SCANSOURCE, INC. AMENDMENT TO STOCK OPTION AGREEMENTS AND PROMISE TO MAKE CASH PAYMENT

EX-10.1 2 dex101.htm FORM OF AMENDMENT TO STOCK OPTION AGREEMENT FOR MEADE AND BENBENEK Form of Amendment to Stock Option Agreement for Meade and Benbenek

Exhibit 10.1

Andrea D. Meade

3 East Cleveland Bay Court

Greenville, SC 29615

SCANSOURCE, INC.

AMENDMENT TO STOCK OPTION AGREEMENTS AND

PROMISE TO MAKE CASH PAYMENT

November 6, 2007

Dear Andrea,

ScanSource, Inc., a South Carolina corporation (“ScanSource”) has determined that certain of your stock options were granted, for accounting purposes, with an exercise price that is less than the fair market value of the ScanSource common stock subject to such options on the applicable “measurement date” (which is not necessarily the same as the “grant date” set forth on your option agreement). As a result, these stock options will be subject to potentially adverse personal tax consequences under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended.

In order to address the potentially adverse personal tax consequences that may apply to certain of your options under Section 409A, ScanSource is offering to amend the exercise price of your eligible options (as identified on the schedule on the last page of this agreement) (the “Eligible Options”) to increase the exercise price of the Eligible Portion(s) (as defined below) to the fair market value of the common stock on the date that was determined to be the measurement date for accounting purposes for such options (the “Corrected Exercise Price”). Such options will be amended as of the date of this agreement. These Eligible Options, if already vested or once vested in accordance with the terms of grant, are exercisable at the amended exercise price as listed on the schedule on the last page of this agreement.

Only certain portions of your Eligible Options will be amended. The portion of an Eligible Option that will be amended has both of the following characteristics (the “Eligible Portion”):

 

   

the portion of the Eligible Option that vested after, or is scheduled to vest after, December 31, 2004; and

 

   

the portion of the Eligible Option that is still outstanding and unexercised as of the date of this agreement.

Please note that the portions of Eligible Options that (A) are considered “Grandfathered Options” (defined below), (B) have already been exercised, (C) have expired or otherwise been cancelled or (D) are beneficially owned by someone other than you, will not be amended. A “Grandfathered Option” is the portion of an Eligible Option that was vested as of December 31, 2004, and as a result are exempt from the adverse personal tax treatment under Section 409A and therefore do not need to be amended. Any amendment of the Eligible Portions of your Eligible Options will not affect the remaining portions of your Eligible Options.

In exchange for your agreement to amend your outstanding Eligible Options to raise the exercise price as indicated on the schedule on the last page of this agreement, ScanSource hereby promises to pay you a special cash payment in the amount described on the schedule on the last page of this agreement (the “Make Whole Payment”). The Make Whole Payment is an amount equal to the difference between the Corrected Exercise Price per share of your Eligible Options and the original exercise price per share of your Eligible Options multiplied by the number of shares subject to the Eligible Portions of your Eligible Options. Your Make Whole Payment will be paid, less applicable tax withholding, promptly on or before your first regular payroll date in January 2008. This payment is not subject to vesting or forfeiture.

This payment will be “grossed up” to reimburse you for Medicare tax obligations arising from such payments.


This agreement acts as an amendment to each of your Eligible Options. Each Eligible Option that is amended pursuant to this agreement will have the same material terms and conditions as it did prior to the amendment, including the same vesting schedule and expiration date, except that the Eligible Portions of the Eligible Options will have a new exercise price. To the extent not amended by this agreement, your Eligible Options will continue to be subject to the terms and conditions of the 1997 Stock Incentive Plan, as amended, or the Amended and Restated 2002 Long-Term Incentive Plan, as amended, as applicable under which the original options were granted.

By signing my name on the last page hereto, I understand and agree to all of the following:

1. I hereby consent to the amendment by ScanSource to amend my Eligible Options in accordance with the terms set forth in this agreement. My Eligible Options consist of the portions of the options granted to me under ScanSource, Inc.’s 1997 Stock Incentive Plan, as amended, or the Amended and Restated 2002 Long-Term Incentive Plan, as amended, that have the grant dates and exercise prices per share listed on the schedule on the last page of this agreement and that (i) were unvested as of December 31, 2004 and (ii) will be outstanding and unexercised as of the date of this agreement. My Eligible Options will be amended as of the date of this agreement to have an adjusted exercise price per share listed on the schedule on the last page of this agreement. Except for such adjusted exercise price, all the terms and provisions of my amended Eligible Options will be the same as in effect immediately before the amendment.

2. I will also receive the Make Whole Payment as listed on the schedule on the last page of this agreement. This Make Whole Payment, less any applicable tax withholdings, will be made on or before my first regular payroll date following January 1, 2008. This payment will be “grossed up” to reimburse me for Medicare tax obligations arising from such payments.

