.

Non-Compete

and

Non-Solicitation

Agreements

Our NEOs are obligated pursuant to their employment agreements, employment letters, and/or the Severance Plan, as applicable, not to compete with the Company for a period of two years (or in the case of Mr. Eldh, for a period of 18 months) following their termination of employment with the Company. These agreements also restrict the NEOs’ disclosure and use of confidential information to which they were exposed during their employment. In addition, the agreements provide for restrictions on the solicitation of suppliers, customers and employees of the Company for a period of twenty-four months (or in the case of Mr. Eldh, for a period of eighteen months) following termination of employment.

Severance and Change in Control Benefits

In the event of a termination of employment by the Company other than for cause, death, disability, retirement, the expiration of the employment agreement (in the case of Mr. Baur), or by a NEO for good reason, the NEO will be entitled to a severance payment, provided that the NEO is in, and remains in, compliance with the

non-competition,

confidentiality,

non-solicitation

and related covenants provided in his or her employment agreement or the Severance Plan. The amount of a severance payment varies based upon the NEO’s historic compensation amounts, up to two and a half times the Chief Executive Officer’s and one and

one-half

times the other NEO’s average annual base salary and variable compensation over the last three fiscal years prior to a termination. These potential payments are discussed in more detail under the caption “

Employment Arrangements and Potential Payments Upon Certain Events

” below.

Our NEOs’ employment agreements, employment letters, and/or the Severance Plan, as applicable, provide for severance in the event of certain termination in connection with a change of control. Such severance payments will be made only if a “double trigger” is met. That is, both a change in control and a termination of employment are required. This is discussed in more detail under the caption “

Employment Arrangements and Potential Payments Upon Certain Events

” below. The Compensation Committee believes this benefit is required to offer competitive benefits to attract and retain highly qualified executives.

Additional Compensation Matters

Risk Assessment of Compensation Policies and Practices

We have assessed our compensation programs for all employees and have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. We believe that our compensation program reflects an appropriate mix of compensation elements and balances current and long-term performance objectives, cash and equity compensation, and risks and rewards. During fiscal 2021, the Compensation Committee reviewed our compensation policies and practices for all employees, including our NEOs, particularly as they relate to risk management practices and risk-taking incentives. As part of its review, the Compensation Committee discussed with management the ways in which risk is effectively managed or mitigated as it relates to our compensation programs and policies.

Based on this review, the Compensation Committee believes that our compensation programs do not encourage excessive risk but instead encourage behaviors that support sustainable value creation. The following features of our executive incentive compensation program illustrate this point:

•

Our compensation program design provides a balanced mix of cash and equity and annual and long-term incentives that are designed to encourage strategies and actions that are in the Company’s and our shareholders’ long-term best interests. Equity awards such as stock options, service and performance-based restricted stock awards and restricted stock units reinforce our long-term performance perspective.

•

Our performance goals and objectives generally reflect a mix of corporate and other performance measures designed to promote progress towards both our annual and longer-term goals.

•

A significant component of each of our NEOs’ total direct compensation consists of long-term, equity-based incentive awards that are designed to encourage these NEOs to focus on sustained stock price appreciation.

•

Equity awards typically have vesting schedules of three years and, in some cases, have performance-based vesting components as well; thus, NEOs typically will always have unvested awards that could decrease significantly in value if our business is not well-managed for the long term.

•

Equity incentive awards are granted periodically, typically annually, during open window periods and under an established equity grant program.

•

The Compensation Committee believes that our overall compensation of our NEOs is at reasonable and sustainable levels, as determined by a review of historical analysis and a review of our economic positions and prospects, as well as the compensation offered by comparable companies.

•

The Compensation Committee retains discretion to reduce compensation based on corporate and individual performance and other factors.

•

Equity awards are subject to annual limitations on the number of shares that may be awarded during any year. The typical Company compensation structure has a threshold and maximum for cash bonuses.

•

The target levels under our annual cash bonus program are designed to be set at a level where achieving the target incentive compensation levels is not guaranteed and the achievement of such levels is rewarding to both the NEO and the shareholders.

•

NEO base salaries are consistent with the NEOs’ responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security.

•

Our internal reporting system ensures a consistent and ongoing assessment of financial results used to determine payouts.

•

Our stock ownership policy sets out a minimum level of Company share ownership for our CEO so that he has personal wealth tied to the long-term success of Company and is therefore aligned with shareholders and imposes an equity retention requirement to facilitate attaining such levels of ownership.

•

We maintain a “claw-back policy,” which requires the reimbursement to the Company of any incentive compensation to executive and certain other officers, the payment of which was predicated upon the achievement of financial results that were subsequently the subject of a restatement caused by the recipient’s fraud or misconduct, or otherwise is required under applicable laws, rules, and regulations.

