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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.
 
Large accelerated filer
 
  
Smaller reporting company
 
       
Accelerated filer
 
  
Emerging growth company
 
       
Non-accelerated filer
 
        
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.
 
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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.
 
2

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.
 
3

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.
 
4

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.
 
5

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
 
6

  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
 
7

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
 
8

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.
 
9

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
 
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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.
 
11

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         
   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
 
12

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.
 
13

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.
 
14

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.
 
15

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
 
 
 
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.
 
16

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
 
17

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
 
18

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
 
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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  
 
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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).
 
21

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.
 
22

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,
 
23

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.
 
24

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.
 
25

   
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).
 
26

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  
     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.
 
27

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:
 
  
Name
  
Fiscal
Year
    
Perquisites
($)
(1)
    
Company
Contributions
to
Nonqualified
Deferred
Compensation
Plan
($)
   
Company
Paid
Disability
Benefit
($)
(2)
    
Company
Contributions
to
Deferred
Contribution
Plans (401(k))
($)
    
Company
Paid
Travel
for
Spouses
($)
    
Other
($)
(3)
    
Total
($)
 
 Michael L. Baur
     2021        4,085        42,361
(4)
 
    77,601        800        —          23,616        148,463  
     2020        5,536        42,361
(4)
 
    77,601        800        —          23,616        149,914  
     2019        3,229        25,000
(4)
 
    51,160        800        15,507        12,234        107,930  
 Stephen T. Jones
     2021        1,500        9,000       —          800        —          76,000        87,300  
 Matthew S. Dean
     2021        2,500        12,000       10,152        800        —          15,689        41,141  
     2020        1,000        11,250       10,152        800        —          15,689        38,891  
     2019        —          6,750       2,703        800        576        1,560        12,389  
 John Eldh
     2021        —          22,500       —          800        —          67,805        91,105  
 Rachel Hayden
     2021        —          —         —          —          —          100,000        100,000  
 Gerald Lyons
     2021        —          5,114       —          800        —          140,216        146,130  
     2020        1,500        10,819       13,717        800        —          14,526        41,362  
     2019        1,700        11,867       3,785        800        —          6,996        25,148  
 
(1)
Represents physical examination costs.
(2)
Includes supplemental long-term disability benefits.
(3)
Represents life insurance benefits. For Mr. Jones, also includes physical examination costs for his spouse of $1,000. For Mr. Jones, Mr. Eldh and Ms. Hayden, also includes relocation (and related tax
gross-up)
benefits of $75,000, $67,805 and $100,000, respectively. For Mr. Lyons, includes $140,216 in severance payments.
(4)
The deferred compensation benefit is provided in connection with Mr. Baur’s employment agreement, which is discussed below under “
Employment Arrangements and Potential Payments upon Certain Events
.”
 
28

2021 Grants of Plan Based Awards Table
The following table summarizes awards granted to each of the NEOs during the fiscal year ended June 30, 2021 under the 2013 Plan (other than Ms. Hayden, who did not receive any grants in fiscal 2021):
 
         
Estimated Possible

Payouts

Under Non-Equity

Incentive

Plan Awards
   
Estimated Future Payouts

Under Equity Incentive

Plan Awards
   
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
   
All Other Option Awards:
Number of Securities
Underlying Options
(#)(1)
   
Exercise or Base
Price of Option
Awards
($/Sh)
   
Grant Date
Fair Value
of Stock
and
Option
Awards
($)
 
  
Name
 
Grant
Date
   
Threshold
($)
   
Target
($)
   
Maximum
($)
   
Threshold
(#)
   
Target
(#)
   
Maximum
(#)
 
 Michael L. Baur
    8/20/2020       328,125       1,312,500       2,625,000                
    11/19/2020                   51,136       133,899       24.68       2,488,551
(2)(3)
 
    11/24/2020                     119,021       27.14       1,202,112
(3)
 
 Stephen T. Jones
    11/16/2020       100,000       400,000       800,000                
    3/01/2021                   27,482         29.11       800,001
(2(3))
 
 Matthew S. Dean
    8/20/2020       42,500       170,000       340,000                
    11/19/2020                   9,659       25,292       24.68       470,059
(2)(3)
 
    11/24/2020                     23,804       27.14       240,420
(3)
 
 John Eldh
    8/20/2020       187,500       750,000       1,500,000                
    11/19/2020                   34,091       89,266       24.68       1,659,042
(2)(3)
 
 Gerald Lyons
    8/20/2020       64,613       257,250       514,500                
 
(1)
See “
Compensation Discussion and Analysis — Material Elements of our Compensation Programs — Annual Performance-Based and Service-Based Equity Awards
,” above.
(2)
See “
Compensation Discussion and Analysis — Material Elements of our Compensation Program — Annual Performance-Based and Service-Based Equity Awards
,” above.
(3)
The grant date fair value of the option award granted on November 19, 2020 was determined pursuant to the Black-Scholes options valuation model, using the following assumptions: exercise price of $24.68, stock price volatility of 42.44%, risk-free interest rate of 0.39%, expected term of 5 years, and dividend yield of 0%. The grant date fair value of the option award granted on November 24, 2020 was determined pursuant to the Black-Scholes options valuation model, using the following assumptions: exercise price of $27.14, stock price volatility of 42.56%, risk-free interest rate of 0.39%, expected term of 5 years, and dividend yield of 0%.
 
29

2021 Outstanding Equity Awards at Fiscal Year End Table
The following table summarizes outstanding equity awards held by each of the NEOs as of June 30, 2021 (other than Ms. Hayden, who did not hold any equity awards at such time):
 
  
Name
         
Option Awards
    
Stock Awards
 
  
Grant
Date
    
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
   
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(1)
    
Option
Exercise
Price
($)
    
Option
Expiration
Date
    
Grant
Date
    
Number
of
Shares
or Units
of
Stock
that
Have
Not
Vested
(#)
(1)
    
Market
Value
of
Shares
or
Units
of
Stock
that
Have
Not
Vested
($)
    
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested
(#)
    
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested
($)
 
Michael L. Baur
                            
     8/21/2012        26,586       —          34.35        8/21/2022                 
     12/6/2013        115,356       —          42.82        12/6/2023                 
     12/5/2014        164,093       —          41.13        12/5/2024                 
     12/4/2015        125,000       —          38.19        12/4/2025                 
     12/2/2016        77,339       —          37.00        12/2/2026                 
     12/8/2017        53,079       —          34.35        12/8/2027                 
                   12/3/2018        9,435        265,407        —          —    
                   11/15/2019        21,064        592,530        —          —    
     11/19/2020        —         133,899        24.68        11/19/2030                 
                   11/19/2020        51,136        1,438,456        —          —    
     11/24/2020        —         119,021        27.14        11/24/2030                 
Stephen T. Jones
                            
