10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2009

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             .

Commission File Number: 000-26926

ScanSource, Inc.

(Exact name of registrant as specified in its charter)

South Carolina	57-0965380
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6 Logue Court Greenville, South Carolina	29615
(Address of principal executive offices)	(Zip Code)

(864) 288-2432

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, no par value	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.    x  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    x  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 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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    ¨  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    ¨  Yes    x  No

The aggregate market value of the voting common stock of the Registrant held by non-affiliates of the Registrant at December 31, 2008 was $503,435,880, as computed by reference to the closing price of such stock on such date.

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 August 24, 2008
Common Stock, no par value per share	26,569,370 shares

DOCUMENTS INCORPORATED BY REFERENCE

The registrant has incorporated by referenced into Part III of this report certain portions of its proxy statement for its 2009 Annual Meeting of Shareholders, which is expected to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended June 30, 2009.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	13
Item 2.	Properties	13
Item 3.	Legal Proceedings	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 8.	Financial Statements and Supplementary Data	35
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	68
Item 9A.	Controls and Procedures	68
Item 9B.	Other Information	69
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	70
Item 11.	Executive Compensation	70
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	70
Item 13.	Certain Relationships and Related Transactions, and Director Independence	70
Item 14.	Principal Accountant Fees and Services	70
PART IV
Item 15.	Exhibits and Financial Statement Schedules	71
Signatures		73

FORWARD-LOOKING STATEMENTS

The forward-looking statements included in the “Business,” “Risk Factors,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures About Market Risk” sections and elsewhere herein, which reflect our best judgment based on factors currently known, involve risks and uncertainties. Words such as “expects,” “anticipates,” “believes,” “intends,” “plans,” “hopes,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors including, but not limited to, the factors discussed in such sections and, in particular, those set forth in the cautionary statements contained in “Risk Factors.” The forward-looking information we have provided in this Form 10-K pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors.

PART I

ITEM 1. Business.

ScanSource, Inc. (the “Company”), incorporated in 1992, is a leading wholesale distributor of specialty technology products, providing value-added distribution sales to resellers in the specialty technology markets. The Company has two geographic distribution segments: one serving North America from the Southaven, Mississippi distribution center, and an international segment currently serving Latin America (including Mexico) and Europe from distribution centers located in Florida and Mexico, and in Belgium and the United Kingdom, respectively. The North American distribution segment markets automatic identification and data capture (“AIDC”) and point-of-sale (“POS”) products through its ScanSource POS and Barcoding sales unit; voice, data and converged communications equipment through its Catalyst Telecom sales unit; video conferencing, telephony, and communications products through its ScanSource Communications unit; and electronic security products and wireless infrastructure products through its ScanSource Security Distribution unit. The international distribution segment markets AIDC and POS products through its ScanSource Latin American and European sales units, while communication products are marketed through its ScanSource Communications sales unit in Europe. See Note 14 to the Notes to the Consolidated Financial Statements for financial information concerning the Company’s reporting segments and the geographic areas in which the Company operates.

North American Distribution Segment

ScanSource POS and Barcoding Sales Unit

The ScanSource POS and Barcoding sales unit markets AIDC and POS products which interface with computer systems used to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling and warehouse management. The bar code family of products is referred to as automatic identification and data capture (AIDC) because it includes all types of portable data collection terminals, wireless products and bar code label printers, in addition to scanners. POS products are those PC-based products that have replaced electronic cash registers in retail and hospitality environments and the peripheral products that attach to them. These peripheral devices include such items as cash drawers, pole displays, signature capture units, display monitors and magnetic strip readers. In addition to these peripheral devices, ScanSource POS and Barcoding also sells products that attach to the POS network in the store, including kiosks, network access points, routers and digital signage displays.

ScanSource POS and Barcoding sales unit vendors include most of the leading AIDC and POS manufacturers, including Cisco, Datalogic, Elo, Epson America, Honeywell, IBM, Intermec, Motorola, NCR, and Zebra Technologies.

Catalyst Telecom Sales Unit

The Catalyst Telecom sales unit markets voice, data and converged communication systems and is a distributor of Avaya communications solutions, including Avaya Global Communication Solutions (GCS), Small and Medium Enterprise (SME) and internet protocol (IP) products. Catalyst Telecom also markets products complementary to the Avaya product line from vendors including Extreme Networks, Juniper Networks, Plantronics, Polycom, and multiple wireless vendors.

ScanSource Communications Sales Unit

ScanSource Communications is a comprehensive value-added distributor of total communications solutions, including video and audio conferencing products; telephony solutions including Voice over IP (VoIP); and computer telephony building blocks. ScanSource Communications’ manufacturing partners include Polycom, Audiocodes, Dialogic, Plantronics, and Quintum.

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ScanSource Security Sales Unit

The ScanSource Security sales unit focuses on hardware distribution of electronic security equipment using the two-tier distribution model, as described below in “Industry Overview”. The product offering includes identification, access control, video surveillance, intrusion-related, and wireless infrastructure products. Manufacturers include Alvarion, Axis, Cisco Security, Datacard, Digiop, DSC, Fargo, GE Security, HID, Motorola Wireless, Panasonic, Sony, Tropos and Zebra Card.

International Distribution Segment

The Company’s international distribution segment markets AIDC, POS, and communications products exclusively to technology resellers and integrators in the Latin American (including Mexico) and European markets. Key vendors include many of the same vendors that supply the ScanSource POS and Barcoding, Catalyst Telecom, and ScanSource Communications sales units of the North American distribution segment. Other key vendors exclusive to the international distribution segment include Siemens Communications, Shortel, Star Micronics, and Mitel.

See Item 1A. “Risk Factors” below for a discussion of certain risks relating to the Company’s international operations.

Products and Markets

The Company currently markets over 61,700 products from approximately 245 hardware and software vendors to over 20,000 reseller customers primarily from its central warehouses in Mississippi, Florida, Mexico, Belgium and the United Kingdom.

AIDC technology incorporates the capabilities for electronic identification and data processing without the need for manual input and consists of a wide range of products, including bar code printers, hand-held and fixed-mount laser scanners, mobile and wireless data collection devices, and magnetic stripe readers. As AIDC technology has become more pervasive, applications have evolved from traditional uses such as inventory control, materials handling, distribution, shipping and warehouse management to more advanced applications such as health care. POS products include those computer-based systems that have replaced electronic cash registers in grocery, retail, and hospitality environments. POS product lines include computer-based terminals, monitors, receipt printers, pole displays, cash drawers, keyboards, peripheral equipment and fully integrated processing units. Voice and data products include private branch exchanges (PBXs), key systems, and telephone handsets and components used in voice, fax, data, voice recognition, call center management and IP communication applications. Converged communication products combine voice, data, fax, and speech technologies to deliver communications solutions that combine computers, telecommunications and the Internet. Converged communications products include telephone and IP network interfaces, VoIP systems, PBX integration products and carrier-class board systems-level products. Video products include video and voice conferencing and network systems. Electronic security products include identification, access control, video surveillance, and intrusion-related products, and wireless infrastructure products.

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below for a discussion of the amount of the Company’s net sales contributed by product categories.

Industry Overview

The distribution channels for specialty technology products generally consist of manufacturers, wholesale distributors such as ScanSource, resellers and end-users. The “sales channel” for specialty technology products typically evolves through a three-stage process: (i) direct sales by manufacturers to end-users; (ii) single-tier distribution in which manufacturers sell to resellers who, in turn, sell directly to end-users; and (iii) two-tier, or wholesale distribution, in which manufacturers sell to wholesale distributors, including ScanSource, who sell only to resellers who, in turn, sell directly to end-users.

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Currently, the technology products wholesale distribution channel is served by both broadline and specialty distributors. The broadline distributors are engaged primarily in conventional order fulfillment and typically offer their reseller customers less support and fewer value-added services than do specialty distributors. The specialty distributors that compete with ScanSource are generally smaller, both in terms of size and geographic area covered.

Competition among an expanding number of manufacturers typically causes product prices to decrease and product applications to expand, which has resulted in an increasing number of resellers entering the market in order to support a broader base of potential end-users. As the number of resellers and end-users has grown, competition among manufacturers and within the reseller channel has intensified. Because many specialty technology manufacturers develop products that represent only one part of a total solution, most products eventually are developed to provide interoperability among products from multiple manufacturers. As a result of interoperability, a variety of manufacturers’ products are typically configured together to create a system solution. Therefore, both manufacturers and resellers have become more dependent upon value-added wholesale distributors such as ScanSource for the aggregation of products and reseller support services, as well as the organization and maintenance of an efficient market structure.

In addition, manufacturers that face declining product prices and rising costs of direct sales increasingly rely upon value-added wholesale distributors by outsourcing certain support functions, such as product assortment, delivery, inventory management, technical assistance, and marketing. At the same time, shortened product life cycles and the introduction of new products and applications have caused resellers increasingly to rely on wholesale distributors for various inventory management, financing, technical support and related functions. The Company believes that as the reseller market grows and becomes more fragmented, and as specialty technology products continue to transition to open systems, the wholesale distribution channel in which the Company operates will become increasingly more important.

Vendors

The Company’s key vendors for its ScanSource POS and Barcoding sales unit are Cisco, Datalogic, Elo, Epson America, Honeywell, IBM, Intermec, Motorola, NCR, and Zebra Technologies. The Company’s key vendors in its Catalyst Telecom sales unit are Avaya, Extreme Networks, Juniper Networks, Plantronics and Polycom. The Company’s key vendors for its ScanSource Communications sales unit are Audiocodes, Dialogic, Plantronics, and Polycom. The Company’s key vendors for its ScanSource Security sales unit are Axis, Sony, and Zebra Card.

Of all of the Company’s vendors, only two, Motorola and Avaya, each constitute more than 10% of the Company’s net sales.

The Company has over 245 vendors that currently supply its products. The Company’s products are typically purchased directly from the manufacturer on a non-exclusive basis. The Company’s agreements with its vendors generally do not restrict the Company from selling similar or comparable products manufactured by competitors. The Company has the flexibility to terminate or curtail sales of one product line in favor of another due to technological change, pricing considerations, product availability, customer demand, or vendor distribution policies.

The Company has written distribution agreements with its key vendors and with almost all of its vendors. The Company’s written distribution agreements are in the form that it believes are customarily used by manufacturers and distributors. The Company’s agreements generally provide it with non-exclusive distribution rights and often include territorial restrictions that limit the countries in which the Company can distribute its products. These agreements typically provide the Company with stock rotation and price protection provisions. Stock rotation rights give the Company the ability, subject to certain limitations, to return for credit or exchange a portion of those inventory items purchased from the vendor. Price protection situations occur when a vendor

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credits the Company for declines in inventory value resulting from the vendor’s price reductions. Along with the Company’s inventory management policies and practices, these provisions are designed to reduce the Company’s risk of loss due to slow-moving inventory, vendor price reductions, product updates or obsolescence.

Some of the Company’s distribution agreements contain minimum purchase requirements that the Company must meet in order to receive preferential prices. The Company participates in various rebate, cash discount and cooperative marketing programs offered by its vendors to support expenses associated with distributing and marketing the vendor’s products. The rebates and purchase discounts are generally influenced by sales volumes and are subject to change.

The Company’s distribution agreements are generally short term, subject to periodic renewal, and provide for termination by either party without cause upon 30 to 120 days notice. The Company’s vendors generally warrant the products the Company distributes and allow returns of defective products, including those returned to the Company by its customers. The Company generally does not independently warrant the products it distributes; however, local laws may in some cases impose warranty obligations on the Company.

The Company’s merchandising department recruits vendors and manages important aspects of its vendor relationships, such as purchasing arrangements, cooperative marketing initiatives, vendor sales force relationships, product training, monitoring of rebate programs and various contract terms and conditions.

Customers

The Company’s reseller customers currently include over 20,000 active value-added reseller accounts (“VARs”) located in the United States, Canada, Mexico, Latin America and Europe. No single customer accounted for more than 6% of the Company’s total net sales for the fiscal year ended June 30, 2009. The Company generally targets two types of reseller customers:

Specialty Technology VARs

These resellers focus on selling specialty technology products as tailored software or integrated hardware solutions for their end-users’ existing applications or incorporating specialty technology products into customized technology solutions for their end-users. Primary industries served by these resellers include manufacturing, distribution, health care, pharmaceutical, hospitality, government, convenience, grocery, financial, and other retail markets.

Networking or PC VARs

These resellers develop computer solutions and networking for their end-users’ microcomputer needs. They typically have well-established relationships with end-user management information system directors and are seeking additional revenue and profit opportunities in related technology markets, such as AIDC, POS, security, or communications.

Sales and Electronic Commerce

The Company’s sales department consists primarily of inside sales representatives located in the United States, Canada, Mexico, Belgium, France, Germany, the United Kingdom, and the Netherlands. In order to build strong customer relationships, most active resellers are assigned to a sales representative. Each sales representative negotiates pricing directly with their assigned customers. The Company also employs business development representatives who are responsible for developing technical expertise within broad product markets, recruiting customers, creating demand, and reviewing overall product and service requirements of resellers. Each sales representative and business development representative receives comprehensive training with respect to the technical characteristics of each vendor’s products. This training is supplemented by frequent product seminars conducted by vendors’ representatives and bi-weekly meetings among product, marketing and sales managers.

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Increasingly, customers rely upon the Company’s electronic ordering and information systems, in addition to its product catalogs and frequent mailings, as sources for product information, including availability and price. Through the Company’s website, most customers can gain remote access to the Company’s information systems to check real-time product availability, see their customized pricing and place orders. Customers can also follow the status of their orders and obtain United Parcel Service (“UPS”) and Federal Express (“FedEx”) package tracking numbers from this site.

Marketing

The Company provides a range of marketing services, including cooperative advertising with vendors through trade publications and direct mail, product catalogs for each of the North American, European and Latin American markets, periodic newsletters, management of sales leads, trade shows with hardware and software companies and vendors, direct mail, and sales promotions. In addition, the Company organizes and operates its own seminars teaming with top vendors to recruit prospective resellers and introduce new applications for the specialty technology products it distributes. The Company frequently customizes its marketing services for vendors and resellers.

Value-Added Services

In addition to the basic order fulfillment and credit services that conventional wholesale distributors typically provide to resellers, the Company differentiates itself by providing an array of value-added services and business tools that assist resellers to provide more complete solutions and improve customer service. Such services include custom configuration, professional services, technical support, partner marketing, web storefronts, custom packaging, and other specialized services.

Operations

Information System

The Company’s information system is a scalable, centralized processing system capable of supporting numerous operational functions including purchasing, receiving, order processing, shipping, inventory management and accounting. Sales representatives rely on the information system for on-line, real-time information on product pricing, inventory availability and reservation, and order status. The Company’s warehouse operations use bar code technology for receiving and shipping, and automated UPS and FedEx systems for freight processing and shipment tracking, each of which is integrated with the Company’s information system. The customer service and technical support departments employ the system for documentation and faster processing of customer product returns. To ensure that adequate inventory levels are maintained, the Company’s buyers depend on the system’s purchasing and receiving functions to track inventory on a continual basis.

Central Warehouse and Shipping

The Company operates a 600,000 square foot distribution center in Southaven, Mississippi, which is located near the FedEx hub facility in Memphis, Tennessee and serves all of North America. The Company utilizes a third party warehouse located in Liege, Belgium that serves all of Europe, including the United Kingdom. The Company has additional warehouse facilities in Florida and Mexico, which serve Latin America (including Mexico). The Company believes that its centralized distribution creates several advantages, including: (i) a reduced amount of “safety stock” inventory which, in turn, reduces the Company’s working capital requirements; (ii) an increased turnover rate through tighter controls over inventory; (iii) maintenance of a consistent order-fill rate; (iv) improved personnel productivity; (v) improved delivery time; (vi) simplified purchasing and tracking; (vii) decreased demand for management personnel; and (viii) flexibility to meet customer needs for systems integration. The Company’s objective is to ship all orders on the same day, using bar code technology to expedite shipments and minimize shipping errors. The Company offers reduced freight rates and flexible delivery options to minimize a reseller’s need for inventory.

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Financial Services

The Company routinely offers competitive credit terms relative to the specific geographic area for qualified resellers and facilitates various third party financing options, including leasing, flooring, and other secured financing. The Company believes this policy reduces the customer’s need to establish multiple credit relationships with a large number of manufacturers.

Competition

The markets in which the Company operates, as identified above, are highly competitive. Competition is based primarily on factors such as price, product availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to customer needs, quality and breadth of product lines and services, and availability of technical and product information.

In the ScanSource POS and Barcoding sales unit, the Company competes with broad-line distributors such as Avnet, Ingram Micro, Synnex and Tech Data, in all geographic segments. Additionally, the Company also competes against other smaller, more specialized, AIDC and POS distributors, such as Bluestar. In the Catalyst Telecom sales unit, the Company competes against Ingram Micro, Jenne, Tech Data, and Voda One. In the ScanSource Communications sales unit based in North America and in Europe, the Company competes against Ingram Micro, Nimans, Tech Data, and Westcon. In the ScanSource Security sales unit, which is based in North America, the Company competes against other broad-line distributors such as ADI, Synnex, and Tech Data and more specialized distributors such as Anixter, Northern Video Systems, and Tri-Ed. As the Company seeks to expand its business into other areas closely related to the Company’s offerings, the Company may encounter increased competition from current competitors and/or from new competitors, some of which may be the Company’s current customers.

The Company’s competitors include regional and national wholesale distributors, as well as hardware manufacturers (including most of the Company’s vendors) that sell directly to resellers and to end-users. In addition, the Company competes with master resellers that sell to franchisees, third-party dealers and end-users. Certain of the Company’s current and potential competitors have greater financial, technical, marketing and other resources than the Company has and may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Certain smaller regional competitors, who are specialty two-tier or mixed model master resellers, may also be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competition has increased for our sales units over the last several years as broad-line and other value-added distributors have entered into the specialty technology markets. Such competition could also result in price reductions, reduced margins and loss of market share by the Company.

Employees

As of June 30, 2009, the Company had 1,017 employees located in North America, Latin America (including Mexico) and Europe. Only employees located in Mexico are considered to be a collective bargaining unit. The Company considers its employee relations to be good.

Service Marks

The Company conducts its business under the trademarks and service marks “ScanSource POS and Barcode”, “Catalyst Telecom”, “ScanSource Communications”, “Partner Services”, and “ScanSource Security”.

The Company has been issued registrations for the service marks “ScanSource” and “Catalyst Telecom” in countries in its principal markets. These trademarks and service marks do not have value assigned to them and have a designated indefinite life. The Company does not believe that its operations are dependent upon any of its trademarks or service marks. The Company also sells products and provides services under various trademarks, service marks and trade names to which reference is made in this report that are the property of owners other than the Company.

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Additional Information

The Company’s principal internet address is www.scansourceinc.com. The Company provides its annual and quarterly reports free of charge on www.scansourceinc.com, as soon as reasonably practicable after they are electronically filed, or furnished to, the Securities and Exchange Commission (“SEC”). We provide a link to all SEC filings where current reports on Form 8-K and any amendments to previously filed reports may be accessed, free of charge, on our website.

ITEM 1A. Risk Factors.

An investment in our common stock involves a number of risks. You should carefully consider each of the risks described below before deciding to invest in our common stock. There also are other risks that we may not describe, generally because we currently do not perceive them to be material, which could impact us. If any of these risks develops into actual events, our business, financial condition or results of operations could be negatively affected, the market price of our common stock could decline and you may lose all or part of your investment. We expressly disclaim any obligation to update or revise any risk factors, whether as a result of new information, future events or otherwise, except as required by law.

Global economic downturn – Current world-wide economic conditions and market disruptions may adversely affect our business and results of operations.

Financial markets throughout the world could continue to experience extreme disruption, including, among other things, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations and pricing volatility of others, and failure and potential failures of major financial institutions. These continuing developments and the related general economic downturn may adversely impact our business and financial condition in a number of ways. The slowdown could lead to reduced information technology spending by end users, which could adversely affect our sales. The current tightening of credit in financial markets and the general economic downturn may adversely affect the ability of our reseller customers, vendors and service providers to obtain financing for significant purchases and operations and to perform their obligations under our agreements with them. This could result in a decrease in or cancellation of orders for our products and services, could negatively impact our ability to collect our accounts receivable on a timely basis, could result in additional reserves for uncollectible accounts receivable being required, and could lead to elevated levels of obsolete inventory. Significant volatility and fluctuations in the rates of exchange for the U.S. dollar against currencies such as the Euro, could also negatively impact our customer pricing and operating results.

We continue to be unable to predict the duration and severity of the current economic downturn and disruption in financial markets or their effects on our business and results of operations, but the consequences may be materially adverse and more severe than other recent economic slowdowns.

People – If we cannot continue to hire and retain high quality employees, our business and financial results may be negatively affected.

Our operating results could be adversely affected by increased competition for employees, higher employee turnover, or increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in part on our ability to retain the services of our key management, sales, IT, operational, finance and administrative personnel. We have built our business on a set of core values and we attempt to hire employees who are committed to these values. We want employees who will fit our culture of providing exceptional service to our vendors and customers. In order to compete and to continue to grow, we must attract, retain, and motivate employees, including those in executive, senior management, sales, marketing, logistics, technical support and other operating positions.

Many of our employees work in small teams to provide specific services to vendors and customers. They are trained to develop their knowledge of vendor products, programs and practices, and customer business needs, as

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well as to enhance the skills required to provide exceptional service and to manage our business. As they gain experience and develop their knowledge and skills, our employees become highly desired by other businesses. Therefore, to retain our employees, we have to provide a satisfying work environment and competitive compensation and benefits. If our costs to retain our skilled employees increase, then our business and financial results may be negatively affected.

Our continued growth is also dependent, in part, on the skills, experience and efforts of our senior management, including but not limited to, Michael Baur, our Chief Executive Officer. We may not be successful in retaining the members of our senior management team or our other key employees. While we have entered into employment agreements with key executives and have obtained a key person life insurance policy on our CEO’s life, the loss of the services of Mr. Baur or any member of our senior management team could also have an adverse effect on our business, financial condition and results of operations.

Vendor relationships – Terminations of a distribution or services agreement or a significant change in supplier terms, authorizations, or conditions of sale could negatively affect our operating margins, revenue or the level of capital required to fund our operations.

A significant percentage of our net sales relates to products sold to us by relatively few vendors. As a result of such concentration risk, terminations of supply or services agreements or a significant change in terms or conditions of sale from one or more of our more significant vendors could negatively affect our operating margins, revenues or the level of capital required to fund our operations. Our vendors have the ability to make significantly adverse changes in their sales terms and conditions, such as reducing the level of purchase discounts and rebates they make available to us. We have no guaranteed price or delivery agreements with our significant vendors. In certain product categories, limited price protection or return rights offered by our vendors may have a bearing on the amount of product we may be willing to stock. Our inability to pass through to our reseller customers the impact of these changes, as well as our failure to develop systems to manage ongoing vendor programs, could cause us to record inventory write-downs or other losses and could have significant negative impact on our gross margins.

We receive purchase discounts and rebates from some vendors based on various factors, including goals for quantitative and qualitative sales or purchase volume and customer related metrics. Certain purchase discounts and rebates may affect gross margins. Many purchase discounts from vendors are based on percentage increases in sales of products. Our operating results could be negatively impacted if these rebates or discounts are reduced or eliminated or if our vendors significantly increase the complexity of process and costs for us to receive such rebates.

Our ability to obtain particular products or product lines in the required quantities and to fulfill customer orders on a timely basis is critical to our success. Our manufacturers have experienced product supply shortages from time to time due to the inability of certain suppliers to supply certain products on a timely basis. As a result, we have experienced, and may in the future continue to experience, short-term shortages of specific products. In addition, vendors who currently distribute their products through us may decide to shift to or substantially increase their existing distribution, through other distributors, their own dealer networks, or directly to resellers or end-users. Suppliers have, from time to time, made efforts to reduce the number of distributors with which they do business. This could result in more intense competition as distributors strive to secure distribution rights with these vendors, which could have an adverse effect on our operating results. If vendors are not able to provide us with an adequate supply of products to fulfill our customer orders on a timely basis or we cannot otherwise obtain particular products or a product line or vendors substantially increase their existing distribution through other distributors, their own dealer networks, or directly to resellers, our reputation, sales and profitability may suffer.

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Customer relationships – We operate in a highly competitive environment and good customer relations are critical to our success. There can be no assurance that we will be able to retain and expand our customer relationships or acquire new customers.

Meeting our customers’ needs quickly and fairly is critical to our business success. Our transactions with our customers are generally performed on a purchase order basis rather than under long term supply agreements. Our customers generally do not have an obligation to purchase from us. Therefore, our customers can readily switch vendors. From time to time, we experience shortages in availability of some products from vendors, and this impacts our customers’ decisions regarding whether to make purchases from us. Anything that negatively impacts our customer relations also can negatively impact our operating results. Accordingly, our sales can vary as a result of fluctuations in pricing, product availability, and general competitive and economic conditions.

Centralized functions – We have centralized a number of functions to provide efficient support to our business. As a result, a loss or reduction of use of one of our locations could have an adverse effect on our business operations and financial results.

In order to be as efficient as possible, we centralize a number of critical functions. For instance, we currently distribute products in North America from a single warehouse near Memphis, Tennessee (with corresponding arrangements for our Latin American and European markets). Similarly, we utilize a single information system based in Greenville, South Carolina. While we have backup systems and business continuity plans, any significant or lengthy interruption of our ability to provide these centralized functions could significantly impair our ability to continue normal business operations. In addition, the centralization of these functions increases our exposure to local risks, such as the availability of qualified employees and the lessening of competition for critical services, such as freight and communications.

Although we have business interruption insurance, not all losses are covered, and an uninsured loss from electrical or telephone failure, fire or other casualty, or other disruption could have an adverse effect on our business, financial condition, and results of operations. In addition, there are limits on all of our insurance coverage, and it is possible that losses might exceed that coverage.

Systems – Our ability to manage our business and monitor results is highly dependent upon information and communication systems. A failure of these systems could disrupt our business.

We are highly dependent upon a variety of internal computer and telecommunication systems to operate our business. In addition, our customers rely increasingly on our electronic ordering and information systems as a source for product information, including availability and pricing. There can be no assurance that our systems will not fail or experience disruptions, and any significant failure or disruption of these systems could prevent us from making sales, ordering and delivering products and otherwise conducting our business.

In order to continue support of our growth, we plan to make significant technological upgrades to our information systems. This can be a lengthy and expensive process that may result in a significant diversion of resources from other operations. In addition, the information systems of companies we acquire may not be sufficient to meet our standards or we may not be able to successfully convert them to provide acceptable information on a timely and cost-effective basis. In addition, we must attract and retain qualified people to operate our systems, expand and improve them, integrate new programs effectively with our existing programs, and convert to new systems efficiently when required. Any disruption to our business due to such issues, or an increase in our costs to cover these issues that is greater than what we have anticipated, could have an adverse affect on our financial results and operations.

Many of our customers use our website to check real-time product availability, see their customized pricing and to place orders. The Internet and individual websites have experienced a number of disruptions and slowdowns. In addition, some websites have experienced security breakdowns. While our website has not

9

experienced any material disruptions or security breakdowns, any disruptions or breaches in security or a breach that compromises sensitive information could harm our relationship with our vendors, customers and other business partners. Any material disruption of our website or the Internet in general could impair our order processing or prevent our vendors and customers from accessing information and could adversely affect our operations.

International operations – Our international operations expose us to risks that are different from, or possibly greater than, the risks we are exposed to domestically.

We currently have facilities in seven foreign countries and sell products in a number of others. These operations are subject to a variety of risks that either are in addition to the risks that we face domestically or are similar risks but with potentially greater exposure. These risks include:

• Changes in international trade laws, such as the North American Free Trade Agreement, affecting our import and export activities, including export license requirements, restrictions on the export of certain technology, and tariff changes;

• Difficulties in collecting accounts receivable and longer collection periods;

• Changes in, or expiration of, various foreign incentives that provide economic benefits to us;

• Changes in labor laws and regulations affecting our ability to hire and retain employees;

• Fluctuations of foreign currency, exchange controls and currency devaluations;

• Potential political instability and changes in governments;

• Terrorist or military actions that result in destruction or seizure of our assets or suspension or disruption of our operations or those of our customers;

• Potential regulatory changes, including foreign environmental restrictions; and

• Different general economic conditions.

Our sales growth and gross profit for our international operations were adversely affected by pricing issues in our European operations caused by the strengthening of the Euro against the U.S. Dollar. This made us significantly less competitive in Europe as the U.S. Dollar continued to weaken against the Euro at a record rate. Our competitors, some of whom purchase inventory in U.S. Dollars, were able to lower their prices during this period without impacting their profitability.

Because we have operations in Canada, Mexico and Europe, we are exposed to fluctuations in foreign currency exchange rates. Exchange rate fluctuations may cause our international results to fluctuate significantly when reflected in U.S. Dollar terms. We manage our exposure to fluctuations in the value of currencies using various derivative instruments. However, we may not be able to mitigate all foreign currency related risk. In addition, in foreign markets we are more dependent upon third party providers of key services, such as third party freight forwarders and third party warehouses. Adverse changes in any of these third party services could have an adverse effect on our business, financial condition, and results of operations. As we expand our international operations, we expect these risks to increase.

Credit exposure – We have credit exposure to our reseller customers. Any adverse trends in their businesses could cause us to suffer credit losses.

We have credit exposure to our reseller customers and negative trends in their businesses could increase our credit risk. As is customary in our industry, we extend credit to our reseller customers and most of our sales are on open accounts. We may be unable to collect on receivables if our reseller customers experience decreases in

10

demand for their products and services, do not manage their businesses adequately, or otherwise become less able to pay due to adverse economic conditions. As we grow and compete for business, our typical payment terms tend to be longer, and therefore may increase our credit risk. While we evaluate resellers’ qualifications for credit and monitor our extensions of credit, these efforts cannot prevent all credit losses, and credit losses in excess of historical levels would negatively impact our performance. In addition, for financial reporting purposes we estimate future credit losses and establish an appropriate reserve. To the extent that our credit losses exceed those reserves, our financial performance will be negatively impacted.

Narrow profit margins – Our narrow margins significantly impact our operating results.

Because we are a distributor in a highly competitive industry, we have significant price competition that results in narrow gross profit and operating profit margins. Because these margins are narrow, fluctuations in sales can have a significant impact on our overall operating results.

Competition – We experience intense competition in all of our markets. Such competition could result in reduced margins and loss of our market share.

The markets that we operate in are highly competitive. We compete on the basis of price, product availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor solutions to the needs of our customers, quality and breadth of product line and services, and availability of technical and product information. Our competitors include regional and national wholesale distributors as well as hardware manufacturers (including most of our vendors) that sell directly to resellers and to end users. In addition, we compete with master resellers that sell to franchisees, third party dealers and end-users. Certain of our current and potential competitors have greater financial, technical, marketing and other resources than we have and may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Certain smaller, regional competitors, who are specialty two-tier or mixed model master resellers, may also be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competition has increased for our sales units as broadline and other value-added distributors have entered into the specialty technology markets. Such competition could result in price reductions, reduced margins and loss of our market share. As a result of intense price competition in our industry, our gross margins and our operating profit margins have historically been narrow and we expect them to be narrow in the future. To remain competitive we may be forced to offer more credit or extended payment terms to our customers. This could result in an increase in our need for capital, increase our financing costs, increase our bad debt expenses and have a negative impact on our financial results.

Growth strategies – If we fail to effectively manage and implement our growth strategies, we may experience a negative effect on our business and financial results.

A significant component of our growth strategy has been to add new vendors and products, and we expect to be able to enter new product markets in the future. Expansion of our existing product markets and entry into new product markets divert the use of our resources and systems, require additional resources that might not be available (or available on acceptable terms), result in new or more intense competition, may require longer implementation times or greater start-up expenditures than anticipated, and may otherwise fail to achieve the desired results in a timely fashion, if at all. In addition, while we have been very successful in adding new vendors in the past, we already represent most of the significant vendors in our primary areas of focus, and there is regular consolidation among our vendors. As a result, there may be fewer expansion opportunities of this nature in the future. If we are unable to increase our sales and earnings by expanding our product offerings in a cost effective manner, then the valuation of our stock may decrease.

Our ability to successfully manage our growth will require continued enhancement of our operational, managerial, and financial resources and controls. Our failure to effectively manage our growth could have an adverse effect on our business, financial condition, and results of operations. Additionally, our growth may increase our working capital requirements and as a result, we may require additional equity or debt financing. Such financing may not be available on terms that are favorable to us, if at all.

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Inventory – The value of our inventory may be adversely affected by market and other factors.

Our business, like that of other distributors, is subject to the risk that the value of our inventory will be adversely affected by price reductions by manufacturers or by technological changes affecting the usefulness or desirability of our products. Under the terms of most of our vendor agreements and the policy of most manufacturers of specialty technology products, we have some price protection and stock rotation opportunities with respect to slow moving or obsolete inventory items. However, these protections are limited in scope and do not protect against all declines in inventory value, excess inventory, or product obsolescence, and in some instances we may not be able to fulfill all necessary conditions or successfully manage such price protection or stock rotation opportunities. In addition, these industry practices are sometimes not reflected in vendor agreements and their application in a particular situation is dependent upon negotiations between our vendors and us. As a result, from time-to-time we are required to write down the value of excess and obsolete inventory, and should any of these write-downs occur at a significant level, they could have an adverse effect on our business, financial condition, and results of operations.

Should the current economic downturn persist, it is possible that prices may decline due to an oversupply of product, and therefore, there may be a greater risk of declines in inventory value. In addition, our vendors may become insolvent and unable to fulfill their product obligations to us. Significant declines in inventory value in excess of established inventory reserves or dramatic changes in prevailing technologies could have an adverse effect on our business, financial condition, and results of operations.

Laws and regulations – Changes in tax laws, accounting rules, and other laws and regulations may adversely impact us.

We are subject to a wide range of local, state and federal laws and regulations. While we plan our operations based upon existing and anticipated laws and regulations, we cannot anticipate every change and can have only little, if any, impact on others. We are particularly susceptible to changes in income and other tax laws, laws regulating international trade, and accounting and securities disclosure laws and regulations. For instance, a change in current accounting standards could have a significant adverse effect on our reported earnings. To a lesser degree, changes in environmental regulation, including electronic waste recovery legislation, may impact us. In each case, a change in the laws or regulations that we are required to comply with could have an adverse impact on our business operations or financial results.

Quarterly fluctuations – Our net sales and operating results are dependent on a number of factors. Our net sales may fluctuate from quarter to quarter and these fluctuations may cause volatility in our stock price.

Our net sales and operating results may fluctuate quarterly as a result of changes in demand for our products and services, the introduction of new technology, actions by our competitors, changes in vendors’ prices or price protection policies, changes in vendors’ business practices or strategies, changes in freight rates, the timing of the addition of operating expenses to support our growth, the timing of major marketing or other service projects, product supply shortages, and the general economic factors referenced above. In addition, a substantial portion of our net sales in each quarter results from orders booked in that quarter, which are difficult to accurately forecast in advance. As a result, our performance in one period may vary significantly from our performance in the preceding quarter, and may differ significantly from our forecast of performance from quarter to quarter. The impact of these variances may cause volatility in our stock price.

Third-party freight carriers – We are dependent on third-parties for the delivery of a majority of our products. Changes in shipping terms or the failure or inability of our third-party shippers to perform could have an adverse impact on our business and results of operations.

We are dependent upon major shipping companies, including Federal Express and United Parcel Service, for the shipment of our products to and from our centralized warehouses. Changes in shipping terms, or the

12

inability of these third-party shippers to perform effectively (whether as a result of mechanical failure, casualty loss, labor stoppage, or any other reason), could have an adverse effect on our business, financial condition, and results of operations. Recently, we have experienced significant increases in shipping costs due to increases in fuel costs. If our shipping costs increase or remain high, it may adversely affect our financial results if we are unable to pass on these higher costs to our customers.

Litigation – We routinely are involved in litigation that can be costly and lead to adverse results.

In the ordinary course of our business, we are involved in a wide range of disputes, some of which result in litigation. In addition, as a public company with a large shareholder base, we are susceptible to class-action and other litigation resulting from disclosures that we make and our other activities. Litigation is expensive to bring and defend, and the outcome of litigation can be adverse and significant. Not all adverse outcomes can be anticipated, and applicable accounting rules do not always require or permit the establishment of a reserve until a final result has occurred or becomes probable and estimable. In some instances we are insured for the potential losses; in other instances we are not. An uninsured adverse outcome in significant litigation could have an adverse effect on our business, financial condition and results of operations.