3. My consent hereto will constitute my acceptance of all of the terms and conditions of this agreement and this agreement will constitute a binding agreement between ScanSource and me.

4. I am the registered holder of the Eligible Options amended hereby, and my name and other information appearing on page 1 and the last page of this agreement are true and correct.

5. ScanSource cannot give me legal, tax or investment advice with respect to my Eligible Options and has advised me to consult with my own legal, tax and investment advisors as to the consequences of amending or not amending my Eligible Options.

6. I understand that neither ScanSource nor the board of directors of ScanSource is making any recommendation as to whether I should consent to this amendment of my Eligible Options, and that I must make my own decision whether to consent to this amendment of my Eligible Options, taking into account my own personal circumstances and preferences.

This agreement reflects the entire agreement between you and ScanSource with respect to this transaction. This agreement may be amended only by means of a writing signed by you and an authorized officer of ScanSource.

 

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ScanSource, Inc.

Schedule of Amended Options and Cash Payments

The following is the schedule of your amended options:

 

Grant Date

   Total Number of
Shares Originally
Granted under
the Option
   Total Number of
Shares Outstanding
under the Option as
of November 7, 2007
   Number of Shares
Subject to Eligible
Portion of the

Eligible Options
   Original Exercise
Price Per Share
   Adjusted Exercise
Price Per Share

if Amended
   Difference between
Original Exercise

Price and Adjusted
Exercise Price
   Potential Make
Whole Cash
Payment if
Amended

1/2/2003

   6,000    2,000    2,000    $ 12.68    $ 14.16    $ 1.48    $ 2,960.00

1/2/2004

   4,400    4,400    4,400    $ 23.06    $ 24.73    $ 1.67    $ 7,348.00

1/5/2005

   92    92    92    $ 29.70    $ 33.92    $ 4.22    $ 388.24

1/5/2005

   4,308    4,308    4,308    $ 29.70    $ 33.92    $ 4.22    $ 18,179.76

1/5/2006

   644    644    644    $ 27.48    $ 29.44    $ 1.96    $ 1,262.24

1/5/2006

   3,756    3,756    3,756    $ 27.48    $ 29.44    $ 1.96    $ 7,361.76

 

SCANSOURCE, INC.

By:  

/s/ John J. Ellsworth

Name:   John J. Ellsworth
Title:   General Counsel & Corporate Secretary

 

ACCEPTED BY:

/s/ Andrea D. Meade

[                    ]

 

* This amount does not include an additional “gross up” amount that will be paid to you to reimburse you for Medicare tax obligations arising from such payment.

 

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R. Scott Benbenek

308 Shadowbrooke Court

Simpsonville, SC 29681

SCANSOURCE, INC.

AMENDMENT TO STOCK OPTION AGREEMENTS AND

PROMISE TO MAKE CASH PAYMENT

November 6, 2007

Dear Scott,

ScanSource, Inc., a South Carolina corporation (“ScanSource”) has determined that certain of your stock options were granted, for accounting purposes, with an exercise price that is less than the fair market value of the ScanSource common stock subject to such options on the applicable “measurement date” (which is not necessarily the same as the “grant date” set forth on your option agreement). As a result, these stock options will be subject to potentially adverse personal tax consequences under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended.

In order to address the potentially adverse personal tax consequences that may apply to certain of your options under Section 409A, ScanSource is offering to amend the exercise price of your eligible options (as identified on the schedule on the last page of this agreement) (the “Eligible Options”) to increase the exercise price of the Eligible Portion(s) (as defined below) to the fair market value of the common stock on the date that was determined to be the measurement date for accounting purposes for such options (the “Corrected Exercise Price”). Such options will be amended as of the date of this agreement. These Eligible Options, if already vested or once vested in accordance with the terms of grant, are exercisable at the amended exercise price as listed on the schedule on the last page of this agreement.

Only certain portions of your Eligible Options will be amended. The portion of an Eligible Option that will be amended has both of the following characteristics (the “Eligible Portion”):

 

   

the portion of the Eligible Option that vested after, or is scheduled to vest after, December 31, 2004; and

 

   

the portion of the Eligible Option that is still outstanding and unexercised as of the date of this agreement.

Please note that the portions of Eligible Options that (A) are considered “Grandfathered Options” (defined below), (B) have already been exercised, (C) have expired or otherwise been cancelled or (D) are beneficially owned by someone other than you, will not be amended. A “Grandfathered Option” is the portion of an Eligible Option that was vested as of December 31, 2004, and as a result are exempt from the adverse personal tax treatment under Section 409A and therefore do not need to be amended. Any amendment of the Eligible Portions of your Eligible Options will not affect the remaining portions of your Eligible Options.