                   03/01/2021        27,482        773,069        —          —    
Matthew S. Dean
                            
     2/9/2018        10,000
(1)
 
    —          32.25        2/9/2028                 
                   12/3/2018        944        26,555        —          —    
                   11/15/2019        3,980        111,957        —          —    
     11/19/2020        25,292       —          24.68        11/19/2030                 
                   11/19/2020        9,659        271,708        —          —    
     11/24/2020        23,804       —          27.14        11/24/2030                 
John Eldh
     —          —         —          —          —          11/15/2019        18,724        526,706        —          —    
     —          —         —          —          —          12/2/2019        9,389        264,113        —          —    
     11/19/2020        —         89,266        24.68        11/19/2030                 
                   11/19/2020        34,091        958,980        —          —    
 
(1)
Stock options and restricted stock units vest ratably over three years beginning on the grant date, unless otherwise noted.
 
30

2021 Option Exercises and Stock Vested Table
The following table summarizes the exercise of options and the vesting of stock awards by each of our NEOs during the fiscal year ended June 30, 2021:
 
  Name
  
Option Awards
    
Restricted Awards
 
  
Number
of
Shares
Acquired
on
Exercise
(#)
    
Value
Realized
on
Exercise
($)
    
Number
of
Shares
Acquired
on
Vesting
(#)
    
Value
Realized
on
Vesting
($)
 
 Michael L. Baur
     —          —          26,125        693,392  
 Stephen T. Jones
     —          —          —          —    
 Matthew S. Dean
     —          —          2,992        77,589  
 John Eldh
     —          —          14,481        340,692  
 Rachel Hayden
     —          —          —          —    
 Gerald Lyons
     —          —          3,484        92,470  
2021 Nonqualified Deferred Compensation Table
The following table contains information concerning benefits earned by each of the NEOs under nonqualified deferred compensation plans during the fiscal year ended June 30, 2021:
 
  Name
  
Executive
Contributions
in Last
Fiscal Year
($)
(1)(2)
    
Registrant
Contributions
in Last
Fiscal Year
($)
(3)
    
Aggregate
Earnings
(Loss)
in Last
Fiscal Year
($)
(4)
    
Aggregate
Withdrawals/
Distributions
($)
(4)
   
Aggregate
Balance at
Last Fiscal
Year-End

($)
 
 Michael L. Baur
     84,722        42,361        2,329,049        (1,629,820     12,159,398  
 Stephen T. Jones
     30,000        9,000        1,531        —         40,531  
 Matthew S. Dean
     39,231        11,769        27,216        —         133,424  
 John Eldh
     75,000        22,500        7,766        —         105,266  
 Rachel Hayden
     —          —          —          —         —    
 Gerald Lyons
     17,046        5,114        173,634        —         613,522  
 
(1)
Amounts represent voluntary deferrals of salary, bonus or a combination of both salary and bonus under our Nonqualified Deferred Compensation Plan. Contributions of deferred salary are reported as fiscal year 2021 income in the “Salary” column of the 2021 Summary Compensation Table.
(2)
Amounts reflect voluntary deferrals under our Nonqualified Deferred Compensation Plan associated with plan awards for fiscal year 2021 but paid in fiscal year 2022.
(3)
Amounts represents our matching contributions under our Nonqualified Deferred Compensation Plan. These amounts are reported as fiscal year 2021 income in the “All Other Compensation” column of the 2021 Summary Compensation Table.
(4)
Reflects cash flows for the fiscal year ended June 30, 2021.
Our Nonqualified Deferred Compensation Plan permits our NEOs to elect to defer a portion of their base salary and incentive bonus, and to receive matching contributions from the Company on a portion of the deferred amounts. Mr. Baur may defer up to 50% of his base compensation and 100% of his bonus, and we will provide a
 
31

matching contribution of 50% of the amount deferred up to a calendar year limit of $200,000 in matching contributions. Each of Mr. Jones, Mr. Dean, Mr. Eldh, and Ms. Hayden may defer up to 50% of his or her base salary and 100% of his or her bonus, and we will provide a matching contribution of 30% on the first 15% of compensation deferred.
Deferred amounts are credited to each participant’s account, which are invested in one or more investment alternatives chosen by each participant from a range of mutual fund offerings and other investments available under the plan. Each participant’s account is adjusted to reflect the investment performance of the selected investments. Benefits under the plan are payable in cash and generally will be paid in either a lump sum or in annual installments over a certain term upon retirement, death or other termination of employment, or upon a change in control of the Company, as elected in advance by the participant. A participant may also elect to receive some or all of the deferred amounts and related earnings pursuant to an
in-service
distribution, subject to a minimum five-year deferral.
Employment Arrangements and Potential Payments Upon Certain Events
We have entered into an employment agreement with Mr. Baur that was effective July 1, 2017 and employment letters with Mr. Jones, Mr. Dean, Mr. Eldh, and Ms. Hayden effective December 14, 2020, January 11, 2018, October 1, 2019, and June 7, 2021, respectively. Mr. Baur, Mr. Jones, Mr. Dean, Mr. Eldh, and Ms. Hayden also participate in the Severance Plan. Notwithstanding these employment arrangements, each of Mr. Baur, Mr. Jones, Mr. Dean, Mr. Eldh, and Ms. Hayden has the right to voluntarily terminate his or her employment at any time. The employment arrangements set forth the general terms and conditions of Mr. Baur’s, Mr. Jones’, Mr. Dean’s, Mr. Eldh’s, and Ms. Hayden’s employment and provide for certain severance benefits upon the occurrence of certain events.
The material elements of compensation of each NEO as contained in their employment arrangements are described in the “
Compensation Discussion and Analysis
” section herein. The following sets forth in tabular format the incremental compensation that would be payable to such NEO in the event of his termination of employment under various scenarios, which we refer to as termination events. In accordance with SEC rules, the following discussion assumes:
 
   
That the termination event in question occurred on June 30, 2021, the last day of fiscal 2021; and
 
   
With respect to calculations based on our stock price, the reported closing price of our common stock on June 29, 2021, $27.37, was used.
The tables contained in this section do not include payments made to a NEO with respect to contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation, in favor of our executive officers and that are available generally to all salaried employees, such as our 401(k) plan. The actual amounts that would be paid upon a termination event can only be determined at the time of such executive officer’s termination. Due to the number of factors that affect the nature and amount of any compensation or benefits provided upon the termination events, any actual amounts paid or distributed may be higher or lower than reported below. Factors that could affect these amounts include the timing during the year of any such event and our stock price at such time.
Mr. Baur
General
Pursuant to the terms of Mr. Baur’s employment agreement, he was entitled to receive an annual base salary of $875,000 in fiscal 2021, which was reduced for a portion of fiscal 2021 as discussed earlier. Under his agreement, Mr. Baur is eligible to receive annual incentive cash and equity awards under our equity plans as described in the “
Compensation Discussion and Analysis
” section herein. Subject to the provisions of his employment agreement, Mr. Baur is obligated to comply with certain provisions relating to
non-competition
(for two years post termination), confidentiality and
non-solicitation
of customers and employees (for two years post termination) if his employment is terminated.
 