See Item 3. “Legal Proceedings” for information concerning certain litigation to which we are currently a party.

Capital resources – Market factors may increase the cost and availability of capital. Additional capital may not be available to us on acceptable terms to fund our working capital needs and growth.

Our business requires significant levels of capital to finance accounts receivable and product inventory that is not financed by trade creditors. We have an increased demand for capital when our business is expanding, including through acquisitions. Changes in payment terms with either suppliers or customers could increase our capital requirements. We have historically relied upon cash generated from operations, borrowings under our revolving credit facility, secured and unsecured borrowings, and, to a lesser extent, borrowings under a subsidiary’s line of credit to satisfy our capital needs and to finance growth. While we believe that our existing sources of liquidity will provide sufficient resources to meet our current working capital and cash requirements, if we require capital to meet our future business needs, such capital may not be available to us on terms acceptable to us, or at all. Changes in how lenders rate our credit worthiness, as well as macroeconomic factors such as the current economic downturn may restrict our ability to raise capital in adequate amounts or on terms acceptable to us, and the failure to do so could harm our ability to operate our business.

ITEM 1B. Unresolved Staff Comments.

Not applicable.

ITEM 2. Properties.

The Company owns a 70,000 square foot building in Greenville, South Carolina, which is the site of its principal executive and sales offices, and a 103,000 square foot building on adjacent property, of which, approximately 70,000 feet is subleased to an unrelated third party.

North American Distribution Facilities

In February 2008, the Company completed the process of relocating its North American distribution operations from Memphis, Tennessee to its new location in Southaven, Mississippi, allowing for substantially expanded warehousing capacity. The Southaven facility accommodates approximately 600,000 square feet with an optional 147,000 square feet of available expansion space. A subsidiary of the Company entered into a ten-year lease associated with this facility, with options to extend the lease for two consecutive five-year periods. Shortly after operations commenced in the Southaven facility, the Company completed the sale of its former distribution facility in Memphis, Tennessee.

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The Company or its subsidiaries also have offices, each of 10,000 square feet or less, in leased facilities in Norcross, Georgia; Williamsville, New York; Tempe, Arizona; Lenexa, Kansas; Eagan, Minnesota; Toronto, Canada; and Vancouver, Canada.

International Distribution Facilities

The Company or its subsidiaries lease 22,000 square feet of office and distribution center space in Miami, Florida, 25,000 square feet of office and distribution center space in Mexico City, Mexico, 17,000 square feet of office space in Brussels, Belgium, and 8,000 square feet of office space and distribution center space in Egham, England. The Company or its subsidiaries lease approximately 38,000 square feet of third party warehouse space in Liege, Belgium.

The Company or its subsidiaries have additional sales offices, each of 10,000 square feet or less, in leased facilities in Bad Homburg, Germany; Hull, England; Crawley, England; Olivet, France; and Eindhoven, Netherlands.

Management believes the Company’s office and warehouse facilities are adequate to support its operations at their current levels and for the foreseeable future.

ITEM 3. Legal Proceedings.

On June 17, 2009, the U.S. District Court for the District of South Carolina, Greenville Division entered a Consent Order for Final Approval of Settlement (the “Final Order”) in connection with certain shareholder derivative actions previously disclosed entitled In re ScanSource, Inc. Derivative Litigation (the “Derivative Action”). The Final Order approved the Stipulation of Compromise and Settlement (the “Settlement”) among the Company, the shareholder derivative plaintiffs, and the individually named defendants in the Derivative Action, who are either current or former officers or directors of the Company. The Settlement was effective as of June 17, 2009.

The Company and its subsidiaries are, from time to time, parties to lawsuits arising out of operations. Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition or results of operations.

ITEM 4. Submission of Matters to a Vote of Security Holders.

There have been no matters submitted to a vote of security holders during the last quarter of the fiscal year ended June 30, 2009.

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PART II

ITEM 5. Market For Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock is quoted on The NASDAQ Global Select Market under the symbol “SCSC.” The Company has never paid or declared a cash dividend since inception and the Board of Directors does not intend to institute a cash dividend policy in the foreseeable future. Under the terms of the Company’s revolving credit facility, the payment of cash dividends is restricted. On August 17, 2009, there were approximately 10,604 recorded and known beneficial holders of the Company’s common stock. The following table sets forth, for the periods indicated, the high and low sales prices of the Company’s common stock on the NASDAQ Global Select Market.

	High		Low
Fiscal Year 2009
First quarter	$	34.74	$	25.18
Second quarter		29.09		13.58
Third quarter		20.59		13.78
Fourth quarter		27.64		16.59
Fiscal Year 2008
First quarter	$	34.14	$	25.44
Second quarter		39.50		28.06
Third quarter		38.21		22.61
Fourth quarter		37.50		23.75

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Stock Performance Chart

The following stock performance graph compares cumulative total shareholder return on the Company’s common stock over a five-year period with the Nasdaq Market Index and with the Standard Industrial Classification (“SIC”) Code Index (SIC Code 5045 – Wholesale Computers and Peripheral Equipment and Software) for the same period. Total shareholder return represents stock price changes and assumes the reinvestment of dividends. The graph assumes the investment of $100 on July 1, 2004.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN

AMONG SCANSOURCE, INC., NASDAQ MARKET INDEX, AND SIC CODE INDEX

ASSUMES $100 INITIAL INVESTMENT ON JULY 1, 2004

	2004		2005		2006		2007		2008		2009
ScanSource, Inc.	$	100	$	72	$	99	$	108	$	90	$	83
SIC Code 5045 – Computers & Peripheral Equipment	$	100	$	89	$	95	$	109	$	87	$	84
NASDAQ Market Index	$	100	$	100	$	106	$	127	$	112	$	89

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ITEM 6. Selected Financial Data.

The selected financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. The following statement of income data and balance sheet data were derived from the Company’s consolidated financial statements.

FIVE YEAR FINANCIAL SUMMARY

	Fiscal Year Ended June 30,
	2009			2008(1)			2007(1)			2006(1)		2005
	(in thousands, except per share data)
Statement of income data:
Net sales	$	1,847,969		$	2,175,485		$	1,986,927		$	1,665,600	$	1,469,094
Cost of goods sold		1,639,121			1,947,867			1,776,255			1,497,248		1,319,368
Gross profit		208,848			227,618			210,672			168,352		149,726
Selling, general and administrative expenses		134,730			133,653			135,339			105,042		90,970
Operating income		74,118			93,965			75,333			63,310		58,756
Interest expense (income), net		771			3,959			6,804			1,620		1,264
Other (income) expense, net		(2,307	)		(212	)		(144	)		57		(413	)
Total other (income) expense		(1,536	)		3,747			6,660			1,677		851
Income before income taxes and minority interest		75,654			90,218			68,673			61,633		57,905
Provision for income taxes		27,966			34,586			25,987			21,592		22,010
Minority interest in income of consolidated subsidiaries, net of taxes		-			-			60			225		291
Net income	$	47,688		$	55,632		$	42,626		$	39,816	$	35,604
Net income per common share, basic	$	1.80		$	2.13		$	1.65		$	1.56	$	1.41
Weighted-average shares outstanding, basic		26,445			26,098			25,773			25,491		25,254
Net income per common share, diluted	$	1.79		$	2.10		$	1.63		$	1.53	$	1.37
Weighted-average shares outstanding, diluted		26,588			26,445			26,213			26,034		25,927
	As of June 30,
	2009			2008			2007			2006		2005
	(in thousands)
Balance sheet data:
Working capital	$	399,647		$	368,636		$	352,955		$	262,171	$	219,851
Total assets		748,631			772,206			738,448			617,497		469,604
Total long-term debt (including current portion)		30,429			56,623			107,730			32,185		37,878
Total shareholders’ equity		445,446			395,753			324,744			273,409		225,212

⁽¹⁾ Included in the statement of income for the fiscal years ended June 30, 2008 and 2007 are $1.0 million and $9.9 million, respectively, of direct costs associated with the special committee review of the Company’s stock option practices. See Note 1A to the Notes to Consolidated Financial Statements included in Part II, Item 8 of the Company’s amended Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements within this Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), are not historical facts and contain “forward-looking statements” as described in the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks and uncertainties and actual results could differ materially from those projected. Factors that could cause actual results to differ materially include the following: our ability to retain key employees, particularly senior management; our ability to retain and expand our existing and new customer relationships; our dependence on vendors, product supply, and availability; our ability to centralize certain functions to provide efficient support to our business; our dependence upon information systems; our ability to manage the potential adverse effects of operating in foreign jurisdictions; our ability to manage and limit our credit exposure due to the deterioration in the financial condition of our customers; our ability to remain profitable in the face of narrow margins; our ability to compete in new and existing markets that are highly competitive; our ability to manage our business when general economic conditions are poor; our ability to effectively manage and implement our growth strategies; our ability to manage and negotiate successful pricing and stock rotation opportunities associated with inventory value decreases; our ability to anticipate adverse changes in tax laws, accounting rules, and other laws and regulations; our inability to eliminate potential volatility in our net sales and operating results on a quarterly basis as a result of changes in demand for our products; our dependence on third-party freight carriers; our inability to resolve or settle potentially adverse litigation matters; and our inability to obtain required capital at acceptable terms to fund our working capital and growth strategies. Additional discussion of these and other factors affecting our business and prospects is contained in our periodic filings with the SEC, copies of which can be obtained at our Investor Relations website at www.scansource.com. Please refer to the cautionary statements and important factors discussed in Item 1A. “Risk Factors” in this Annual Report on Form 10-K for the year ended June 30, 2009 for further information. This discussion and analysis should be read in conjunction with “Selected Financial Data” and the Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report on Form 10-K.

Overview

ScanSource, Inc. is a leading wholesale distributor of specialty technology products, providing value-added distribution sales to resellers in the specialty technology markets. The Company distributes more than 61,700 products worldwide. The Company has two geographic distribution segments: one serving North America from the Southaven, Mississippi distribution center, and an international segment currently serving Latin America (including Mexico) and Europe from distribution centers located in Florida and Mexico, and in Belgium and the United Kingdom, respectively. The North American distribution segment markets automatic identification and data capture (“AIDC”) and point-of-sale (“POS”) products through the ScanSource POS and Barcoding sales unit; voice, data and converged communications equipment through its Catalyst Telecom sales unit; video conferencing, telephony and communications products through its ScanSource Communications sales unit; and electronic security products and wireless infrastructure products through its ScanSource Security sales unit. The international distribution segment markets AIDC, POS and Barcode products through its ScanSource Latin America and European sales units, while communication products are marketed through its ScanSource Communications sales unit in Europe.

The Company was incorporated in December 1992 and is headquartered in Greenville, South Carolina. The Company serves North America from a single, centrally located distribution center located near the FedEx hub in Southaven, Mississippi. The single warehouse and strong management information system form the cornerstone of the Company’s cost-driven operational strategy. This strategy has been expanded to Latin America and Europe, with distribution centers located in Florida and Mexico, and in Belgium and the United Kingdom, respectively.

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North American Distribution Segment

The Company’s North American distribution segment sells products exclusively to resellers and integrators in large and growing technology markets. Key AIDC vendors include Cisco, Datalogic, Honeywell, Intermec, Motorola and Zebra, and leading POS lines include Elo, Epson America, IBM, and NCR. Key communications vendors include Avaya, Extreme Networks, Juniper Networks, Plantronics and Polycom, while Dialogic supplies key components for the converged communications market. Key electronic security vendors include Alvarion, Axis, Cisco Security, Datacard, Digiop, DSC, Fargo, GE Security, HID, Motorola Wireless, Panasonic, Sony, Tropos and Zebra Card. During fiscal 2008, the Company relocated its North American distribution center from Memphis, Tennessee to a 600,000 square foot facility located in Southaven, Mississippi to meet the current and near-term growth requirements of the North American business.

International Distribution Segment

The Company’s international distribution segment sells AIDC and POS and communications products exclusively to resellers and integrators in the Latin American (including Mexican) and European markets principally from the same product manufacturers as those sold by the North American distribution segment. Marketing efforts to recruit new reseller customers, competitive product pricing, the addition of new vendors, and strategic acquisitions have driven growth in net sales.

Cost Control/Profitability

The Company’s operating income growth is driven not only by gross profits but by a disciplined control of operating expenses. The Company’s operations feature a scalable information system, streamlined management, and centralized distribution, enabling it to achieve the economies of scale necessary for cost-effective order fulfillment. From its inception, the Company has managed its general and administrative expenses by maintaining strong cost controls. However, in order to continue to grow its markets, the Company has invested in new initiatives including investments in new geographic markets of Europe and Latin America, increased marketing efforts to recruit resellers, enhancements of employee benefit plans to retain employees, and strategic acquisitions in both the North American and International distribution segments.

Evaluating Financial Condition and Operating Performance

The Company’s management places a significant emphasis on operating income and return on invested capital (“ROIC”) in evaluating and monitoring the Company’s financial condition and operating performance. ROIC is used by the Company to assess its efficiency at allocating the capital under its control to generate returns. ROIC is computed by the Company as net income plus income taxes, interest expense, depreciation and amortization divided by invested capital. Invested capital includes all monetary capital invested calculated as follows – average interest bearing debt and average shareholders’ equity.

The following table summarizes the Company’s return on invested capital ratio for the fiscal years ended June 30, 2009, 2008, and 2007, respectively:

	2009		2008		2007
Return on invested capital ratio	17.7	%	22.7	%	19.7	%

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The discussion that follows this overview explains the decrease in ROIC from the comparative periods shown above. The Company uses ROIC as a performance measurement because it believes that this metric best balances the Company’s operating results with its asset and liability management, it excludes the results of capitalization decisions, is easily computed, communicated and understood and drives changes in shareholder value. The components of this calculation and a reconciliation to the Company’s financial statements is shown, as follows:

Reconciliation of EBITDA to Net Income
	Fiscal Year Ended June 30,
	2009			2008			2007
	(in thousands)
Net income	$	47,688		$	55,632		$	42,626
Plus: income taxes		27,966			34,586			25,987
Plus: interest expense		2,176			5,471			7,689
Plus: depreciation & amortization		6,781			7,127			6,930
EBITDA (numerator)	$	84,611		$	102,816		$	83,232
Invested capital calculations
	Fiscal Year Ended June 30,
	2009			2008			2007
	(in thousands)
Equity – beginning of the year	$	395,753		$	324,744		$	273,409
Equity – end of the year		445,446			395,753			324,744
Average equity		420,600			360,249			299,077
Average debt(1)		57,605			92,456			122,483
Invested capital (denominator)	$	478,205		$	452,705		$	421,560
Return on invested capital		17.7	%		22.7	%		19.7	%

⁽¹⁾ Average debt is based upon average daily debt and is therefore not able to be represented in this format.

Results of Operations

The following table sets forth for the periods indicated certain income and expense items as a percentage of net sales:

	Fiscal Year Ended June 30,
	2009		2008		2007
Statement of income data:
Net sales	100.0	%	100.0	%	100.0	%
Cost of goods sold	88.7		89.5		89.4
Gross profit	11.3		10.5		10.6
Selling, general and administrative expenses	7.3		6.2		6.8
Operating income	4.0		4.3		3.8
Interest expense (income), net	-		0.2		0.3
Other (income) expense, net	(0.1	)	-		-
Total other (income) expense	(0.1	)	0.2		0.3
Income before income taxes and minority interest	4.1		4.1		3.5
Provision for income taxes	1.5		1.5		1.3
Net income	2.6	%	2.6	%	2.2	%

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Comparison of Fiscal Years Ended June 30, 2009 and 2008

Net Sales

The Company has two reporting segments, which are based on geographic location. The following table summarizes the Company’s net sales results (net of inter-segment sales) for each of these reporting segments for the comparable fiscal years ending June 30th:

Product Category

	2009		2008		$ Change			% Change
	(in thousands)
POS, barcoding and security products	$	1,161,956	$	1,379,573	$	(217,617	)	(15.8	%)
Communications products		686,013		795,912		(109,899	)	(13.8	%)
Net Sales	$	1,847,969	$	2,175,485	$	(327,516	)	(15.1	%)

Geographic Segments

	2009		2008		$ Change			% Change
	(in thousands)
North American distribution segment	$	1,500,144	$	1,777,534	$	(277,390	)	(15.6	%)
International distribution segment		347,825		397,951		(50,126	)	(12.6	%)
Total net sales	$	1,847,969	$	2,175,485	$	(327,516	)	(15.1	%)

Consolidated net sales for the fiscal year ended June 30, 2009 decreased 15.1% to $1.85 billion in comparison to prior fiscal year net sales of $2.18 billion.

North American Distribution

The North American distribution segment includes sales to technology resellers in the United States and Canada that originate from our centralized distribution facility located in Southaven, Mississippi. We note that sales to technology resellers in Canada accounted for less than 5% of total net sales for both fiscal years presented. For the fiscal year ended June 30, 2009, net sales for this segment decreased by approximately $277.4 million, or 15.6%, as compared to the prior fiscal period.

The Company’s North American POS, barcoding, and security product categories saw revenues decrease by 16% in comparison to the prior fiscal year. During the fiscal year ended June 30, 2009, all of these units were challenged by weaker end-user demand caused by tighter credit markets and uncertain economic conditions in North America. Sales of substantially all of our major vendors and product lines were down in comparison to the prior fiscal year, as many of the larger deals and projects that we normally expect to see during the fiscal year were delayed or even cancelled.

The Company has two North American sales units that sell communications products to our customers – the Catalyst Telecom and ScanSource Communications sales units. The combined sales of these units were 15.1% lower for the fiscal year ended June 30, 2009 versus the prior fiscal year. Both of these sales units were also impacted by the prevailing macroeconomic conditions in North America discussed above, and a majority of the vendors in these units experienced lower sales on a comparative basis.

For the first six months of the fiscal year ended June 30, 2009, our key vendor in the Catalyst Telecom sales unit implemented various corrective program changes in response to an unsuccessful new program roll-out from the prior fiscal year. Due to the negative reaction surrounding the initial program roll-out, in addition to the uncertainty associated with the subsequent changes designed to correct the program, revenues for this sales unit

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were adversely impacted as reseller purchases were delayed or lost to competitive products during the first half of the fiscal year. We believe that this vendor continues to make progress with its programs, products, and service offerings and we are encouraged that these changes have been well-received by our resellers. Accordingly, we attribute the overall lack of demand experienced over the last half of the fiscal year to be driven primarily by the uncertain economic climate and an absence of larger transactions that would normally occur in a more stable economic environment.

International Distribution

The international distribution segment includes sales to Latin America (including Mexico) and Europe from the ScanSource POS and Barcoding sales unit and in Europe through the ScanSource Communications sales unit. Sales for the overall international segment decreased by 12.6%, or $50.1 million, as compared to the prior fiscal year. However, on a constant exchange rate basis, the sales decrease was approximately 7.0%. The constant currency decline in sales for both geographies was also driven by weakness in end-user demand which was largely attributable to the economic downturn experienced in both Europe and Latin America.

Gross Profit

The following table summarizes the Company’s gross profit for the fiscal years ended June 30th:

										% of Sales June 30,
	2009		2008		$ Change			% Change		2009		2008
	(in thousands)
North American distribution segment	$	155,916	$	176,692	$	(20,776	)	(11.8	%)	10.4	%	9.9	%
International distribution segment		52,932		50,926		2,006		3.9	%	15.2	%	12.8	%
Total gross profit	$	208,848	$	227,618	$	(18,770	)	(8.2	%)	11.3	%	10.5	%

North American Distribution

Gross profit for the North American distribution segment decreased $20.8 million, or 11.8%, for the fiscal year ended June 30, 2009, as compared to the prior fiscal year. The decrease in gross profit is primarily the result of lower sales volume in all of our sales units, as previously discussed. While total gross profit for the North American distribution segment decreased, gross profit, expressed as a percentage of net sales, actually increased to 10.4% for the fiscal year ended June 30, 2009 as compared to 9.9% for the prior fiscal year. This improvement is largely the result of a more favorable product mix and less margin dilution due to an absence of larger deals and projects that traditionally carry lower margins.

International Distribution

Despite a decrease in sales for the international distribution segment, gross profit actually increased by $2.0 million, or 3.9% for the fiscal year ended June 30, 2009, as compared to the prior fiscal year. The increase in gross profit for the fiscal year ended June 30, 2009 was achieved primarily through the use of strategic inventory purchases in the anticipation of subsequent vendor price increases in our European operating segment. These opportunistic purchases resulted in the achievement of significantly higher gross margins during the second half of the fiscal year. As a result, gross profit, expressed as a percentage of net sales for this segment increased to 15.2% in the fiscal year ended June 30, 2009 versus 12.8% in the prior fiscal year. While gross profit of this segment, expressed as a percentage of net sales, is typically greater than the North American distribution segment, the significant increase in gross margin percentage experienced during the quarter is a direct result of this unique buying opportunity, and does not necessarily reflect a sustainable increase in profitability for this segment.

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Operating Expenses

The following table summarizes the Company’s operating expenses for the periods ended June 30th:

									% of Sales June 30,
	2009		2008		$ Change		% Change		2009		2008
	(in thousands)
Operating expenses	$	134,730	$	133,653	$	1,077	0.8	%	7.3	%	6.2	%

For the fiscal year ended June 30, 2009, operating expenses were $134.7 million, which was slightly higher than the prior fiscal year. Approximately $2.7 million of this increase is attributable to the incremental operating expenses associated with our acquisition of MTV Telecom in April 2008. Offsetting these incremental costs is the favorable year over year exchange rate impact on operating expenses in our international distribution segment.

Operating expenses as a percentage of sales increased to 7.3% for the fiscal year ended June 30, 2009, compared to 6.2% in the prior year comparative period. This increase is largely due to the significant decline in revenues between the two comparable periods. However, the increase also reflects the Company’s continued investment in our ScanSource Security sales units in North America and ScanSource Communications sales unit in Europe.

Operating Income

The following table summarizes the Company’s operating income for the fiscal years ended June 30th:

										% of Sales June 30,
	2009		2008		$ Change			% Change		2009		2008
	(in thousands)
North American distribution	$	56,261	$	76,233	$	(19,972	)	(26.2	%)	3.8	%	4.3	%
International distribution		17,857		17,732		125		0.7	%	5.1	%	4.5	%
	$	74,118	$	93,965	$	(19,847	)	(21.1	%)	4.0	%	4.3	%

Operating income decreased 21.1% or $19.8 million for the fiscal year ended June 30, 2009 as compared to the prior fiscal year. This decrease was entirely the result of lower sales volumes experienced in our North America distribution segment due to the prevailing economic conditions. While our International distribution segment also experienced lower sales volumes, the sales generated in the current year yielded significantly more gross profit than the comparative sales in the prior fiscal year, as discussed previously.

Total Other (Income) Expense

The following table summarizes the Company’s total other (income) expense for the fiscal years ended June 30th:

												% of Sales June 30,
	2009			2008			$ Change			% Change		2009		2008
	(in thousands)
Interest expense	$	2,176		$	5,471		$	(3,295	)	(60.2	%)	0.1	%	0.3	%
Interest income		(1,405	)		(1,512	)		107		(7.1	%)	(0.1	%)	(0.1	%)
Net foreign exchange losses (gains)		1,587			194			1,393		718.0	%	0.1	%	0.0	%
Other, net		(3,894	)		(406	)		(3,488	)	858.9	%	(0.2	%)	0.0	%
Total other (income) expense	$	(1,536	)	$	3,747		$	(5,283	)	(141.0	%)	(0.1	%)	0.2	%

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Interest expense reflects interest paid on borrowings on the Company’s revolving credit facility and long-term debt. Interest expense for the period ended June 30, 2009 was $2.2 million compared to $5.5 million for the comparative prior year period. The decrease in interest expense is primarily the result of lower average debt balances between the respective periods, and, to a much lesser extent, lower interest rates experienced between the comparative periods.

Interest income for the period ended June 30, 2009 was consistent with the comparative prior year periods. The Company generates interest income on longer-term interest bearing receivables, and, to a much lesser extent, interest earned on cash and cash-equivalent balances on hand.

Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses. Foreign exchange losses and gains are generated as the result of fluctuations in the value of the Euro versus the British Pound and the U.S. Dollar versus other currencies. During the fiscal year ended June 30, 2009, the Company generated a net foreign exchange loss due to the strengthening of the U.S. Dollar against the Euro, the British Pound, the Mexican Peso, and the Canadian Dollar. While the Company utilizes foreign exchange contracts and debt in non-functional currencies to hedge foreign currency exposure, our foreign exchange policy prohibits us from entering into speculative transactions.

During the quarter ended December 31, 2008, the Company settled a claim against a former legal service provider resulting in a $3.5 million recovery. The settlement was received by the Company on December 5, 2008 and was recorded as other income.

Provision for Income Taxes

Income tax expense was $28.0 million and $34.6 million for the fiscal years ended June 30, 2009 and 2008, respectively, reflecting an effective tax rate of 37.0% and 38.3%, respectively. The decrease in the effective tax rate for the fiscal year ended June 30, 2009 is largely attributable to the Company’s receipt of a favorable tax ruling from a state taxing jurisdiction that was retroactive to fiscal 2008, which had the effect of decreasing our effective tax rate for the fiscal year ended June 30, 2009.

Net Income

The following table summarizes the Company’s net income for the fiscal year ended June 30th:

										% of Sales June 30,
	2009		2008		$ Change			% Change		2009		2008
	(in thousands)
Net income	$	47,688	$	55,632	$	(7,944	)	(14.28	%)	2.6	%	2.6	%

Net income for the fiscal year ended June 30, 2009 was $47.7 million, a $7.9 million decrease over the prior fiscal year period. The decrease in net income is attributable to the changes in operating profits previously discussed.

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Comparison of Fiscal Years Ended June 30, 2008 and 2007

Net Sales

The Company has two reporting segments, which are based on geographic location. The following table summarizes the Company’s net sales results (net of inter-segment sales) for each of these reporting segments for the comparable fiscal years ending June 30th:

Product Category

	2008		2007		$ Change		% Change
	(in thousands)
POS, barcoding and security products	$	1,379,573	$	1,200,497	$	179,076	14.9	%
Communications products		795,912		786,430		9,482	1.2	%
Total net sales	$	2,175,485	$	1,986,927	$	188,558	9.5	%

Geographic Segments

	2008		2007		$ Change		% Change
	(in thousands)
North American distribution segment	$	1,777,534	$	1,669,648	$	107,886	6.5	%
International distribution segment		397,951		317,279		80,672	25.4	%
Total net sales	$	2,175,485	$	1,986,927	$	188,558	9.5	%

Consolidated net sales for the fiscal year ended June 30, 2008 increased 9.5% to $2.18 billion in comparison to prior fiscal year net sales of $1.99 billion.

North American Distribution

The North American distribution segment includes sales to technology resellers in the United States and Canada that originate from our centralized distribution facility now located in Southaven, Mississippi. We note that sales to technology resellers in Canada account for less than 5% of total net sales for both fiscal years presented. For the fiscal year ended June 30, 2008, net sales for this segment increased by $107.9 million, or 6.5%, as compared to the prior fiscal period.

The Company’s North American POS, barcoding, and security product category sales increased 11.6% in comparison to the prior fiscal year. This increase was primarily driven by sales growth in our scanning and mobility products, and to a lesser extent, sales growth in our security product lines. The Company continues to grow by continually adding new product lines and attracting new resellers who previously bought directly from manufacturers and other distributors. The Company continues to hire additional sales representatives to better serve our new and existing customers in these product lines.

The Company has two North American sales units that sell communications products to our customers – the Catalyst Telecom sales unit and the ScanSource Communications sales unit. ScanSource Communications was formed in January 2008 through the merger of former sales units T2 Supply and Paracon. The Company believes this merger will enable more sales and support resources for the units’ customers. For the fiscal year ended June 30, 2008, net sales of communication products lines increased only slightly over the prior fiscal year to approximately $0.8 billion. A 13.3% increase in sales in the ScanSource Communications sales unit was offset by a 2.2% decrease in sales in our Catalyst Telecom sales unit. Sales in our Catalyst Telecom business unit were negatively impacted by a key vendor’s unsuccessful new program roll-out during the fiscal year ended June 30,

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2008. As a result, purchases by our resellers were either delayed or lost to competitive products of other vendors due to an adverse reaction to the terms and conditions of the new program. Though the vendor subsequently announced corrective changes to the program, our sales were adversely impacted during the fiscal year ended June 30, 2008.

International Distribution

The international distribution segment includes sales to Latin America (including Mexico) and Europe from the ScanSource POS and Barcoding sales unit. Prior to the fiscal year ended June 30, 2008, our European operations only sold POS and barcoding product lines. However, in April 2008, the Company further expanded its communications business internationally through the acquisition of MTV Telecom (Distribution) PLC, a UK-based distributor of voice and data solutions. Sales of communications products were immaterial for the fiscal year ended June 30, 2008. Sales for the overall international segment increased 25.4% or $80.7 million as compared to the prior fiscal year, comprised of sales growth of 30.9% and 7.5% in Europe and Latin America, respectively.

Sales during the fiscal year ended June 30, 2008 were favorably impacted by foreign exchange fluctuations of $34.8 million. Without the foreign exchange fluctuations, the increase in sales for the fiscal year would have been $45.9 million or 14.5%. Although management cannot forecast the future direction of foreign exchange rate movements, if significant unfavorable changes in exchange rates occur, net sales of the segment could be adversely affected.

Gross Profit

The following table summarizes the Company’s gross profit for the fiscal years ended June 30th:

									% of Sales June 30,
	2008		2007		$ Change		% Change		2008		2007
	(in thousands)
North American distribution segment	$	176,692	$	169,627	$	7,065	4.2	%	9.9	%	10.2	%
International distribution segment		50,926		41,045		9,881	24.1	%	12.8	%	12.9	%
Total gross profit	$	227,618	$	210,672	$	16,946	8.0	%	10.5	%	10.6	%

North American Distribution

Gross profit for the North American distribution segment increased $7.1 million, or 4.2%, for the fiscal year ended June 30, 2008 as compared to the prior fiscal year. The increase in gross profit for the year ended June 30, 2008 was a result of increased sales volume of the segment, as previously discussed. Gross profit for the North America distribution segment, expressed as a percentage of net sales, decreased slightly to 9.9% of sales for fiscal year 2008 as compared to 10.2% of sales for the prior fiscal year. This decrease was largely attributable to a less favorable product mix resulting from lower sales in the Company’s Catalyst Telecom sales unit and higher freight costs.

International Distribution

Gross profit for the international distribution segment increased $9.9 million, or 24.1% for the fiscal year ended June 30, 2008, as compared to the prior fiscal year. The increase was primarily due to increased sales volume, as previously discussed. Gross profit of this segment, expressed as a percentage of net sales, is typically greater than the North American distribution segment. For the fiscal year ended June 30, 2008, this percentage decreased slightly to 12.8%, as compared to 12.9% in the prior fiscal year.

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Operating Expenses

The following table summarizes the Company’s operating expenses for the periods ended June 30th:

										% of Sales June 30,
	2008		2007		$ Change			% Change		2008		2007
	(in thousands)
Operating expenses	$	133,653	$	135,339	$	(1,686	)	(1.2	%)	6.2	%	6.8	%

For the fiscal year ended June 30, 2008, operating expenses were $133.7 million, which was slightly lower than the prior fiscal year. The comparability of operating expenses between these two periods is impacted by approximately $9.9 million of legal and professional fees incurred in the prior fiscal year related to the Company’s stock option investigation and remediation activities. In the fiscal year ended June 30, 2008, the Company incurred approximately $1.0 million of fees associated with this matter. Therefore, excluding expenditures related to this matter, operating expenses would have increased by $7.2 million, or approximately 5.8% for the fiscal year ended June 30, 2008. This increase was comprised primarily of $9.3 million in higher salaries and employee benefits due to higher headcounts worldwide, partially offset by a $2.4 million reduction in bad debts in comparison to the prior fiscal year.

Operating expenses, expressed as a percentage of sales, decreased to 6.2% for the fiscal year ended June 30, 2008, from 6.8% in the comparable fiscal year. As discussed previously, this decrease is largely attributable to the legal and professional fees incurred in connection with our stock option investigation. Excluding these expenditures in the prior year, this ratio would have been 6.3%. The Company continued to benefit from greater economies of scale associated with the Company’s worldwide expansion of capacity and employee headcount. Pursuant to achieving internal goals during the fiscal year ended June 30, 2008, the Company recorded world-wide profit-sharing expense of $7.5 million compared to $5.5 million for the fiscal year ended June 30, 2007.

Operating Income

The following table summarizes the Company’s operating income for the fiscal years ended June 30th:

									% of Sales June 30,
	2008		2007		$ Change		% Change		2008		2007
	(in thousands)
Operating income	$	93,965	$	75,333	$	18,632	24.7	%	4.3	%	3.8	%

Operating income increased 24.7% or $18.6 million for the fiscal year ended June 30, 2008 as compared to the prior fiscal year. This increase was attributable to higher sales volumes achieved in both our North American and international distribution segments, as well as significantly lower expenditures related to the Special Committee investigation into our stock option granting practices. As a result, operating income, expressed as a percentage of net sales, increased to 4.3% for the fiscal year ended June 30, 2008 compared to 3.8% in the prior fiscal year. The expenditures related to the Special Committee investigation had a (0.1)% and (0.5)% impact on operating income expressed as a percentage of net sales for the fiscal years ended June 30, 2008 and 2007, respectively.

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Total Other Expense (Income)

The following table summarizes the Company’s total other expense (income) for the fiscal years ended June 30th:

												% of Sales June 30,
	2008			2007			$ Change			% Change		2008		2007
	(in thousands)
Interest expense	$	5,471		$	7,689		$	(2,218	)	(28.8	%)	0.3	%	0.4	%
Interest income		(1,512	)		(885	)		(627	)	70.8	%	(0.1	%)	(0.1	%)
Foreign exchange loss (gain), net		194			190			4		2.1	%	0.0	%	0.0	%
Other, net		(406	)		(334	)		(72	)	21.6	%	0.0	%	0.0	%
Total other expense (income)	$	3,747		$	6,660		$	(2,913	)	(43.7	%)	0.2	%	0.3	%

Interest expense for the years ended June 30, 2008 and 2007 was $5.5 million and $7.7 million, respectively, primarily reflecting interest paid on borrowings on the Company’s revolving line of credit and long-term debt. The improvement in interest expense for the fiscal year ended June 30, 2008 is primarily attributable to lower average debt balances, and to a lesser extent, lower interest rates.

The Company generates interest income on longer-term interest bearing receivables and to a lesser extent interest earned on cash and cash-equivalent balances on hand. However, the increase in interest income for the current fiscal year is primarily attributable to an increase on interest bearing receivables in comparison to the prior fiscal year.

Net foreign exchange gains and losses consisted of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses. Net foreign exchange losses were $0.2 million for both fiscal years ended June 30, 2008 and 2007, respectively. Foreign exchange losses for the current fiscal year are similar to the prior fiscal year and were primarily the result of fluctuations in the value of the Euro versus the British Pound, and to a lesser extent, the U.S. Dollar versus other currencies. The Company utilizes foreign exchange contracts and debt in non-functional currencies to hedge foreign currency exposure. The Company’s foreign exchange policy prohibits entering into speculative transactions.

Provision for Income Taxes

Income tax expense was $34.6 million and $26.0 million for the fiscal years ended June 30, 2008 and 2007, respectively, reflecting an effective income tax rate of 38.3% and 37.8%, respectively. The increase in the effective tax rate was largely due to higher state tax expense.

Minority Interest in Income of Consolidated Subsidiaries

In the fiscal year ended June 30, 2007, the Company recorded minority interest income associated with certain minority shareholders. Effective July 1, 2007, the Company owned 100% of its consolidated subsidiaries.

Net Income

The following table summarizes the Company’s net income for the fiscal year ended June 30th:

									% of Sales June 30,
	2008		2007		$ Change		% Change		2008		2007
	(in thousands)
Net income	$	55,632	$	42,626	$	13,006	30.5	%	2.6	%	2.1	%

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Net income for the current fiscal year ended June 30, 2008 was $55.6 million, a $13 million increase over the prior fiscal year period. The increase in net income and net income expressed as a percentage of net sales is attributable to the changes in operating profits discussed previously.

Quarterly Results

The following tables set forth certain unaudited quarterly financial data. The information has been derived from unaudited financial statements that, in the opinion of management, reflect all adjustments.