In exchange for your agreement to amend your outstanding Eligible Options to raise the exercise price as indicated on the schedule on the last page of this agreement, ScanSource hereby promises to pay you a special cash payment in the amount described on the schedule on the last page of this agreement (the “Make Whole Payment”). The Make Whole Payment is an amount equal to the difference between the Corrected Exercise Price per share of your Eligible Options and the original exercise price per share of your Eligible Options multiplied by the number of shares subject to the Eligible Portions of your Eligible Options. Your Make Whole Payment will be paid, less applicable tax withholding, promptly on or before your first regular payroll date in January 2008. This payment is not subject to vesting or forfeiture.

This payment will be “grossed up” to reimburse you for Medicare tax obligations arising from such payments.


This agreement acts as an amendment to each of your Eligible Options. Each Eligible Option that is amended pursuant to this agreement will have the same material terms and conditions as it did prior to the amendment, including the same vesting schedule and expiration date, except that the Eligible Portions of the Eligible Options will have a new exercise price. To the extent not amended by this agreement, your Eligible Options will continue to be subject to the terms and conditions of the 1997 Stock Incentive Plan, as amended, or the Amended and Restated 2002 Long-Term Incentive Plan, as amended, as applicable under which the original options were granted.

By signing my name on the last page hereto, I understand and agree to all of the following:

1. I hereby consent to the amendment by ScanSource to amend my Eligible Options in accordance with the terms set forth in this agreement. My Eligible Options consist of the portions of the options granted to me under ScanSource, Inc.’s 1997 Stock Incentive Plan, as amended, or the Amended and Restated 2002 Long-Term Incentive Plan, as amended, that have the grant dates and exercise prices per share listed on the schedule on the last page of this agreement and that (i) were unvested as of December 31, 2004 and (ii) will be outstanding and unexercised as of the date of this agreement. My Eligible Options will be amended as of the date of this agreement to have an adjusted exercise price per share listed on the schedule on the last page of this agreement. Except for such adjusted exercise price, all the terms and provisions of my amended Eligible Options will be the same as in effect immediately before the amendment.

2. I will also receive the Make Whole Payment as listed on the schedule on the last page of this agreement. This Make Whole Payment, less any applicable tax withholdings, will be made on or before my first regular payroll date following January 1, 2008. This payment will be “grossed up” to reimburse me for Medicare tax obligations arising from such payments.

3. My consent hereto will constitute my acceptance of all of the terms and conditions of this agreement and this agreement will constitute a binding agreement between ScanSource and me.

4. I am the registered holder of the Eligible Options amended hereby, and my name and other information appearing on page 1 and the last page of this agreement are true and correct.

5. ScanSource cannot give me legal, tax or investment advice with respect to my Eligible Options and has advised me to consult with my own legal, tax and investment advisors as to the consequences of amending or not amending my Eligible Options.

6. I understand that neither ScanSource nor the board of directors of ScanSource is making any recommendation as to whether I should consent to this amendment of my Eligible Options, and that I must make my own decision whether to consent to this amendment of my Eligible Options, taking into account my own personal circumstances and preferences.

This agreement reflects the entire agreement between you and ScanSource with respect to this transaction. This agreement may be amended only by means of a writing signed by you and an authorized officer of ScanSource.

 

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ScanSource, Inc.

Schedule of Amended Options and Cash Payments

The following is the schedule of your amended options:

 

Grant Date

   Total Number of
Shares Originally
Granted under
the Option
   Total Number of
Shares Outstanding
under the Option as of
November 7, 2007
   Number of Shares
Subject to Eligible
Portion of the
Eligible Options
   Original Exercise
Price Per Share
   Adjusted Exercise
Price Per Share
if Amended
   Difference between
Original Exercise

Price and Adjusted
Exercise Price
   Potential Make
Whole Cash
Payment if
Amended

1/2/2003

   12,000    12,000    8,000    $ 12.68    $ 14.16    $ 1.48    $ 11,840.00

1/2/2004

   6,000    6,000    6,000    $ 23.06    $ 24.73    $ 1.67    $ 10,020.00

1/5/2005

   2,080    2,080    2,080    $ 29.70    $ 33.92    $ 4.22    $ 8,777.60

1/5/2005

   3,920    3,920    3,920    $ 29.70    $ 33.92    $ 4.22    $ 16,542.40

1/5/2006

   3,860    3,860    3,860    $ 27.48    $ 29.44    $ 1.96    $ 7,565.60

1/5/2006

   4,140    4,140    4,140    $ 27.48    $ 29.44    $ 1.96    $ 8,114.40

 

SCANSOURCE, INC.

By:  

/s/ John J. Ellsworth

Name:   John J. Ellsworth
Title:   General Counsel & Corporate Secretary

 

ACCEPTED BY:

/s/ Scott Benbenek

[                    ]

 

* This amount does not include an additional “gross up” amount that will be paid to you to reimburse you for Medicare tax obligations arising from such payment.

 

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