32

Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Baur is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
 
    
Before
Change in
Control
Termination
w/o Cause
or
for Good
Reason
($)
    
After
Change in
Control
Termination
w/o Cause
or
for Good
Reason
($)
    
Termination
Due to
Death
($)
    
Termination
Due to
Retirement
($)
    
Termination
Due to
Disability
($)
    
Voluntary
Termination
($)
 
 Severance
     4,238,027        5,085,632        —          —          —          —    
 Pro Rata Variable Compensation
(1)
     2,033,063        2,033,063        2,033,063        2,033,063        2,033,063        2,033,063  
 Equity Acceleration
(2)
     —          2,296,393        2,296,393        2,296,393        2,296,393        —    
 Performance-Based Equity Acceleration
(3)
     —          —          —          —          —          —    
 Medical Coverage
(4)
     464,512        464,512        464,512        464,512        464,512        —    
 Deferred Compensation
     —          —          —          —          —          —    
 Disability
(5)
     —          —          —          —          382,813        —    
 
TOTAL
(6)
     6,735,601        9,879,600        4,793,968        4,793,968        5,176,780        2,033,063  
 
(1)
Mr. Baur’s employment agreement provides for the payment of a pro rata portion of the current fiscal year annual variable compensation that would otherwise be payable if Mr. Baur had continued employment through the end of the current fiscal year, based on actual performance. Amounts shown reflect the earned and unpaid portion of Mr. Baur’s fiscal 2021 annual variable compensation as of June 30, 2021.
(2)
Reflects (i) the difference between fair market value as of June 30, 2021 of the underlying shares over the exercise price of all unvested stock options, and (ii) the fair market value of all unearned and unvested
non-performance-based
restricted stock awards and restricted stock units. Vesting accelerates in the event of a change in control and termination by the Company without cause or by the grantee for good reason.
(3)
Reflects the fair market value as of June 30, 2021, of the shares of all unearned and unvested performance based restricted stock awards, the vesting of which accelerates with a change in control and termination by the Company without cause or by the grantee for good reason.
(4)
Reflects the cost of providing continued health and welfare benefits to the executive officer as provided in the executive officer’s employment arrangements.
(5)
The executive officer’s employment agreement provides that if his employment is terminated by reason of disability, he will continue to receive his salary during the period under which he continues to receive benefits under our short-term disability policy (assumed to be six months for purposes of this disclosure), less any benefits received under our short-term disability policy.
(6)
These amounts do not include the payout of Mr. Baur’s vested balance under our Nonqualified Deferred Compensation Plan, which is reflected and described in the Nonqualified Deferred Compensation Table herein.
Mr. Jones
General
Mr. Jones serves as our Senior Executive Vice President and Chief Financial Officer. At June 30, 2021, Mr. Jones received an annual base salary of $400,000. Mr. Jones is eligible to receive both annual incentive cash compensation and equity awards under the 2013 Plan. Subject to the provisions of his employment arrangements, Mr. Jones is obligated to comply with certain provisions relating to
non-competition
(for two years post termination), confidentiality and
non-solicitation
of customers and employees (for two years post termination) if his employment is terminated.
 
33

Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Jones is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
 
    
Before
Change in
Control
Termination
w/o Cause
or for Good
Reason
($)
    
After
Change in
Control
Termination
w/o Cause
or for Good
Reason
($)
    
Termination
Due to
Death
($)
    
Termination
Due to
Retirement
($)
    
Termination
Due to
Disability
($)
    
Voluntary
Termination
($)
 
 Severance
     868,443        1,157,924        —          —          —          —    
 Pro Rata Variable Compensation
(1)
     360,500        360,500        360,500        360,500        360,500        360,500  
 Equity Acceleration
(2)
     —          773,069        773,069        773,069        773,069        —    
 Performance-Based Equity Acceleration
(3)
     —          —          —          —          —          —    
 Medical Coverage
(4)
     29,026        29,026        29,026        29,026        29,026        —    
 Deferred Compensation
     —          —          —          —          —          —    
 Disability
(5)
     —          —          —          —          109,231        —    
 
TOTAL
(6)
     1,257,969        2,320,519        1,162,595        1,162,595        1,271,826        360,500  
 
(1)
Mr. Jones’ employment arrangements provide for the payment of a pro rata portion of the current fiscal year annual variable compensation that would otherwise be payable if Mr. Jones had continued employment through the end of the current fiscal year, based on actual performance. Amounts shown reflect the earned and unpaid portion of Mr. Jones fiscal 2021 annual variable compensation as of June 30, 2021.
(2)
Reflects (i) the difference between fair market value as of June 30, 2021 of the underlying shares over the exercise price of all unvested stock options, and (ii) the fair market value of all unearned and unvested
non-performance-based
restricted stock awards and restricted stock units. Vesting accelerates in the event of a change in control and termination by the Company without cause or by the grantee for good reason.
(3)
Reflects the fair market value as of June 30, 2021, of the shares of all unearned and unvested performance based restricted stock awards, the vesting of which accelerates with a change in control and termination by the Company without cause or by the grantee for good reason.
(4)
Reflects the cost of providing continued health and welfare benefits to the executive officer as provided in the executive officer’s employment arrangements.
(5)
The executive officer’s employment arrangement provides that if his employment is terminated by reason of disability, he will continue to receive his salary during the period under which he continues to receive benefits under our short-term disability policy (assumed to be six months for purposes of this disclosure), less any benefits received under our short-term disability policy.
(6)
These amounts do not include the payout of the executive officer’s vested balance under our Nonqualified Deferred Compensation Plan, which is reflected and described in the Nonqualified Deferred Compensation Table herein.
Mr. Dean
General
Mr. Dean serves as our Chief Legal Officer. At June 30, 2021, Mr. Dean received an annual base salary of $450,000. Mr. Dean is eligible to receive both annual incentive cash compensation and equity awards under the 2013 Plan. Subject to the provisions of his employment arrangements, Mr. Dean is obligated to comply with certain provisions relating to
non-competition
(for two years post termination), confidentiality and
non-solicitation
of customers and employees (for two years post termination) if his employment is terminated.
 