	Three Months Ended
	Fiscal 2009								Fiscal 2008
	Jun. 30 2009		Mar. 31 2009		Dec. 31 2008		Sept. 30 2008		Jun. 30 2008		Mar. 31 2008		Dec. 31 2007		Sept. 30 2007
	(in thousands, except per share data)
Net sales	$	441,236	$	389,815	$	477,093	$	539,825	$	554,030	$	514,420	$	553,344	$	553,691
Cost of goods sold		387,753		342,280		424,765		484,323		495,432		462,701		494,167		495,567
Gross profit	$	53,483	$	47,535	$	52,328	$	55,502	$	58,598	$	51,719	$	59,177	$	58,124
Net income	$	12,504	$	9,229	$	13,525	$	12,430	$	14,468	$	11,028	$	15,450	$	14,686
Weighted-average shares outstanding, basic		26,542		26,463		26,411		26,364		26,307		26,038		25,899		25,866
Weighted-average shares outstanding, assuming dilution		26,704		26,565		26,540		26,611		26,549		26,423		26,330		26,276
Net income per common share, basic	$	0.47	$	0.35	$	0.51	$	0.47	$	0.55	$	0.42	$	0.60	$	0.57
Net income per common share, assuming dilution	$	0.47	$	0.35	$	0.51	$	0.47	$	0.54	$	0.42	$	0.59	$	0.56

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis management evaluates its estimates, including those related to the allowance for uncollectible accounts receivable, inventory reserves to reduce inventories to the lower of cost or market, and vendor incentives. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ materially from these estimates under different assumptions or conditions, however, management believes that its estimates, including those for the above-described items are reasonable and that the actual results will not vary significantly from the estimated amounts. For further discussion of our significant accounting policies, refer to Note 2 of Notes to Consolidated Financial Statements.

Revenue Recognition

The Company recognizes revenue once four criteria are met: (1) the Company must have persuasive evidence that an arrangement exists; (2) delivery must occur, which happens at the point of shipment (this

29

includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed and determinable; and (4) collectability must be reasonably assured. A provision for estimated losses on returns is recorded at the time of sale based on historical experience.

The Company has service revenue associated with configuration and marketing, which is recognized when the work is complete and all obligations are substantially met. The Company also sells third-party services, such as maintenance contracts. Since the Company is acting as an agent for these services, revenue is recognized net of cost at the time of sale. Revenue from multiple element arrangements is allocated to the various elements based on the relative fair value of the elements, and each revenue cycle is considered a separate accounting unit with recognition of revenue based on the criteria met for the individual element of the multiple deliverables.

Allowances for Trade and Notes Receivable

The Company maintains an allowance for uncollectible accounts receivable for estimated losses resulting from customers’ failure to make payments on accounts receivable due to the Company. Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including: (1) historical experience, (2) aging of the accounts receivable and (3) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers. If the financial condition of the Company’s customers were to deteriorate and reduce the ability of the Company’s customers to make payments on their accounts, the Company may be required to increase its allowance by recording additional bad debt expense. Likewise, should the financial condition of the Company’s customers improve and result in payments or settlements of previously reserved amounts, the Company may be required to record a reduction in bad debt expense to reverse the recorded allowance. A provision for estimated losses on returns and allowances is recorded at the time of sale based on historical experience.

Inventory Reserves

Management determines the inventory reserves required to reduce inventories to the lower of cost or market based principally on the effects of technological changes, quantities of goods on hand, and other factors. An estimate is made of the market value, less cost to dispose, of products whose value is determined to be impaired. If these products are ultimately sold at less than estimated amounts, additional reserves may be required. Likewise, if these products are sold for more than the estimated amounts, reserves may be reduced.

Vendor Programs

The Company receives incentives from vendors related to cooperative advertising allowances, volume rebates and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the vendors. Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the vendor. Vendors generally require that we use their cooperative advertising allowances exclusively for advertising or other marketing programs. Incentives received from vendors for specifically identified incremental cooperative advertising programs are recorded as adjustments to selling, general and administrative expenses. Emerging Issues Task Force (“EITF”) Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor (“EITF 02-16”) requires that a portion of these vendor funds in excess of our costs be reflected as a reduction of inventory. Such funds are recognized as a reduction of the cost of goods sold when the related inventory is sold.

The Company records unrestricted volume rebates received as a reduction of inventory and as a reduction of the cost of goods sold when the related inventory is sold. Amounts received or receivable from vendors that are not yet earned are deferred in the consolidated balance sheet. In addition, the Company may receive early payment discounts from certain vendors. The Company records early payment discounts received as a reduction of inventory and recognizes the discount as a reduction of cost of goods sold when the related inventory is sold.

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EITF 02-16 requires management to make certain estimates of the amounts of vendor incentives that will be received. Actual recognition of the vendor consideration may vary from management estimates based on actual results.

Accounting Standards Recently Issued

See Note 2 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.

Liquidity and Capital Resources

The Company’s primary sources of liquidity are cash flow from operations, borrowings under the revolving credit facility, secured and unsecured borrowings, and borrowings under the subsidiary’s line of credit. The Company’s cash and cash equivalent balance totaled $127.7 million at June 30, 2009, compared to $15.2 million at June 30, 2008. The Company’s working capital increased to $400.0 million at June 30, 2009 from $368.6 million at June 30, 2008. The $31.4 million increase in working capital is primarily due to significantly higher cash reserves between the two periods, offset by lower receivables and inventory balances. As of June 30, 2009, there was no outstanding balance on the Company’s revolving line of credit facility.

The number of days sales in receivables (DSO) was 59 at June 30, 2009, compared to 59 days at June 30, 2008 and 58 days at March 31, 2009.

Inventory turnover increased to 7.1 times in the current fiscal year versus 6.9 times in the comparative prior year period. This increase is largely the function of lower average inventory balances carried during the current fiscal year.

Cash provided by operating activities was approximately $143.3 million for the year ended June 30, 2009, compared to $62.9 million of cash provided by operating activities for the comparative prior year period. This increase was driven primarily by a reduction in receivables and a corresponding decrease in inventory purchases due to lower sales volumes, partially offset by the timing of vendor payments between the periods.

Cash used in investing activities for the twelve months ended June 30, 2009 was $2.5 million, compared to $11.4 million used in the comparative prior year period. For the twelve months ended June 30, 2009, the Company had worldwide capital expenditures of $3.7 million versus $7.0 million in the comparative prior year period. Cash used for capital expenditures was offset by the receipt of proceeds from the sale of property and equipment of $1.2 million and $6.1 million for the twelve months ended June 30, 2009 and 2008, respectively. These proceeds reflect the sale of our fractional interests in two airplanes and a Company owned property in the United Kingdom during the fiscal year ended June 30, 2009. In the prior fiscal year, these proceeds reflect the sale of our former distribution facility in Memphis, Tennessee. There was no acquisition activity during the fiscal year ended June 30, 2009, however, in the prior year the Company acquired MTV Telecom for $8.2 million in April 2008, purchased the assets of PC4 in January 2008 for $1.2 million and purchased the remaining outstanding shares of Netpoint for $1.1 million.

Cash used in financing activities was approximately $28.2 million for the twelve months ended June 30, 2009, compared to cash used of $38.6 million for the comparative prior year period. The majority of the funds used for both periods were for the purpose of making payments on our revolving credit facility and short term borrowing agreements, which was partially offset by cash proceeds from the exercise of stock options and the receipt of remediation payments from Section 16 officers in connection with our stock option investigation in the prior year. In addition, the Company received proceeds related to the issuance of long-term debt in both periods, primarily related to the purchase of equipment and other building improvements related to our distribution facility located in Southaven, Mississippi.

31

The Company has a revolving credit facility secured by the assets of its European operations and guaranteed by the Company. This facility was amended on May 14, 2008 to increase the borrowing limit to €6.0 million for the Company’s European operations. At June 30, 2009, there was no outstanding balance on this facility.

On January 2, 2008, the Company entered into a $25 million promissory note with a financial institution. This note payable accrues interest on the unpaid balance at a rate per annum equal to the 30 day LIBOR plus 0.65% and matures on September 28, 2012. The terms of the note payable allow for payments to be due and payable in consecutive monthly payment terms of accrued interest only, commencing on January 31, 2008, and continuing on the last day of each month thereafter until fully paid. In any event, all principal and accrued interest will be due and payable on September 28, 2012. The note may be prepaid in whole or in part at any time without penalty.

On January 4, 2008, the Company entered into an interest rate swap with a notional amount of $25 million and designated this instrument as a cash flow hedge of our exposure to variability in future cash flows associated with this note payable. Under the terms of the swap, the Company pays a fixed rate of 3.65% plus a fixed spread of 0.65% on the $25 million notional amount and receives payments from a counterparty based on 30 day LIBOR plus a fixed spread of 0.65% for a term ending on September 28, 2011.

On September 28, 2007, the Company entered into a $250 million multi-currency revolving credit facility with a syndicate of banks that matures on September 28, 2012. This revolving credit facility has a $50 million accordion feature that allows the Company to increase the availability to $300 million, subject to obtaining commitments for the incremental capacity from existing or new lenders. The facility is guaranteed by the Company and certain of its subsidiaries and is secured by substantially all of the domestic assets of the Company and its domestic subsidiaries. The facility bears interest at a rate equal to a spread over the applicable LIBOR or prime rate, as chosen by the Company. This spread is dependent on the Company’s ratio of funded debt to EBITDA (as defined in the credit facility) and ranges from 0.50% to 1.25% for LIBOR-based loans, and from 0.00% to 0.25% for prime rate-based loans. The spread in effect as of June 30, 2009 was 0.50% for LIBOR-based loans and 0.00% for prime rate-based loans. This agreement subjects the Company to certain financial covenants, including minimum fixed charge and leverage ratio covenants. The Company was in compliance with all covenants under the credit facility as of June 30, 2009. There were no outstanding borrowings on this facility as of June 30, 2009. As a result, the Company had $250 million available for additional borrowings on this facility.

On August 1, 2007, the Company entered into an agreement with the State of Mississippi in order to provide financing for the acquisition and installation of certain equipment to be utilized at the Company’s Southaven, Mississippi distribution facility, through the issuance of an industrial development revenue bond. The bond matures on September 1, 2032 and accrues interest at the 30-day LIBOR rate plus a spread of 0.85%. The terms of the bond allow for payment of interest only for the first 10 years of the agreement, and then, starting on September 1, 2018 through 2032, principal and interest payments are due until the maturity date or the redemption of the bond. The outstanding balance on this facility was $5.4 million as of June 30, 2009, and the effective interest rate was 1.17%.

The Company believes that its existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under the Company’s credit agreements, will provide sufficient resources to meet the Company’s present and future working capital and cash requirements for at least the next twelve months.

32

Commitments

At June 30, 2009, the Company had contractual obligations in the form of non-cancelable operating leases and debt, including interest payments (See Notes 7 and 13 to the consolidated financial statements) as follows:

	Payments Due by Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		Greater than 5 Years
	(in thousands)
Contractual Obligations
Principal debt payments	$	30,429	$	-	$	-	$	25,000	$	5,429
Non-cancelable operating leases(1)		25,889		4,516		7,802		5,742		7,829
Other(2)		-		-		-		-		-
Total obligations	$	56,318	$	4,516	$	7,802	$	30,742	$	13,258

⁽¹⁾ Amounts to be paid in future periods for real estate taxes, insurance, and other operating expenses applicable to the properties pursuant to the respective operating leases have been excluded from the table above as the amounts payable in future periods are generally not specified in the lease agreements and are dependent upon amounts which are not known at this time. Such amounts were not material in the current fiscal year.

⁽²⁾ Amounts totaling $6.1 million of deferred compensation which are included in other non-current liabilities in our consolidated balance sheet as of June 30, 2009 have been excluded from the table above due to the uncertainty of the timing of the payment of these obligations, which are generally at the discretion of the individual employees or upon death of the former employee, respectively.

33

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.

The Company’s principal exposure to changes in financial market conditions in the normal course of its business is a result of its selective use of bank debt and transacting business in foreign currencies in connection with its foreign operations.

Interest Rate Risk

The Company is exposed to changes in interest rates primarily as a result of its borrowing activities, which include revolving credit facilities with a group of banks used to maintain liquidity and fund the Company’s business operations. The nature and amount of the Company’s debt may vary as a result of future business requirements, market conditions and other factors. A hypothetical 100 basis point increase or decrease in interest rates on borrowings on the Company’s revolving credit facility, variable rate long term debt and subsidiary line of credit for the fiscal year ended June 30, 2009 would have resulted in a less than $0.4 million increase or decrease, respectively, in pre-tax income for the period.

To mitigate the risk of interest rate fluctuations associated with the Company’s variable rate long-term debt, the Company has implemented an interest rate risk management strategy that incorporates the use of an interest rate swap designated as a cash flow hedge to minimize the significant unplanned fluctuations in earnings caused by interest rate volatility. The Company’s use of derivative instruments has the potential to expose the Company to certain market risks including the possibility of (1) the Company’s hedging activities not being as effective as anticipated in reducing the volatility of the Company’s cash flows, (2) the counterparty not performing its obligations under the applicable hedging arrangement, (3) the hedging arrangement being imperfect or ineffective, or (4) the terms of the swap or associated debt may change. The Company seeks to lessen such risks by having established a policy to identify, control, and manage market risks which may arise from changes in interest rates, as well as limiting its counterparties to major financial institutions.

Foreign Currency Exchange Rate Risk

The Company is exposed to foreign currency risks that arise from its foreign operations in Canada, Mexico and Europe. These risks include the translation of local currency balances of foreign subsidiaries, inter-company loans with foreign subsidiaries and transactions denominated in non-functional currencies. These risks may change over time as business practices evolve and could have a material impact on the Company’s financial results in the future. In the normal course of business, foreign exchange risk is managed by using foreign currency forward contracts to hedge these exposures, as well as balance sheet netting of exposures. The Company’s Board of Directors has approved a foreign exchange hedging policy to minimize foreign currency exposure. The Company’s policy is to utilize financial instruments to reduce risks where internal netting cannot be effectively employed and not to enter into foreign currency derivative instruments for speculative or trading purposes. The Company monitors its risk associated with the volatility of certain foreign currencies against its functional currencies and enters into foreign exchange derivative contracts to minimize short-term currency risks on cash flows. These positions are based upon our forecasted purchases and sales denominated in certain foreign currencies. The Company continually evaluates foreign exchange risk and may enter into foreign exchange transactions in accordance with its policy. Actual variances from these forecasted transactions can adversely impact foreign exchange results. Foreign currency gains and losses are included in other expense (income).

The Company has elected not to designate its foreign currency contracts as hedging instruments, and therefore, the instruments are marked to market with changes in their values recorded in the Consolidated Income Statement each period. The underlying exposures are denominated primarily in British Pounds, Euros, Mexican Pesos and Canadian Dollars. At June 30, 2009, the fair value of the Company’s currency forward contracts outstanding was a net receivable of less than $0.1 million. The Company does not utilize financial instruments for trading or other speculative purposes.

34

ITEM 8. Financial Statements and Supplementary Data.

Index to Financial Statements

	Page
Financial Statements
Report of Independent Registered Certified Public Accounting Firm	36
Report of Independent Registered Certified Public Accounting Firm on Internal Control Over Financial Reporting	37
Consolidated Balance Sheets	38
Consolidated Income Statements	39
Consolidated Statements of Shareholders’ Equity	40
Consolidated Statements of Cash Flows	41
Notes to Consolidated Financial Statements	42

All schedules and exhibits not included are not applicable, not required or would contain information which is shown in the financial statements or notes thereto.

35

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of ScanSource, Inc.

We have audited the accompanying consolidated balance sheets of ScanSource, Inc. and subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2009. Our audits also included the financial statement schedule listed in the index at item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ScanSource, Inc. and subsidiaries at June 30, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ScanSource, Inc.’s internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 27, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Greenville, South Carolina

August 27, 2009

36

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of ScanSource, Inc.

We have audited ScanSource, Inc.’s internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). ScanSource, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ScanSource, Inc. maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of ScanSource, Inc. and subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2009 of ScanSource, Inc. and subsidiaries and our report dated August 27, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Greenville, South Carolina

August 27, 2009

37

ScanSource, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except for share information)

	June 30, 2009		June 30, 2008
Assets
Current assets:
Cash and cash equivalents	$	127,664	$	15,224
Trade and notes receivable:
Trade, less allowance of $16,883 at June 30, 2009 and $17,244 at June 30, 2008		291,037		360,154
Other receivables		7,676		8,052
		298,713		368,206
Inventories		216,829		280,077
Prepaid expenses and other assets		10,356		5,556
Deferred income taxes		8,735		11,428
Total current assets		662,297		680,491
Property and equipment, net		21,035		22,420
Goodwill		34,087		36,121
Other assets, including identifiable intangible assets		31,212		33,174
Total assets	$	748,631	$	772,206
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	-	$	-
Short-term borrowings		-		7,649
Trade accounts payable		228,408		265,284
Accrued expenses and other liabilities		30,443		34,337
Income taxes payable		3,799		4,585
Total current liabilities		262,650		311,855
Long-term debt		30,429		29,576
Borrowings under revolving credit facility		-		27,047
Other long-term liabilities		10,106		7,975
Total liabilities		303,185		376,453
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued		-		-
Common stock, no par value; 45,000,000 shares authorized, 26,565,870 and 26,349,520 shares issued and outstanding at June 30, 2009 and June 30, 2008, respectively		104,461		96,097
Retained earnings		337,822		290,134
Accumulated other comprehensive income		3,163		9,522
Total shareholders’ equity		445,446		395,753
Total liabilities and shareholders’ equity	$	748,631	$	772,206

See accompanying notes to consolidated financial statements

38

ScanSource, Inc. and Subsidiaries

Consolidated Income Statements

Years Ended June 30, 2009, 2008, and 2007

(in thousands, except per share data)

	2009			2008			2007
Net sales	$	1,847,969		$	2,175,485		$	1,986,927
Cost of goods sold		1,639,121			1,947,867			1,776,255
Gross profit		208,848			227,618			210,672
Operating expenses:
Selling, general and administrative expenses		134,730			133,653			135,339
Operating income		74,118			93,965			75,333
Other (income) expense:
Interest expense		2,176			5,471			7,689
Interest income		(1,405	)		(1,512	)		(885	)
Other, net		(2,307	)		(212	)		(144	)
Total other (income) expense		(1,536	)		3,747			6,660
Income before income taxes and minority interest		75,654			90,218			68,673
Provision for income taxes		27,966			34,586			25,987
Income before minority interest		47,688			55,632			42,686
Minority interest in income of consolidated subsidiaries, net of income taxes of $0, $0, and $36 at June 30, 2009, 2008, and 2007, respectively		-			-			60
Net income	$	47,688		$	55,632		$	42,626
Per share data:
Net income per common share, basic	$	1.80		$	2.13		$	1.65
Weighted-average shares outstanding, basic		26,445			26,098			25,773
Net income per common share, diluted	$	1.79		$	2.10		$	1.63
Weighted-average shares outstanding, diluted		26,588			26,445			26,213

See accompanying notes to consolidated financial statements

39

ScanSource, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Years Ended June 30, 2009, 2008, and 2007

(in thousands, except per share data)

	Common Stock (Shares)	Common Stock (Amount)			Retained Earnings		Accumulated Other Comprehensive Income			Total
Balance at June 30, 2006	25,725,214	$	76,915		$	191,876	$	4,618		$	273,409
Comprehensive Income:
Net income	-		-			42,626		-			42,626
Foreign currency translation adjustment	-		-			-		1,971			1,971
Total comprehensive income											44,597
Exercise of stock options	130,510		1,125			-		-			1,125
Share based compensation	-		3,642			-		-			3,642
Tax benefit of deductible compensation arising from exercise of options	-		1,971			-		-			1,971
Balance at June 30, 2007	25,855,724	$	83,653		$	234,502	$	6,589		$	324,744
Comprehensive Income:
Net income	-		-			55,632		-			55,632
Unrealized gain on hedged transaction, net of tax of $41	-		-			-		66			66
Foreign currency translation adjustment	-		-			-		2,867			2,867
Total comprehensive income											58,565
Exercise of stock options and shares issued under share-based compensation plans	493,796		7,487			-		-			7,487
Share based compensation	-		4,300			-		-			4,300
Tax benefit of deductible compensation arising from exercise of stock options	-		364			-		-			364
Consideration received from certain officers related to remediation activities (see Note 10)	-		751			-		-			751
Reclassification of additional-paid-in-capital related to remediation activities (see Note 10)	-		(458	)		-		-			(458	)
Balance at June 30, 2008	26,349,520	$	96,097		$	290,134	$	9,522		$	395,753
Comprehensive Income:
Net income	-		-			47,688		-			47,688
Unrealized loss on hedged transaction, net of tax of $476	-		-			-		(821	)		(821	)
Foreign currency translation adjustment	-		-			-		(5,538	)		(5,538	)
Total comprehensive income											41,329
Exercise of stock options and shares issued under share-based compensation plans	216,350		2,077			-		-			2,077
Share based compensation	-		4,738			-		-			4,738
Tax benefit of deductible compensation arising from exercise of stock options	-		1,549			-		-			1,549
Balance at June 30, 2009	26,565,870	$	104,461		$	337,822	$	3,163		$	445,446

See accompanying notes to consolidated financial statements

40

ScanSource, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended June 30, 2009, 2008, and 2007

(in thousands)

	2009			2008			2007
Cash flows from operating activities:
Net income	$	47,688		$	55,632		$	42,626
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		4,203			4,652			4,851
Amortization of intangible assets		2,578			2,475			2,079
Allowance for accounts and notes receivable		6,404			6,504			8,858
Share-based compensation and restricted stock		4,738			4,904			3,642
Asset impairment		191			202			148
Deferred income taxes		1,763			(94	)		992
Excess tax benefits from share-based payment arrangements		(1,549	)		(364	)		(1,971	)
Minority interest in income of subsidiaries		-			-			60
Changes in operating assets and liabilities, net of acquisitions:
Trade and notes receivable		54,186			(3,056	)		(45,172	)
Other receivables		2,772			(9,774	)		(1,158	)
Inventories		58,929			85			(21,138	)
Prepaid expenses and other assets		(4,917	)		5,276			(8,126	)
Other noncurrent assets		(212	)		(2,692	)		(2,471	)
Trade accounts payable		(32,267	)		629			(16,088	)
Accrued expenses and other liabilities		(2,173	)		(267	)		7,044
Income taxes payable		916			(1,223	)		(123	)
Net cash provided by (used in) operating activities		143,250			62,889			(25,947	)
Cash flows used in investing activities:
Capital expenditures		(3,655	)		(6,982	)		(4,542	)
Net proceeds from sale of property and equipment		1,158			6,100			-
Cash paid for business acquisitions, net of cash acquired		-			(10,530	)		(50,585	)
Net cash (used in) investing activities		(2,497	)		(11,412	)		(55,127	)
Cash flows from financing activities:
(Decreases) increases in short-term borrowings, net		(6,564	)		3,797			3,309
(Payments) advances on revolving credit, net of expenses		(26,141	)		(63,137	)		59,800
Exercise of stock options and Section 16 remediation		2,077			8,238			1,125
Excess tax benefits from share-based payment arrangements		1,549			364			1,971
Proceeds from issuance of long-term debt		853			25,000			13,000
Repayment of long-term debt		-			(12,840	)		(211	)
Net cash (used in) provided by financing activities		(28,226	)		(38,578	)		78,994
Effect of exchange rate changes on cash and cash equivalents		(87	)		461			113
Increase (decrease) in cash and cash equivalents		112,440			13,360			(1,967	)
Cash and cash equivalents at beginning of period		15,224			1,864			3,831
Cash and cash equivalents at end of period	$	127,664		$	15,224		$	1,864
Supplemental disclosure of cash flow information:
Interest paid during the year	$	2,308		$	6,885		$	6,229
Income taxes paid during the year	$	30,379		$	29,580		$	30,228

See accompanying notes to consolidated financial statements

41

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(1) Business Description

ScanSource, Inc. (“The Company”) is a leading wholesale distributor of specialty technology products, providing value-added distribution sales to resellers in the specialty technology markets. The Company has two geographic distribution segments: one serving North America from the Southaven, Mississippi distribution center, and an international segment currently serving Latin America (including Mexico) and Europe from distribution centers located in Florida and Mexico, and in Belgium and the United Kingdom, respectively. The North American distribution segment markets automatic identification and data capture (“AIDC”) and point-of-sale (“POS”) products through its ScanSource POS and Barcoding sales unit; voice, data and converged communications equipment through its Catalyst Telecom sales unit; video conferencing, telephony, and communications products through its ScanSource Communications sales unit; and electronic security products and wireless infrastructure products through its ScanSource Security sales unit. The international distribution segment markets AIDC, POS and Barcode through its ScanSource Latin American and European sales units, while communication products are marketed through its ScanSource Communications sales unit in Europe.

(2) Summary of Significant Accounting Policies and Accounting Standards Recently Issued

Consolidation Policy

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

Minority Interest

Minority interest represents that portion of the net equity of majority-owned subsidiaries of the Company held by minority shareholders. The minority shareholders’ share of the subsidiaries’ income or loss is listed separately in the Consolidated Income Statements. Effective July 1, 2007, the Company owned 100% of Netpoint International, Inc. (“Netpoint”).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the allowance for uncollectible accounts receivable and inventory reserves. Management bases its estimates on assumptions that management believes to be reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, management believes that its estimates, including those for the above described items, are reasonable and that the actual results will not vary significantly from the estimated amounts.

The following significant accounting policies relate to the more significant judgments and estimates used in the preparation of the consolidated financial statements:

(a) Allowances for Trade and Notes Receivable

The Company maintains an allowance for uncollectible accounts receivable for estimated losses resulting from customers’ failure to make payments on accounts receivable due to the Company.

42

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including: (1) historical experience, (2) aging of the accounts receivable and (3) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers. If the financial condition of the Company’s customers were to deteriorate and reduce the ability of the Company’s customers to make payments on their accounts, the Company may be required to increase its allowance by recording additional bad debt expense. Likewise, should the financial condition of the Company’s customers improve and result in payments or settlements of previously reserved amounts, the Company may be required to record a reduction in bad debt expense to reverse the recorded allowance. A provision for estimated losses on returns and allowances is recorded at the time of sale based on historical experience.

(b) Inventory Reserves

Management determines the inventory reserves required to reduce inventories to the lower of cost or market based principally on the effects of technological changes, quantities of goods on hand, and other factors. An estimate is made of the market value, less cost to dispose, of products whose value is determined to be impaired. If these products are ultimately sold at less than estimated amounts, additional reserves may be required. Likewise, if these products are sold for more than the estimated amounts, reserves may be reduced.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation in the accompanying consolidated financial statements.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company from time to time maintains balances in depository accounts in excess of FDIC insured limits. The Company has not experienced any credit losses nor anticipates any future losses in such accounts. At June 30, 2009 and 2008, amounts exceeding FDIC insured limits aggregated approximately $8.1 million and $14.0 million, respectively. Checks released but not yet cleared at the Company’s bank of $45.6 million and $25.9 million as of June 30, 2009 and 2008, respectively, are included in accounts payable.

Concentration of Credit Risk

The Company sells its products to a large base of value-added resellers throughout North America, Latin America (including Mexico) and Europe. The Company performs ongoing credit evaluations of its customers’ financial condition. In certain cases, the Company will accept tangible assets as collateral to increase the trade credit of its customers. No single customer accounted for more than 6% of the Company’s net sales for fiscal 2009, 2008, or 2007.

The Company has established arrangements with certain customers for longer term financing. The Company accounts for these arrangements by recording them at their historical cost less specific allowances at balance sheet dates. Interest income is recognized in the period earned and is recorded as interest income in the Consolidated Income Statement.

43

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company maintains its cash with high credit quality financial institutions. At times, such investments may be in excess of FDIC insurance limits.

Derivative Financial Instruments

The Company uses derivative instruments to manage certain exposures related to foreign currency as well as changes in interest rates as a result of our borrowing activities. We record all derivative instruments as either assets or liabilities in the balance sheet at fair value. The Company currently does not use derivative financial instruments for trading or speculative purposes.

The Company’s foreign currency exposure results from purchasing and selling internationally in several foreign currencies. In addition, the Company has foreign currency risk related to debt that is denominated in currencies other than the U.S. Dollar. The Company may reduce its exposure to fluctuations in foreign exchange rates by creating offsetting positions through the use of derivative financial instruments or multi-currency borrowings. The market risk related to the foreign exchange agreements is offset by changes in the valuation of the underlying items. Derivative financial instruments related to foreign currency exposure are accounted for on an accrual basis with gains or losses on these contracts recorded in income in the period in which their value changes, with the offsetting entry for unsettled positions reflected in either other assets or other liabilities. These contracts are generally for a duration of 90 days or less. The Company has elected not to designate its foreign currency contracts as hedging instruments. They are, therefore, marked-to-market with changes in their fair value recorded in the Consolidated Income Statement each period. The underlying exposures are denominated primarily by British Pounds, Euros, Mexican Pesos, and Canadian Dollars. The gains and losses on these activities were not material for the fiscal years ended June 30, 2009 and 2008, respectively.

During the fiscal year ended June 30, 2008, the Company entered into an interest rate swap and designated this instrument as a hedge of the cash flows on certain variable rate debt. To the extent the derivative instrument is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative instrument will not be included in current earnings, but will be reported as other comprehensive income (loss). The ineffective portion, if any, will be recorded as an adjustment to earnings.

Investments

The Company has investments that are held in a grantor trust formed by the Company related to the ScanSource, Inc. Nonqualified Deferred Compensation Plan. The Company has classified these investments as trading securities and they are recorded at fair market value with unrealized gains and losses included in the accompanying Consolidated Income Statements. The Company’s obligations under this deferred compensation plan change in concert with the performance of the investments. The fair value of these investments and the corresponding deferred compensation obligation was $6.1 million and $5.7 million as of June 30, 2009 and June 30, 2008, respectively. These investments are classified within other non-current assets in the Consolidated Balance Sheets. The deferred compensation obligation is classified within other long-term liabilities.

Inventories

Inventories (consisting entirely of finished goods) are stated at the lower of cost (first-in, first-out method) or market.

44

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Vendor Programs

The Company receives incentives from vendors related to cooperative advertising allowances, volume rebates and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the vendors. Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the vendor. Vendors generally require that we use their cooperative advertising allowances exclusively for advertising or other marketing programs. Incentives received from vendors for specifically identified incremental cooperative advertising programs are recorded as adjustments to selling, general and administrative expenses. Emerging Issues Task Force (“EITF”) Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor (“EITF 02-16”) requires that the portion of these vendor funds in excess of our costs be reflected as a reduction of inventory. Such funds are recognized as a reduction of the cost of products sold when the related inventory is sold.

The Company records unrestricted volume rebates received as a reduction of inventory and as a reduction of the cost of goods sold when the related inventory is sold. Amounts received or receivables from vendors that are not yet earned are deferred in the Consolidated Balance Sheets. In addition, the Company may receive early payment discounts from certain vendors. The Company records early payment discounts received as a reduction of inventory and recognizes the discount as a reduction of cost of goods sold when the related inventory is sold. EITF 02-16 requires management to make certain estimates of the amounts of vendor incentives that will be received. Actual recognition of the vendor consideration may vary from management estimates based on actual results.

Vendor Concentration

The Company sells products from many suppliers, however, sales from products supplied by Motorola and Avaya each constituted more than 10% of the Company’s net sales for the fiscal years ended June 30, 2009, 2008, and 2007, respectively.

Product Warranty

The Company’s vendors generally provide a warranty on the products distributed by the Company and allow the Company to return defective products, including those that have been returned to the Company by its customers. In one product line, the Company offers certain warranty service programs. With respect to these programs, the Company either records a provision for estimated service warranty costs at the time of sale adjusting periodically to reflect the actual experience, or will purchase a contract from an unrelated third party to fulfill the service. To date, neither warranty expense nor the accrual for warranty costs has been material to the Company’s consolidated financial statements. For all other product lines, the Company does not independently provide a warranty on the products it distributes; however, to maintain customer relations, the Company facilitates returns of defective products from the Company’s customers by accepting for exchange, with the Company’s prior approval, most defective products within 30 days of invoicing.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of 3 to 10 years for furniture, equipment and computer software, 40 years for buildings and 15 years for building improvements. Leasehold improvements are amortized over the shorter

45

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

of the lease term or the estimated useful life. Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and betterments to property and equipment are capitalized.

Goodwill

The Company accounts for recorded goodwill in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, which requires that they are reviewed annually for impairment, or more frequently if impairment indicators exist. See Note 6, “Goodwill and Other Identifiable Intangible Assets” for a discussion of the annual goodwill impairment test.

Intangible Assets

Intangible assets consist of customer relationships, debt issue costs, trade names, trademarks, and non-compete agreements. Customer relationships are amortized using the straight-line method over their estimated useful lives, which range from 5 to 15 years. Debt issue costs are amortized over the term of the credit facility. Trade names and trademarks are amortized over a period ranging from 1 to 2 years. Non-compete agreements are amortized over their contract life. These assets are included in other assets and are shown in detail in Note 6, “Goodwill and Other Identifiable Intangible Assets”.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. Tests for recoverability of a long-lived asset to be held and used are measured by comparing the carrying amount of the long-lived asset to the sum of the estimated future undiscounted cash flows expected to be generated by the asset. In estimating the future undiscounted cash flows we use projections of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the assets. If it is determined that a long-lived asset is not recoverable, an impairment loss would be calculated equal to the excess of the carrying amount of the long-lived asset over its fair value. The Company did not record any material impairment charges for the fiscal years ended June 30, 2009, 2008 and 2007.

Fair Value of Financial Instruments

The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying values of financial instruments such as accounts receivable, accounts payable, accrued liabilities, borrowings under the revolving credit facility and subsidiary lines of credit approximate fair value based upon either short maturities or variable interest rates of these instruments. The fair value of the Company’s interest rate swap and other foreign currency contracts are based upon information from a third party broker.

Contingencies

The Company accrues for contingent obligations, including estimated legal costs, when it is probable that a liability is incurred and the amount is reasonably estimable. As facts concerning contingencies become known, management reassesses its position and makes appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include tax, legal, and other regulatory matters, which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process.

46

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Revenue Recognition

Revenue is recognized once four criteria are met: (1) the Company must have persuasive evidence that an arrangement exists; (2) delivery must occur, which happens at the point of shipment (this includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed and determinable; and (4) collectability must be reasonably assured. A provision for estimated losses on returns is recorded at the time of sale based on historical experience.

The Company has service revenue associated with configuration and marketing, which is recognized when the work is complete and all obligations are substantially met. The Company also sells third-party services, such as maintenance contracts. Since the company is acting as an agent for these services, revenue is recognized net of cost at the time of sale. Revenue from multiple element arrangements is allocated to the various elements based on the relative fair value of the elements, and each revenue cycle is considered a separate accounting unit with recognition of revenue based on the criteria met for the individual element of the multiple deliverables.

Shipping Revenue and Costs

Shipping revenue is included in net sales and related costs are included in cost of goods sold. Shipping revenue for the years ended June 30, 2009, 2008 and 2007 was approximately $9.9 million, $11.8 million, and $11.1 million, respectively.

Advertising Costs

The Company defers advertising related costs until the advertising is first run in trade or other publications, or in the case of brochures, until the brochures are printed and available for distribution. Advertising costs, included in marketing costs, after vendor reimbursement, were not significant in any of the three years ended June 30, 2009. Deferred advertising costs at June 30, 2009 and 2008 were not significant.

Foreign Currency

The currency effects of translating the financial statements of the Company’s foreign entities that operate in their local currency are included in the cumulative currency translation adjustment component of accumulated other comprehensive income. The assets and liabilities of these foreign entities are translated into U.S. Dollars using the exchange rate at the end of the respective period. Sales, costs and expenses are translated at average exchange rates effective during the respective period. Foreign currency transactional and re-measurement gains and losses are included in other (income) expense in the Consolidated Income Statements. Such amounts are not significant to any of the periods presented.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Valuation allowances are provided against deferred tax assets in accordance with SFAS No. 109, Accounting for Income Taxes, (“SFAS 109”). Federal income taxes are not provided on the undistributed earnings of foreign subsidiaries because it has been the practice of the Company to reinvest

47

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

those earnings in the business outside the United States. Effective July 1, 2007, the Company adopted the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of SFAS 109, or (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. See Note 12 for more information on the Company’s adoption of the interpretation.

Share-Based Payment

The Company accounts for share-based compensation using the provisions of FASB Statement No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”) which requires the recognition of the fair value of share-based compensation. Share-based compensation is estimated at the grant date based on the fair value of the awards, in accordance with the provisions of SFAS 123R. Since this compensation cost is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has elected to expense grants of awards with graded vesting on a straight-line basis over the requisite service period for each separately vesting portion of the award.