•

NEOs must obtain permission from the Legal Department before the purchase or sale of any shares, even during an open trading period.

Based on a combination of the above, we believe that (i) our NEOs and other employees are encouraged to manage the Company in a prudent manner because our compensation programs are aligned with our business strategy and risk profile, and (ii) our incentive programs are not designed to encourage our NEOs or other employees to take excessive risks or risks that are inconsistent with the Company’s and shareholders’ best interests. In addition, we have in place various controls and management processes that help mitigate the potential for incentive compensation plans to have a material adverse effect on the Company.

Impact of Accounting and Tax Treatment of Compensation

Section 162(m) of the Code generally sets a limit of $1 million on the amount of compensation that we may deduct for federal income tax purposes in any given year with respect to the compensation of each of our NEOs. For years beginning prior to January 1, 2018, the $1 million limitation did not apply to qualified performance-based compensation that satisfied certain requirements, including, among others, approval of the material terms of the plan by our shareholders. Effective for the years beginning on or after January 1, 2018, there is no exception for qualified performance-based compensation from the Section 162(m) limitation, although a transition rule applies in some circumstances for outstanding awards. We consider the impact of the deduction limit under Section 162(m) when developing and implementing our executive compensation programs. We intend to design our executive compensation arrangements to be consistent with the interests of our shareholders. We believe that it is important to preserve flexibility in administering compensation programs to promote various corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible under Section 162(m) of the Internal Revenue Code. Some amounts paid under our compensation programs may not be deductible as the result of Section 162(m).

EXECUTIVE COMPENSATION

Compensation Tables

2021 Summary Compensation Table

The following table summarizes compensation paid to or accrued on behalf of the NEOs for the fiscal year ended June 30, 2021:



Name and Principal Position	Fiscal Year		Salary ($)		Bonus ($)		Stock Awards ($) (1)		Option Awards ($) (1)		Non-Equity Incentive Plan Compensation ($) (2)		All Other Compensation ($) (3)		Total ($)
Michael L. Baur Chairman, Chief Executive Officer and President		2021		765,625		—		1,262,036		2,428,626		2,033,063		148,463		6,637,813
		2020		875,000		—		2,248,093		—		169,444		149,914		3,442,451
		2019		875,000		—		2,190,566		—		367,500		107,930		3,540,996
Stephen T. Jones Senior Executive Vice President, Chief Financial Officer (4)		2021		218,462		—		800,001		—		360,500		87,300		1,466,263
Matthew S. Dean		2021		427,500		—		238,384		472,094		418,230		41,141		1,597,349
Chief Legal Officer (5)		2020		450,000		170,000		424,648		—		34,857		38,891		1,118,369
Chief Legal Officer (5)		2019		395,577		—		219,057		—		47,600		12,389		674,623
John Eldh		2021		475,000		—		841,366		817,676		1,161,750		91,105		3,386,897
Senior Executive Vice President, Chief Revenue Officer (6)
Rachel Hayden Senior Executive Vice President, Chief Information Officer (7)		2021		20,192		—		—		—		27,107		100,000		147,299
Gerald Lyons		2021		191,524		—		—		—		233,712		146,130		571,366
Former Senior Executive Vice President, Chief Financial Officer		2020		367,500		—		299,793		—		33,211		41,362		741,866
		2019		367,500		—		292,075		—		72,030		25,148		756,753

(1)

Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see Note 12 to our audited financial statements for the fiscal year ended June 30, 2021, included in our Annual Report on Form

10-K

for the fiscal year ended June 30, 2021.

(2)

Reflects the value of cash incentives earned pursuant to our annual incentive plan. For fiscal 2021, the cash incentives were awarded in August 2021. For fiscal 2020, the cash incentives under that program were awarded in August 2020. For fiscal 2019, the cash incentives under that program were awarded in August 2019. See the discussion in “

Compensation Discussion and Analysis

” herein.

(3)	See the All Other Compensation table below for additional information.

(4)	Mr. Jones joined the Company as Senior Executive Vice President and Chief Financial Officer in December 2020 and was designated an executive officer in December 2020.

(5)	Mr. Dean joined the Company as Vice President and General Counsel in January 2018 and was designated an executive officer in November 2018.

(6)	Mr. Eldh joined the Company as Senior Executive Vice President and Chief Revenue Officer in October 2019 and was designated an executive officer in November 2020.

(7)	Ms. Hayden joined the Company as Senior Executive Vice President and Chief Information Officer in June 2021 and was designated an executive officer at that time.

2021 All Other Compensation Table

The following supplemental table summarizes all other compensation paid to our NEOs for the fiscal year ended June 30, 2021, which is included in the All Other Compensation column in the 2021 Summary Compensation Table above:

SEC Form 10-K/A filed by ScanSource, Inc. (Amendment)