34

Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Dean is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
 
    
Before
Change in
Control
Termination
w/o Cause
or for Good
Reason
($)
    
After
Change in
Control
Termination
w/o Cause
or for Good
Reason
($)
    
Termination
Due to
Death
($)
    
Termination
Due to
Retirement
($)
    
Termination
Due to
Disability
($)
    
Voluntary
Termination
($)
 
 Severance
     1,125,440        1,500,587        —          —          —          —    
 Pro Rata Variable Compensation
(1)
     418,230        418,230        418,230        418,230        418,230        418,230  
 Equity Acceleration
(2)
     —          410,220        410,220        410,220        410,220        —    
 Performance-Based Equity Acceleration
(3)
     —          —          —          —          —          —    
 Medical Coverage
(4)
     23,148        23,148        23,148        23,148        23,148        —    
 Deferred Compensation
     —          —          —          —          —          —    
 Disability
(5)
     —          —          —          —          213,750        —    
 
TOTAL
(6)
     1,566,818        2,352,185        851,598        851,598        1,065,348        418,230  
 
(1)
Mr. Dean’s employment arrangements provide for the payment of a pro rata portion of the current fiscal year annual variable compensation that would otherwise be payable if Mr. Dean had continued employment through the end of the current fiscal year, based on actual performance. Amounts shown reflect the earned and unpaid portion of Mr. Dean’s fiscal 2021 annual variable compensation as of June 30, 2021.
(2)
Reflects (i) the difference between fair market value as of June 30, 2021 of the underlying shares over the exercise price of all unvested stock options, and (ii) the fair market value of all unearned and unvested
non-performance-based
restricted stock awards and restricted stock units. Vesting accelerates in the event of a change in control and termination by the Company without cause or by the grantee for good reason.
(3)
Reflects the fair market value as of June 30, 2021, of the shares of all unearned and unvested performance based restricted stock awards, the vesting of which accelerates with a change in control and termination by the Company without cause or by the grantee for good reason.
(4)
Reflects the cost of providing continued health and welfare benefits to the executive officer as provided in the executive officer’s employment arrangements.
(5)
The executive officer’s employment arrangement provides that if his employment is terminated by reason of disability, he will continue to receive his salary during the period under which he continues to receive benefits under our short-term disability policy (assumed to be six months for purposes of this disclosure), less any benefits received under our short-term disability policy.
(6)
These amounts do not include the payout of the executive officer’s vested balance under our Nonqualified Deferred Compensation Plan, which is reflected and described in the Nonqualified Deferred Compensation Table herein.
Mr. Eldh
General
Mr. Eldh serves as our Senior Executive Vice President and Chief Revenue Officer. At June 30, 2021, Mr. Eldh received an annual base salary of $500,000. Mr. Eldh is eligible to receive both annual incentive cash compensation and equity awards under the 2013 Plan. Subject to the provisions of his employment arrangements, Mr. Eldh is obligated to comply with certain provisions relating to
non-competition
(for 18 months post termination), confidentiality and
non-solicitation
of customers and employees (for 18 months post termination) if his employment is terminated.
 
35

Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Eldh is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
 
    
Before
Change in
Control
Termination
w/o Cause
or for Good
Reason
($)
    
After
Change in
Control
Termination
w/o Cause
or for Good
Reason
($)
    
Termination
Due to
Death
($)
    
Termination
Due to
Retirement
($)
    
Termination
Due to
Disability
($)
    
Voluntary
Termination
($)
 
 Severance
     2,455,125        3,273,500        —          —          —          —    
 Pro Rata Variable Compensation
(1)
     1,161,750        1,161,750        1,161,750        1,161,750        1,161,750        1,161,750  
 Equity Acceleration
(2)
     —          1,749,799        1,749,799        1,749,799        1,749,799        —    
 Performance-Based Equity Acceleration
(3)
     —          —          —          —          —          —    
 Medical Coverage
(4)
     29,026        29,026        29,026        29,026        29,026        —    
 Deferred Compensation
     —          —          —          —          —          —    
 Disability
(5)
     —          —          —          —          237,500        —    
 
TOTAL
(6)
     3,645,901        6,214,075        2,940,575        2,940,575        3,178,075        1,161,750  
 
(1)
Mr. Eldh’s employment arrangements provide for the payment of a pro rata portion of the current fiscal year annual variable compensation that would otherwise be payable if Mr. Eldh had continued employment through the end of the current fiscal year, based on actual performance. Amounts shown reflect the earned and unpaid portion of Mr. Eldh fiscal 2021 annual variable compensation as of June 30, 2021.
(2)
Reflects (i) the difference between fair market value as of June 30, 2021 of the underlying shares over the exercise price of all unvested stock options, and (ii) the fair market value of all unearned and unvested
non-performance-based
restricted stock awards and restricted stock units. Vesting accelerates in the event of a change in control and termination by the Company without cause or by the grantee for good reason.
(3)
Reflects the fair market value as of June 30, 2021, of the shares of all unearned and unvested performance based restricted stock awards, the vesting of which accelerates with a change in control and termination by the Company without cause or by the grantee for good reason.
(4)
Reflects the cost of providing continued health and welfare benefits to the executive officer as provided in the executive officer’s employment arrangements.
(5)
The executive officer’s employment arrangement provides that if his employment is terminated by reason of disability, he will continue to receive his salary during the period under which he continues to receive benefits under our short-term disability policy (assumed to be six months for purposes of this disclosure), less any benefits received under our short-term disability policy.
(6)
These amounts do not include the payout of the executive officer’s vested balance under our Nonqualified Deferred Compensation Plan, which is reflected and described in the Nonqualified Deferred Compensation Table herein.
Ms. Hayden
General
Ms. Hayden serves as our Senior Executive Vice President and Chief Information Officer. Ms. Hayden’s initial base salary was set in her employment arrangement at $350,000. Ms. Hayden is eligible to receive both annual incentive cash compensation and equity awards under the 2013 Plan. Subject to the provisions of her employment arrangements, Ms. Hayden is obligated to comply with certain provisions relating to
non-competition
(for two years post termination), confidentiality and
non-solicitation
of customers and employees (for two years post termination) if her employment is terminated.
 