Comprehensive Income

SFAS 130, Reporting Comprehensive Income, defines comprehensive income as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The primary components of comprehensive income for the Company include net income, foreign currency translation adjustments arising from the consolidation of the Company’s foreign subsidiaries, and unrealized gains and losses on the Company’s hedged transactions, net of tax.

Accounting Standards Recently Issued

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification^™ and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 (“Codification”). The Codification will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No.165”). SFAS No. 165 provides guidance to establish general standard of accounting for and disclosures of events that occur after balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or fiscal periods ending after June 15, 2009, and was required to be adopted by the Company beginning with the year ended June 30, 2009. The adoption of SFAS No. 165 did not have a material impact on the Company’s consolidated financial statements.

48

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Effective January 1, 2009, the Company adopted Statement SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133, or (“SFAS No. 161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) with the intent to provide users of financial statements with an enhanced understanding of: (i) How and why an entity uses derivative instruments; (ii) How derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (iii) How derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The adoption of SFAS No. 161 did not have a material impact on the Company’s consolidated financial statements.

Effective July 1, 2008, the first day of fiscal 2009, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, or (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value reporting option for any assets and liabilities not previously recorded at fair value.

Effective July 1, 2008, the first day of fiscal 2009, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements, or (“SFAS 157”) for financial assets and liabilities, as well as any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements in which the Financial Accounting Standards Board (“FASB”) has previously concluded that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. The impact of adoption of SFAS 157 is discussed in Note 9, “Fair Value of Financial Instruments”. The Company applied the provisions of Financial Staff Positions Nos. 157-1 and 157-2, which partially deferred the effective date of SFAS 157 for certain non-financial assets and liabilities and removed certain leasing transactions from its scope. The deferred non-financial assets and liabilities include items such as goodwill and non-amortizable intangibles. The Company is required to adopt SFAS 157 for non-financial assets and liabilities in the first quarter of fiscal 2010. The Company’s management is currently evaluating the impact on the Company’s consolidated financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP 03-6-1”). FSP 03-6-1 states that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and should be included in the computation of earnings per share using the two-class method outlined in SFAS No. 128, Earnings per Share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. FSP 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and requires that all prior period earnings per share data be adjusted retrospectively to conform to the provisions of the FSP. The Company is currently evaluating the impact of the adoption of FSP 03-6-1.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements-an amendment of Accounting Research Bulletin No. 51, or (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and

49

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

distinguish between the interests of the parent and the interests of the non-controlling owners. SFAS 160 is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008, and will be adopted by the Company in the first quarter of fiscal 2010. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, or (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008, and will be adopted by the Company in the first quarter of fiscal 2010. Early adoption is prohibited.

(3) Earnings per Share

Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted-average number of common and potential common shares outstanding.

	Net Income		Shares	Per Share Amount
	(in thousands, except per share data)
Fiscal Year Ended June 30, 2009:
Net income per common share, basic	$	47,688	26,445	$	1.80
Effect of dilutive stock options		-	143
Net income per common share, assuming dilution	$	47,688	26,588	$	1.79
Fiscal Year Ended June 30, 2008:
Net income per common share, basic	$	55,632	26,098	$	2.13
Effect of dilutive stock options		-	347
Net income per common share, assuming dilution	$	55,632	26,445	$	2.10
Fiscal Year Ended June 30, 2007:
Net income per common share, basic	$	42,626	25,773	$	1.65
Effect of dilutive stock options		-	440
Net income per common share, assuming dilution	$	42,626	26,213	$	1.63

50

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

(4) Property and Equipment

Property and equipment is comprised of the following:

	June 30,
	2009			2008
	(in thousands)
Land	$	2,978		$	2,261
Buildings and leasehold improvements		15,825			14,719
Computer software and equipment		12,487			12,532
Furniture, fixtures and equipment		17,178			28,787
		48,468			58,299
Less accumulated depreciation		(27,433	)		(35,879	)
	$	21,035		$	22,420

During the fiscal year ended June 30, 2008, the Company relocated its North American distribution center from Memphis, Tennessee to its new location in Southaven, Mississippi. In January 2008, the Company sold the existing Memphis, Tennessee facility for cash proceeds of $6.1 million, net of expenses. An immaterial loss was recorded in connection with this sale.

(5) Acquisitions

In April 2008, the Company expanded its communications business internationally with the acquisition of MTV Telecom, a UK-based distributor of voice and data solutions. The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values on the transaction date. This resulted in the recognition of $6.1 million of goodwill and $2 million of amortizable intangible assets related primarily to customer relationships and trademarks.

In March 2008, the Company purchased certain assets of PC 4, a wholesale distributor of point-of-sale (POS) hardware. In accordance with this acquisition, approximately $0.3 million of the purchase price was allocated to customer relationships.

In accordance with the purchase agreement, the Company purchased the remaining outstanding shares of Netpoint for $1.1 million, thereby increasing its ownership to 100% effective July 1, 2007.

(6) Goodwill and Other Identifiable Intangible Assets

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company performs its annual goodwill impairment test at the end of each fiscal year, or whenever indicators of impairment are present. This testing includes the determination of each reporting unit’s fair value using market multiples and discounted cash flows modeling. These reporting units are also the Company’s operating segments. During fiscal years 2009, 2008 and 2007, no impairment charge related to goodwill was recorded.

51

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Changes in the carrying amount of goodwill for the years ended June 30, 2009 and 2008, by operating segment, are as follows:

	North American Distribution Segment		International Distribution Segment			Total
	(in thousands)
Balance as of June 30, 2007	$	20,081	$	9,280		$	29,361
Goodwill acquired during 2008		-		6,767			6,767
Fluctuations in foreign currencies		-		(7	)		(7	)
Balance as of June 30, 2008	$	20,081	$	16,040		$	36,121
Fluctuations in foreign currencies		-		(2,034	)		(2,034	)
Balance as of June 30, 2009	$	20,081	$	14,006		$	34,087

During the fiscal year ended June 30, 2009, there were no acquisitions that impacted goodwill. In the fiscal year ending June 30, 2008, the Company’s goodwill balances increased due to the acquisition of MTV Telecom and the purchase of the remaining outstanding shares of Netpoint, as discussed previously.

The following table shows the Company’s identifiable intangible assets as of June 30, 2009 and 2008, respectively. These balances are included on the consolidated balance sheet within other assets:

	June 30, 2009						June 30, 2008
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Amortized intangible assets:
Customer relationships	$	19,818	$	3,816	$	16,002	$	20,127	$	2,450	$	17,677
Debt issue costs		841		265		576		841		113		728
Trade names and trademarks		960		871		89		987		412		575
Non-compete agreements		1,785		1,785		-		1,785		1,190		595
Total	$	23,404	$	6,737	$	16,667	$	23,740	$	4,165	$	19,575

The weighted average amortization period for all intangible assets was approximately 13 years for each of the years ended June 30, 2009, 2008 and 2007, respectively. Amortization expense for the years ended June 30, 2009, 2008 and 2007 was $2.6 million, $2.5 million, and $2.1 million, respectively. Estimated future amortization expense is as follows:

	Amortization Expense
	(in thousands)
Year Ended June 30,
2010	$	1,602
2011		1,512
2012		1,512
2013		1,401
2014		1,364
Thereafter		9,276
	$	16,667

52

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

(7) Short-Term Borrowings and Long-Term Debt

Short-Term Borrowings

	June 30, 2009		June 30, 2008
	(in thousands)
Short-term borrowings	$	-	$	7,649

The Company has a €6.0 million secured revolving credit facility which bears interest at the 30 day Euro Interbank Offered Rate (“EURIBOR”) plus a spread of 1.25 per annum. At June 30, 2009, there were no outstanding borrowings against this facility. The effective interest rate at June 30, 2008 was 4.97%. This facility is secured by the assets of our European operations and is guaranteed by ScanSource, Inc.

Revolving Credit Facility

	June 30, 2009		June 30, 2008
	(in thousands)
Revolving credit facility	$	-	$	27,047

On September 28, 2007, the Company entered into a $250 million multi-currency revolving credit facility with a syndicate of banks that matures on September 28, 2012. This revolving credit facility has a $50 million accordion feature that allows the Company to increase the availability to $300 million subject to obtaining commitments for the incremental capacity from existing or new lenders. The facility is guaranteed by the Company and its domestic subsidiaries and is secured by substantially all of the domestic assets of the Company and its domestic subsidiaries. The facility bears interest at a rate equal to a spread over the applicable London Interbank Offered Rate (“LIBOR”) rate or prime rate, as chosen by the Company. This spread is dependent on the Company’s ratio of funded debt to EBITDA (as defined in the credit facility) and ranges from 0.50% to 1.25% for LIBOR-based loans, and from 0.00% to 0.25% for prime rate-based loans. The spread in effect as of June 30, 2009 was 0.50% for LIBOR-based loans and 0.00% for prime rate-based loans. The agreement subjects the Company to certain financial covenants, including minimum fixed charge and leverage ratio covenants. The agreement also has certain restrictive covenants that, among other things, place limitations on the payment of cash dividends. The Company was in compliance with all covenants under the credit facility as of June 30, 2009.

There were no outstanding borrowings on this facility as of June 30, 2009, leaving $250 million available for additional borrowings. The effective weighted average interest rate for the Company’s revolving line of credit facility as of June 30, 2008 was 4.55%.

53

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Long-Term Debt

	June 30, 2009		June 30, 2008
	(in thousands)
Industrial Development Revenue Bond, monthly payments of interest only, 1.17% variable interest rate at June 30, 2009 and maturing in fiscal 2033	$	5,429	$	4,576
Unsecured note payable to a bank, monthly payments of interest only, 0.96% variable interest rate at June 30, 2009 and maturing in fiscal 2013 (see Note 8)		25,000		25,000
		30,429		29,576
Less current portion		-		-
Long-term portion	$	30,429	$	29,576

On August 1, 2007, the Company entered into an agreement with the State of Mississippi in order to provide financing for the acquisition and installation of certain equipment to be utilized at the Company’s new Southaven, Mississippi distribution facility, through the issuance of an industrial development revenue bond. The bond matures on September 1, 2032 and accrues interest at the 30-day LIBOR rate plus a spread of 0.85%. The terms of the bond allow for payment of interest only for the first 10 years of the agreement, and then, starting on September 1, 2018 through 2032, principal and interest payments are due until the maturity date or the redemption of the bond. As of June 30, 2009, the Company was in compliance with all covenants under this bond.

On January 2, 2008, the Company entered into a $25 million promissory note with a third party lender. This note payable accrues interest on the unpaid balance at a rate per annum equal to the 30-day LIBOR plus 0.65% and matures on September 28, 2012. The terms of the note payable allow for payments to be due and payable in consecutive monthly payment terms of accrued interest only, commencing on January 31, 2008, and continuing on the last day of each month thereafter until the principal balance is fully re-paid. This note may be prepaid in whole or in part at any time without penalty. Under the terms of this agreement, the Company has agreed not to encumber its headquarters’ property, except as permitted by the lender. As of June 30, 2009, the Company was in compliance with all covenants under this note payable.

Scheduled maturities of the Company’s revolving credit facility and long-term debt at June 30, 2009 are as follows:

	Long-Term Debt
	(in thousands)
Fiscal year:
2010	$	-
2011		-
2012		-
2013		25,000
2014		-
Thereafter		5,429
Total principal payments	$	30,429

54

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

(8) Derivatives and Hedging Activities

On January 1, 2009, the Company adopted SFAS 161, which changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for under SFAS 133, and (3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.

The results of operations could be materially impacted by significant changes in foreign currency exchange rates and interest rates. These risks and the management of these risks are discussed in greater detail below. In an effort to manage the exposure to these risks, the Company periodically enters into various derivative instruments. The Company’s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with SFAS 133. The Company records all derivatives on the balance sheet at fair value. Derivatives that are not designated as hedging instruments or the ineffective portions of cash flow hedges are adjusted to fair value through earnings in other income and expense.

Foreign Currency – the Company conducts a portion of its business internationally in a variety of foreign currencies. The exposure to market risk for changes in foreign currency exchange rates arises from foreign currency denominated assets and liabilities, and transactions arising from non-functional currency financing or trading activities. The Company’s objective is to preserve the economic value of non-functional currency denominated cash flows. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through forward contracts or other hedging instruments with third parties. At June 30, 2009, the Company had contracts outstanding with notional amounts of $59.1 million to exchange foreign currencies, including the US Dollar, Euro, British Pound, Canadian Dollar, and Mexican Peso. To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense. Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures are as follows:

	Fiscal Year Ended June 30,
	2009			2008			2007
	(in thousands)
Foreign exchange derivative contract gains, net of losses	$	5,147		$	873		$	188
Foreign currency transactional and remeasurement losses, net of gains	$	(6,734	)	$	(1,067	)	$	(378	)
Net foreign currency transactional and remeasurement gains (losses)	$	(1,587	)	$	(194	)	$	(190	)

Interest Rates – the Company’s earnings are also affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. To manage the exposure to interest rates, the Company may enter into interest rate swap agreements. In the prior fiscal year, the Company entered into an interest rate swap agreement to hedge the variability in future cash flows of interest payments related to the $25 million promissory note payable discussed in Note 7. Interest rate differentials paid or received under the swap agreement are recognized as adjustments to interest expense. To the extent the swap is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swap are not included in current earnings but are reported as other comprehensive income (loss). The fair value of the swap was a liability of $1.2 million as of June 30, 2009. To date, there has not been any ineffectiveness associated with this instrument, and there are no other swap agreements outstanding.

55

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

The components of the cash flow hedge included in accumulated other comprehensive income, net of income taxes, in the Consolidated Statements of Shareholders’ Equity for the fiscal years ended June 30, 2009 and 2008, are as follows:

	Fiscal Year Ended June 30,
	2009			2008
	(in thousands)
Net interest expense recognized as a result of interest rate swap	$	540		$	69
Unrealized (loss) gain in fair value of interest swap rates		(1,361	)		(3	)
Net (decrease) increase in accumulated other comprehensive income, net of tax	$	(821	)	$	66

The Company has the following derivative instruments located on the Consolidated Balance Sheets and Income Statements, utilized for the risk management purposes detailed above:

	As of June 30, 2009
	Fair Value of Derivatives Designated as Hedge Instruments			Fair Value of Derivatives Not Designated as Hedge Instruments
	(in thousands)
Derivative assets(a):
Foreign exchange contracts	$	-		$	46
Derivative liabilities(b):
Foreign exchange contracts	$	-		$	(29	)
Interest rate swap agreement	$	(1,189	)	$	-

(a) All derivative assets are recorded as prepaid expense and other assets in the Consolidated Balance Sheets.

(b) All derivative liabilities are recorded as accrued expenses and other liabilities in the Consolidated Balance Sheets.

(9) Fair Value of Financial Instruments

The Company adopted SFAS 157 effective July 1, 2008 for financial assets and liabilities measured on a recurring basis. SFAS 157 applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. There was no impact from the adoption of SFAS 157 on the Consolidated Financial Statements, however, SFAS 157 establishes a framework for measuring fair value and expands disclosure about fair value measurements. The Company’s financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

• Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

56

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

The following table summarizes the valuation of the Company’s short-term investments and financial instruments by the above SFAS 157 categories as of June 30, 2009:

	Total			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
	(in thousands)
Deferred compensation plan investments(1)	$	6,110		$	6,110	$	-		$	-
Derivative instruments(2)
Forward foreign currency exchange contracts		17			-		17			-
Interest rate swap liability		(1,189	)		-		(1,189	)		-
Notes receivable		2,694			-		2,694			-
Total	$	7,632		$	6,110	$	1,522		$	-

⁽¹⁾ These investments are held in a rabbi trust and include mutual funds and cash equivalents for payment of certain non-qualified benefits for certain retired, terminated and active employees.

⁽²⁾ See Note 8, “Derivatives and Hedging Activities”.

(10) Share-Based Compensation

Share-Based Compensation Plans

The Company has awards outstanding from four share-based compensation plans (the 1993 Incentive Stock Option Plan, the 1997 Stock Incentive Plan, the 2002 Long-Term Incentive Plan, and the 2003 Director Plan), two of which (the 2002 Long-Term Incentive Plan and the 2003 Director Plan) are available for future grants. All of the Company’s share-based compensation plans are shareholder approved and it is the Company’s belief that such awards better align the interests of its employees and directors with those of its shareholders. Under the plans, the Company is authorized to award officers, employees, and non-employee members of the Board of Directors various share-based payment awards, including options to purchase common stock and restricted stock. As of June 30, 2009, there were 579,790 and 127,300 shares available for future grant under the 2002 Long-Term Incentive Plan and the 2003 Director Plan, respectively.

The Company accounts for its share-based compensation awards in accordance with SFAS 123(R), which was adopted by the Company on July 1, 2005. This standard requires all share-based compensation to be recognized in the income statement based on fair value and applies to all awards granted, modified, cancelled, or repurchased after the effective date. Total share-based compensation included as a component of selling, general, and administrative expense in our Consolidated Income Statements was as follows:

	Fiscal Year Ended June 30,
	2009		2008		2007
	(in thousands)
Share-based compensation related to:
Equity classified stock options	$	4,168	$	3,977	$	3,242
Equity classified restricted stock		570		323		400
Tender offer modification		-		604		-
Total share-based compensation	$	4,738	$	4,904	$	3,642

57

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Stock Options

During the fiscal year ended June 30, 2009, the Company granted 542,800 stock options to certain employees. These options vest annually over 3 years and have a 10-year contractual life. In accordance with the requirements of the Company’s Equity Award Grant Policy, the options issued during the fiscal year were granted with an exercise price that is no less than 100% of the fair market value of those shares on the date of the grant.

The fair value of each option (for purposes of calculation of share-based compensation) was estimated on the date of grant using the Black-Scholes-Merton option pricing formula that uses assumptions determined at the date of grant. Use of this option pricing model requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of our common stock price over the expected term (“expected volatility”) and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). Changes in the subjective assumptions can materially affect the estimate of the fair value of share-based compensation and, consequently, the related amount recognized in the Consolidated Income Statements.

The Company used the following weighted average assumptions for the options granted during the following fiscal years:

	Fiscal Year Ended June 30,
	2009			2008			2007
Expected term		5.12 years			4.59 years			4.7 years
Expected volatility		45.73	%		38.00	%		35.90	%
Risk-free interest rate		1.67	%		3.40	%		5.04	%
Dividend yield		0.00	%		0.00	%		0.00	%
Weighted average fair value per option	$	7.49		$	13.20		$	12.60

The weighted average expected term of the options represents the period of time the options are expected to be outstanding based on historical trends and behaviors of certain groups and individuals receiving these awards. The expected volatility is predominately based on the historical volatility of our common stock for a period approximating the expected life. The risk-free interest rate reflects the interest rate at grant date on zero-coupon U.S. governmental bonds that have a remaining life similar to the expected option term. The dividend yield assumption was based on our dividend payment history and expectations of future dividend payments.

A summary of our stock option plans is presented below:

	Fiscal Year Ended June 30, 2009
	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, beginning of year	1,859,553		$	25.58
Granted during the period	542,800			18.14
Exercised during the period	(198,350	)		10.47
Cancelled, forfeited, or expired during the period	(49,954	)		30.33
Outstanding, end of year	2,154,049			24.99	6.85	$	8,445,278
Vested and expected to vest at June 30, 2009	1,931,366			25.65	7.13	$	6,868,286
Exercisable, end of year	1,275,793		$	25.22	5.38	$	4,993,698

58

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

The aggregate intrinsic value was calculated using the market price of our stock on June 30, 2009 and the exercise price for only those options that have an exercise price that is less than the market price of our stock. This amount will change as the market price per share changes. The aggregate intrinsic value of options exercised during the fiscal years ended June 30, 2009, 2008, and 2007 was $2.4 million, $9.1 million, and $2.9 million, respectively.

A summary of the status of the Company’s unvested shares as of June 30, 2009, and changes during the year then ended, is presented below:

	Fiscal Year Ended June 30, 2009
	Options		Weighted- Average Exercise Price		Weighted- Average Grant Date Fair-Value
Unvested, beginning of year	674,230		$	34.03	$	11.47
Granted	542,800			18.14		7.49
Vested	(309,255	)		32.87		11.78
Cancelled, forfeited, or expired	(29,519	)		33.28		10.08
Unvested, end of year	878,256		$	24.64	$	8.94

As of June 30, 2009, there was approximately $6.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. The cost is expected to be recognized over a weighted-average period of 1.83 years. The total fair value of shares vested during the fiscal years ended June 30, 2009, 2008, and 2007 is $3.6 million, $3.4 million and $3.9 million, respectively. The following table summarizes information about stock options outstanding as of June 30, 2009:

Range of Exercise Prices	Shares Outstanding	Weighted- Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted- Average Exercise Price
$  0.00 - $  3.67	-	-	$	-	-	$	-
$  3.67 - $  7.34	-	-	$	-	-	$	-
$  7.34 - $11.01	156,070	1.67	$	9.66	156,070	$	9.66
$11.01 - $14.68	178,958	2.74	$	12.64	178,958	$	12.64
$14.68 - $18.35	603,666	8.81	$	18.01	62,666	$	16.85
$18.35 - $22.01	18,800	4.43	$	21.58	18,800	$	21.58
$22.01 - $25.68	77,558	4.51	$	24.54	77,558	$	24.54
$25.68 - $29.35	89,700	6.51	$	27.49	89,700	$	27.49
$29.35 - $33.02	531,137	7.47	$	31.27	412,215	$	31.02
$33.02 - $36.69	498,160	7.44	$	35.74	279,826	$	35.00
	2,154,049	6.85	$	24.99	1,275,793	$	25.22

The Company issues shares to satisfy the exercise of options.

Tender Offer Modification

In connection with the review of the Company’s stock option granting practices that took place in fiscal 2006, the Company determined that a number of stock options awarded to non-executive employees were granted with exercise prices below the quoted market price of the Company’s common stock on the date of the revised grant. Under Section 409A of the Internal Revenue Code (“Section 409A”), options that were granted with exercise prices below the quoted market price of the underlying stock on the date of grant and that vest after

59

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

December 31, 2004 are subject to unfavorable tax consequences that did not apply at the time of grant. In order to compensate the Company’s non-executive employees who previously exercised affected options and already incurred taxes and penalties, the Company made payments on behalf of such individuals for these taxes in fiscal 2008 for an aggregate amount of approximately $1.6 million.

In order to remedy the unfavorable personal tax consequences of Section 409A for non-executive holders of outstanding options, the Company conducted a tender offer in the quarter ended December 31, 2007 for the affected options, pursuant to which the Company offered to amend the affected options to increase the option exercise price to the quoted market price on the revised grant date, and to give option holders (excluding certain executive officers) a cash payment for the difference in option exercise price between the amended option and the original price. The Company accounted for the financial impact of the tender offer as a stock option modification, resulting in an increase to share-based compensation of $0.6 million, a $0.4 million decrease in additional-paid-in-capital, and the establishment of a $1.1 million liability to reflect the partial settlement of these options in accordance with SFAS 123(R). The aggregate cash payments associated with the tender offer were subsequently paid out to the holders of these options in January 2008.

On January 24, 2008, the Company received written notice from the SEC advising it that the SEC’s investigation concerning the Company’s historical stock option grant practices had been completed and that no enforcement action was recommended.

Restricted Stock

Employees

During the fiscal year ended June 30, 2009, the Company elected to grant certain employees shares of restricted stock. On December 5, 2008, the Company granted 54,900 shares of restricted stock to such employees with a grant date fair value of $18.14. These awards vest annually over 3 years.

On May 21, 2009, the Company granted 14,240 shares of restricted stock with a grant date fair value of $24.58 to certain executive officers. The vesting of these awards is subject to the satisfaction of certain service and performance conditions established within the award agreement.

Non-Employee Directors

In fiscal 2007, the 2003 Directors Plan was amended to provide that non-employee directors will receive annual awards of restricted stock, as opposed to stock options. The number of shares of restricted stock to be granted will be established from time to time by the Board of Directors. Currently, the number of shares of restricted stock awarded to each non-employee director will be determined by dividing $80,000 by the fair market value of the common stock on the date of grant. These awards will generally vest in full on the day that is six months after the date of grant, and the compensation expense associated with these awards will be recognized on a pro-rata basis over this period. On December 5, 2008, the Company granted 18,000 restricted shares in accordance with the provisions of this plan, with a grant date fair value of $18.14.

On February 3, 2009, in connection with the appointment of a new member of the Board of Directors, the Company granted 3,500 shares of restricted stock with a grant date fair value of $19.15. These awards vest, in full, on the day that is six months after the date of grant.

60

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

A summary of the status of the Company’s outstanding restricted stock as of June 30, 2009, and the changes during the year ended June 30, 2009, are presented below:

	Fiscal Year Ended June 30, 2009
	Shares		Weighted-Average Grant Date Fair- Value
Outstanding, beginning of year	-		$	-
Granted during the period	90,670			19.19
Vested during the period	(18,000	)		18.14
Cancelled, forfeited, or expired during the period	(1,275	)		18.14
Outstanding, end of year	71,395		$	19.47

As of June 30, 2009, there was approximately $1 million of unrecognized compensation cost related to unvested restricted stock awards granted, which is expected to be recognized over a weighted average period of 2.11 years.

(11) Employee Benefit Plans

The Company has a defined contribution plan under Section 401(k) of the Internal Revenue Code that covers all employees located in the United States meeting certain eligibility requirements. For the years ended June 30, 2009, 2008 and 2007 the Company provided a matching contribution of $0.4 million for each period, respectively, which was equal to one-half of each participant’s contribution, up to a maximum matching contribution per participant of $800 for 2009, 2008 and 2007. The Company determines its matching contributions annually and can make discretionary contributions in addition to matching contributions. In fiscal 2009, 2008 and 2007, the Company made discretionary profit-sharing contributions of approximately $4.4 million, $6.4 million and $4.6 million, respectively. Employer contributions are vested based upon tenure over a five-year period.

The Company also maintains a non-qualified, unfunded, deferred compensation plan that allows eligible executives to defer a portion of their compensation in addition to receiving discretionary matching contributions from the Company. Employer contributions are vested over a five-year period.

(12) Income Taxes

Income tax expense (benefit) consists of:

	Fiscal Year Ended June 30,
	2009			2008			2007
	(in thousands)
Current:
Federal	$	20,444		$	27,087		$	20,213
State		(314	)		3,663			2,338
Foreign		5,626			4,046			2,531
Total current		25,756			34,796			25,082
Deferred:
Federal		2,253			(348	)		423
State		191			(162	)		8
Foreign		(234	)		300			474
Total deferred		2,210			(210	)		905
Total	$	27,966		$	34,586		$	25,987

61

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

A reconciliation of the U.S. Federal income tax expense at a statutory rate of 35% to actual income tax expense, excluding any other taxes related to extraordinary gain is as follows:

	Fiscal Year Ended June 30,
	2009			2008			2007
	(in thousands)
U.S. Federal income tax at statutory rate	$	26,479		$	31,588		$	24,036
Increase (decrease) in income taxes due to:
State and local income taxes, net of		(81	)		2,338			1,525
U.S. Federal income tax benefit		-			-			-
Tax credits		(175	)		(277	)		(108	)
Valuation allowance		21			772			(34	)
Effect of foreign operations, net		(162	)		(267	)		(359	)
Stock compensation		548			426			291
Other		1,336			6			636
	$	27,966		$	34,586		$	25,987

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at June 30, 2009 and 2008 are presented below:

	June 30,
	2009			2008
	(in thousands)
Deferred tax assets derived from:
Allowance for accounts receivable	$	3,541		$	3,360
Inventories		5,054			5,630
Nondeductible accrued expenses		822			3,053
Net operating loss carryforwards		157			184
Tax credits		1,020			1,083
Deferred compensation		2,378			2,311
Stock compensation		3,523			2,532
Total deferred tax assets		16,495			18,153
Valuation allowance		(839	)		(819	)
Total deferred tax assets		15,656			17,334
Deferred tax liabilities derived from:
Timing of amortization deduction from intangible assets		(1,792	)		(1,824	)
Timing of depreciation and other deductions for building and equipment		(105	)		(18	)
Total deferred tax liabilities		(1,897	)		(1,842	)
Net deferred tax assets	$	13,759		$	15,492

62

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

The components of pretax earnings are as follows:

	Fiscal Year Ended June 30,
	2009		2008		2007
	(in thousands)
Domestic	$	59,957	$	75,793	$	58,901
Foreign		15,697		14,425		9,772
	$	75,654	$	90,218	$	68,673

At June 30, 2009, the Company has: (i) gross net operating loss carry forwards of approximately $0.2 million for U.S. Federal income tax purposes that will begin to expire in 2020; (ii) gross net operating loss carry forwards of approximately $1.8 million for state income tax purposes and (iii) state income tax credit carry forwards of approximately $0.3 million that will begin to expire in 2022. For both periods, the Company has established a valuation allowance of less than $0.1 million for state net operating losses where it was determined that, in accordance with SFAS 109, it is more likely than not that they cannot be utilized.

There is a full valuation reserve against foreign tax credits of approximately $0.8 million as it was determined that it is more likely than not that the credits cannot be utilized.

The Company has not provided U.S. income taxes for undistributed earnings of foreign subsidiaries that are considered to be retained indefinitely for reinvestment. The distribution of these earnings would result in additional foreign withholding taxes and additional U.S. federal income taxes to the extent they are not offset by foreign tax credits, but it is not practicable to estimate the total liability that would be incurred upon such a distribution.

Effective July 1, 2007, the beginning of fiscal year 2008, the Company adopted the provisions of FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

As of June 30, 2009, the Company had gross unrecognized tax benefits of $2.3 million, $2.0 million of which, if recognized, would affect the effective tax rate. This reflects an increase of $0.3 million and $0.3 million, respectively, over the prior fiscal year. The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	(in thousands)
Balance as of June 30, 2008	$	1,976
Additions based on tax positions related to the current year		173
Additions for tax positions of prior years		182
Reduction for tax positions of prior years		(22	)
Settlements		-
Balance as of June 30, 2009	$	2,309

63

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries in which it operates. With few exceptions, the Company is no longer subject to state and local, or non-U.S. income tax examinations by tax authorities for the years before 2005.

The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of June 30, 2009, the Company had approximately $0.9 million accrued for interest and penalties, of which $0.2 million was a current period expense.

The Company’s effective tax rate differs from the federal statutory rate of 35% primarily as a result of certain nondeductible expenses. State taxes were lower in the current year due to recoveries of prior years’ taxes and a lower overall state tax rate.

The Company leases office and warehouse space under non-cancelable operating leases that expire through September 2017. Future minimum lease payments under operating leases are as follows:

	Payments
	(in thousands)
Fiscal Year Ended June 30,
2010	$	4,516
2011		4,172
2012		3,630
2013		3,075
2014		2,667
Thereafter		7,829
	$	25,889

Lease expense was approximately $4.4 million, $3.8 million, and $2.2 million for the fiscal years ended June 30, 2009, 2008, and 2007, respectively. On April 27, 2007, the Company entered into an agreement to lease approximately 600,000 square feet for distribution, warehousing and storage purposes in a building located in Southaven, Mississippi. The lease also provides for a right of first refusal on an additional 147,000 square feet of expansion space. The term of the lease is 120 months with 2 consecutive 5-year extension options.

A majority of the Company’s net revenues in 2009, 2008 and 2007 were received from the sale of products purchased from the Company’s ten largest vendors. The Company has entered into written distribution agreements with substantially all of its major vendors. While the Company’s agreements with most of its vendors contain standard provisions for periodic renewals, these agreements generally permit termination by either party without cause upon 30 to 120 days notice.

The Company or its subsidiaries are, from time to time, parties to lawsuits arising out of operations. Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition or results of operations.

64

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

(14) Segment Information

The Company is a leading distributor of specialty technology products, providing value-added distribution sales to resellers in the specialty technology markets. The Company has two reporting segments, based on geographic location.

North American Distribution

North American Distribution offers products for sale in four primary categories: (i) AIDC and POS equipment sold by the ScanSource POS and Barcoding sales unit, (ii) voice, data and converged communications equipment sold by the Catalyst Telecom sales unit, (iii) video conferencing, telephony, and communications products sold by the ScanSource Communications unit, (iv) electronic security products and wireless infrastructure products through the ScanSource Security Distribution sales unit. These products are sold to more than 14,000 resellers and integrators of technology products that are geographically disbursed over the United States and Canada in a pattern that mirrors population concentration. No single account represented more than 6% of the Company’s consolidated net sales for the fiscal years ended June 30, 2009, 2008, and 2007, respectively.

International Distribution

The international distribution segment sells to two geographic areas, Latin America (including Mexico) and Europe, and offers AIDC and POS equipment as well as communications products to more than 6,000 resellers and integrators of technology products. Of this segment’s customers, no single account represented more than 2% of the Company’s consolidated net sales during the fiscal years ended June 30, 2009, 2008, and 2007, respectively.

Inter-segment sales consist primarily of sales by the North American distribution segment to the international distribution segment. All inter-segment revenues and profits have been eliminated in the accompanying Consolidated Financial Statements.

65

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

Selected financial information for each business segment is presented below:

	Fiscal Year Ended June 30,
	2009			2008			2007
	(in thousands)
Sales:
North American distribution	$	1,527,656		$	1,806,700		$	1,697,832
International distribution		347,825			397,951			317,279
Less intersegment sales		(27,512	)		(29,166	)		(28,184	)
	$	1,847,969		$	2,175,485		$	1,986,927
Depreciation and amortization:
North American distribution	$	5,833		$	6,214		$	6,243
International distribution		948			913			687
	$	6,781		$	7,127		$	6,930
Operating income:
North American distribution	$	56,261		$	76,233	(1)	$	61,972	(1)
International distribution		17,857			17,732			13,361
	$	74,118		$	93,965		$	75,333
Assets:
North American distribution	$	689,865		$	671,434		$	636,553
International distribution		58,766			100,772			101,895
	$	748,631		$	772,206		$	738,448
Capital expenditures:
North American distribution	$	3,513		$	5,751		$	3,929
International distribution		142			1,231			613
	$	3,655		$	6,982		$	4,542

⁽¹⁾ Included in North American distribution’s operating income for the fiscal years ended June 30, 2008 and 2007 are $1.0 million and $9.9 million, respectively, of direct costs associated with the special committee review of the Company’s stock option practices.

Selected financial information by product category is presented below:

	Fiscal Year Ended June 30,
	2009		2008		2007
	(in thousands)
Sales by Product Category:
POS, barcoding and security products	$	1,161,956	$	1,379,573	$	1,200,497
Communication products		686,013		795,912		786,430
	$	1,847,969	$	2,175,485	$	1,986,927

66

SCANSOURCE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2009

(15) Related Party Transactions

During fiscal years 2009, 2008, and 2007, the Company had sales of $3.2 million, $4.2 million, and $5.6 million, respectively, to companies affiliated with the former minority shareholder of Netpoint. At June 30, 2009 and 2008, accounts receivable from these companies totaled $0.3 million, and $0.1 million, respectively.

During fiscal years 2009, 2008 and 2007, the Company had sales of $9.0 million, $7.2 million, and $6.8 million to a company affiliated with a member of management. At June 30, 2009 and 2008, net accounts receivable from this company totaled $4.7 million and $0.5 million, respectively. This individual left the Company in September 2008.

(16) Subsequent Events

In accordance with SFAS 165, the Company evaluated events occurring between the end of our most recent fiscal year and August 27, 2009, the date the financial statements were issued.

67

ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

ITEM 9A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply judgment in evaluating the cost-benefit relationship of those disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Our disclosure controls and procedures are designed to provide reasonable assurance that the controls and procedures will meet their objectives.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of June 30, 2009, were effective in providing reasonable assurance that the objectives of the disclosure controls and procedures are met.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2009. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Based on its assessment using those criteria, our management concluded that our internal control over financial reporting was effective as of June 30, 2009.

The effectiveness of our internal control over financial reporting as of June 30, 2009 has been audited by Ernst & Young, LLP, an independent registered public accounting firm, as stated in their Report of Independent Registered Certified Public Accounting Firm on Internal Control Over Financial Reporting which is included with the Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

(c) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal year ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

68

ITEM 9B. Other Information.

Not applicable.

69

PART III

Information called for by Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K has been omitted as the Company intends to file with the SEC not later than 120 days after the close of its fiscal year ended June 30, 2009, a definitive Proxy Statement relating to the 2009 Annual Meeting of Shareholders pursuant to Regulation 14A promulgated under the Exchange Act. Such information will be set forth in such Proxy Statement and is incorporated herein by reference.

ITEM 10. Directors, Executive Officers and Corporate Governance.

Incorporated herein by reference to the information presented under the heading “Directors and Executive Officers of the Registrant” in the Company’s 2009 Proxy Statement, which will be filed with the SEC not later than 120 days after June 30, 2009.

ITEM 11. Executive Compensation.

Incorporated herein by reference to the information presented under the heading “Executive Compensation” and “Compensation Committee Report” in the Company’s 2009 Proxy Statement, which will be filed with the SEC not later than 120 days after June 30, 2009.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Incorporated herein by reference to the information presented under the heading “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Company’s 2009 Proxy Statement, which will be filed with the SEC not later than 120 days after June 30, 2009.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence.

Incorporated herein by reference to the information presented under the heading “Certain Relationships and Related Transactions” and “Directors and Executive Officers of the Registrant” in the Company’s 2009 Proxy Statement, which will be filed with the SEC not later than 120 days after June 30, 2009.

ITEM 14. Principal Accountant Fees and Services.

Incorporated herein by reference to the information presented under the heading “Principal Accountant Fees and Services” in the Company’s 2009 Proxy Statement, which will be filed with the SEC not later than 120 days after June 30, 2009.

70

PART IV

ITEM 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements. For a list of the financial statements included in this Annual Report on Form 10-K, see “Index to the Financial Statements” on page 35.

(a)(2) Financial Statement Schedules. Schedule II – “Valuation and Qualifying Accounts” appears below.

(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 immediately preceding such exhibits and is incorporated by reference in this Item 15(a)(3).

(b) Exhibits. See Exhibit Index.

(c) Separate Financial Statements and Schedules. None.

71

SCHEDULE II

SCANSOURCE, INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts

(in thousands)

Description	Balance at Beginning of Period		Amounts Charged to Expense	Reductions(1)		Other(2)		Balance at End of Period
Valuation account for trade and notes receivable:
Year ended June 30, 2007	$	11,525	8,858	(7,392	)	1,629		$	14,620
Trade and current note receivable allowance								$	13,342
Long-term note allowance								$	1,278
Year ended June 30, 2008	$	14,620	6,504	(6,110	)	2,230		$	17,244
Trade and current note receivable allowance								$	17,244
Long-term note allowance								$	-
Year ended June 30, 2009	$	17,244	6,404	(6,696	)	(69	)	$	16,883
Trade and current note receivable allowance								$	16,883
Long-term note allowance								$	-

⁽¹⁾ “Reductions” amounts represent write-offs for the years indicated.

⁽²⁾ “Other” amounts includes recoveries and the effect of foreign currency fluctuations. The amount in 2008 also includes a $1.3 million reclassification.

72

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

August 27, 2009

SCANSOURCE, INC.
By:	/s/ MICHAEL L. BAUR
	Michael L. Baur
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ JAMES G. FOODY James G. Foody	Chairman of the Board	August 27, 2009
/s/ MICHAEL L. BAUR Michael L. Baur	Chief Executive Officer and Director (principal executive officer)	August 27, 2009
/s/ RICHARD P. CLEYS Richard P. Cleys	Vice President and Chief Financial Officer, (principal financial and accounting officer)	August 27, 2009
/s/ STEVEN R. FISCHER Steven R. Fischer	Director	August 27, 2009
/s/ MICHAEL J. GRAINGER Michael J. Grainger	Director	August 27, 2009
/s/ JOHN P. REILLY John P. Reilly	Director	August 27, 2009
/s/ CHARLES R. WHITCHURCH Charles R. Whitchurch	Director	August 27, 2009

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INDEX TO EXHIBITS

Exhibit Number	Description	Filed herewith	Form	Period Ending	Exhibit	Filing Date
3.1	Amended and Restated Articles of Incorporation of the Registrant and Articles of Amendment Amending the Amended and Restated Articles of Incorporation of the Registrant		10-Q	12/31/04	3.1	2/3/05
3.2	Amended and Restated Bylaws of the Registrant, effective December 5, 2008		8-K		3.1	12/9/08
4.1	Form of Common Stock Certificate		SB-2		4.1	2/7/94
	Executive Compensation Plans and Arrangements
10.1	1993 Incentive Stock Option Plan, as amended, of the Registrant and Form of Stock Option Agreement		S-1		10.10	1/23/97
10.2	1997 Stock Incentive Plan, as amended, of the Registrant and Form of Stock Option Agreement		10-K	6/30/99	10.13	9/28/99
10.3	Amended and Restated 2002 Long-Term Incentive Plan (as amended and restated through March 12, 2009)	X
10.4	Amended and Restated Director’s Equity Compensation Plan		DEF 14A		Annex A	10/26/06
10.5	Form of Incentive Stock Option Agreement under the 2002 Long-Term Incentive Plan		8-K		99.1	1/11/05
10.6	Form of Incentive Stock Option Agreement for options granted under the 2002 Long-Term Incentive Plan after December 4, 2007		10-K	6/30/08	10.6	8/28/08
10.7	Form of Restricted Stock Award Certificate (US) under the 2002 Long-Term Incentive Plan		10-Q	12/31/08	10.1	2/4/09
10.8	Form of Restricted Stock Award Certificate (UK) under the 2002 Long-Term Incentive Plan		10-Q	12/31/08	10.2	2/4/09
10.9	Form of Restricted Stock Award Certificate (Europe, not UK) under the 2002 Long-Term Incentive Plan		10-Q	12/31/08	10.3	2/4/09
10.10	Nonqualified Deferred Compensation Plan effective July 1, 2004		10-Q	9/30/04	10.2	11/8/04
10.11	Amended and Restated Employment Agreement effective as of June 30, 2008 between the Registrant and Michael L. Baur		10-K	6/30/08	10.19	8/28/08
10.12	Amended and Restated Employment Agreement effective as of June 30, 2008 between the Registrant and Richard P. Cleys		10-K	6/30/08	10.18	8/28/08

Exhibit Number	Description	Filed herewith	Form	Period Ending	Exhibit	Filing Date
10.13	Amended and Restated Employment Agreement effective as of May 21, 2009 between the Registrant and R. Scott Benbenek	X
10.14	Amended and Restated Employment Agreement effective as of May 21, 2009 between the Registrant and Andrea Dvorak Meade	X
10.15	Amended and Restated Employment Agreement effective as of September 2, 2008 between the Registrant and John J. Ellsworth		10-Q	9/30/08	10.1	11/6/08
10.16	Form of Amendment to Stock Option Agreement and Promise to Make Cash Payment for Andrea Meade and Scott Benbenek		10-Q	12/31/07	10.1	2/6/08
10.17	Amendment to Stock Option Agreement and Promise to Make Cash Payment for Richard Cleys and Bobby McLain		10-Q	12/31/07	10.2	2/6/08
10.18	Description of Option Remediation for Certain Executive Officers and Directors		10-Q	12/31/07	10.3	2/6/08
10.19	Form of Restricted Stock Award Certificate for Scott Benbenek	X
10.20	Form of Restricted Stock Award Certificate for Andrea Meade	X
	Bank Agreements
10.21	Amended and Restated Credit Agreement dated as of July 16, 2004 among ScanSource, Inc., Netpoint International, Inc., 4100 Quest, LLC, and Partner Services, Inc., ScanSource Europe SPRL, ScanSource Europe Limited and ScanSource UK Limited, Branch Banking and Trust Company of South Carolina, as Administrative Agent and a Bank, Wachovia Bank, National Association, as Syndication Agent and an Other Currency Lender, and Fifth Third Bank, First Tennessee Bank National Association and Hibernia National Bank as Banks		10-K	6/30/04	10.19	9/10/04
10.22	First Amendment dated as of May 13, 2005 to Amended and Restated Credit Agreement dated as of July 16, 2004 among ScanSource, Inc., Netpoint International, Inc., 4100 Quest, LLC and Partner Services, Inc., ScanSource Europe SPRL, ScanSource Europe Limited and ScanSource UK Limited, Branch Banking and Trust Company of South Carolina, as Administrative Agent and a Bank, Wachovia Bank, National Association, as Syndication Agent and an Other Currency Lender, and Fifth Third Bank, First Tennessee Bank National Association and Hibernia National Bank as Banks		10-K	6/30/05	10.25	9/1/05

Exhibit Number	Description	Filed herewith	Form	Period Ending	Exhibit	Filing Date
10.23	Letter Agreement and Consent dated July 3, 2006 amending the Amended and Restated Credit Agreement dated as of July 16, 2004 among ScanSource, Inc., Netpoint International, Inc., 4100 Quest, LLC, and Partner Services, Inc., ScanSource Europe SPRL, ScanSource Europe Limited and ScanSource UK Limited, Branch Banking and Trust Company of South Carolina, as Administrative Agent and a Bank, Wachovia Bank, National Association, as Syndication Agent and an Other Currency Lender, and Fifth Third Bank, First Tennessee Bank National Association and Capital One, N.A. (formerly Hibernia National Bank) as Banks		10-K	6/30/06	10.3	9/1/06
10.24	Waivers dated as of November 9, 2006 to Amended and Restated Credit Agreement dated as of July 16, 2004, as amended, among ScanSource, Inc., Netpoint International, Inc., Scansource Europe Limited, Scansource UK Limited, 4100 Quest, LLC, Partner Services, Inc. and T2 Supply, Inc., Branch Banking and Trust Company of South Carolina, Wachovia Bank, National Association, Fifth Third Bank, First Tennessee Bank National Association and Capital One, N.A.		10-Q	12/31/06	10.1	6/18/07
10.25	Amendment dated as of February 14, 2007 to Amended and Restated Credit Agreement dated as of July 16, 2004, as amended, among ScanSource, Inc., Netpoint International, Inc., Scansource Europe Limited, Scansource UK Limited, 4100 Quest, LLC, Partner Services, Inc. and T2 Supply, Inc., Branch Banking and Trust Company of South Carolina, Wachovia Bank, National Association, Fifth Third Bank, First Tennessee Bank National Association and Capital One, N.A.		10-Q	3/31/07	10.1	6/18/07
10.26	Waivers dated as of February 14, 2007 to Amended and Restated Credit Agreement dated as of July 16, 2004, as amended, among ScanSource, Inc., Netpoint International, Inc., Scansource Europe Limited, Scansource UK Limited, 4100 Quest, LLC, Partner Services, Inc. and T2 Supply, Inc., Branch Banking and Trust Company of South Carolina, Wachovia Bank, National Association, Fifth Third Bank, First Tennessee Bank National Association and Capital One, N.A.		10-Q	3/31/07	10.2	6/18/07

Exhibit Number	Description	Filed herewith	Form	Period Ending	Exhibit	Filing Date
10.27	Third Amendment dated as of April 20, 2007 to its Amended and Restated Credit Agreement dated as of July 16, 2004, as amended, among ScanSource, Inc., Netpoint International, Inc., Scansource Europe Limited, Scansource UK Limited, 4100 Quest, LLC, Partner Services, Inc. and T2 Supply, Inc., Branch Banking and Trust Company of South Carolina, Wachovia Bank, National Association, Fifth Third Bank, First Tennessee Bank National Association and Capital One, N.A. (formerly Hibernia National Bank) as Banks		10-K	6/30/07	10.25	8/29/07
10.28	Waivers dated as of May 14, 2007 to Amended and Restated Credit Agreement dated as of July 16, 2004, as amended, among ScanSource, Inc., Netpoint International, Inc., Scansource Europe Limited, Scansource UK Limited, 4100 Quest, LLC, Partner Services, Inc. and T2 Supply, Inc., Branch Banking and Trust Company of South Carolina, Wachovia Bank, National Association, Fifth Third Bank, First Tennessee Bank National Association and Capital One, N.A		10-K	6/30/07	10.28	8/29/07
10.29	Credit Agreement dated as of September 28, 2007, among ScanSource, Inc., the Subsidiary Borrowers party thereto, the Lenders party thereto and, J.P. Morgan Chase Bank, N.A. as Administrative Agent, Swingline Lender and Issuing Bank, Wachovia Bank, N.A. as Syndication Agent, and Regions Bank and Wells Fargo Bank, N.A. as Co-Documentation Agents, J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger		8-K		10.1	10/1/07
	Other Agreements
10.30+	Industrial Lease Agreement dated April 27, 2007 between Registrant and Industrial Developments International, Inc.		10-K	6/30/07	10.26	8/29/07
10.31	Purchase and Sale Agreement dated December 13, 2007 between 4100 Quest, LLC, a wholly owned subsidiary of ScanSource, Inc., and Kansas City Life Insurance Company		10-K	6/30/08	10.31	8/28/08
10.32	Amendment dated as of January 18, 2008 to Purchase and Sale Agreement dated December 13, 2007 between 4100 Quest, LLC and Kansas City Life Insurance Company		10-K	6/30/08	10.32	8/28/08

Exhibit Number	Description	Filed herewith	Form	Period Ending	Exhibit	Filing Date
10.33	Amendment dated as of January 30, 2008 to Purchase and Sale Agreement dated December 13, 2007 between 4100 Quest, LLC and Kansas City Life Insurance Company		10-K	6/30/08	10.33	8/28/08
10.34++	US Avaya contract with ScanSource, Inc.	X
10.35++	US Motorola (f/k/a Symbol Technologies) contract with ScanSource, Inc.	X
21.1	Subsidiaries of the Company	X
23.1	Consent of Ernst & Young LLP	X
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of the Chief Executive Officer of ScanSource, Inc. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of the Chief Financial Officer of ScanSource, Inc. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002	X
99.1	Consent Order for Final Approval of Settlement		8-K		99.1	6/19/09
99.2	Stipulation of Compromise and Settlement, dated as of April 15, 2009		8-K		99.1	4/15/09

+ Confidential treatment has been granted with respect to certain portions of this Exhibit, which portions have been omitted and filed separately with the Commission as part of an application for confidential treatment.

++ Portions of this Exhibit have been omitted and filed separately with the Commission as part of an application for confidential treatment.

EX-10.3

Exhibit 10.3

AMENDED AND RESTATED 2002 LONG-TERM INCENTIVE PLAN

ARTICLE 1

PURPOSE

1.1 GENERAL. The purpose of the ScanSource, Inc. 2002 Long-Term Incentive Plan (the “Plan”) is to promote the success, and enhance the value, of ScanSource, Inc. (the “Company”), by linking the personal interests of employees, officers, consultants and advisors of the Company or any Affiliate (as defined below) to those of Company shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of employees, officers, consultants and advisors upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees, officers, consultants and advisors.

ARTICLE 2

EFFECTIVE DATE

2.1 EFFECTIVE DATE. The Plan shall be effective as of the date it is approved by both the Board and the shareholders of the Company.

ARTICLE 3

DEFINITIONS

3.1 DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings:

(a) “Affiliate” means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Company, as determined by the Committee.

(b) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Deferred Stock Unit Award, Performance Award, Dividend Equivalent Award, or Other Stock-Based Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.

(c) “Award Certificate” means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award.

(d) “Board” means the Board of Directors of the Company.

(e) “Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Company or an affiliated company, provided, however that if there is no such employment agreement in which such term is defined, “Cause” shall mean any of the following acts by the Participant, as determined by the Board: gross neglect of duty, prolonged absence from duty without the consent of the Company, intentionally engaging in any activity that is in conflict with or adverse to the business or other interests of the Company, or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Company.

(f) “Change in Control” means and includes the occurrence of any one of the following events:

(i) individuals who, on the Effective Date, constitute the Board of Directors of the Company (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (such term for purposes of this definition being as defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

(ii) any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of either (A) 35% or more of the then-outstanding shares of common stock of the Company (“Company Common Stock”) or (B) securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of directors (the “Company Voting Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary of the Company, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary of the Company, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below); or

2

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 55% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Reorganization, Sale or Acquisition (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the “Surviving Corporation”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any Subsidiary of the Company, (y) the Surviving Corporation or its ultimate parent corporation, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing is the beneficial owner, directly or indirectly, of 35% or more of the total common stock or 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Corporation, and (C) at least a majority of the members of the board of directors of the Surviving Corporation were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(g) “Code” means the Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

(h) “Committee” means the committee of the Board described in Article 4.

(i) “Company” means ScanSource, Inc., a South Carolina corporation.

(j) “Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee, officer, consultant or advisor of the Company, as applicable. Continuous Status as a Participant shall continue to the extent provided in

3

a written severance or employment agreement during any period for which severance compensation payments are made to an employee, officer, consultant or advisor and shall not be considered interrupted in the case of any leave of absence authorized in writing by the Company prior to its commencement.

(k) “Covered Employee” means a covered employee as defined in Code Section 162(m)(3).

(l) “Deferred Stock Unit” means a right granted to a Participant under Article 9 to receive Shares of Stock (or the equivalent value in cash or other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by the Committee in the case of voluntary deferral elections.

(m) “Disability” or “Disabled” shall mean any illness or other physical or mental condition of a Participant that renders the Participant incapable of performing his customary and usual duties for the Company, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder which, in the judgment of the Committee, is permanent and continuous in nature. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition. Notwithstanding the above, with respect to an Incentive Stock Option, Disability shall mean Permanent and Total Disability as defined in Section 22(e)(3) of the Code.

(n) “Dividend Equivalent” means a right granted to a Participant under Article 11.

(o) “Effective Date” has the meaning assigned such term in Section 2.1.

(p) “Eligible Participant” means an employee, officer, consultant or advisor of the Company or any Affiliate.

(q) “Exchange” means the Nasdaq National Market or any national securities exchange on which the Stock may from time to time be listed or traded.

(r) “Fair Market Value”, on any date, means (i) if the Stock is listed on a securities exchange or is traded over the Nasdaq National Market, the closing sales price on such exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on a securities exchange or traded over the Nasdaq National Market, the mean between the bid and offered prices as quoted by Nasdaq for such date, provided that if it is determined that the fair market value is not properly reflected by such Nasdaq quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A.

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(s) “Good Reason” has the meaning assigned such term in the employment agreement, if any, between a Participant and the Company or an Affiliate, provided, however that if there is no such employment agreement in which such term is defined, and unless otherwise defined in the applicable Award Certificate, “Good Reason” shall mean any of the following acts by the Company or an Affiliate after the occurrence of a Change in Control, without the consent of the Participant (in each case, other than an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or the Affiliate promptly after receipt of notice thereof given by the Participant): (i) the assignment to the Participant of duties materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities as in effect on the date of the Change in Control, (ii) a material reduction by the Company or an Affiliate in the Participant’s base salary as in effect on the date of the Change in Control, (iii) the Company or an Affiliate requiring the Participant, without his or her consent, to be based at any office or location more than 35 miles from the location at which the Participant was stationed immediately prior to the Change in Control, or (iv) the material breach by the Company or an Affiliate of any employment agreement between the Participant and the Company or an Affiliate; provided that any event described in clauses (i) through (iv) above shall constitute Good Reason only if the Company fails to rescind or cure such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; and provided, further, that Good Reason shall cease to exist for an event or condition described in clauses (i) through (iv) above on the 90th day following the later of its occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice thereof prior to such date.

(t) “Full Value Award” means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Stock (or at the discretion of the Committee, settled in cash valued by reference to Stock value).

(u) “Grant Date” means the date an Award is made by the Committee.

(v) “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

(w) “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.

(x) “Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

(y) “Other Stock-Based Award” means a right, granted to a Participant under Article 12, that relates to or is valued by reference to Stock or other Awards relating to Stock.

(z) “Parent” means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code.

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(aa) “Participant” means a person who, as an employee, officer, consultant or advisor of the Company or any Affiliate, has been granted an Award under the Plan; provided that in the case of the death of a Participant, the term “Participant” refers to a beneficiary designated pursuant to Section 13.5 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.

(bb) “Performance Award” means Performance Shares or Performance Units granted pursuant to Article 9.

(cc) “Performance Share” means any right granted to a Participant under Article 9 to a unit to be valued by reference to a designated number of Shares to be paid upon achievement of such performance goals as the Committee establishes with regard to such Performance Share.

(dd) “Performance Unit” means a right granted to a Participant under Article 9 to a cash award, or unit valued by reference to a designated amount of cash or property other than Shares, to be paid to the Participant upon achievement of such performance goals as the Committee establishes with regard to such Performance Unit.

(ee) “Plan” means the ScanSource, Inc. Amended and Restated 2002 Long-Term Incentive Plan, as amended from time to time.

(ff) “Qualified Performance-Based Award” means (i) a Performance Award, Restricted Stock Award, Other Stock-Based Award or cash incentive award that is intended to qualify for the Section 162(m) Exemption and is made subject to performance goals based on Qualified Performance Criteria as set forth in Section 13.11, or (ii) an Option or SAR having an exercise price equal to or greater than the Fair Market Value of the underlying Stock as of the Grant Date.

(gg) “Qualified Performance Criteria” means one or more of the performance criteria listed in Section 13.11(b) upon which performance goals for certain Qualified Performance-Based Awards may be established by the Committee.

(hh) “Restricted Stock Award” means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture.

(ii) “Restricted Stock Unit Award” means the right granted to a Participant under Article 9 to receive shares of Stock (or the equivalent value in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture.

(jj) “Retirement” means, (i) with respect to Awards granted on and after the Effective Date and prior to March 12, 2009, a Participant’s termination of employment with the Company or an Affiliate with the Committee’s approval after attaining any normal or early retirement age specified in any pension, profit sharing or other retirement program sponsored by the Company, or, in the event of the inapplicability thereof with respect to the Participant in question, as determined by the Committee in its reasonable

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judgment; and, (ii) with respect to Awards granted on and after March 12, 2009, a Participant’s voluntary termination of employment or service with the Company or an Affiliate with the Committee’s approval, in each case unless an Award Certificate provides otherwise.

(kk) “Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code or any successor provision thereto.

(ll) “Shares” means shares of the Company’s Stock. If there has been an adjustment or substitution pursuant to Section 14.1, the term “Shares” shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant to Section 14.1.

(mm) “Stock” means the no par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Article 14.

(nn) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to Article 8.

(oo) “Subsidiary” means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.

(pp) “1933 Act” means the Securities Act of 1933, as amended from time to time.

(qq) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.

ARTICLE 4

ADMINISTRATION

4.1 COMMITTEE. The Plan shall be administered by a Committee appointed by the Board (which Committee shall consist of at least two directors) or, at the discretion of the Board from time to time, the Plan may be administered by the Board. It is intended that at least two of the directors appointed to serve on the Committee shall be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the 1934 Act) and “outside directors” (within the meaning of Code Section 162(m) and the regulations thereunder) and that any such members of the Committee who do not so qualify shall abstain from participating in any decision to make or administer Awards that are made to Eligible Participants who at the time of consideration for such Award are, or who are anticipated to be become, either (i) Covered Employees or (ii) persons subject to the

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short-swing profit rules of Section 16 of the 1934 Act. However, the mere fact that a Committee member shall fail to qualify under either of the foregoing requirements or shall fail to abstain from such action shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the discretion of, the Board. The Board may reserve to itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes. To the extent the Board has reserved any authority and responsibility or during any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. To the extent any action of the Board under the Plan conflicts with actions taken by the Committee, the actions of the Board shall control.

4.2 ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes of administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s or an Affiliate’s independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

4.3 AUTHORITY OF COMMITTEE. Except as provided below, the Committee has the exclusive power, authority and discretion to:

(a) Grant Awards;

(b) Designate Participants;

(c) Determine the type or types of Awards to be granted to each Participant;

(d) Determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate;

(e) Determine the terms and conditions of any Award granted under the Plan;

(f) [Omitted];

(g) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards or other property, or an Award may be canceled, forfeited or surrendered;

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(h) Prescribe the form of each Award Certificate, which need not be identical for each Participant;

(i) Decide all other matters that must be determined in connection with an Award;

(j) Establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan;

(k) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan;

(l) Amend the Plan or any Award Certificate as provided herein; and

(m) Adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the benefits of Awards granted to participants located in such other jurisdictions and to meet the objectives of the Plan.

Notwithstanding the above, the Board or the Committee may expressly delegate to a special committee consisting of one or more directors who are also officers of the Company some or all of the Committee’s authority under subsections (a) through (i) above, except that no delegation of its duties and responsibilities may be made to officers of the Company with respect to Awards to Eligible Participants who are, or who are anticipated to become, either (i) Covered Employees or (ii) persons subject to the short-swing profit rules of Section 16 of the 1934 Act. The acts of such delegates shall be treated hereunder as acts of the Committee and such delegates shall report to the Committee regarding the delegated duties and responsibilities.

4.4 AWARD CERTIFICATES. Each Award shall be evidenced by an Award Certificate. Each Award Certificate shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 14.1, the aggregate number of Shares reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award (such as with a Stock Appreciation Right or Performance Award) shall be 2,800,000.

5.2 LAPSED AWARDS.

(a) To the extent that an Award is canceled, terminates, expires is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award will again be available for issuance pursuant to Awards granted under the Plan.

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(b) Shares subject to Awards settled in cash will again be available for issuance pursuant to Awards granted under the Plan.

(c) Shares withheld from an Award or delivered by a Participant to satisfy minimum tax withholding requirements will again be available for issuance pursuant to Awards granted under the Plan.

(d) If the exercise price of an Option is satisfied by delivering Shares to the Company (by either actual delivery or attestation), only the number of Shares issued to the Participant in excess of the Shares tendered (by delivery or attestation) shall be considered for purposes of determining the number of Shares remaining available for issuance delivery pursuant to Awards granted under the Plan.

(e) To the extent that the full number of Shares subject to an Option or SAR is not issued upon exercise of the Option or SAR for any reason, including by reason of net-settlement of the Award, only the number of Shares issued and delivered upon exercise of the Option or SAR shall be considered for purposes of determining the number of Shares remaining available for issuance pursuant to Awards granted under the Plan.

(f) To the extent that the full number of Shares subject to an Award other than an Option or SAR is not issued for any reason, including by reason of failure to achieve maximum performance goals, only the number of Shares issued and delivered shall be considered for purposes of determining the number of Shares remaining available for issuance pursuant to Awards granted under the Plan.

5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

5.4 LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 14.1), the maximum number of Shares with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one Participant shall be 200,000. The maximum fair market value (measured as of the Grant Date) of any Awards other than Options and SARs that may be received by any one Participant (less any consideration paid by the Participant for such Award) during any one calendar year under the Plan shall be $3,000,000.

5.5 MINIMUM VESTING REQUIREMENTS. Full-Value Awards granted under the Plan to an employee, officer or consultant shall either (i) be subject to a minimum vesting period of three years (which may include graduated vesting within such three-year period), or one year if the vesting is based on performance criteria other than continued service, or (ii) be granted solely in exchange for foregone cash compensation; provided, however, that the Committee may provide for or permit acceleration of vesting of such Full Value Awards in the event of a Participant’s death, Disability, Retirement or other termination of service, or the occurrence of a Change in Control, in accordance with Article 13. Notwithstanding the foregoing, the Committee may, in its sole discretion but

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only with respect to a maximum of 10% of the total number of Shares authorized for issuance under Section 5.1, (i) accelerate the vesting of Awards for any reason in accordance with the second sentence of Section 13.9, (ii) grant substitute Awards pursuant to Section 13.1, or grant awards as an inducement to join the Company or an Affiliate as a new employee to replace forfeited awards from a former employer, without minimum vesting requirements, and (iii) grant Stock or Other Stock-Based Awards pursuant to Article 12 without minimum vesting requirements.

ARTICLE 6

ELIGIBILITY

6.1 GENERAL. Awards may be granted only to Eligible Participants; except that Incentive Stock Options may not be granted to Eligible Participants who are not employees of the Company or a Parent or Subsidiary as defined in Section 424(e) and (f) of the Code.

ARTICLE 7

STOCK OPTIONS

7.1 GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:

(a) Exercise Price. The exercise price per Share under an Option shall be determined by the Committee, provided that the exercise price for any Option shall not be less than the Fair Market Value as of the Grant Date.

(b) Prohibition on Repricing. Except as otherwise provided in Section 15.1, the exercise price of an Option may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the shareholders of the Company.

(c) Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(d). The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested. Subject to Section 13.9, the Committee may waive any exercise or vesting provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exercisable or vested at an earlier date. The Committee may permit an arrangement whereby receipt of Stock upon exercise of an Option is delayed until a specified future date.

(d) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, Shares or other property (including “cashless exercise” arrangements), and the methods by which Shares shall be delivered or deemed to be delivered to Participants.

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(e) Exercise Term. In no event may any Option be exercisable for more than ten years from the Grant Date.

(f) No Deferral Feature. No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option.

7.2 Incentive Stock Options. The terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules:

(a) Lapse of Option. An Incentive Stock Option shall lapse upon the earliest of the following circumstances; provided, however, that the Committee may, prior to the lapse of the Incentive Stock Option under the circumstances described in subsections (3), (4), (5) and (6) below, provide in writing that the Option will extend until a later date, but if an Option is so extended and is exercised after the dates specified in subsections (3) and (4) below, it will automatically become a Non-Qualified Stock Option:

(1) The expiration date set forth in the Award Certificate.

(2) The tenth anniversary of the Grant Date.

(3) Three months after termination of the Participant’s Continuous Status as a Participant for any reason other than the Participant’s Disability, death or termination for Cause.

(4) One year after the termination of the Participant’s Continuous Status as a Participant by reason of the Participant’s Disability.

(5) One year after the termination of the Participant’s death if the Participant dies while employed, or during the three-month period described in paragraph (3) or during the one-year period described in paragraph (4) and before the Option otherwise lapses.

(6) The date of the termination of the Participant’s Continuous Status as a Participant if such termination is for Cause.

Unless the exercisability of the Incentive Stock Option is accelerated as provided in Article 13, if a Participant exercises an Option after termination of employment, the Option may be exercised only with respect to the Shares that were otherwise vested on the Participant’s termination of employment. Upon the Participant’s death, any exercisable Incentive Stock Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 13.5.

(b) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the Grant Date) of all Shares with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00.

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(c) Ten Percent Owners. No Incentive Stock Option shall be granted to any individual who, at the Grant Date, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary unless the exercise price per share of such Option is at least 110% of the Fair Market Value per Share at the Grant Date and the Option expires no later than five years after the Grant Date.

(d) Expiration of Authority to Grant Incentive Stock Options. No Incentive Stock Option may be granted pursuant to the Plan after the day immediately prior to the tenth anniversary of the Effective Date.

(e) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant or, in the case of the Participant’s Disability, by the Participant’s guardian or legal representative.

(f) Eligible Grantees. The Committee may not grant an Incentive Stock Option to a person who is not at the Grant Date an employee of the Company or a Parent or Subsidiary.

ARTICLE 8

STOCK APPRECIATION RIGHTS

8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions:

(a) Right to Payment. Upon the exercise of a Stock Appreciation Right, the Participant to whom it is granted has the right to receive the excess, if any, of:

(1) The Fair Market Value of one Share on the date of exercise; over

(2) The grant price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of one Share on the Grant Date in the case of any Stock Appreciation Right related to an Incentive Stock Option.

(b) Prohibition on Repricing. Except as otherwise provided in Section 15.1, the grant price of a SAR may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the shareholders of the Company.

(c) Exercise Term. In no event may any SAR be exercisable for more than ten years from the Grant Date.

(d) No Deferral Feature. No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR.

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(e) Other Terms. All awards of Stock Appreciation Rights shall be evidenced by an Award Certificate. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Certificate.

ARTICLE 9

PERFORMANCE AWARDS

9.1 GRANT OF PERFORMANCE AWARDS. The Committee is authorized to grant Performance Shares or Performance Units to Participants on such terms and conditions as may be selected by the Committee. The Committee shall have the complete discretion to determine the number of Performance Shares or Performance Units granted to each Participant, subject to Section 5.4, and to designate the provisions of such Performance Awards as provided in Section 4.3.

9.2 PERFORMANCE GOALS. The Committee may establish performance goals for Performance Awards which may be based on any one or more of the Qualified Performance Criteria listed in Section 13.11(b) or any other criteria selected by the Committee. Such performance goals may be described in terms of Company-wide objectives or in terms of objectives that relate to the performance of an Affiliate or a division, region, department or function within the Company or an Affiliate. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render performance goals to be unsuitable, the Committee may modify such performance goals in whole or in part, as the Committee deems appropriate. If a Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee may determine that the performance goals or performance period are no longer appropriate and may (i) adjust, change or eliminate the performance goals or the applicable performance period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (ii) make a cash payment to the participant in amount determined by the Committee. The foregoing two sentences shall not apply with respect to a Performance Award that is intended to be a Qualified Performance-Based Award.

9.3 RIGHT TO PAYMENT. The grant of a Performance Share to a Participant will entitle the Participant to receive at a specified later time a specified number of Shares, or the equivalent cash value, if the performance goals established by the Committee are achieved and the other terms and conditions thereof are satisfied. The grant of a Performance Unit to a Participant will entitle the Participant to receive at a specified later time a specified dollar value in cash or property other than Shares, variable under conditions specified in the Award, if the performance goals in the Award are achieved and the other terms and conditions thereof are satisfied. The Committee shall set performance goals and other terms or conditions to payment of the Performance Awards in its discretion which, depending on the extent to which they are met, will determine the number and value of the Performance Award that will be paid to the Participant.

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9.4 OTHER TERMS. Performance Awards may be payable in cash, Stock or other property, and have such other terms and conditions as determined by the Committee and reflected in the Award Certificate. For purposes of determining the number of Shares to be used in payment of a Performance Award denominated in cash but payable in whole or in part in Shares or Restricted Stock, the number of Shares to be so paid will be determined by dividing the cash value of the Award to be so paid by the Fair Market Value of a Share on the date of determination of the amount of the Award by the Committee, or, if the Committee so directs, the date immediately preceding the date the Award is paid.

ARTICLE 10

RESTRICTED STOCK, RESTRICTED STOCK UNITS

AND DEFERRED STOCK UNITS

10.1 GRANT OF RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS. The Committee is authorized to make Awards of Restricted Stock, Restricted Stock Units or Deferred Stock Units to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee. An Award of Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be evidenced by an Award Certificate setting forth the terms, conditions, and restrictions applicable to the Award.

10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise provided in an Award Certificate or any special Plan document governing an Award, the Participant shall have all of the rights of a shareholder with respect to the Restricted Stock, and the Participant shall have none of the rights of a stockholder with respect to Restricted Stock Units or Deferred Stock Units until such time as Shares of Stock are paid in settlement of the Restricted Stock Units or Deferred Stock Units. Unless otherwise provided in the applicable Award Certificate, Awards of Restricted Stock will be entitled to full dividend rights and any dividends paid thereon will be paid or distributed to the holder no later than the end of the calendar year in which the dividends are paid to shareholders or, if later, the 15th day of the third month following the date the dividends are paid to shareholders.

10.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of Continuous Status as a Participant during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock or Restricted Stock Units that are at that time subject to restrictions shall be forfeited.

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10.4 DELIVERY OF RESTRICTED STOCK. Shares of Restricted Stock shall be delivered to the Participant at the time of grant either by book-entry registration or by delivering to the Participant, or a custodian or escrow agent (including, without limitation, the Company or one or more of its employees) designated by the Committee, a stock certificate or certificates registered in the name of the Participant. If physical certificates representing shares of Restricted Stock are registered in the name of the Participant, such certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

ARTICLE 11

DIVIDEND EQUIVALENTS

11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents to Participants, subject to such terms and conditions as may be selected by the Committee. Dividend Equivalents shall entitle the Participant to receive payments equal to dividends with respect to all or a portion of the number of Shares subject to an Award, as determined by the Committee. The Committee may provide that Dividend Equivalents be paid or distributed when accrued or be deemed to have been reinvested in additional Shares, or otherwise reinvested. Unless otherwise provided in the applicable Award Certificate, Dividend Equivalents will be paid or distributed no later than the 15th day of the 3rd month following the later of (i) the calendar year in which the corresponding dividends were paid to shareholders, or (ii) the first calendar year in which the Participant’s right to such Dividends Equivalents is no longer subject to a substantial risk of forfeiture.

ARTICLE 12

STOCK OR OTHER STOCK-BASED AWARDS

12.1 GRANT OF STOCK OR OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation Shares awarded purely as a “bonus” and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, and Awards valued by reference to book value of Shares or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards.

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ARTICLE 13

PROVISIONS APPLICABLE TO AWARDS

13.1 SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

13.2 TERM OF AWARD. The term of each Award shall be for the period as determined by the Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years from its Grant Date (or, if Section 7.2(c) applies, five years from its Grant Date).

13.3 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable law or Award Certificate, payments or transfers to be made by the Company or an Affiliate on the grant or exercise of an Award may be made in such form as the Committee determines at or after the Grant Date, including without limitation, cash, Stock, other Awards or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee.

13.4 LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b) and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal tax or securities laws applicable to transferable Awards.