36

Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Ms. Hayden is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of her termination.
 
    
Before
Change in
Control
Termination
w/o Cause
or
for Good
Reason
($)
    
After
Change in
Control
Termination
w/o Cause
or
for Good
Reason
($)
    
Termination
Due to
Death
($)
    
Termination
Due to
Retirement
($)
    
Termination
Due to
Disability
($)
    
Voluntary
Termination  
($)
 
Severance
     70,949        94,598        —          —          —          —    
Pro Rata Variable Compensation
(1)
     27,107        27,107        27,107        27,107        27,107        27,107  
Equity Acceleration
(2)
     —          —          —          —          —          —    
Performance-Based Equity Acceleration
(3)
     —          —          —          —          —          —    
Medical Coverage
(4)
     25,372        25,372        25,372        25,372        25,372        —    
Deferred Compensation
     —          —          —          —          —          —    
Disability
(5)
     —          —          —          —          10,096        —    
TOTAL
(6)
     123,427        147,077        52,479        52,479        62,575        27,107  
 
(1)
Ms. Hayden’s employment agreement provides for the payment of a pro rata portion of the current fiscal year annual variable compensation that would otherwise be payable if Ms. Hayden had continued employment through the end of the current fiscal year, based on actual performance. Amounts shown reflect the earned and unpaid portion of Ms. Hayden’s fiscal 2021 annual variable compensation as of June 30, 2021.
(2)
Reflects (i) the difference between fair market value as of June 30, 2021 of the underlying shares over the exercise price of all unvested stock options, and (ii) the fair market value of all unearned and unvested
non-performance-based
restricted stock awards and restricted stock units. Vesting accelerates in the event of a change in control and termination by the Company without cause or by the grantee for good reason.
(3)
Reflects the fair market value as of June 30, 2021, of the shares of all unearned and unvested performance based restricted stock awards, the vesting of which accelerates with a change in control and termination by the Company without cause or by the grantee for good reason.
(4)
Reflects the cost of providing continued health and welfare benefits to the executive officer as provided in the executive officer’s employment arrangements.
(5)
The executive officer’s employment arrangement provides that if her employment is terminated by reason of disability, she will continue to receive her salary during the period under which she continues to receive benefits under our short-term disability policy (assumed to be six months for purposes of this disclosure), less any benefits received under our short-term disability policy.
(6)
These amounts do not include the payout of the executive officer’s vested balance under our Nonqualified Deferred Compensation Plan, which is reflected and described in the Nonqualified Deferred Compensation Table herein.
Mr. Lyons
Mr. Lyons left the Company in January 2021. At the time of his termination of employment, we had an employment letter with Mr. Lyons, and he also participated in the Severance Plan. At the time of Mr. Lyons’ termination of employment, he received the following benefits under his employment letter and Severance Plan: Severance - $140,216 and Medical Coverage - $23,659.38. In addition, as part of his benefits, Mr. Lyons received a
pro-rata
payment under the MIP of $233,712.
Pay Ratio Disclosure
Pursuant to Item 402(u) of Regulation
S-K
promulgated under the Exchange Act, we are required to disclose the median annual total compensation of all the Company’s employees, the total compensation of our CEO and the ratio of those two amounts. The pay ratio set forth below is a reasonable estimate and has been calculated in a manner consistent with SEC rules and based on the methodology described below. The SEC rules for identifying median employees allow companies to use a variety of methodologies. As a result, the pay ratio reported by others may not be comparable to our reported pay ratio. For the year ended June 30, 2021:
 
   
the total compensation for our median employee was $51,080;
 
   
the annual total compensation of Mr. Baur was $6,637,813; and
 
   
based on the information above, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees is 130 to 1.
 
37

The methodology that we used and the material assumptions, adjustments and estimates that we used to identify the median and determine annual total compensation were as follows:
Employee population
. As of June 30, 2021, the date we selected to identify our median employee, our employee population consisted of approximately 2,184 individuals, with 765 employees representing 35% of our total employee population located outside the United States and 1,419 employees representing 65% of our total employee population located in the United States.
Identification of Median
. To identify the median of the annual total compensation of all of our employees, we reviewed the total cash earnings of all employees for the twelve-month period ending on June 30, 2021 (the “reported compensation”). In making this calculation, we annualized the reported compensation of all of our employees who were hired during the period. While we did not make any cost of living adjustments to the reported compensation in identifying the median employee, we did convert the reported compensation of our
non-United
States employees to United States dollars using the applicable conversion rate as of June 30, 2021. Using this methodology, we determined that our median employee was a full-time, salaried employee located in the United States.
COMPENSATION OF DIRECTORS
2021 Director Compensation Table
The following table provides information regarding the compensation paid to each of our
non-employee
directors for the fiscal year ended June 30, 2021.
 
  Name
  
Fees
Earned
or Paid
in Cash
($)
    
Stock
Awards
($)
(1)
   
Total
($)
 
Peter C. Browning
     85,000        130,804       215,804  
Frank E. Emory, Jr.
     42,500        162,888
(3)
 
    205,388  
Michael J. Grainger
     45,000        130,804       175,804  
Charles A. Mathis
(2)
     —          —         —    
Dorothy F. Ramoneda
     42,500        130,804       173,304  
John P. Reilly
     45,000        130,804       175,804  
Jeffrey R. Rodek
     42,500        130,804       173,304  
Elizabeth O. Temple
     45,000        130,804       175,804  
Charles R. Whitchurch
     55,000        130,804       185,804  
 
(1)
 
Amounts shown are the aggregate grant date fair value of restricted stock 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. Each then-serving
non-employee
director received a restricted stock award on November 19, 2020 for 5,300 shares that vested in June 2021.
(2)
 
Mr. Mathis was appointed as a director of the Company effective August 19, 2021.
(3)
 
Stock Awards for Mr. Emory includes a
pro-rated
new hire grant when Mr. Emory was appointed a director of the Company in 2020.
Cash Retainers for Fiscal 2021
Directors who are not our employees are paid an annual retainer of $85,000. An additional annual retainer of $70,000 is paid, as applicable, to a
non-executive
Chairman or Lead Independent Director of the Board. An additional annual retainer of $25,000 is paid to the chair of the Audit Committee, and an additional annual retainer of $15,000 is paid to the chair of the Compensation Committee. An additional annual retainer of $5,000
was paid to the chairs of the Nominating Committee and Governance Committee serving at such time. Annual service for this purpose relates to the approximate
12-month
periods between annual meetings of our shareholders. All directors are reimbursed for expenses incurred in connection with the performance of their services as directors as well as the cost of any director education. As of January 1, 2019, directors may elect to receive any portion of their cash fees in shares. In connection with the expense reduction plan effective July 1, 2020, our directors elected to forego their annual cash retainer fees through December 31, 2020. In August 2021, given the combination of the Nominating Committee and the Governance Committee, the director compensation plan was revised to provide for an annual retainer of $10,000 for the chair of the Nominating and Corporate Governance Committee.
 