13.5 BENEFICIARIES. Notwithstanding Section 13.4, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Certificate applicable to the Participant, except to the extent the Plan and

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Award Certificate otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, payment shall be made to the Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

13.6 STOCK CERTIFICATES. All Stock issuable under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.

13.7 ACCELERATION UPON DEATH, DISABILITY OR RETIREMENT. Notwithstanding any other provision in the Plan or any Participant’s Award Certificate to the contrary, upon the Participant’s death or Disability during his Continuous Status as a Participant, or upon the Participant’s Retirement, all of such Participant’s outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully exercisable and all restrictions on the Participant’s outstanding Awards shall lapse. Any Option or Stock Appreciation Rights Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Certificate. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(b), the excess Options shall be deemed to be Non-Qualified Stock Options.

13.8 ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise provided in the Award Certificate, all of a Participant’s outstanding Options and other Awards in the nature of rights that may be exercised shall become fully exercisable and all restrictions on the Participant’s outstanding Awards shall lapse if the Participant’s employment is terminated without Cause or the Participant resigns for Good Reason within 12 months after the effective date of a Change in Control. Any Option or Stock Appreciation Rights Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Certificate.

13.9 ACCELERATION FOR OTHER REASONS. Regardless of whether an event has occurred as described in Section 13.7 or 13.8 above, the Committee may in its sole discretion at any time determine that, upon the termination of service of a Participant for any reason, or the occurrence of a Change in Control, all or a portion of such Participant’s Options and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, and/or that all or a part of the restrictions on all or a portion of the Participant’s outstanding Awards shall lapse, in each case, as of such date as the Committee may, in its sole discretion, declare. The Committee may in its sole discretion at any time accelerate the vesting of Awards for any other reason, unless the aggregate number of Shares with respect to which such acceleration occurs exceeds 5% of the total number of Shares authorized for issuance under Section 5.1 of the Plan. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 13.9.

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13.10 EFFECT OF ACCELERATION. If an Award is accelerated under Section 13.8 or Section 13.9, the Committee may, in its sole discretion, provide (i) that the Award will expire after a designated period of time after such acceleration to the extent not then exercised, (ii) that the Award will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to a transaction giving rise to the acceleration or otherwise be equitably converted or substituted in connection with such transaction, (iv) that the Award may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise price of the Award, or (v) any combination of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated. To the extent that such acceleration causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(b), the excess Options shall be deemed to be Non-Qualified Stock Options.

13.11 QUALIFIED PERFORMANCE-BASED AWARDS.

(a) The provisions of the Plan are intended to ensure that all Options and Stock Appreciation Rights granted hereunder to any Covered Employee qualify for the Section 162(m) Exemption.

(b) When granting any Performance Award, Restricted Stock Award, Other Stock-Based Award (other than Options or SARs), or any cash incentive award, the Committee may designate such Award as a Qualified Performance-Based Award, based upon a determination that the recipient is or may be a Covered Employee with respect to such Award, and the Committee wishes such Award to qualify for the Section 162(m) Exemption. If an Award is so designated, the Committee shall establish performance goals for such Award within the time period prescribed by Section 162(m) of the Code based on one or more of the following Qualified Performance Criteria, which may be expressed in terms of Company-wide objectives or in terms of objectives that relate to the performance of an Affiliate or a division, region, department or function within the Company or an Affiliate: (1) earnings per share, (2) EBITDA (earnings before interest, taxes, depreciation and amortization), (3) EBIT (earnings before interest and taxes), (4) economic profit, (5) cash flow, (6) sales growth, (7) net profit before tax, (8) gross profit, (9) operating income or profit, (10) return on equity, (11) return on assets, (12) return on capital, (13) changes in working capital, or (14) shareholder return.

(c) Each Qualified Performance-Based Award (other than an Option or SAR) shall be earned, vested and payable (as applicable) only upon the achievement of performance goals established by the Committee based upon one or more of the Qualified Performance Criteria, together with the satisfaction of any other conditions, such as continued employment, as the Committee may determine to be appropriate; provided, however, that the Committee may provide, either in connection with the grant thereof or by amendment thereafter, that achievement of such performance goals will be waived upon the death or Disability of the Participant, or upon termination of the Participant’s employment without Cause or for Good Reason within 12 months after the effective date of a Change in Control.

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(d) Any payment of a Qualified Performance-Based Award granted with performance goals shall be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied. Except as specifically provided in subsection (c), no Qualified Performance-Based Award may be amended, nor may the Committee exercise any discretionary authority it may otherwise have under the Plan with respect to a Qualified Performance-Based Award under the Plan, in any manner to waive the achievement of the applicable performance goal based on Qualified Performance Criteria or to increase the amount payable pursuant thereto or the value thereof, or otherwise in a manner that would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption.

(e) Section 5.4 sets forth the maximum number of Shares or dollar value that may be granted in any one-year period to a Participant in designated forms of Qualified Performance-Based Awards.

13.12 TERMINATION OF EMPLOYMENT. Whether military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. A Participant’s Continuous Status as a Participant shall not be deemed to terminate (i) in a circumstance in which a Participant transfers from the Company to an Affiliate, transfers from an Affiliate to the Company, or transfers from one Affiliate to another Affiliate, or (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant’s employer from the Company or any Affiliate. To the extent that this provision causes Incentive Stock Options to extend beyond three months from the date a Participant is deemed to be an employee of the Company, a Parent or Subsidiary for purposes of Sections 424(e) and 424(f) of the Code, the Options held by such Participant shall be deemed to be Non-Qualified.

ARTICLE 14

CHANGES IN CAPITAL STRUCTURE

14.1 MANDATORY ADJUSTMENTS. In the event of a nonreciprocal transaction between the Company and its stockholders that causes the per-share value of the Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the authorization limits under Section 5.1 and 5.4 shall be adjusted proportionately, and the Committee shall make such adjustments to the Plan and Awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. Action by the Committee may include: (i) adjustment of the number and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding

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Awards or the measure to be used to determine the amount of the benefit payable on an Award; and (iv) any other adjustments that the Committee determines to be equitable. Without limiting the foregoing, in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding Stock into a lesser number of Shares, the authorization limits under Section 5.1 and 5.4 shall automatically be adjusted proportionately, and the Shares then subject to each Award shall automatically, without the necessity for any additional action by the Committee, be adjusted proportionately without any change in the aggregate purchase price therefor.

14.2 DISCRETIONARY ADJUSTMENTS. Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including, without limitation, any merger, reorganization, recapitalization, combination or exchange of shares, or any transaction described in Section 14.1), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested and exercisable and will expire after a designated period of time to the extent not then exercised, (iii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iv) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise price of the Award, (v) that performance targets and performance periods for Performance Awards will be modified, consistent with Code Section 162(m) where applicable or (vi) any combination of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.

14.3 GENERAL. Any discretionary adjustments made pursuant to this Article 14 shall be subject to the provisions of Section 15.2. To the extent that any adjustments made pursuant to this Article 15 cause Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be Non-Qualified Stock Options.

ARTICLE 15

AMENDMENT, MODIFICATION AND TERMINATION

15.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan without shareholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board or the Committee, either (i) materially increase the benefits accruing to Participants, (ii) materially increase the number of Shares issuable under the Plan, (iii) materially modify the requirements for eligibility, or (iv) otherwise constitute a material amendment requiring shareholder approval under applicable laws, policies or regulations, then such amendment shall be subject to shareholder approval; and provided, further, that the Board or Committee may condition any other amendment or modification on the approval of shareholders of the Company

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for any reason, including by reason of such approval being necessary or deemed advisable to (i) permit Awards made hereunder to be exempt from liability under Section 16(b) of the 1934 Act, (ii) to comply with the listing or other requirements of an Exchange or (iii) to satisfy any other tax, securities or other applicable laws, policies or regulations.

15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however:

(a) Subject to the terms of the applicable Award Certificate, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option or Stock Appreciation Right for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award);

(b) The original term of any Option may not be extended without the prior approval of the shareholders of the Company;

(c) except as otherwise provided in Article 14, the exercise price of any Option may not be reduced, directly or indirectly, without the prior approval of the shareholders of the Company; and

(d) No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby.

ARTICLE 16

GENERAL PROVISIONS

16.1 NO RIGHTS TO AWARDS; NON-UNIFORM DETERMINATIONS. No Participant or any Eligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated to treat Participants or Eligible Participants uniformly, and determinations made under the Plan may be made by the Committee selectively among Eligible Participants who receive, or are eligible to receive, Awards (whether or not such Eligible Participants are similarly situated).

16.2 NO SHAREHOLDER RIGHTS. No Award gives a Participant any of the rights of a shareholder of the Company unless and until Shares are in fact issued to such person in connection with such Award.

16.3 WITHHOLDING. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s

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FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes.

16.4 NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment or status as an officer, consultant or advisor at any time, nor confer upon any Participant any right to continue as an employee, officer, consultant or advisor of the Company or any Affiliate, whether for the duration of a Participant’s Award or otherwise.

16.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Certificate shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate.

16.6 INDEMNIFICATION. To the extent allowable under applicable law, each member of the Committee shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which such member may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by such member in satisfaction of judgment in such action, suit, or proceeding against him provided he gives the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in such other plan.

16.8 EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Affiliates.

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16.9 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

16.10 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

16.11 FRACTIONAL SHARES. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up.

16.12 GOVERNMENT AND OTHER REGULATIONS.

(a) Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act.

(b) Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any Exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee’s determination that all related requirements have been fulfilled. The Company shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement.

16.13 GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award Certificates shall be construed in accordance with and governed by the laws of the State of South Carolina.

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16.14 ADDITIONAL PROVISIONS. Each Award Certificate may contain such other terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of the Plan.

16.15 NO LIMITATIONS ON RIGHTS OF COMPANY. The grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. The Plan shall not restrict the authority of the Company, for proper corporate purposes, to draft or assume Awards, other than under the Plan, to or with respect to any person. If the Committee so directs, the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.

16.16 SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE.

(a) Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of the Code would otherwise be payable or distributable under the Plan or any Award Certificate by reason of the occurrence of a Change in Control, or Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to Participant by reason of such circumstance unless (i) the circumstances giving rise to such Change in Control, Disability or separation from service meet any description or definition of “change in control event,” “disability” or “separation from service”, as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any amount upon a Change in Control, Disability or separation from service, however defined. If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant “change in control event” “disability” or “separation from service” as the case may be.

(b) If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar limit permitted for the separation pay exemptions, the Company (acting through the Committee or the Head of Human Resources) shall determine which Awards or portions thereof will be subject to such exemptions.

(c) Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or

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distributable under the Plan or any Award Certificate by reason of the Participant’s separation from service during a period in which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

(i) if the payment or distribution is payable in a lump sum, Participant’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Participant’s death or the first day of the seventh month following Participant’s separation from service; and

(ii) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following Participant’s separation from service will be accumulated and Participant’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of Participant’s death or the first day of the seventh month following Participant’s separation from service, whereupon the accumulated amount will be paid or distributed to Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.

For purposes of this Plan, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder (“Final 409A Regulations”), provided, however, that, as permitted in the Final 409A Regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board of Directors or a committee thereof, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.

(d) Eligible Participants who are service providers to an Affiliate may be granted Options or SARs under this Plan only if the Affiliate qualifies as an “eligible issuer of service recipient stock” within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A.

The foregoing is hereby acknowledged as being the ScanSource, Inc. 2002 Long-Term Incentive Plan as adopted by the Company’s shareholders on December 5, 2002, as amended by the Company’s shareholders on December 1, 2005 and December 6, 2007, and as further amended by the Company’s board of directors on December 6, 2007 and on March 12, 2009.

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EX-10.13

Exhibit 10.13

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) between ScanSource, Inc., a South Carolina corporation (“Company”), and R. Scott Benbenek (“Executive”) (collectively “the Parties”) is effective as of May 21, 2009 (“Effective Date”) as an amendment and restatement of the Employment Agreement originally dated as of June 20, 2007, between the Company and Executive.

BACKGROUND

The Company desires to employ Executive as President of Worldwide Operations, and Executive is willing to serve in such capacity, in accordance with the terms and conditions of this Agreement.

In consideration of the foregoing and of the mutual commitments below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Employment. On the Effective Date, Executive will be employed in the capacity stated above with such commensurate responsibilities as are assigned to him by the Company’s Board of Directors (“Board”) or Chief Executive Officer (“CEO”). Executive will report directly to the CEO.

2. Employment Period. Unless earlier terminated in accordance with Section 5, Executive’s employment will be for a term (the “Employment Period”), beginning on the Effective Date and ending on June 30, 2011, the Employment Period End Date. Provided, however, that if a Change in Control, as defined in Exhibit C hereto, occurs during the Employment Period, the ending date of the Employment Period will be extended so that it expires on the later of the Employment Period End Date or the first anniversary of the date on which the Change in Control initially occurred.

3. Extent of Service. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder. Provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as these activities do not interfere with the performance of Executive’s responsibilities under this Agreement.

4. Compensation and Benefits.

(a) Base Salary. During the Employment Period, the Company will pay to Executive a base salary at the rate specified on Exhibit A (“Base Salary”), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company’s payroll practices from time to time. The CEO will review

Executive’s Base Salary annually and make recommendations to the Compensation Committee, which has sole discretion to increase (but not decrease) Executive’s Base Salary from year to year. This annual review of Executive’s Base Salary will consider, among other things, Executive’s performance and the Company’s performance. If Executive becomes eligible during the Employment Period to receive benefits under the Company’s short-term disability policy, the Company will continue to pay Executive’s Base Salary; provided, however, that Executive’s Base Salary during such period will be reduced by any amounts Executive receives under the short-term disability policy.

(b) Variable Compensation, Savings and Retirement Plans. During the Employment Period, Executive will be entitled to participate in all deferred compensation, savings and retirement plans, practices, policies and programs applicable to staff officers of the Company (“Peer Executives”) pursuant to their terms. The Executive will also be eligible to receive certain variable compensation (“Variable Compensation”) based on the criteria specified on Exhibit A.

(c) Welfare Benefit Plans. During the Employment Period, Executive and Executive’s eligible dependents may participate pursuant to their terms in the welfare benefit plans, practices, policies and programs provided by the Company which may include, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) (“Welfare Plans”) to the extent applicable to Peer Executives. Contributions will be required by the Executive. The Company may, in its sole discretion, modify, change, or eliminate its Welfare Plans.

(d) Expenses. During the Employment Period, Executive will be entitled to receive reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company, and such reimbursements will be made no later than the last day of the year immediately following the year in which Executive incurs the reimbursable expense.

(e) Fringe Benefits. During the Employment Period, Executive will be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company in effect for Peer Executives.

(f) Vacation. During each fiscal year during the Employment Period, Executive will be entitled to the number of days of paid vacation specified on Exhibit A. Executive may take vacation at the times Executive reasonably requests, subject to the prior approval of the person specified on Exhibit A. Unused vacation time will not carry over to the next fiscal year and will not be paid upon termination of employment.

5. Termination of Employment.

(a) Death, Retirement or Disability. Executive’s employment terminates automatically upon Executive’s death or Retirement during the Employment Period. For purposes of this Agreement, “Retirement” means normal retirement as defined in the Company’s retirement plan in effect when Executive retires, or if there is no retirement

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plan, “Retirement” will mean the Executive’s voluntary termination of employment after age 55 with ten years of service. If the Company determines that the Executive has become disabled during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive’s employment. Executive’s employment with the Company will terminate effective on the 30th day after receipt of such written notice by Executive (“Disability Effective Date”), unless, within the 30 days after such receipt, Executive has returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability” means a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company’s long-term disability plan, if any. If the Company has no long-term disability plan, “Disability” will mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental condition which has lasted (or can reasonably be expected to last) for twelve workweeks in any twelve-month period. At the request of Executive or his personal representative, the Board’s determination that the Disability of Executive has occurred will be certified by two physicians mutually agreed upon by Executive, or his personal representative, and the Company. If the two physicians are unwilling to certify that the Executive is disabled, Executive’s termination will be deemed a termination by the Company without Cause and not a termination because of his Disability.

(b) Termination by the Company. The Company may terminate Executive’s employment during the Employment Period with or without Cause. For purposes of this Agreement, “Cause” means:

(i) the failure of Executive to satisfactorily perform Executive’s duties with the Company (other than failure resulting from incapacity due to Disability), after a written demand for satisfactory performance is delivered to Executive by the CEO, which specifically identifies the manner in which the CEO believes that Executive has not satisfactorily performed Executive’s duties. The decision of whether Executive has satisfactorily performed his duties with the Company or complied with the demand for satisfactory performance is in the sole discretion of the Company;

(ii) engaging in unethical or illegal conduct or misconduct that includes but is not limited to violations of the Company’s policies concerning employee conduct; or

(iii) the Executive’s breach of any term of this Agreement.

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(c) Termination by Executive. Executive’s employment may be terminated by Executive for Good Reason or no reason. For purposes of this Agreement, “Good Reason” means:

(i) without the consent of Executive, the assignment to Executive of any duties materially inconsistent for Peer Executives, excluding an isolated, insubstantial, and inadvertent action taken in good faith which is remedied by the Company promptly after receipt of notice from Executive;

(ii) a material reduction by the Company in Executive’s Base Salary or a material reduction in Executive’s Variable Compensation opportunity;

(iii) the failure by the Company (a) to continue in effect any compensation plan in which Executive participates as of the Effective Date that is material to Executive’s total base compensation, unless the Company provides a substantially equivalent alternative plan, or (b) to continue Executive’s participation in the alternative plan on a basis that is substantially equivalent in terms of the value of benefits provided;

(iv) the Company’s requiring Executive, without his consent, to be based at any location that increases Executive’s normal work commute by fifty (50) miles or more as compared to Executive’s normal work commute or otherwise is a material change in the location at which Executive is based;

(v) any failure by the Company to comply with and satisfy Section 12(c) of this Agreement;

(vi) the material breach of this Agreement by the Company; or

(vii) if no new employment agreement has been entered into by Executive and the Company or its successor after or in contemplation of a Change in Control, termination by Executive for any reason or no reason during the 60-day period beginning on the sixth-month anniversary of a Change in Control.

Executive must provide written notice to the Company of Executive’s intent to terminate employment for Good Reason within 30 days of the initial existence of the Good Reason. The Company will have an opportunity to cure any claimed event of Good Reason within 30 days of notice from Executive. The Board’s good faith determination of cure will be binding. The Company will notify Executive in writing of the timely cure of any claimed event of Good Reason and how the cure was made. Any Notice of Termination delivered by Executive based on a claimed Good Reason which was thereafter cured by the Company will be deemed withdrawn and ineffective to terminate this Agreement. If the Company fails to cure any claimed event of Good Reason within 30 days of notice from Executive, Executive must terminate employment for such claim of Good Reason within 180 days of the initial existence of the Good Reason, and if Executive fails to do so, such claimed event of Good Reason will be deemed withdrawn and ineffective to terminate this Agreement.

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(d) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive must be communicated by Notice of Termination to the other Party in accordance with Section 13(f) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) states the specific termination provision in this Agreement relied upon, including whether such termination is for Cause or Good Reason, (ii) if such termination is for Cause or Good Reason, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause will not waive any right of Executive or the Company, or preclude Executive or the Company from asserting applicable facts or circumstances in enforcing rights under this Agreement.

(e) Date of Termination. “Date of Termination” means the date specified in the Notice of Termination or, if Executive’s employment is terminated by reason of death, Retirement or Disability, the date of death or Retirement or the Disability Effective Date.

6. Obligations of the Company upon Termination.

(a) Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death, Disability, Retirement, or Normal Expiration of Employment Period. If, during the Employment Period: (i) the Company terminates Executive’s employment other than for Cause, death, Disability, or Retirement or the normal expiration of the Employment Period, or (ii) Executive terminates employment for Good Reason following the Company’s failure to cure such Good Reason as set forth in Section 5(c) of this Agreement, the Company will pay Executive the following amounts and provide the following benefits:

(i) Executive’s Base Salary earned through the Date of Termination to the extent not already paid (such amount is hereinafter referred to as the “Accrued Obligations”) will be paid as soon as practicable after the Date of Termination per the Company’s customary payroll practices;

(ii) to the extent not previously paid or provided and only if earned as of the Date of Termination, the Company will timely pay or provide to Executive any other amounts or benefits which Executive is eligible to receive under any plan, program, policy, practice, contract or agreement of the Company (“Other Benefits”) pursuant to the terms of such Other Benefits; and

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(iii) subject to Section 13(i) of this Agreement and Executive’s execution of a Release in substantially the form of Exhibit B hereto (the “Release”) within the time set forth in Section 6(g) of this Agreement, on the 30^th day after the Date of Termination, the Company will pay to Executive in a lump sum in cash the amount in (A), pay the amount in (B) as set forth below, and provide the benefits in (C):

(A) a single year of compensation in an amount equal to one (1) times the highest combined annual Base Salary and Variable Compensation earned by Executive from the Company, including any such amounts earned but deferred, in the last three fiscal years before the Date of Termination (the “Severance Benefits”), less normal withholdings. Notwithstanding the foregoing, if the Date of Termination occurs within 12 months after or otherwise in contemplation of a Change in Control, as defined in Exhibit C, Executive will receive Severance Benefits of two (2) years of compensation in an amount equal to two (2) times the highest combined annual Base Salary and Variable Compensation earned by Executive from the Company, including any such amounts earned but deferred, in the last three fiscal years before the Date of Termination, less normal withholdings. Executive’s entitlements to receive and retain the amounts set forth in this Section 6 are conditioned on Executive’s compliance with the Restrictions on Conduct described in Section 11;

(B) a bonus equal to the pro rata portion, based on the number of full fiscal quarters elapsed in the current fiscal year through the Date of Termination, of the current fiscal year annual variable compensation, if any, payable based on actual performance during such quarter(s) (the “Pro Rata Bonus”). The Pro Rata Bonus, if any, and less normal withholdings, will be paid and/or vest within thirty days of the Company’s certification that the Executive has met the necessary performance criteria, which will be no later than the later of March 15 following the end of the calendar year in which Executive’s right to the bonus vests or the 15^th day of the third month following the end of the Company’s fiscal year in which Executive’s right to the bonus vests; and

(C) for up to twelve (12) months following the Date of Termination, the Company will reimburse Executive on a monthly basis for COBRA payments made by Executive which are in excess of the monthly rates paid by active employees, for medical and dental insurance benefits. Reimbursement may cease sooner than twelve (12) months if Executive becomes eligible to receive similar benefits under another employer provided or group plan (which may be the plan of the Executive’s new employer or his spouse’s employer) and, in such event, Executive’s right to COBRA ceases. Such cash reimbursements will be made per the Company’s customary payroll practices (not less frequently than monthly) for up to the twelve (12) months following the Date of Termination.

(b) Death. If Executive’s employment is terminated because of Executive’s death during the Employment Period, this Agreement will terminate without further obligations to Executive’s legal representatives under this Agreement other than (i) the

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payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in Section 6(a)(iii)(B), and (iii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii) of this Agreement. The Accrued Obligations and the Pro Rata Bonus will be paid to Executive’s estate or beneficiary, as applicable. Other Benefits as used in this Section 6(b) will include, without limitation, and Executive’s estate and/or beneficiaries will be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as are applicable to Executive on the date of his death pursuant to the terms of such Other Benefits.

(c) Disability. If Executive’s employment is terminated because of Executive’s Disability during the Employment Period, this Agreement will terminate without further obligations to Executive other than (i) the payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in Section 6(a)(iii)(B), and (iii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii) of this Agreement. The term Other Benefits as used in this Section 6(c) includes, without limitation, and Executive will be entitled after the Disability Effective Date to receive, disability and other benefits under such plans, programs, practices and policies relating to disability, if any, as are applicable to Executive and his family on the Date of Termination pursuant to the terms of such Other Benefits.

(d) Retirement. If Executive’s employment is terminated because of Executive’s Retirement during the Employment Period, this Agreement will terminate without further obligations to Executive other than (i) the payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in Section 6(a)(iii)(B), and (iii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii) of this Agreement. The term Other Benefits as used in this Section 6(d) includes, without limitation, and Executive will be entitled after the Date of Termination to receive, retirement and other benefits under such plans, programs, practices and policies relating to retirement, if any, as applicable to Executive on the Date of Termination pursuant to the terms of such Other Benefits.

(e) Cause or Voluntary Termination without Good Reason. If Executive’s employment is terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement will terminate without further obligations to Executive, other than for (i) the payment of Accrued Obligations as described in Section 6(a)(i), and (ii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii).

(f) Normal Expiration of Employment Period. If Executive’s employment is terminated due to the normal expiration of the Employment Period or is terminated within 60 days after the Employment Period End Date (for reasons other than Cause, death, Disability or Retirement), this Agreement will terminate without further obligations to Executive, other than for (i) the payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in

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Section 6(a)(iii)(B), (iii) the payment of the Severance Benefits (subject to the Executive’s execution of the Release) as described in Section 6(a)(iii)(A), and (iv) the timely payment or provision of Other Benefits as described in Section 6(a)(ii). Notwithstanding anything to the contrary in this Agreement, if the Company provides notice that the Agreement will not be renewed and a new employment agreement is not offered and the Executive remains an employee of the Company in any capacity, Executive’s employment will not be governed by this Agreement and Executive will be an at-will employee. In that instance, Executive remains subject to the Restrictions on Conduct described in Section 11.

(g) Execution of Release. Notwithstanding anything to the contrary in this Section 6, the Release must be executed and provided to the Company, and the period for revoking same must have expired, before the 30^th day following the Date of Termination.

7. Non-exclusivity of Rights. Nothing in this Agreement prevents or limits Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 13(d), will anything in this Agreement limit or otherwise affect any rights Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice, program, contract or agreement with the Company at or subsequent to the Date of Termination will be payable in accordance with such plan, policy, practice, program, contract or agreement except as explicitly modified by this Agreement.

8. Mandatory Reduction of Payments in Certain Events. Any payments made to Executive under this Agreement will be made with the Executive’s best interests in mind related to the excise tax imposed by Code Section 4999 (the “Excise Tax”).

(a) Anything in this Agreement to the contrary notwithstanding, if it is determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) would be subject to the Excise Tax, then, before making the Payment to Executive, a calculation will be made comparing (i) the net benefit to Executive of all Payments after payment of the Excise Tax, to (ii) the net benefit to Executive if the Payment had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments will be limited to the extent necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). In that event, Executive will direct which Payments are to be reduced and any such reduction will be made so as not to violate Code Section 409A.

(b) The determination of whether an Excise Tax would be imposed, the amount of such Excise Tax, and the calculation of the amounts referred to in Section 8(a)(i) and (ii) above will be made by the Company’s regular independent accounting firm at the expense of the Company or, at the election and expense of Executive, another nationally recognized independent accounting firm (the “Accounting

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Firm”) which will provide detailed supporting calculations. Any determination by the Accounting Firm will be binding upon the Company and Executive. As a result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments to which Executive was entitled, but did not receive pursuant to Section 8(a), could have been made without the imposition of the Excise Tax (“Underpayment”). In such event, the Accounting Firm will determine the amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by the Company to or for the benefit of Executive.

(c) If the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 8 will be of no further force or effect.

9. Costs of Enforcement. Subject to Section 8(b), each Party will pay its own costs and expenses incurred in enforcing or establishing its rights under this Agreement, including, without limitation, attorneys’ fees, whether a suit is brought or not, and whether or not incurred in trial, bankruptcy, or appellate proceedings.

10. Representations and Warranties. Executive represents and warrants to the Company that Executive is not a party to, or otherwise subject to, any restrictive covenant not to compete, not to solicit or not to disclose or use confidential information, with any person or entity, and Executive’s execution of this Agreement and performance of his obligations will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity.

11. Restrictions on Conduct of Executive.

(a) General. Executive agrees that as part of the services he will perform for the Company he will be exposed to, and help create and maintain, competitive advantages over other “Competitive Businesses,” as well as good will with the Company’s customers and suppliers. By virtue of the position Executive will hold, Executive is receiving, will receive, or will be provided access to the Company’s: (1) customers, suppliers, advertisers, and vendors as well as pricing information, distribution channels, and other terms of those relationships; (2) “Confidential Information” and “Trade Secrets;” (3) the relationships and other elements that together comprise good will; and/or (4) institutional knowledge regarding product development, its engineering, product specification, material suppliers, material specifications, product suppliers, manufacturing knowledge, customer feedback, surveys, design-around information, research and development information, internal quality control tests, other quality control information, and other similar information. Executive agrees that the competitive advantage and good will the Company has created, and which Executive will assist in furthering and maintaining, is an important and legitimate business asset of the Company. Should Executive compete against the Company, having intimate knowledge of the information that gives the Company its competitive advantage and good will would give Executive, or those “Competitive Businesses” he is assisting, an unfair advantage over the Company.

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(b) Definitions. The following capitalized terms used in this Section 11 will have the meanings assigned to them below, which definitions will apply to both the singular and the plural forms of these terms:

“Competitive Business” – means any entity that distributes any goods or services in or to the point of sale, automatic identification, data capture, security, business telephony, communication products and peripherals markets if such entity distributes any product that is the same or similar to any good or service offered by the Company, including reasonable alternatives, within the final two (2) years of Executive’s employment with the Company. Executive agrees that Competitive Businesses include, but are not limited to, the following entities: Ingram Micro, Tech Data, Avnet, BlueStar, Westcon, Voda One, Arrow, Agilysis, Azerty, PC POS, Jarltech, Jenne, Securematics, Synnex, Alliance (NEI), NETXUSA, ADI, Tri-Ed, Northern Video, and Anixter.

“Confidential Information” means any and all information of the Company that has value and is not generally known to the Company’s competitors. This includes, but is not limited to, any information or documents about: the Company’s accounting practices; financial data; financial plans and practices; the Company’s operations; its future plans (including new products, improved products, and products under development); its methods of doing business; internal forms, checklists, or quality assurance testing; programs; customer and supplier lists or other such related information as pricing or terms of business dealings; supply chains; shipping chains and prices; packaging technology or pricing; sourcing information for components, materials, supplies, and other goods; employees; pay scales; bonus structures; contractor information and lists; marketing strategies and information; product plans; distribution plans and distribution channel relationships; business plans; manufacturing, operation, sales and distribution processes; costs; margins for products; prices, sales, orders and quotes for the Company’s business that is not readily attainable by the general public; existing and future services; testing information (including methods and results) related to materials used in the development of the Company’s products or materials that could be used with the Company’s products; development information (including methods and results) related to computer programs that design or test products or that track information from a central database; and the computer or electronic passwords of all employees and/or firewalls of the Company. Notwithstanding the definitions stated above, the term Confidential Information does not include any information which (i) at the time of disclosure to Executive, was in the public domain; (ii) after disclosure to Executive, is published or otherwise becomes part of the public domain through no fault of Executive; (iii) without a breach of duty owed to the Company, was already in Executive’s possession at the time of disclosure; (iv) was received after disclosure to Executive from a third party who had a lawful right to the information other

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than through a relationship of trust and confidence with the Company, and without a breach of duty to the Company, disclosed the information to Executive; or (v) where Executive can show it was independently developed by Executive on non-Company time without reference to, or reliance upon, other Confidential Information or Trade Secrets.

“Prohibited Duties” means supervising, consulting, advising, coaching, providing any information related to, or directly or indirectly performing any task for a Competitive Business that is similar or related to one or more duties Executive performed or supervised for the Company. Prohibited duties include owning greater than 10% of any Competitive Business. Prohibited duties includes supervising, consulting, advising, coaching, providing any information related to, or directly or indirectly performing any task for any material, product or service provider of any Competitive Business, if Executive’s work for such material, product or service provider is associated with a Competitive Business.

“Restricted Territory” means any place where the Company or its affiliates is (or is attempting to) actively manufacturing, marketing, selling, or distributing its products within the final two (2) years of Executive’s employment, or places where the Company made affirmative steps to market or sell its products within the final six (6) months of Executive’s employment. If Executive was assigned only a portion of the territory in which the Company operates or sells, then the Restricted Territory shall be narrowly construed to include only the limited territory of the Executive.

“Trade Secrets” means information related to the business or services of the Company which (1) derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reasonable reverse engineering processes by persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts by the Company and affiliated third parties that are reasonable under the circumstances to maintain its secrecy. Assuming the foregoing criteria in clauses (1) and (2) are met, Trade Secret encompasses business and technical information including, without limitation, know-how, designs, formulas, patterns, compilations, programs, devices, inventions, methods, techniques, drawings processes, finances, actual or potential customers and suppliers, and existing and future products and services of the Company. Notwithstanding the definitions stated above, the term Confidential Information does not include any information which (i) at the time of disclosure to Executive, was in the public domain; (ii) after disclosure to Executive, is published or otherwise becomes part of the public domain through no fault of Executive; (iii) without a breach of duty owed to the Company, was already in Executive’s possession at the time of disclosure; (iv) was received after disclosure to Executive from a third party who had a lawful right to the information through some avenue other than through a relationship of trust and confidence with the Company, and without a breach of duty to the Company, disclosed the information to Executive; or (v) where Executive can show it was independently developed by Executive on non-Company time without reference to, or reliance upon, other Confidential Information or Trade Secrets.

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(c) Restrictions. Executive understands and agrees that the compensation the Company has agreed to provide pursuant to this Agreement would not be as lucrative if the restrictions set forth in this section were not included in this Agreement. Therefore, in consideration of the compensation provided in this Agreement, and the other terms agreed to by the Company, along with the disclosure (and continued disclosure of Confidential Information and Trade Secrets) a portion of which is being paid to compensate Executive for these covenants, Executive covenants and agrees as follows:

(i) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Date of Termination, Executive agrees he will not engage in any Prohibited Duties for a Competitive Business in the Restricted Territory;

(ii) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Date of Termination, Executive agrees he will not solicit any of the Company’s customers or suppliers with whom Executive had contact during the course of Executive’s employment with the Company for any Competitive Business;

(iii) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Date of Termination, Executive agrees he will not solicit any of the Company’s prospective customers or prospective suppliers with whom Executive had contact during the course of Executive’s employment with the Company for any Competitive Business;

(iv) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Termination Date, Executive agrees he will not solicit any of the Company’s employees whom Executive supervised during the course of his employment with the Company, any employees with whom he had contact during his employment, any employees who had contacts of employment with the Company at the time solicited, or any employees who had restrictive covenants at the time solicited, to leave the Company for any purpose;

(v) for the term of Executive’s employment, and for a period of no less than twenty-four (24) months (for Confidential Information) or for so long as the information remains protected under this Agreement or applicable statute (for Trade Secrets) thereafter, Executive agrees that he will not, either directly or indirectly, publish, disseminate, provide, or otherwise disclose any Confidential Information or Trade Secrets to any third party, unless required to do so by legal process or other law, without the Company’s prior written consent. Executive agrees that if he believes he is compelled to reveal Confidential Information or Trade Secrets pursuant to the limited exception provided herein, Executive will provide the Company at least 7 days advance notice before doing so, and will explain the specifics under which such Confidential Information or Trade Secrets are to be disclosed.

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(vi) For the term of Executive’s employment, and for a period of no less than twenty-four (24) months (for Confidential Information) or for so long as the information remains protected under this Agreement or applicable statute (for Trade Secrets) thereafter, Executive agrees that he will not, either directly or indirectly, for his own behalf or otherwise, use in any manner the Company’s Confidential Information or Trade Secrets.

(d) Non-Disparagement. The Company and Executive agree that for the term of Employee’s employment, and for a period of five (5) years thereafter, they will not disparage each other to any non-governmental third parties. Nothing in this subsection should be interpreted as any restriction on either Party’s compliance with any laws requiring or compelling disclosure, or any disclosures that are considered absolutely privileged, such as legal proceedings.

(e) Blue Pencil. The Company and Executive agree that the provisions of Section 11, including all subparts, are intended to strike the balance between Executive earning a livelihood and the Company protecting its important competitive advantages and good will. The Parties have drafted the provisions of Section 11, including all subparts, to allow for enforcement. The Parties agree that should a court determine that any word, phrase, clause, sentence, or paragraph is unreasonably broad in time, territory, or scope so as to render any remaining provisions unenforceable, the Parties desire the court to strike the offending language in the narrowest way possible and enforce the remainder as if the offending language was not there, so that only reasonable restrictions are enforced.

(f) Elective Right of the Company. If Executive challenges the enforceability of the Restrictive Covenants (or asserts an affirmative defense to an action seeking to enforce the Restrictive Covenants) based on an argument that the Restrictive Covenants are (i) not enforceable as a matter of law, (ii) unreasonable in geographical scope or duration or (iii) void as against public policy, the Company will have the right (1) to cease making the payments required under Section 6 above, and (2) upon demand, to have Executive repay, within 10 business days of any such demand, any payments already made. Any right afforded to, or exercised by, the Company under this Agreement will not affect the enforceability of the Restrictive Covenants or any other right of the Company under this Agreement.

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12. Assignment and Successors.

(a) This Agreement is personal to Executive and without the prior written consent of the Company will not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement will inure to the benefit of and be enforceable by Executive’s legal representatives.

(b) This Agreement will inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” will mean the Company as herein before defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

13. Miscellaneous.

(a) Waiver. Failure of either Party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement will not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless the waiver is in a writing signed by the Party making the waiver.

(b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability will not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which will remain in full force and effect.

(c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it.

(d) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Parties on the subject matter hereof. From and after the Effective Date, this Agreement will supersede any other agreement between the Parties on the subject matter hereof, including without limitation, any prior Agreement.

(e) Governing Law and Jurisdiction. Without regard to conflict of laws principles, the laws of the State of South Carolina will govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. This

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Agreement may only be enforced in a court of competent jurisdiction in Greenville County, South Carolina and Executive agrees to submit to the exclusive jurisdiction of a court of competent jurisdiction in Greenville, South Carolina.

(f) Notices. All notices, requests, demands and other communications required or permitted in this Agreement must be in writing and will be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid:

To Company:	ScanSource, Inc.
	6 Logue Court
	Greenville, SC 29615
	Attn: Chief Executive Officer
To Executive:	To the address specified on Exhibit A

Any Party may change the address to which notices, requests, demands and other communications will be delivered or mailed by giving notice thereof to the other Party in the same manner provided herein.

(g) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both Parties, which makes specific reference to this Agreement.

(h) Construction. Each Party and his or its counsel have been provided the opportunity to review and revise this Agreement and accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement will be construed as a whole, and according to its fair meaning, and not strictly for or against either party.

(i) Deferred Compensation Provision. Notwithstanding any other provision of this Agreement, it is intended that any payment or benefit provided under this Agreement that is considered to be “deferred compensation” subject to Code Section 409A will be provided in such manner and at such time, including without limitation in connection with a permissible payment event under Code Section 409A, as is exempt from or complies with the requirements of Code Section 409A. All rights to payments and benefits under this Agreement are to be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Code Section 409A. Termination of employment under this Agreement, to the extent required by Code Section 409A, will be construed to mean a “separation from service” under Code Section 409A where it is anticipated that no further services will be performed after such date or that the level of services Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of services Executive performed over the prior thirty-six (36)-month period. The terms of this Agreement are intended to, and will be construed and administered to

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the fullest extent possible, to permit compensation to be paid under this Agreement to be exempt from or comply with Code Section 409A. Regardless, the Company will not be liable to Executive or anyone else if the Internal Revenue Service or any court or other authority determines that any payments or benefits to be provided under this Agreement are subject to taxes, penalties or interest as a result of failing to comply with or be exempt from Code Section 409A.

Notwithstanding anything in this Agreement to the contrary, if any payment or benefit that constitutes non-exempt “deferred compensation” under Code Section 409A would otherwise be provided under this Agreement due to Executive’s separation from service during a period in which he is a “specified employee” (as defined in Code Section 409A and the associated final regulations), then, to the extent required by Code Section 409A, such payments or benefits will be delayed, to the extent applicable, until six months after Executive’s separation from service or, if earlier, Executive’s death (the “409A Deferral Period”). If such payments are otherwise due to be made in installments during the 409A Deferral Period, the payments that would otherwise have been made in the 409A Deferral Period will be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payments will be made as otherwise scheduled. In the event benefits are required to be deferred, any such benefit may be provided during the 409A Deferral Period at Executive’s expense, with Executive having the right to reimbursement from the Company once the 409A Deferral Period ends, and the balance of the benefits will be provided as otherwise scheduled.

14. Arbitration. Any claim or dispute arising under this Agreement will be subject to arbitration, and before commencing any court action, the Parties agree that they will arbitrate all controversies and such arbitration will occur in Greenville, South Carolina according to the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §1, et seq. The arbitrators will be authorized to award both liquidated and actual damages as well as injunctive relief, but no punitive damages. The arbitrator’s award will be binding and conclusive upon the Parties, subject to 9 U.S.C. §10. Each party has the right to have the award made the judgment of a court of competent jurisdiction.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the dates indicated below.

EXECUTIVE:		SCANSOURCE, INC.:
Name:	/s/ R. Scott Benebenek	By:	/s/ Michael L. Baur
Date:	5/22/09	Name:	Michael L. Baur
		Title:	CEO
		Date:	5/21/2009

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EXHIBIT A TO EMPLOYMENT AGREEMENT

Executive: R. Scott Benbenek

Base Salary: $324,000 annually

Variable Compensation: The incentive compensation structure detailed in Exhibit A to Executive’s prior employment agreement with the Company effective June 20, 2007, will remain in effect through June 30, 2009. Beginning July 1, 2009 and continuing through the end of the Employment Period, incentive compensation will be paid with respect to the Company’s Operating Income determined at the end of each fiscal year calculated by using the table below.

For purposes of this Agreement, “Operating Income” means the amount reflected for the line item identified as Operating Income on the Company’s audited consolidated financial statements for each respective fiscal year ending during the term of this Agreement and “Return on Invested Capital” means an amount expressed as a percentage of: the Company’s annual (or annualized) EBITDA (net income plus interest, taxes, depreciation and amortization) divided by average shareholder’s equity and interest bearing debt (defined as the sum of shareholder’s equity at the beginning of the period added to the sum of shareholder’s equity at the end of the period, divided by 2, plus the average daily interest bearing debt for the period). The Company reserves the right to make adjustments to the calculation of Return on Invested Capital to account for any extraordinary or unusual items that did not exist or were not in effect as of the Effective Date and to the extent permitted to qualify for the Code Section 162(m) Exemption (as defined below), including, but not limited to, newly pronounced accounting standards and similar laws and regulations and significant non-recurring events that impact the Company. The Company’s calculation of Operating Income, Return on Invested Capital, and the incentive compensation amount shall be conclusive and binding absent fraud or manifest and material error.

The target amount of variable compensation is 0.35% of operating income (“target variable compensation”). The actual amount may vary depending on actual operating income achieved by the Company.

For the initial year of the Employment Period, the incentive compensation will be paid to Executive in quarterly installments with each quarterly installment being equal to seventy percent (70%) of the incentive bonus computed using the Operating Income determined by the financial statement prepared for each quarter during the term of this Agreement. The balance of the incentive compensation will be paid with respect to each fiscal year immediately following the auditor’s approval of the release of the Company’s year-end earnings. The Company has no right of reimbursement in the event the amount advanced in quarterly installments exceeds the incentive bonus as finally computed. Following the initial year of the Employment Period, the incentive compensation will be paid to Executive annually. Such annual incentive compensation payments will be made immediately following the auditor’s approval of the release of the Company’s year-end earnings.

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The amount of the incentive compensation will be calculated as follows:

• If return on invested capital (“ROIC”) is greater than or equal to 30%, variable compensation will equal 115% of target variable compensation

• If return on invested capital (“ROIC”) is less than 30% but greater than or equal to 25%, variable compensation will equal 110% of target variable compensation

• If return on invested capital (“ROIC”) is less than 25% but greater than or equal to 20%, variable compensation will equal 100% of target variable compensation

• If return on invested capital (“ROIC”) is less than 20% but greater than or equal to 10%, variable compensation will equal 90% of target variable compensation

• If return on invested capital (“ROIC”) is less than 10%, variable compensation will equal 70% of target variable compensation

Notwithstanding any other provision of this Agreement or this Exhibit A, any incentive compensation to be paid under this Agreement will be paid to Executive by the later of (i) March 15^th following the end of the calendar year in which Executive right to such incentive compensation vests or (ii) the 15^th day of the third month following the end of the Company’s fiscal year in which Executive’s right to such incentive compensation vests.

Given Executive may be a “covered employee” under Code Section 162(m), the foregoing incentive compensation is intended to be a Performance Unit granted under the terms of the Company’s 2002 Long-Term Incentive Plan and has been designated as a “Qualified Performance-Based Award.” The incentive compensation is intended to qualify for the Code Section 162(m) Exemption within the meaning of the Company’s 2002 Long-Term Incentive Plan. In no event may Executive’s incentive compensation under this Agreement for any year exceed the maximum amount allowed by the terms of the 2002 Long-Term Incentive Plan currently in effect, which is $3,000,000 as of the Effective Date. Executive’s right to receive and retain any payment of incentive compensation is subject to the written certification of the Board Compensation Committee that the relevant performance goals have been achieved. To the extent appropriate, the Board Compensation Committee may provide for the payment of incentive compensation under the terms of another Company incentive plan that permits Qualified Performance-Based Awards, in which case the limits and terms of such other incentive plan will apply.

Equity-Based Compensation: The Company agrees that it will recommend to the Compensation Committee (the “Committee”) of the Board that the Executive be granted a restricted stock award (the “RSA”) for such number of shares (the “Shares”) of the Company’s Common Stock (the “Common Stock”) as is determined by dividing $200,000 by the Fair Market Value (as defined under the Company’s Amended and Restated 2002 Long-Term Incentive Plan or other applicable plan (the “2002 Plan”) of the Common Stock on the grant date. The RSA is subject to the following terms and conditions:

(a) The RSA grant is subject to the approval of the Committee. The RSA will be granted under the 2002 Plan. The RSA will be subject to the terms and conditions of the 2002 Plan and a restricted stock award agreement (the “RSA Agreement”) to be entered into between the Company and the Executive . In the event of a conflict between the terms of this Agreement, including Exhibit A, and the 2002 Plan or the RSA Agreement, the 2002 Plan or

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the RSA Agreement, as the case may be, will control. The Company is under no obligation to grant any additional equity-based awards to the Executive, the grant of which will be subject to Committee discretion. The RSA will be deemed earned and vested only if (and to the extent that) these conditions are met. The Committee has sole discretion to determine if the RSA (or portion thereof) has been earned and vested. Specifically, the RSA is subject to both continued service and performance requirements as follows:

(i) First tranche: Up to fifty percent (50%) of the Shares subject to the RSA will (except as otherwise provided in paragraph (c) below) vest and be earned if (A) the Executive is employed by the Company on June 30, 2010 and has been an employee continuously since the grant date and (B) operating income (as defined below) for the Company for the fiscal year ended June 30, 2010 equals or exceeds $51,000,000.00. If both the continued service condition described in (a)(i)(A) and the performance condition described in (a)(i)(B) are not met, then none of the Shares subject to the first tranche will vest; that is, both conditions must be met in order for any of such Shares to vest.

(ii) Second tranche: Up to fifty percent (50%) of the Shares subject to the Award will (except as otherwise provided in paragraph (c) below) vest and be earned if (A) the Executive is employed by the Company on June 30, 2011 and has been an employee continuously since the grant date and (B) operating income for the fiscal year ended June 30, 2011 equals or exceeds $67,000,000.00. If both the continued service condition described in (b)(ii)(A) and the performance condition described in (b)(ii)(B) are not met, then none of the Shares subject to the second tranche will vest; that is, both conditions must be met in order for any of such Shares to vest.

The Award will not be deemed earned and vested with respect to a particular tranche until both of the following events have occurred: (A) the completion of the Company’s audited financial statements for the particular fiscal year and (B) the Committee’s written certification regarding if and to the extent that applicable performance goals have been met. For these purposes, “operating income” means the amount reflected for the line item identified as Operating Income for the Company’s audited financial statements for each respective fiscal year referenced above. The Company’s calculation of Operating Income will be conclusive and binding absent fraud or manifest and material error.

(b) Even if the conditions described in paragraph (a) and/or paragraph (b) above may have been met, the Committee retains sole discretion to reduce (but not increase) the number of Shares deemed earned and vested (but not below 50% of the number of shares subject to a particular tranche) if the Committee determines that such reduction is appropriate based on the Committee’s evaluation of the Executive’s performance in the following areas: (A) acquisitions and integration of acquisitions: (B) restructuring alternatives; (C) achievement of cost reduction goals; (D) acquisition and implementation of the Company-wide information technology project involving a new enterprise resource planning software package; or (E) such other corporate, divisional or individual goals as may be applied by the Committee.

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(c) If the Executive’s employment with the Company terminates for any reason other than as set forth in this paragraph (c), then the Executive will forfeit all of the Executive’s right, title and interest in the RSA (and the underlying Shares), to the extent not vested and earned as of the date of the Executive’s termination of employment. Notwithstanding the foregoing, however, the RSA will be deemed earned and vested with respect to all of the Shares underlying the Award on the earliest to occur of the following: (i) the termination of the Executive’s employment due to death or Disability; or (ii) the occurrence of a Change in Control. For these purposes, the terms “Disability,” “Change in Control,” “Cause” and “Good Reason” have the meanings given such terms in the 2002 Plan.

Days of Paid Vacation per Fiscal Year:	Approving Person:
20	Chief Executive Officer

Executive Notice Address:

110 Chatsworth Road

Greer, South Carolina 29651

Initials:	/s/ RSB	/	/s/ MLB
	5/22/09		5/21/2009

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EXHIBIT B TO EMPLOYMENT AGREEMENT

Form of Release

THIS RELEASE (“Release”) is granted effective as of the              day of                     ,             , by             (“Executive”) in favor of ScanSource, Inc. (the “Company”). This is the Release referred to that certain Employment Agreement dated as of                     ,              by and between the Company and Executive (the “Employment Agreement”). Executive gives this Release in consideration of the Company’s promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part.

1. Release of the Company. Executive, for himself, his successors, assigns, executors, administrators, insureds, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, shareholders, stockholders, trustees, partners, joint ventures, board members, employees, agents, parent corporations, divisions, wholly or partially owned subsidiaries, affiliates, estates, predecessors, successors, heirs, executors, administrators, assigns, representatives, and attorneys (the “Released Parties”), from any and all legal, administrative, and equitable claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorneys’ fees and costs, or liabilities of any nature whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal, state or local statutes, except as provided in Paragraph 2. without limiting the broadness of the foregoing language, Executive agrees to release Company from any and all claims under:

(1) local, state or federal common law, statute, regulation, ordinance or treaty;

(2) Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000(e), et seq.

(3) 42 U.S.C. §§ 1981, 1981A, 1983 and 1985;

(4) the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.;

(5) the Federal Rehabilitation Act of 1973;

(6) the Older Worker Benefit Protection Act, 29 U.S.C. §§ 621, et seq.;

(7) the Family and Medical Leave Act of 1993, 29 U.S.C. §§ 2601, et seq.;

(8) Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 301, et seq.;

(9) the Health Insurance Portability Act;

(10) the Occupational and Safety Health Act;

(11) the Equal Pay Act;

(12) the Worker Adjustment and Retraining Notification Act;

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(13) the Sarbanes-Oxley Corporate Reform Act of 2002, 15 U.S.C. 7201, et seq.;

(14) Executive Orders 11246 and 11141;

(15) South Carolina Human Affairs Law;

(16) the South Carolina Payment of Wages Act;

(17) the South Carolina Bill of Rights for Handicapped Persons;

(18) the state workers’ compensation law, including S.C. Code Ann. § 41-1-80;

(19) tort claims including, but not limited to, claims of wrongful termination, constructive discharge, defamation, invasion of privacy, interference with contract, interference with prospective economic advantage and intentional or negligent infliction of emotional distress and outrage;

(20) contract claims, whether express or implied;

(21) claims for unpaid wages, benefits or entitlements asserted under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., or under South Carolina wages and hours laws, including, but not limited to, the South Carolina Payment of Wages Act;

(22) claims for unpaid benefits or entitlements asserted under any Company plan, policy, benefits offering or program except as otherwise required by law;

(23) claims for attorneys’ fees, interest, expenses and costs, injunctive relief or reinstatement to which he is, claims to be or may be entitled; and

(24) the Age Discrimination in Employment Act, 29 U.S.C. §§ 621, et seq.;

each as amended, and all other such similar statutes, city or county ordinances or resolutions and laws of the State of South Carolina, provided, however, that nothing herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company’s bylaws, certificate of incorporation, South Carolina law, or otherwise.

Without waiving any prospective or retrospective rights under the Family and Medical Leave Act (“FMLA”) or the Fair Labor Standards Act (“FLSA”), Executive admits that he has received from the Company all rights and benefits, if any, potentially due to him pursuant to the FMLA or FLSA. It is the parties’ intent to release all claims, which can legally be released, but no more than that.

Executive specifically agrees not to attempt to institute any proceedings or pursue any action pursuant to any laws (state, local, or federal) with any agency or in any jurisdiction (state, local, or federal) based on employment with or termination from the Company except as required or protected by law. Executive covenants that he will in not way encourage or assist any person or entity (including, but not limited to, any past, present or future employee(s) of Company) to take part or participate in any legal or administrative action against Company, except as otherwise required or protected by law. Nothing in the Agreement shall be interpreted or applied in a manner that affects or limits Executive’s otherwise lawful ability to bring an administrative charge with the Equal Employment Opportunity Commission or other appropriate state or local comparable administrative agency; however, the parties agree that Executive has released Company from all liability arising from the laws, statutes, and common law listed in paragraph 1 (except as set forth in this paragraph below, with respect to the Age Discrimination in Employment Act (“ADEA”)) and, as such, Executive is not and will not be entitled to any

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monetary or other comparable relief on his own behalf. Nothing in this Agreement shall be interpreted or applied in a manner that affects or limits Executive’s ability to challenge (with a lawsuit or administrative charge) the validity of Executive’s release of Company in this Agreement for age claims under the ADEA (which release is provided for in paragraph 2 of this Agreement). Other than a challenge to the validity of the release of ADEA claims under this Agreement, Executive has released Company from all liability with respect to the laws, statutes, and common law listed in paragraph 2, including the ADEA

2. Release of Claims Under Age Discrimination in Employment Act. Without limiting the generality of the foregoing, Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. It is understood that Executive is advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof.

3. Executive acknowledges and represents that as an employee of the Company he has been obligated to, and has been given the full and unfettered opportunity to, report timely to the Company any conduct that would give rise to an allegation that the Company or any affiliate of the Company has violated any laws applicable to its businesses or has engaged in conduct which could otherwise be construed as inappropriate or unethical in any way, even if such conduct is not, or does not appear to be, a violation of any law. Executive acknowledges that a condition of the payment of any consideration provided by the Company to the Executive hereunder is his truthful and complete representation to the Company regarding any such conduct, including but not limited to conduct regarding compliance with the Company’s Code of Ethics, polices, and procedures, and with all laws and standards governing the Company’s business.

Executive’s truthful and complete representation, based on his thorough search of his knowledge and memory, is as follows: Executive has not been directly or indirectly involved in any such conduct; no one has asked or directed him to participate in any such conduct; and Executive has no specific knowledge of any conduct by any other person(s) that would give rise to an allegation that the Company or any affiliate of the Company has violated any laws applicable to its businesses or has engaged in conduct which could otherwise be construed as inappropriate or unethical in any way.

Executive agrees that he has carefully read this Release and is signing it voluntarily. Executive acknowledges that he has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving his right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by him, and must deliver written notice of revocation in

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person to                      at the following address:                             , and such revocation shall not be effective unless actually received by             , within seven (7) days following the date the release was signed by Executive. If Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date.

EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AND ANY AND ALL OTHER STATE AND FEDERAL LAWS, WHETHER STATUTORY OR COMMON LAW. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS.

Executive

Date:

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EXHIBIT C to EMPLOYMENT AGREEMENT

Definition of Change in Control:

For the purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of the following events:

(i) individuals who, on the Effective Date, constitute the Board of Directors of the Company (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (such term for purposes of this definition being as defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

(ii) any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of either (A) 35% or more of the then-outstanding shares of common stock of the Company (“Company Common Stock”) or (B) securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of directors (the “Company Voting Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary of the Company, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary of the Company, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below); or

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 55% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such

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Reorganization, Sale or Acquisition (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the “Surviving Corporation”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any Subsidiary of the Company, (y) the Surviving Corporation or its ultimate parent corporation, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing is the beneficial owner, directly or indirectly, of 35% or more of the total common stock or 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Corporation, and (C) at least a majority of the members of the board of directors of the Surviving Corporation were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

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EX-10.14

Exhibit 10.14

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) between ScanSource, Inc., a South Carolina corporation (“Company”), and Andrea Dvorak Meade (“Executive”) (collectively “the Parties”) is effective as of May 21, 2009 (Effective Date”) as an amendment and restatement of the Employment Agreement originally dated as of June 20, 2007, between the Company and Executive.

BACKGROUND

The Company desires to employ Executive as Executive Vice President of Operations and Corporate Development, and Executive is willing to serve in such capacity, in accordance with the terms and conditions of this Agreement.

In consideration of the foregoing and of the mutual commitments below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Employment. On the Effective Date, Executive will be employed in the capacity stated above with such commensurate responsibilities as are assigned to her by the Company’s Board of Directors (“Board”) or Chief Executive Officer (“CEO”). Executive will report directly to the CEO.

2. Employment Period. Unless earlier terminated in accordance with Section 5, Executive’s employment will be for a term (the “Employment Period”), beginning on the Effective Date and ending on June 30, 2011, the Employment Period End Date. Provided, however, that if a Change in Control, as defined in Exhibit C hereto, occurs during the Employment Period, the ending date of the Employment Period will be extended so that it expires on the later of the Employment Period End Date or the first anniversary of the date on which the Change in Control initially occurred.

3. Extent of Service. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote her business time, attention, skill and efforts exclusively to the faithful performance of her duties hereunder. Provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as these activities do not interfere with the performance of Executive’s responsibilities under this Agreement.

4. Compensation and Benefits.

(a) Base Salary. During the Employment Period, the Company will pay to Executive a base salary at the rate specified on Exhibit A (“Base Salary”), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company’s payroll practices from time to time. The CEO will review

Executive’s Base Salary annually and make recommendations to the Compensation Committee, which has sole discretion to increase (but not decrease) Executive’s Base Salary from year to year. This annual review of Executive’s Base Salary will consider, among other things, Executive’s performance and the Company’s performance. If Executive becomes eligible during the Employment Period to receive benefits under the Company’s short-term disability policy, the Company will continue to pay Executive’s Base Salary; provided, however, that Executive’s Base Salary during such period will be reduced by any amounts Executive receives under the short-term disability policy.

(b) Variable Compensation, Savings and Retirement Plans. During the Employment Period, Executive will be entitled to participate in all deferred compensation, savings and retirement plans, practices, policies and programs applicable to staff officers of the Company (“Peer Executives”) pursuant to their terms. The Executive will also be eligible to receive certain variable compensation (“Variable Compensation”) based on the criteria specified on Exhibit A.

(c) Welfare Benefit Plans. During the Employment Period, Executive and Executive’s eligible dependents may participate pursuant to their terms in the welfare benefit plans, practices, policies and programs provided by the Company which may include, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) (“Welfare Plans”) to the extent applicable to Peer Executives. Contributions will be required by the Executive. The Company may, in its sole discretion, modify, change, or eliminate its Welfare Plans.

(d) Expenses. During the Employment Period, Executive will be entitled to receive reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company, and such reimbursements will be made no later than the last day of the year immediately following the year in which Executive incurs the reimbursable expense.

(e) Fringe Benefits. During the Employment Period, Executive will be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company in effect for Peer Executives.

(f) Vacation. During each fiscal year during the Employment Period, Executive will be entitled to the number of days of paid vacation specified on Exhibit A. Executive may take vacation at the times Executive reasonably requests, subject to the prior approval of the person specified on Exhibit A. Unused vacation time will not carry over to the next fiscal year and will not be paid upon termination of employment.

5. Termination of Employment.

(a) Death, Retirement or Disability. Executive’s employment terminates automatically upon Executive’s death or Retirement during the Employment Period. For purposes of this Agreement, “Retirement” means normal retirement as defined in the Company’s retirement plan in effect when Executive retires, or if there is no retirement

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plan, “Retirement” will mean the Executive’s voluntary termination of employment after age 55 with ten years of service. If the Company determines that the Executive has become disabled during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive’s employment. Executive’s employment with the Company will terminate effective on the 30th day after receipt of such written notice by Executive (“Disability Effective Date”), unless, within the 30 days after such receipt, Executive has returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability” means a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company’s long-term disability plan, if any. If the Company has no long-term disability plan, “Disability” will mean the inability of Executive, as determined by the Board, to perform the essential functions of her regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental condition which has lasted (or can reasonably be expected to last) for twelve workweeks in any twelve-month period. At the request of Executive or her personal representative, the Board’s determination that the Disability of Executive has occurred will be certified by two physicians mutually agreed upon by Executive, or her personal representative, and the Company. If the two physicians are unwilling to certify that the Executive is disabled, Executive’s termination will be deemed a termination by the Company without Cause and not a termination because of her Disability.

(b) Termination by the Company. The Company may terminate Executive’s employment during the Employment Period with or without Cause. For purposes of this Agreement, “Cause” means:

(i) the failure of Executive to satisfactorily perform Executive’s duties with the Company (other than failure resulting from incapacity due to Disability), after a written demand for satisfactory performance is delivered to Executive by the CEO, which specifically identifies the manner in which the CEO believes that Executive has not satisfactorily performed Executive’s duties. The decision of whether Executive has satisfactorily performed her duties with the Company or complied with the demand for satisfactory performance is in the sole discretion of the Company;

(ii) engaging in unethical or illegal conduct or misconduct that includes but is not limited to violations of the Company’s policies concerning employee conduct; or

(iii) the Executive’s breach of any term of this Agreement.

(c) Termination by Executive. Executive’s employment may be terminated by Executive for Good Reason or no reason. For purposes of this Agreement, “Good Reason” means:

(i) without the consent of Executive, the assignment to Executive of any duties materially inconsistent for Peer Executives, excluding an isolated, insubstantial, and inadvertent action taken in good faith which is remedied by the Company promptly after receipt of notice from Executive;

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(ii) a material reduction by the Company in Executive’s Base Salary or a material reduction in Executive’s Variable Compensation opportunity;

(iii) the failure by the Company (a) to continue in effect any compensation plan in which Executive participates as of the Effective Date that is material to Executive’s total base compensation, unless the Company provides a substantially equivalent alternative plan, or (b) to continue Executive’s participation in the alternative plan on a basis that is substantially equivalent in terms of the value of benefits provided;

(iv) the Company’s requiring Executive, without her consent, to be based at any location that increases Executive’s normal work commute by fifty (50) miles or more as compared to Executive’s normal work commute or otherwise is a material change in the location at which Executive is based;

(v) any failure by the Company to comply with and satisfy Section 12(c) of this Agreement;

(vi) the material breach of this Agreement by the Company; or

(vii) if no new employment agreement has been entered into by Executive and the Company or its successor after or in contemplation of a Change in Control, termination by Executive for any reason or no reason during the 60-day period beginning on the sixth-month anniversary of a Change in Control.

Executive must provide written notice to the Company of Executive’s intent to terminate employment for Good Reason within 30 days of the initial existence of the Good Reason. The Company will have an opportunity to cure any claimed event of Good Reason within 30 days of notice from Executive. The Board’s good faith determination of cure will be binding. The Company will notify Executive in writing of the timely cure of any claimed event of Good Reason and how the cure was made. Any Notice of Termination delivered by Executive based on a claimed Good Reason which was thereafter cured by the Company will be deemed withdrawn and ineffective to terminate this Agreement. If the Company fails to cure any claimed event of Good Reason within 30 days of notice from Executive, Executive must terminate employment for such claim of Good Reason within 180 days of the initial existence of the Good Reason, and if Executive fails to do so, such claimed event of Good Reason will be deemed withdrawn and ineffective to terminate this Agreement.

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(d) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive must be communicated by Notice of Termination to the other Party in accordance with Section 13(f) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) states the specific termination provision in this Agreement relied upon, including whether such termination is for Cause or Good Reason, (ii) if such termination is for Cause or Good Reason, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause will not waive any right of Executive or the Company, or preclude Executive or the Company from asserting applicable facts or circumstances in enforcing rights under this Agreement.

(e) Date of Termination. “Date of Termination” means the date specified in the Notice of Termination or, if Executive’s employment is terminated by reason of death, Retirement or Disability, the date of death or Retirement or the Disability Effective Date.

6. Obligations of the Company upon Termination.

(a) Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death, Disability, Retirement, or Normal Expiration of Employment Period. If, during the Employment Period: (i) the Company terminates Executive’s employment other than for Cause, death, Disability, or Retirement or the normal expiration of the Employment Period, or (ii) Executive terminates employment for Good Reason following the Company’s failure to cure such Good Reason as set forth in Section 5(c) of this Agreement, the Company will pay Executive the following amounts and provide the following benefits:

(i) Executive’s Base Salary earned through the Date of Termination to the extent not already paid (such amount is hereinafter referred to as the “Accrued Obligations”) will be paid as soon as practicable after the Date of Termination per the Company’s customary payroll practices;

(ii) to the extent not previously paid or provided and only if earned as of the Date of Termination, the Company will timely pay or provide to Executive any other amounts or benefits which Executive is eligible to receive under any plan, program, policy, practice, contract or agreement of the Company (“Other Benefits”) pursuant to the terms of such Other Benefits; and

(iii) subject to Section 13(i) of this Agreement and Executive’s execution of a Release in substantially the form of Exhibit B hereto (the “Release”) within the time set forth in Section 6(g) of this Agreement, on the 30^th day after the Date of Termination, the Company will pay to Executive in a lump sum in cash the amount in (A), pay the amount in (B) as set forth below, and provide the benefits in (C):

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(A) a single year of compensation in an amount equal to one (1) times the highest combined annual Base Salary and Variable Compensation earned by Executive from the Company, including any such amounts earned but deferred, in the last three fiscal years before the Date of Termination (the “Severance Benefits”), less normal withholdings. Notwithstanding the foregoing, if the Date of Termination occurs within 12 months after or otherwise in contemplation of a Change in Control, as defined in Exhibit C, Executive will receive Severance Benefits of two (2) years of compensation in an amount equal to two (2) times the highest combined annual Base Salary and Variable Compensation earned by Executive from the Company, including any such amounts earned but deferred, in the last three fiscal years before the Date of Termination, less normal withholdings. Executive’s entitlements to receive and retain the amounts set forth in this Section 6 are conditioned on Executive’s compliance with the Restrictions on Conduct described in Section 11;

(B) a bonus equal to the pro rata portion, based on the number of full fiscal quarters elapsed in the current fiscal year through the Date of Termination, of the current fiscal year annual variable compensation, if any, payable based on actual performance during such quarter(s) (the “Pro Rata Bonus”). The Pro Rata Bonus, if any, and less normal withholdings, will be paid and/or vest within thirty days of the Company’s certification that the Executive has met the necessary performance criteria, which will be no later than the later of March 15 following the end of the calendar year in which Executive’s right to the bonus vests or the 15^th day of the third month following the end of the Company’s fiscal year in which Executive’s right to the bonus vests; and

(C) for up to twelve (12) months following the Date of Termination, the Company will reimburse Executive on a monthly basis for COBRA payments made by Executive which are in excess of the monthly rates paid by active employees, for medical and dental insurance benefits. Reimbursement may cease sooner than twelve (12) months if Executive becomes eligible to receive similar benefits under another employer provided or group plan (which may be the plan of the Executive’s new employer or her spouse’s employer) and, in such event, Executive’s right to COBRA ceases. Such cash reimbursements will be made per the Company’s customary payroll practices (not less frequently than monthly) for up to the twelve (12) months following the Date of Termination.

(b) Death. If Executive’s employment is terminated because of Executive’s death during the Employment Period, this Agreement will terminate without further obligations to Executive’s legal representatives under this Agreement other than (i) the

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payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in Section 6(a)(iii)(B), and (iii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii) of this Agreement. The Accrued Obligations and the Pro Rata Bonus will be paid to Executive’s estate or beneficiary, as applicable. Other Benefits as used in this Section 6(b) will include, without limitation, and Executive’s estate and/or beneficiaries will be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as are applicable to Executive on the date of her death pursuant to the terms of such Other Benefits.

(c) Disability. If Executive’s employment is terminated because of Executive’s Disability during the Employment Period, this Agreement will terminate without further obligations to Executive other than (i) the payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in Section 6(a)(iii)(B), and (iii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii) of this Agreement. The term Other Benefits as used in this Section 6(c) includes, without limitation, and Executive will be entitled after the Disability Effective Date to receive, disability and other benefits under such plans, programs, practices and policies relating to disability, if any, as are applicable to Executive and her family on the Date of Termination pursuant to the terms of such Other Benefits.

(d) Retirement. If Executive’s employment is terminated because of Executive’s Retirement during the Employment Period, this Agreement will terminate without further obligations to Executive other than (i) the payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in Section 6(a)(iii)(B), and (iii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii) of this Agreement. The term Other Benefits as used in this Section 6(d) includes, without limitation, and Executive will be entitled after the Date of Termination to receive, retirement and other benefits under such plans, programs, practices and policies relating to retirement, if any, as applicable to Executive on the Date of Termination pursuant to the terms of such Other Benefits.

(e) Cause or Voluntary Termination without Good Reason. If Executive’s employment is terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement will terminate without further obligations to Executive, other than for (i) the payment of Accrued Obligations as described in Section 6(a)(i), and (ii) the timely payment or provision of Other Benefits as described in Section 6(a)(ii).

(f) Normal Expiration of Employment Period. If Executive’s employment is terminated due to the normal expiration of the Employment Period or is terminated within 60 days after the Employment Period End Date (for reasons other than Cause, death, Disability or Retirement), this Agreement will terminate without further obligations to Executive, other than for (i) the payment of Accrued Obligations as described in Section 6(a)(i), (ii) the payment of the Pro Rata Bonus as described in

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Section 6(a)(iii)(B), (iii) the payment of the Severance Benefits (subject to the Executive’s execution of the Release) as described in Section 6(a)(iii)(A), and (iv) the timely payment or provision of Other Benefits as described in Section 6(a)(ii). Notwithstanding anything to the contrary in this Agreement, if the Company provides notice that the Agreement will not be renewed and a new employment agreement is not offered and the Executive remains an employee of the Company in any capacity, Executive’s employment will not be governed by this Agreement and Executive will be an at-will employee. In that instance, Executive remains subject to the Restrictions on Conduct described in Section 11.

(g) Execution of Release. Notwithstanding anything to the contrary in this Section 6, the Release must be executed and provided to the Company, and the period for revoking same must have expired, before the 30^th day following the Date of Termination.

7. Non-exclusivity of Rights. Nothing in this Agreement prevents or limits Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 13(d), will anything in this Agreement limit or otherwise affect any rights Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice, program, contract or agreement with the Company at or subsequent to the Date of Termination will be payable in accordance with such plan, policy, practice, program, contract or agreement except as explicitly modified by this Agreement.

8. Mandatory Reduction of Payments in Certain Events. Any payments made to Executive under this Agreement will be made with the Executive’s best interests in mind related to the excise tax imposed by Code Section 4999 (the “Excise Tax”).

(a) Anything in this Agreement to the contrary notwithstanding, if it is determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) would be subject to the Excise Tax, then, before making the Payment to Executive, a calculation will be made comparing (i) the net benefit to Executive of all Payments after payment of the Excise Tax, to (ii) the net benefit to Executive if the Payment had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments will be limited to the extent necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). In that event, Executive will direct which Payments are to be reduced and any such reduction will be made so as not to violate Code Section 409A.

(b) The determination of whether an Excise Tax would be imposed, the amount of such Excise Tax, and the calculation of the amounts referred to in Section 8(a)(i) and (ii) above will be made by the Company’s regular independent accounting firm at the expense of the Company or, at the election and expense of Executive, another nationally recognized independent accounting firm (the “Accounting

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Firm”) which will provide detailed supporting calculations. Any determination by the Accounting Firm will be binding upon the Company and Executive. As a result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments to which Executive was entitled, but did not receive pursuant to Section 8(a), could have been made without the imposition of the Excise Tax (“Underpayment”). In such event, the Accounting Firm will determine the amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by the Company to or for the benefit of Executive.

(c) If the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 8 will be of no further force or effect.

9. Costs of Enforcement. Subject to Section 8(b), each Party will pay its own costs and expenses incurred in enforcing or establishing its rights under this Agreement, including, without limitation, attorneys’ fees, whether a suit is brought or not, and whether or not incurred in trial, bankruptcy, or appellate proceedings.

10. Representations and Warranties. Executive represents and warrants to the Company that Executive is not a party to, or otherwise subject to, any restrictive covenant not to compete, not to solicit or not to disclose or use confidential information, with any person or entity, and Executive’s execution of this Agreement and performance of her obligations will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity.