38

Equity Retainers for Fiscal 2021
Our
non-employee
directors receive an annual equity retainer under the ScanSource, Inc. 2013 Long-Term Incentive Plan (the “2013 Plan”). In addition,
non-employee
directors also may be eligible to receive other awards under our 2013 Plan. As of January 1, 2019, each
non-employee
director can elect to receive the award in restricted stock awards or restricted stock units and can elect to defer his or her equity award under the deferred compensation plan.
The number of shares subject to a director’s annual equity award was determined by dividing $130,000
by the equity award value per share on the grant date. The equity award value means the closing price of the common stock on the grant date. The date of grant of the annual equity awards for our
non-employee
directors takes place at the same time as the annual equity awards for our employees.
A person who first becomes a
non-employee
director on a date other than a regularly scheduled annual meeting of shareholders will receive a restricted stock award for a
pro-rated
number of shares of common stock. Restricted stock may not be transferred or sold until it has vested.
Restricted stock granted to directors under the 2013 Plan will vest in full on the day that is six months after the date of grant, or upon the earlier occurrence of (i) the director’s termination of service as a director by reason of death, disability or retirement or (ii) a change in control of the Company. If a director terminates service for any other reason, he or she will forfeit all of his or her right, title and interest in and to the unvested restricted stock as of the date of termination, unless the Board or the Compensation Committee determines otherwise.
Stock Ownership and Retention Policy
Under the equity ownership policy, directors are expected to hold five times their annual Board cash retainer in Company securities. The policy also incorporates a retention requirement by requiring such persons to retain 50% of the net shares resulting from the vesting of certain awards until the required ownership under the policy is met. As of the end of the 2021 fiscal year, all directors were in compliance with this policy.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Annual Report on Form
10-K
for the year ended June 30, 2021 with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate to the Compensation Committee, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form
10-K
for the year ended June 30, 2021 and in the Proxy Statement for the 2022 Annual Meeting of Shareholders.
Submitted by the Compensation Committee:
 
Elizabeth O. Temple, Chair
Peter C. Browning
Frank E. Emory, Jr.
Michael J. Grainger
Dorothy F. Ramoneda
John P. Reilly
Jeffrey R. Rodek
Charles R. Whitchurch
The Compensation Committee report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the Compensation Committee report by reference therein.
 
39

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 2021, directors Browning, Emory, Grainger, Ramoneda, Reilly, Rodek, Temple and Whitchurch served on the Compensation Committee. No member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries during fiscal 2021, or at any time prior thereto. During fiscal 2020, no member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of Regulation
S-K
under the Exchange Act, and no executive officers served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on our Board or Compensation Committee.
Item 12. Security Ownership of Certain Beneficial Owners and Management, and Related Shareholder Matters
Equity Compensation Plan Information
The following table provides information about the common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of June 30, 2021:
 
  Plan Category
  
(a)
Number of
Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
    
(b)
Weighted
Average
Exercise Price of
Outstanding
Options,
Warrants
and Rights
(3)
    
(c)
Number of Securities
   Remaining Available
   for Future Issuance
Under Equity
Compensation Plans
   (Excluding Securities  
Reflected in Column  
(a))
 
Equity Compensation Plans Approved by Shareholders
        
2013 Long-Term Incentive Plan
     1,744,380
(1)
 
   $ 21.99        879,660  
2002 Long-Term Incentive Plan
     29,086
(2)
 
   $ 34.12        —    
Equity Compensation Plans Not Approved by Shareholders
     —          —          —    
TOTAL:
     1,773,466      $ 22.19        879,660  
 
(1)
 
ScanSource, Inc. 2013 Long-Term Incentive Plan (“2013 Plan”). At June 30, 2021, approximately 879,660 shares remain available for issuance under the 2013 Plan, which allows for grants of incentive stock options,
non-qualified
stock options, stock appreciation rights, performance awards, restricted stock awards, restricted stock units, deferred stock units, dividend equivalent awards and other stock-based awards. Includes restricted stock outstanding, including restricted stock awards, restricted stock units, performance restricted stock awards and performance restricted stock units. Amount includes 537,897 restricted shares outstanding in the form of restricted stock units and performance units.
(2)
 
ScanSource, Inc. 2002 Long-Term Incentive Plan, as amended. At June 30, 2021, there were no restricted stock units or performance units outstanding under the ScanSource, Inc. 2002 Long-Term Incentive Plan.
(3)
 
The weighted-average exercise price does not reflect the shares that will be issued upon the payment of outstanding awards of restricted stock, which have no exercise price.
 
40

Stock Ownership Information
Principal Shareholders and Beneficial Ownership
The following table sets forth certain information regarding the beneficial ownership of our common stock as of October 15, 2021 by the following: (i) each of our NEOs; (ii) each of our directors and director nominees; (iii) all of our directors and executive officers as a group; and (iv) each person known to own beneficially more than 5% of our common stock. Unless otherwise indicated, each person possesses sole voting and investment power with respect to the shares identified as beneficially owned. The address for each of our directors and executive officers is 6 Logue Court, Greenville, South Carolina 29615.
 
  Name
  
Number of Shares
Beneficially Owned
    
Percentage
(1)
  
 
BlackRock, Inc.
(2)
     4,633,428        18.81%  
The Vanguard Group, Inc.
(3)
     2,735,139        10.62%  
Dimensional Fund Advisors LP
(4)
     2,020,128        8.27%  
FMR LLC
(5)
     1,954,376        6.78%  
Pzena Investment Management, LLC
(6)
     1,714,280        5.73%  
Victory Capital Management Inc.
(7)
     1,667,753        5.51%  
Michael L. Baur
(8)
     658,677        2.51%  
Peter C. Browning
     28,300            
Matthew S. Dean
(9)
     38,761            
John Eldh
(10)
     63,760            
Frank E. Emory, Jr.
     10,300            
Michael J. Grainger
     33,900            
Rachel Hayden
(11)
     —          —    
Stephen T. Jones
(12)
     —          —    
Charles A. Mathis
     3,700            
Dorothy F. Ramoneda
     13,400            
John P. Reilly
     31,324            
Jeffrey R. Rodek
     13,100            
Elizabeth O. Temple
     19,000            
Charles R. Whitchurch
     21,500            
All directors and executive officers as a group
(14 persons)
(13)
     935,722        3.56%  
 
*
Amount represents less than 1.0%.
(1)
 
Applicable percentage of ownership is based upon 25,540,209 shares of our common stock outstanding on October 15, 2021. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to shares shown as beneficially owned. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the shares and percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person or entity. Except as otherwise indicated, the persons or entities listed in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
(2)
 
The information reported is based on a Schedule 13G filed with the SEC on January 25, 2021 reporting sole power of BlackRock, Inc. to vote or direct the vote of 4,460,153 shares and sole power to dispose or direct the disposition of 4,633,428 shares. The business address of BlackRock, Inc. is 55 East 52nd St., New York, NY 10055.
(3)
 
The information is reported based on a Schedule 13G/A filed with the SEC on February 10, 2021 reporting shared power of The Vanguard Group, Inc. (“Vanguard”) to vote or direct the vote of 30,387 shares, sole power of Vanguard to dispose or direct the disposition of 2,682,071 shares; and shared power of Vanguard to dispose or direct the disposition of 53,068 shares. The business address of Vanguard is 100 Vanguard Boulevard, Malvern, PA 19355.
(4)
 
The information is reported based on a Schedule 13G/A filed with the SEC on February 16, 2021 reporting the beneficial ownership of Dimensional Fund Advisors LP (“Dimensional”) and the sole power to vote or direct the vote of 1,941,450 shares and sole power to dispose or direct the disposition of 2,020,128 shares. Dimensional is an investment adviser registered under Section 203 of the Investment Advisors Act of 1940. All securities reported in this schedule are owned by the funds advised by Dimensional. Dimensional disclaims beneficial ownership of such securities. The business address of Dimensional is Building One, 6300 Bee Cave Road, Building One, Austin, TX 78746.
(5)
 
The information reported is based on a Schedule 13G/A filed with the SEC on February 8, 2021 reporting sole power of FMR LLC, the parent holding company of subsidiary companies engaged in the securities business, to vote or direct the vote of 234,515 shares and sole power to dispose or direct the disposition of 1,954,376 shares; sole power of Abigail P. Johnson to dispose or direct the disposition of 1,954,376 shares; and sole power of Fidelity
Low-Priced
Stock Fund to vote or direct the vote of 1,477,521 shares. The business address of FMR LLC is 245 Summer Street, Boston, MA 02210.
(6)
 
The information reported is based on a Schedule 13G/A filed with the SEC on February 1, 2021 reporting sole power of Pzena Investment Management, LLC (“Pzena”) to vote or direct the vote of 1,328,772 shares and sole power to dispose or direct the disposition of 1,714,280 shares. The business address of Pzena is 320 Park Avenue, 8th Floor, New York, NY 10022.
(7)
 
The information reported is based on a Schedule 13G/A filed with the SEC on February 4, 2021 reporting sole power of Victory Capital Management Inc. (“Victory”) to vote or direct the vote of 1,646,953 shares and sole power to dispose or direct the disposition of 1,667,753 shares. The business address of Victory is 4900 Tiedeman Road, 4th Floor, Brooklyn, OH 44144.
(8)
 
Does not include 166,928 shares issuable pursuant to options granted by the Company that are not currently exercisable and will not become exercisable by December 14, 2021 and includes 85,992 shares pursuant to options which will become exercisable by December 14, 2021. Includes 534,867 shares issuable pursuant to exercisable options. Does not include 75,489 shares underlying unvested restricted stock units that will not vest by December 14, 2021. Includes 37,353 restricted stock units that will vest by December 14, 2021.
(9)
 
Does not include 24,786 shares issuable pursuant to options granted by the Company that are not currently exercisable and will not become exercisable by December 14, 2021 and includes 16,692 shares pursuant to options which will become exercisable by December 14, 2021. Includes 10,000 shares issuable pursuant to exercisable options. Does not include 14,260 shares underlying unvested restricted stock units that will not vest by December 14, 2021. Does include 6,218 shares underlying vested restricted stock units that will vest by December 14, 2021.
 
41

(10)
Does not include 58,916 shares issuable pursuant to options granted by the Company that are not currently exercisable and will not become exercisable by December 14, 2021. Includes 30,350 shares issuable pursuant to exercisable options. Does not include 57,362 shares underlying unvested restricted stock units that will not vest by December 14, 2021.
(11)
Does not include 12,802 shares underlying unvested restricted stock units that will not become exercisable by December 14, 2021
(12)
Does not include 38,578 shares underlying unvested restricted stock units that will not become exercisable by December 14, 2021
(13)
Includes 544,867 shares issuable pursuant to exercisable options, shares 133,034 shares pursuant to which options which will become exercisable by December 14, 2021 and includes 64,523 shares underlying vested restricted stock units that will vest by December 14, 2021.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related-Party Transactions
The Audit Committee reviews all related party transactions (as defined by Item 404 of Regulation
S-K)
in accordance with NASDAQ listing standards. In addition, the charter of the Audit Committee requires the Audit Committee to review a summary of any director’s or officer’s related-party transactions and potential conflicts of interest on a yearly basis. The charter also requires the Audit Committee to review our conflict of interest policy (which is part of our Code of Conduct) and compliance with that policy on an annual basis.
We are not aware of any related-party transaction since the beginning of fiscal 2021 required to be reported under our policy or applicable SEC rules for which our policies and procedures did not require review or for which such policies and procedures were not followed.
There are no family relationships among the executive officers and directors, and there are no arrangements or understandings between any independent director or any other person pursuant to which that independent director was selected as a director.
Director Independence
In accordance with the listing standards of The NASDAQ Stock Market (“NASDAQ”) and our Corporate Governance Guidelines (the “Guidelines”), our Board consists of a majority of independent directors. The Board has determined that all members of the Board, other than Mr. Baur, meet the requirements for being “independent” as defined in the U.S. Securities and Exchange Commission (“SEC”) rules and regulations and NASDAQ listing standards.
The Board maintains three committees as follows: (1) an Audit Committee, (2) a Compensation Committee, and (3) a Nominating and Corporate Governance Committee. Each committee of the Board is comprised only of independent directors.
In addition, under our Corporate Governance Guidelines, executive officers are prohibited from serving as a director of another company that concurrently employs a director of the Company.
Item 14. Principal Accountant Fees and Services
Fees
As reflected in the table below, we incurred fees in fiscal 2021 and 2020 for services performed by Grant Thornton related to such periods.
 
    
Year Ended
June 30,
2021
    
Year Ended
June 30,
2020
 
 Audit Fees
   $ 1,722,195      $ 1,853,810  
 Tax Fees
     182,690        90,300  
  
 
 
    
 
 
 
 Total Fees
   $ 1,904,885      $ 1,944,110  
  
 
 
    
 
 
 
 
42

In the above table, in accordance with applicable SEC rules:
 
   
“Audit Fees” are fees for professional services for the audit of the consolidated financial statements included in our Form
10-K,
the audit of internal control over financial reporting, the review of financial statements included in our Form
10-Qs,
and services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements; and
 
   
“Tax Fees” are fees for professional services related to foreign tax compliance, tax advice and tax planning.
Audit Committee’s
Pre-Approval
Policies and Procedures
It is the policy of the Audit Committee to
pre-approve
all audit and permitted
non-audit
services proposed to be performed by our independent auditor. All audit and permitted
non-audit
services performed in fiscal 2021 were
pre-approved
by the Audit Committee. The process for such
pre-approval
is typically as follows: Audit Committee
pre-approval
is sought at one of the Audit Committee’s regularly scheduled meetings following the presentation of information at such meeting detailing the particular services proposed to be performed. The authority to
pre-approve
non-audit
services may be delegated by the Audit Committee, pursuant to guidelines approved by the Audit Committee, to one or more members of the Audit Committee. None of the services described above were approved by the Audit Committee pursuant to the exception provided by the Exchange Act rules.
The Audit Committee has reviewed the
non-audit
services provided by Grant Thornton and has determined that the provision of such services is compatible with maintaining Grant Thornton’s independence for the period of time during which it has served as our independent auditor.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) and (a)(2): No financial statements or schedules are filed with this report on Form
10-K/A.
(a)(3) Exhibits. The list of exhibits filed as a part of this Annual Report on Form
10-K
is set forth on the Exhibit Index and is incorporated by reference in this Item 15(a)(3).
(b) Exhibits. See Exhibit Index.
(c) Separate Financial Statements and Schedules. None.
 
43

Exhibit Index
 
Exhibit
Number
       
Description
  
Filed
herewith
  
Form
  
Exhibit
  
Filing
Date
  2.1       Letter Agreement between Registrant and Intersmart Comércio ImportaçãoExportação de Equipamentos Eletrônicos, S.A., dated August 14, 2014      
8-K
   10.1    8/15/2014
  2.2       Share Purchase and Sale Agreement for Global Data Network LLP dated January 8, 2015      
10-Q
   2.1    2/3/2015
  2.3       Asset Purchase Agreement for Intelisys, Inc. dated August 5, 2016      
10-Q
   10.1    11/7/2016
  2.4    +    Sale and Purchase Agreement, dated November 12, 2020, by and among ScanSource Europe C.V. and SSE Services Holdings, LLC      
8-K
   2.1    11/13/2020
  3.1       Amended and Restated Articles of Incorporation and Articles of Amendment      
10-Q
   3.1    2/3/2005
  3.2       Amended and Restated Bylaws      
8-K
   3.1    11/30/2018
  4.1       Form of Common Stock Certificate      
SB-2
   4.1    2/7/1994
  4.2       Description of Securities      
10-K
   4.2    8/22/2019
     
Executive Compensation Plans and Arrangements
           
10.1       ScanSource, Inc. Nonqualified Deferred Compensation Plan, as Amended and Restated Effective January 1, 2021      
10-Q
   10.3    5/10/2021
10.2       Amended and Restated 2002 Long-Term Incentive Plan      
8-K
   10.1    12/7/2009
10.3       2013 Long-Term Incentive Plan      
S-8
   99    12/5/2013
10.4       Employee Stock Purchase Plan      
S-8
   99    12/5/2013
10.5       Founder’s Supplemental Executive Retirement Plan Agreement      
10-Q
   10.2    5/6/2011
10.6       Executive Severance Plan      
8-K
   10.3    6/21/2017
10.7       Form of Incentive Stock Option Award Certificate under the Amended and Restated 2002 Long-Term Incentive Plan for grants on or after December 3, 2009      
8-K
   10.3    12/7/2009
10.8       Form of Incentive Stock Option Award Certificate under the Amended and Restated 2002 Long-Term Incentive Plan for grants on or after December 3, 2010      
10-Q
   10.2    2/4/2011
10.9       Form of Non-Qualified Stock Option Award Certificate under the Amended and Restated 2002 Long-Term Incentive Plan for grants on or after December 3, 2009      
8-K
   10.4    12/7/2009
10.10       Form of Non-Qualified Stock Option Award Certificate under the Amended and Restated 2002 Long-Term Incentive Plan for grants on or after December 3, 2010      
10-Q
   10.3    2/4/2011
 
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10.11       Form of Restricted Stock Unit Award Certificate under ScanSource, Inc. 2013 Long-Term Incentive Plan for grants on or after December 5, 2013                   
10-Q
   10.1    2/6/2014
10.12       Form of Director Restricted Stock Unit Award Certificate under ScanSource, Inc. 2013 Long-Term Incentive Plan for grants on or after December 5, 2013      
10-Q
   10.2    2/6/2014
10.13       Form of Incentive Stock Option Award Certificate under ScanSource, Inc. 2013 Long-Term Incentive Plan for grants on or after December 5, 2013      
10-Q
   10.3    2/6/2014
10.14       Form of Non-Qualified Stock Option Award Certificate under ScanSource, Inc. 2013 Long-Term Incentive Plan for grants on or after December 5, 2013      
10-Q
   10.4    2/6/2014
10.15       Form of Other Stock Based Award Certificate under ScanSource, Inc. 2013 Long-Term Incentive Plan      
10-K
   10.33    8/28/2014
10.16       Form of Performance and Service—Based Restricted Stock Unit Award Certificate under ScanSource Inc. 2013 Long-Term Incentive Plan      
10-K
   10.34    8/28/2014
10.17       Form of Restricted Stock Unit Award (Performance and Service-Based) under the 2013 Long-Term Incentive Plan (2017 version)      
8-K
   10.1    12/8/2017
10.18       Form of Restricted Stock Unit Award (Service-Based) under the 2013 Long-Term Incentive Plan (2017 version)      
8-K
   10.2    12/8/2017
10.19       Form of Non-Qualified Stock Option Agreement under the 2013 Long-Term Incentive Plan (2017 version)      
8-K
   10.3    12/8/2017