11. Restrictions on Conduct of Executive.

(a) General. Executive agrees that as part of the services she will perform for the Company she will be exposed to, and help create and maintain, competitive advantages over other “Competitive Businesses,” as well as good will with the Company’s customers and suppliers. By virtue of the position Executive will hold, Executive is receiving, will receive, or will be provided access to the Company’s: (1) customers, suppliers, advertisers, and vendors as well as pricing information, distribution channels, and other terms of those relationships; (2) “Confidential Information” and “Trade Secrets;” (3) the relationships and other elements that together comprise good will; and/or (4) institutional knowledge regarding product development, its engineering, product specification, material suppliers, material specifications, product suppliers, manufacturing knowledge, customer feedback, surveys, design-around information, research and development information, internal quality control tests, other quality control information, and other similar information. Executive agrees that the competitive advantage and good will the Company has created, and which Executive will assist in furthering and maintaining, is an important and legitimate business asset of the Company. Should Executive compete against the Company, having intimate knowledge of the information that gives the Company its competitive advantage and good will would give Executive, or those “Competitive Businesses” she is assisting, an unfair advantage over the Company.

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(b) Definitions. The following capitalized terms used in this Section 11 will have the meanings assigned to them below, which definitions will apply to both the singular and the plural forms of these terms:

“Competitive Business” – means any entity that distributes any goods or services in or to the point of sale, automatic identification, data capture, security, business telephony, communication products and peripherals markets if such entity distributes any product that is the same or similar to any good or service offered by the Company, including reasonable alternatives, within the final two (2) years of Executive’s employment with the Company. Executive agrees that Competitive Businesses include, but are not limited to, the following entities: Ingram Micro, Tech Data, Avnet, BlueStar, Westcon, Voda One, Arrow, Agilysis, Azerty, PC POS, Jarltech, Jenne, Securematics, Synnex, Alliance (NEI), NETXUSA, ADI, Tri-Ed, Northern Video, and Anixter.

“Confidential Information” means any and all information of the Company that has value and is not generally known to the Company’s competitors. This includes, but is not limited to, any information or documents about: the Company’s accounting practices; financial data; financial plans and practices; the Company’s operations; its future plans (including new products, improved products, and products under development); its methods of doing business; internal forms, checklists, or quality assurance testing; programs; customer and supplier lists or other such related information as pricing or terms of business dealings; supply chains; shipping chains and prices; packaging technology or pricing; sourcing information for components, materials, supplies, and other goods; employees; pay scales; bonus structures; contractor information and lists; marketing strategies and information; product plans; distribution plans and distribution channel relationships; business plans; manufacturing, operation, sales and distribution processes; costs; margins for products; prices, sales, orders and quotes for the Company’s business that is not readily attainable by the general public; existing and future services; testing information (including methods and results) related to materials used in the development of the Company’s products or materials that could be used with the Company’s products; development information (including methods and results) related to computer programs that design or test products or that track information from a central database; and the computer or electronic passwords of all employees and/or firewalls of the Company. Notwithstanding the definitions stated above, the term Confidential Information does not include any information which (i) at the time of disclosure to Executive, was in the public domain; (ii) after disclosure to Executive, is published or otherwise becomes part of the public domain through no fault of Executive; (iii) without a breach of duty owed to the Company, was already in Executive’s possession at the time of disclosure; (iv) was received after disclosure to Executive from a third party who had a lawful right to the information other

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than through a relationship of trust and confidence with the Company, and without a breach of duty to the Company, disclosed the information to Executive; or (v) where Executive can show it was independently developed by Executive on non-Company time without reference to, or reliance upon, other Confidential Information or Trade Secrets.

“Prohibited Duties” means supervising, consulting, advising, coaching, providing any information related to, or directly or indirectly performing any task for a Competitive Business that is similar or related to one or more duties Executive performed or supervised for the Company. Prohibited duties include owning greater than 10% of any Competitive Business. Prohibited duties includes supervising, consulting, advising, coaching, providing any information related to, or directly or indirectly performing any task for any material, product or service provider of any Competitive Business, if Executive’s work for such material, product or service provider is associated with a Competitive Business.

“Restricted Territory” means any place where the Company or its affiliates is (or is attempting to) actively manufacturing, marketing, selling, or distributing its products within the final two (2) years of Executive’s employment, or places where the Company made affirmative steps to market or sell its products within the final six (6) months of Executive’s employment. If Executive was assigned only a portion of the territory in which the Company operates or sells, then the Restricted Territory shall be narrowly construed to include only the limited territory of the Executive.

“Trade Secrets” means information related to the business or services of the Company which (1) derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reasonable reverse engineering processes by persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts by the Company and affiliated third parties that are reasonable under the circumstances to maintain its secrecy. Assuming the foregoing criteria in clauses (1) and (2) are met, Trade Secret encompasses business and technical information including, without limitation, know-how, designs, formulas, patterns, compilations, programs, devices, inventions, methods, techniques, drawings processes, finances, actual or potential customers and suppliers, and existing and future products and services of the Company. Notwithstanding the definitions stated above, the term Confidential Information does not include any information which (i) at the time of disclosure to Executive, was in the public domain; (ii) after disclosure to Executive, is published or otherwise becomes part of the public domain through no fault of Executive; (iii) without a breach of duty owed to the Company, was already in Executive’s possession at the time of disclosure; (iv) was received after disclosure to Executive from a third party who had a lawful right to the information through some avenue other than through a relationship of trust and confidence with the Company, and without a breach of duty to the Company, disclosed the information to Executive; or (v) where Executive can show it was independently developed by Executive on non-Company time without reference to, or reliance upon, other Confidential Information or Trade Secrets.

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(c) Restrictions. Executive understands and agrees that the compensation the Company has agreed to provide pursuant to this Agreement would not be as lucrative if the restrictions set forth in this section were not included in this Agreement. Therefore, in consideration of the compensation provided in this Agreement, and the other terms agreed to by the Company, along with the disclosure (and continued disclosure of Confidential Information and Trade Secrets) a portion of which is being paid to compensate Executive for these covenants, Executive covenants and agrees as follows:

(i) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Date of Termination, Executive agrees she will not engage in any Prohibited Duties for a Competitive Business in the Restricted Territory;

(ii) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Date of Termination, Executive agrees she will not solicit any of the Company’s customers or suppliers with whom Executive had contact during the course of Executive’s employment with the Company for any Competitive Business;

(iii) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Date of Termination, Executive agrees she will not solicit any of the Company’s prospective customers or prospective suppliers with whom Executive had contact during the course of Executive’s employment with the Company for any Competitive Business;

(iv) for the term of Executive’s employment, and for a period of twenty-four (24) months following the Termination Date, Executive agrees she will not solicit any of the Company’s employees whom Executive supervised during the course of her employment with the Company, any employees with whom she had contact during her employment, any employees who had contacts of employment with the Company at the time solicited, or any employees who had restrictive covenants at the time solicited, to leave the Company for any purpose;

(v) for the term of Executive’s employment, and for a period of no less than twenty-four (24) months (for Confidential Information) or for so long as the information remains protected under this Agreement or applicable statute (for Trade Secrets) thereafter, Executive agrees that she will not, either directly or indirectly, publish, disseminate, provide, or otherwise disclose any Confidential Information or Trade Secrets to any third party, unless required to do so by legal process or other law, without the Company’s prior written consent. Executive agrees that if she believes she is compelled to reveal Confidential Information or

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Trade Secrets pursuant to the limited exception provided herein, Executive will provide the Company at least 7 days advance notice before doing so, and will explain the specifics under which such Confidential Information or Trade Secrets are to be disclosed.

(vi) For the term of Executive’s employment, and for a period of no less than twenty-four (24) months (for Confidential Information) or for so long as the information remains protected under this Agreement or applicable statute (for Trade Secrets) thereafter, Executive agrees that she will not, either directly or indirectly, for her own behalf or otherwise, use in any manner the Company’s Confidential Information or Trade Secrets.

(d) Non-Disparagement. The Company and Executive agree that for the term of Employee’s employment, and for a period of five (5) years thereafter, they will not disparage each other to any non-governmental third parties. Nothing in this subsection should be interpreted as any restriction on either Party’s compliance with any laws requiring or compelling disclosure, or any disclosures that are considered absolutely privileged, such as legal proceedings.

(e) Blue Pencil. The Company and Executive agree that the provisions of Section 11, including all subparts, are intended to strike the balance between Executive earning a livelihood and the Company protecting its important competitive advantages and good will. The Parties have drafted the provisions of Section 11, including all subparts, to allow for enforcement. The Parties agree that should a court determine that any word, phrase, clause, sentence, or paragraph is unreasonably broad in time, territory, or scope so as to render any remaining provisions unenforceable, the Parties desire the court to strike the offending language in the narrowest way possible and enforce the remainder as if the offending language was not there, so that only reasonable restrictions are enforced.

(f) Elective Right of the Company. If Executive challenges the enforceability of the Restrictive Covenants (or asserts an affirmative defense to an action seeking to enforce the Restrictive Covenants) based on an argument that the Restrictive Covenants are (i) not enforceable as a matter of law, (ii) unreasonable in geographical scope or duration or (iii) void as against public policy, the Company will have the right (1) to cease making the payments required under Section 6 above, and (2) upon demand, to have Executive repay, within 10 business days of any such demand, any payments already made. Any right afforded to, or exercised by, the Company under this Agreement will not affect the enforceability of the Restrictive Covenants or any other right of the Company under this Agreement.

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12. Assignment and Successors.

(a) This Agreement is personal to Executive and without the prior written consent of the Company will not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement will inure to the benefit of and be enforceable by Executive’s legal representatives.

(b) This Agreement will inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” will mean the Company as herein before defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

13. Miscellaneous.

(a) Waiver. Failure of either Party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement will not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless the waiver is in a writing signed by the Party making the waiver.

(b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability will not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which will remain in full force and effect.

(c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it.

(d) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Parties on the subject matter hereof. From and after the Effective Date, this Agreement will supersede any other agreement between the Parties on the subject matter hereof, including without limitation, any prior Agreement.

(e) Governing Law and Jurisdiction. Without regard to conflict of laws principles, the laws of the State of South Carolina will govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. This

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Agreement may only be enforced in a court of competent jurisdiction in Greenville County, South Carolina and Executive agrees to submit to the exclusive jurisdiction of a court of competent jurisdiction in Greenville, South Carolina.

(f) Notices. All notices, requests, demands and other communications required or permitted in this Agreement must be in writing and will be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid:

To Company:	ScanSource, Inc.
	6 Logue Court
	Greenville, SC 29615
	Attn: Chief Executive Officer
To Executive:	To the address specified on Exhibit A

Any Party may change the address to which notices, requests, demands and other communications will be delivered or mailed by giving notice thereof to the other Party in the same manner provided herein.

(g) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both Parties, which makes specific reference to this Agreement.

(h) Construction. Each Party and her or its counsel have been provided the opportunity to review and revise this Agreement and accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement will be construed as a whole, and according to its fair meaning, and not strictly for or against either party.

(i) Deferred Compensation Provision. Notwithstanding any other provision of this Agreement, it is intended that any payment or benefit provided under this Agreement that is considered to be “deferred compensation” subject to Code Section 409A will be provided in such manner and at such time, including without limitation in connection with a permissible payment event under Code Section 409A, as is exempt from or complies with the requirements of Code Section 409A. All rights to payments and benefits under this Agreement are to be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Code Section 409A. Termination of employment under this Agreement, to the extent required by Code Section 409A, will be construed to mean a “separation from service” under Code Section 409A where it is anticipated that no further services will be performed after such date or that the level of services Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of services Executive performed over the prior thirty-six (36)-month period. The terms of this Agreement are intended to, and will be construed and administered to

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the fullest extent possible, to permit compensation to be paid under this Agreement to be exempt from or comply with Code Section 409A. Regardless, the Company will not be liable to Executive or anyone else if the Internal Revenue Service or any court or other authority determines that any payments or benefits to be provided under this Agreement are subject to taxes, penalties or interest as a result of failing to comply with or be exempt from Code Section 409A.

Notwithstanding anything in this Agreement to the contrary, if any payment or benefit that constitutes non-exempt “deferred compensation” under Code Section 409A would otherwise be provided under this Agreement due to Executive’s separation from service during a period in which she is a “specified employee” (as defined in Code Section 409A and the associated final regulations), then, to the extent required by Code Section 409A, such payments or benefits will be delayed, to the extent applicable, until six months after Executive’s separation from service or, if earlier, Executive’s death (the “409A Deferral Period”). If such payments are otherwise due to be made in installments during the 409A Deferral Period, the payments that would otherwise have been made in the 409A Deferral Period will be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payments will be made as otherwise scheduled. In the event benefits are required to be deferred, any such benefit may be provided during the 409A Deferral Period at Executive’s expense, with Executive having the right to reimbursement from the Company once the 409A Deferral Period ends, and the balance of the benefits will be provided as otherwise scheduled.

14. Arbitration. Any claim or dispute arising under this Agreement will be subject to arbitration, and before commencing any court action, the Parties agree that they will arbitrate all controversies and such arbitration will occur in Greenville, South Carolina according to the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §1, et seq. The arbitrators will be authorized to award both liquidated and actual damages as well as injunctive relief, but no punitive damages. The arbitrator’s award will be binding and conclusive upon the Parties, subject to 9 U.S.C. §10. Each party has the right to have the award made the judgment of a court of competent jurisdiction.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the dates indicated below.

EXECUTIVE:		SCANSOURCE, INC.:
Name:	/s/ Andrea Meade	By:	/s/ Michael L. Baur
Date:	5/22/2009	Name:	Michael L. Baur
		Title:	CEO
		Date:	5/21/2009

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EXHIBIT A TO EMPLOYMENT AGREEMENT

Executive:    Andrea Dvorak Meade

Base Salary: $216,000 annually

Variable Compensation: The incentive compensation structure detailed in Exhibit A to Executive’s prior employment agreement with the Company effective June 20, 2007, will remain in effect through June 30, 2009. Beginning July 1, 2009 and continuing through the end of the Employment Period, incentive compensation will be paid with respect to the Company’s Operating Income determined at the end of each fiscal year calculated by using the table below.

For purposes of this Agreement, “Operating Income” means the amount reflected for the line item identified as Operating Income on the Company’s audited consolidated financial statements for each respective fiscal year ending during the term of this Agreement and “Return on Invested Capital” means an amount expressed as a percentage of: the Company’s annual (or annualized) EBITDA (net income plus interest, taxes, depreciation and amortization) divided by average shareholder’s equity and interest bearing debt (defined as the sum of shareholder’s equity at the beginning of the period added to the sum of shareholder’s equity at the end of the period, divided by 2, plus the average daily interest bearing debt for the period). The Company reserves the right to make adjustments to the calculation of Return on Invested Capital to account for any extraordinary or unusual items that did not exist or were not in effect as of the Effective Date and to the extent permitted to qualify for the Code Section 162(m) Exemption (as defined below), including, but not limited to, newly pronounced accounting standards and similar laws and regulations and significant non-recurring events that impact the Company. The Company’s calculation of Operating Income, Return on Invested Capital, and the incentive compensation amount shall be conclusive and binding absent fraud or manifest and material error.

The target amount of variable compensation is 0.25% of operating income (“target variable compensation”). The actual amount may vary depending on actual operating income achieved by the Company.

For the initial year of the Employment Period, the incentive compensation will be paid to Executive in quarterly installments with each quarterly installment being equal to seventy percent (70%) of the incentive bonus computed using the Operating Income determined by the financial statement prepared for each quarter during the term of this Agreement. The balance of the incentive compensation will be paid with respect to each fiscal year immediately following the auditor’s approval of the release of the Company’s year-end earnings. The Company has no right of reimbursement in the event the amount advanced in quarterly installments exceeds the incentive bonus as finally computed. Following the initial year of the Employment Period, the incentive compensation will be paid to Executive annually. Such annual incentive compensation payments will be made immediately following the auditor’s approval of the release of the Company’s year-end earnings.

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The amount of the incentive compensation will be calculated as follows:

• If return on invested capital (“ROIC”) is greater than or equal to 30%, variable compensation will equal 115% of target variable compensation

• If return on invested capital (“ROIC”) is less than 30% but greater than or equal to 25%, variable compensation will equal 110% of target variable compensation

• If return on invested capital (“ROIC”) is less than 25% but greater than or equal to 20%, variable compensation will equal 100% of target variable compensation

• If return on invested capital (“ROIC”) is less than 20% but greater than or equal to 10%, variable compensation will equal 90% of target variable compensation

• If return on invested capital (“ROIC”) is less than 10%, variable compensation will equal 70% of target variable compensation

Notwithstanding any other provision of this Agreement or this Exhibit A, any incentive compensation to be paid under this Agreement will be paid to Executive by the later of (i) March 15^th following the end of the calendar year in which Executive right to such incentive compensation vests or (ii) the 15^th day of the third month following the end of the Company’s fiscal year in which Executive’s right to such incentive compensation vests.

Given Executive may be a “covered employee” under Code Section 162(m), the foregoing incentive compensation is intended to be a Performance Unit granted under the terms of the Company’s 2002 Long-Term Incentive Plan and has been designated as a “Qualified Performance-Based Award.” The incentive compensation is intended to qualify for the Code Section 162(m) Exemption within the meaning of the Company’s 2002 Long-Term Incentive Plan. In no event may Executive’s incentive compensation under this Agreement for any year exceed the maximum amount allowed by the terms of the 2002 Long-Term Incentive Plan currently in effect, which is $3,000,000 as of the Effective Date. Executive’s right to receive and retain any payment of incentive compensation is subject to the written certification of the Board Compensation Committee that the relevant performance goals have been achieved. To the extent appropriate, the Board Compensation Committee may provide for the payment of incentive compensation under the terms of another Company incentive plan that permits Qualified Performance-Based Awards, in which case the limits and terms of such other incentive plan will apply.

Equity-Based Compensation: The Company agrees that it will recommend to the Compensation Committee (the “Committee”) of the Board that the Executive be granted a restricted stock award (the “RSA”) for such number of shares (the “Shares”) of the Company’s Common Stock (the “Common Stock”) as is determined by dividing $150,000 by the Fair Market Value (as defined under the Company’s Amended and Restated 2002 Long-Term Incentive Plan or other applicable plan (the “2002 Plan”) of the Common Stock on the grant date. The RSA is subject to the following terms and conditions:

(a) The RSA grant is subject to the approval of the Committee. The RSA will be granted under the 2002 Plan. The RSA will be subject to the terms and conditions of the 2002 Plan and a restricted stock award agreement (the “RSA Agreement”) to be entered into between the Company and the Executive. In the event of a conflict between the terms of this Agreement, including Exhibit A, and the 2002 Plan or the RSA Agreement, the 2002 Plan or

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the RSA Agreement, as the case may be, will control. The Company is under no obligation to grant any additional equity-based awards to the Executive, the grant of which will be subject to Committee discretion. The RSA will be deemed earned and vested only if (and to the extent that) these conditions are met. The Committee has sole discretion to determine if the RSA (or portion thereof) has been earned and vested. Specifically, the RSA is subject to both continued service and performance requirements as follows:

(i) First tranche: Up to fifty percent (50%) of the Shares subject to the RSA will (except as otherwise provided in paragraph (c) below) vest and be earned if (A) the Executive is employed by the Company on June 30, 2010 and has been an employee continuously since the grant date and (B) operating income (as defined below) for the Company for the fiscal year ended June 30, 2010 equals or exceeds $51,000,000.00. If both the continued service condition described in (a)(i)(A) and the performance condition described in (a)(i)(B) are not met, then none of the Shares subject to the first tranche will vest; that is, both conditions must be met in order for any of such Shares to vest.

(ii) Second tranche: Up to fifty percent (50%) of the Shares subject to the Award will (except as otherwise provided in paragraph (c) below) vest and be earned if (A) the Executive is employed by the Company on June 30, 2011 and has been an employee continuously since the grant date and (B) operating income for the fiscal year ended June 30, 2011 equals or exceeds $67,000,000.00. If both the continued service condition described in (b)(ii)(A) and the performance condition described in (b)(ii)(B) are not met, then none of the Shares subject to the second tranche will vest; that is, both conditions must be met in order for any of such Shares to vest.

The Award will not be deemed earned and vested with respect to a particular tranche until both of the following events have occurred: (A) the completion of the Company’s audited financial statements for the particular fiscal year and (B) the Committee’s written certification regarding if and to the extent that applicable performance goals have been met. For these purposes, “operating income” means the amount reflected for the line item identified as Operating Income for the Company’s audited financial statements for each respective fiscal year referenced above. The Company’s calculation of Operating Income will be conclusive and binding absent fraud or manifest and material error.

(b) Even if the conditions described in paragraph (a) and/or paragraph (b) above may have been met, the Committee retains sole discretion to reduce (but not increase) the number of Shares deemed earned and vested (but not below 50% of the number of shares subject to a particular tranche) if the Committee determines that such reduction is appropriate based on the Committee’s evaluation of the Executive’s performance in the following areas: (A) acquisitions and integration of acquisitions: (B) restructuring alternatives; (C) achievement of cost reduction goals; (D) acquisition and implementation of the Company-wide information technology project involving a new enterprise resource planning software package; or (E) such other corporate, divisional or individual goals as may be applied by the Committee.

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(c) If the Executive’s employment with the Company terminates for any reason other than as set forth in this paragraph (c), then the Executive will forfeit all of the Executive’s right, title and interest in the RSA (and the underlying Shares), to the extent not vested and earned as of the date of the Executive’s termination of employment. Notwithstanding the foregoing, however, the RSA will be deemed earned and vested with respect to all of the Shares underlying the Award on the earliest to occur of the following: (i) the termination of the Executive’s employment due to death or Disability; or (ii) the occurrence of a Change in Control. For these purposes, the terms “Disability,” “Change in Control,” “Cause” and “Good Reason” have the meanings given such terms in the 2002 Plan.

Days of Paid Vacation per Fiscal Year:	Approving Person:
15 (20 upon 10th Employment Anniversary)	Chief Executive Officer

Executive Notice Address:

3 East Cleveland Bay Court

Greenville, SC 29615

Initials:	/s/ ADM	/	/s/ MLB
	5/22/2009		5/21/2009

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EXHIBIT B TO EMPLOYMENT AGREEMENT

Form of Release

THIS RELEASE (“Release”) is granted effective as of the          day of                     ,             , by                              (“Executive”) in favor of ScanSource, Inc. (the “Company”). This is the Release referred to that certain Employment Agreement dated as of                     ,              by and between the Company and Executive (the “Employment Agreement”). Executive gives this Release in consideration of the Company’s promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part.

1. Release of the Company. Executive, for herself, her successors, assigns, executors, administrators, insureds, attorneys, and all those entitled to assert her rights, now and forever hereby releases and discharges the Company and its respective officers, directors, shareholders, stockholders, trustees, partners, joint ventures, board members, employees, agents, parent corporations, divisions, wholly or partially owned subsidiaries, affiliates, estates, predecessors, successors, heirs, executors, administrators, assigns, representatives, and attorneys (the “Released Parties”), from any and all legal, administrative, and equitable claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorneys’ fees and costs, or liabilities of any nature whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal, state or local statutes, except as provided in Paragraph 2. without limiting the broadness of the foregoing language, Executive agrees to release Company from any and all claims under:

(1) local, state or federal common law, statute, regulation, ordinance or treaty;

(2) Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000(e), et seq.

(3) 42 U.S.C. §§ 1981, 1981A, 1983 and 1985;

(4) the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.;

(5) the Federal Rehabilitation Act of 1973;

(6) the Older Worker Benefit Protection Act, 29 U.S.C. §§ 621, et seq.;

(7) the Family and Medical Leave Act of 1993, 29 U.S.C. §§ 2601, et seq.;

(8) Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 301, et seq.;

(9) the Health Insurance Portability Act;

(10) the Occupational and Safety Health Act;

(11) the Equal Pay Act;

(12) the Worker Adjustment and Retraining Notification Act;

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(13) the Sarbanes-Oxley Corporate Reform Act of 2002, 15 U.S.C. 7201, et seq.;

(14) Executive Orders 11246 and 11141;

(15) South Carolina Human Affairs Law;

(16) the South Carolina Payment of Wages Act;

(17) the South Carolina Bill of Rights for Handicapped Persons;

(18) the state workers’ compensation law, including S.C. Code Ann. § 41-1-80;

(19) tort claims including, but not limited to, claims of wrongful termination, constructive discharge, defamation, invasion of privacy, interference with contract, interference with prospective economic advantage and intentional or negligent infliction of emotional distress and outrage;

(20) contract claims, whether express or implied;

(21) claims for unpaid wages, benefits or entitlements asserted under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., or under South Carolina wages and hours laws, including, but not limited to, the South Carolina Payment of Wages Act;

(22) claims for unpaid benefits or entitlements asserted under any Company plan, policy, benefits offering or program except as otherwise required by law;

(23) claims for attorneys’ fees, interest, expenses and costs, injunctive relief or reinstatement to which she is, claims to be or may be entitled; and

(24) the Age Discrimination in Employment Act, 29 U.S.C. §§ 621, et seq.;

each as amended, and all other such similar statutes, city or county ordinances or resolutions and laws of the State of South Carolina, provided, however, that nothing herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company’s bylaws, certificate of incorporation, South Carolina law, or otherwise.

Without waiving any prospective or retrospective rights under the Family and Medical Leave Act (“FMLA”) or the Fair Labor Standards Act (“FLSA”), Executive admits that she has received from the Company all rights and benefits, if any, potentially due to her pursuant to the FMLA or FLSA. It is the parties’ intent to release all claims, which can legally be released, but no more than that.

Executive specifically agrees not to attempt to institute any proceedings or pursue any action pursuant to any laws (state, local, or federal) with any agency or in any jurisdiction (state, local, or federal) based on employment with or termination from the Company except as required or protected by law. Executive covenants that she will in not way encourage or assist any person or entity (including, but not limited to, any past, present or future employee(s) of Company) to take part or participate in any legal or administrative action against Company, except as otherwise required or protected by law. Nothing in the Agreement shall be interpreted or applied in a manner that affects or limits Executive’s otherwise lawful ability to bring an administrative charge with the Equal Employment Opportunity Commission or other appropriate state or local comparable administrative agency; however, the parties agree that Executive has released Company from all liability arising from the laws, statutes, and common law listed in paragraph 1 (except as set forth in this paragraph below, with respect to the Age Discrimination in Employment Act (“ADEA”)) and, as such, Executive is not and will not be entitled to any

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monetary or other comparable relief on her own behalf. Nothing in this Agreement shall be interpreted or applied in a manner that affects or limits Executive’s ability to challenge (with a lawsuit or administrative charge) the validity of Executive’s release of Company in this Agreement for age claims under the ADEA (which release is provided for in paragraph 2 of this Agreement). Other than a challenge to the validity of the release of ADEA claims under this Agreement, Executive has released Company from all liability with respect to the laws, statutes, and common law listed in paragraph 2, including the ADEA

2. Release of Claims Under Age Discrimination in Employment Act. Without limiting the generality of the foregoing, Executive agrees that by executing this Release, she has released and waived any and all claims has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. It is understood that Executive is advised to consult with an attorney prior to executing this Release; that she in fact has consulted a knowledgeable, competent attorney regarding this Release; that she may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration she receives for this Release is in addition to amounts to which she was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof.

3. Executive acknowledges and represents that as an employee of the Company she has been obligated to, and has been given its full and unfettered opportunity to, report timely to the Company any conduct that would give rise to an allegation that the Company or any affiliate of the Company has violated any laws applicable to its businesses or has engaged in conduct which could otherwise be construed as inappropriate or unethical in any way, even if such conduct is not, or does not appear to be, a violation of any law. Executive acknowledges that a condition of the payment of any consideration provided by the Company to the Executive hereunder is her truthful and complete representation to the Company regarding any such conduct, including but not limited to conduct regarding compliance with the Company’s Code of Ethics, polices, and procedures, and with all laws and standards governing the Company’s business.

Executive’s truthful and complete representation, based on her thorough search of her knowledge and memory, is as follows: Executive has not been directly or indirectly involved in any such conduct; no one has asked or directed her to participate in any such conduct; and Executive has no specific knowledge of any conduct by any other person(s) that would give rise to an allegation that the Company or any affiliate of the Company has violated any laws applicable to its businesses or has engaged in conduct which could otherwise be construed as inappropriate or unethical in any way.

Executive agrees that she has carefully read this Release and is signing it voluntarily. Executive acknowledges that she has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving her right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by her, and must deliver written notice of revocation in person

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to                      at the following address:                             , and such revocation shall not be effective unless actually received by                 , within seven (7) days following the date the release was signed by Executive. If Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to her under the Employment Agreement and she shall return to the Company any such payment received prior to that date.

EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AND ANY AND ALL OTHER STATE AND FEDERAL LAWS, WHETHER STATUTORY OR COMMON LAW. EXECUTIVE ACKNOWLEDGES THAT SHE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HER CHOOSING CONCERNING HER EXECUTION OF THIS RELEASE AND THAT SHE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS.

Executive

Date:

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EXHIBIT C to EMPLOYMENT AGREEMENT

Definition of Change in Control:

For the purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of the following events:

(i) individuals who, on the Effective Date, constitute the Board of Directors of the Company (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the Effective ate and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (such term for purposes of this definition being as defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

(ii) any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of either (A) 35% or more of the then-outstanding shares of common stock of the Company (“Company Common Stock”) or (B) securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of directors (the “Company Voting Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary of the Company, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary of the Company, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below); or

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 55% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such

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Reorganization, Sale or Acquisition (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the “Surviving Corporation”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any Subsidiary of the Company, (y) the Surviving Corporation or its ultimate parent corporation, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing is the beneficial owner, directly or indirectly, of 35% or more of the total common stock or 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Corporation, and (C) at least a majority of the members of the board of directors of the Surviving Corporation were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

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EX-10.19

Exhibit 10.19

RESTRICTED STOCK AWARD CERTIFICATE

US EMPLOYEES

Non-transferable

GRANT TO

R. Scott Benbenek

(“Grantee”)

by ScanSource, Inc. (the “Company”) of

8,137 shares of its common stock, no par value (the “Shares”)

on: May 21, 2009 (the “Grant Date”)

pursuant to and subject to the provisions of the ScanSource, Inc. Amended and Restated 2002 Long-Term Incentive Plan (the “Plan”) and to the terms and conditions set forth in this Award Certificate (the “Certificate”). By accepting the Restricted Stock Award described herein, the Grantee shall be deemed to have agreed to the terms and conditions set forth on this Certificate and the Plan and understands and agrees that this Certificate constitutes an agreement between the Grantee and the Company. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

The Award shall become earned and vested only if and to the extent that the conditions stated in Section 2 or Section 3 of the Certificate are met, subject to the other terms of the Certificate and the Plan.

IN WITNESS WHEREOF, ScanSource, Inc., acting by and through its duly authorized officers, has caused this Certificate to be duly executed.

SCANSOURCE, INC.
By:	/s/ John J. Ellsworth
Its:	Authorized Officer
Grant Date: May 21, 2009

1

TERMS AND CONDITIONS

1. Grant of Shares. The Company hereby grants to the Grantee, subject to the restrictions and the other terms and conditions set forth in the Plan and in this Certificate, a Restricted Stock Award (the “Award”) for up to the number of Shares indicated on Page 1 hereof.

2. Vesting and Earning of the Award.

(a) The Award shall be deemed earned and vested only if (and to the extent that) the conditions stated in Section 2 are met. The Committee has sole discretion to determine if the Award (or portion thereof) has been earned and vested.

(b) The Award is subject to both continued service and performance requirements as follows:

(i) First tranche: Up to fifty percent (50%) of the Shares subject to the Award (that is, 4,069 shares) shall (except as otherwise provided in Section 2(c) herein) vest and be earned if (A) the Grantee is employed by the Company on June 30, 2010 and has been an employee continuously since the Grant Date and (B) operating income (as defined below, “operating income”) for the Company for the fiscal year ended June 30, 2010 equals or exceeds $51,000,000. If both the continued service condition described in Section 2(b)(i)(A) and the performance condition described in Section 2(b)(i)(B) are not met, then none of the Shares subject to the first tranche shall vest; that is, both conditions must be met in order for any of such Shares to vest.

(ii) Second tranche: Up to fifty percent (50%) of the Shares subject to the Award (that is, 4,068 shares) shall (except as otherwise provided in Section 2(c) herein) vest and be earned if (A) the Grantee is employed by the Company on June 30, 2011 and has been an employee continuously since the Grant Date and (B) operating income for the fiscal year ended June 30, 2011 equals or exceeds $67,000,000. If both the continued service condition described in Section 2(b)(ii)(A) and the performance condition described in Section 2(b)(ii)(B) are not met, then none of the Shares subject to the second tranche shall vest; that is, both conditions must be met in order for any of such Shares to vest.

(iii) The Award shall not be deemed vested and earned with respect to a particular tranche until both of the following events have occurred: (A) the completion of the Company’s audited financial statements for the particular fiscal year and (B) the Committee’s written certification regarding if and to the extent the applicable performance goals have been met.

(iv) For the purposes herein, “operating income” shall mean the amount reflected for the line item identified as Operating Income on the Company’s audited consolidated financial statements for each respective fiscal year referenced above. The Company’s calculation of operating income shall be conclusive and binding absent fraud or manifest and material error .

(c) Notwithstanding that the conditions referenced in Section 2(b)(i) and/or Section 2(b)(ii) herein may have been met, the Committee shall have sole discretion to reduce (but not increase) the number of Shares deemed earned and vested (but not below 2,034 shares, that is 50% of the number of shares subject to the particular tranche) if the Committee determines that such reduction is appropriate based on the Committee’s evaluation of the Grantee’s performance in the following areas: (A) acquisitions and integration of acquisitions: (B) restructuring alternatives; (C) achievement of cost reduction goals; (D) acquisition and implementation of the Company-wide information technology project involving a new enterprise resource planning software package; or (E) such other corporate, divisional or individual goals as may be applied by the Committee.

The period during which the Shares (or portion thereof) have not yet vested and been earned (or been forfeited) shall be referred to herein as the “Restriction Period.”

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3. Effect of Termination; Forfeiture.

(a) If the Grantee’s employment with the Company terminates for any reason other than as set forth in Section 3(b) herein, then the Grantee shall forfeit all of the Grantee’s right, title and interest in the Award (and the underlying Shares), to the extent not vested and earned as of the date of the Grantee’s termination of employment, and such Restricted Shares shall revert to the Company (without the payment by the Company of any consideration for such Shares) immediately following the event of forfeiture.

(b) Notwithstanding the provisions of Section 2 and Section 3(a) herein, the Award shall be deemed earned and vested on the earliest to occur of the following:

(i) as to all of the Shares, upon the termination of the Grantee’s employment due to death or Disability; or

(ii) as to all of the Shares, upon a Change in Control.

4. Restrictions. The Award and the Shares are subject to the following additional restrictions: “Restricted Shares” mean those Shares underlying the Award (or portion thereof) that are subject to the restrictions imposed hereunder which restrictions have not then expired or terminated. Restricted Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered. The restrictions imposed under this Section shall apply to all Shares or other securities issued with respect to Restricted Shares hereunder in connection with any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock of the Company.

5. Delivery of Shares. The Shares will be registered in the name of Grantee as of the Grant Date and may be held by the Company during the Restricted Period in certificated or uncertificated form. If a certificate for Restricted Shares is issued during the Restricted Period with respect to such Shares, such certificate shall be registered in the name of Grantee and shall bear a legend in substantially the following form: “This certificate and the shares of stock represented hereby are subject to the terms and conditions contained in a Restricted Stock Award Certificate between the registered owner of the shares represented hereby and ScanSource, Inc. Release from such terms and conditions shall be made only in accordance with the provisions of such Certificate, copies of which are on file in the offices of ScanSource, Inc.” Stock certificates for the Shares or portion thereof without the first above legend, shall be delivered to Grantee or Grantee’s designee upon request of Grantee after the expiration of the Restricted Period, but delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply, if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of any stock exchange, and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.

6. Voting and Dividend Rights. Grantee, as beneficial owner of the Shares, shall have full voting and dividend rights with respect to the Shares during and after the Restricted Period. Each dividend payment, if any, shall be made no later than the end of the calendar year in which the dividend is paid to the shareholders or, if later, the 15^th day of the third month following the date the dividend is paid to shareholders. If Grantee forfeits any rights he may have under this Certificate, Grantee shall no longer have any rights as a stockholder with respect to the Restricted Shares or any interest therein and Grantee shall no longer be entitled to receive dividends on such stock. In the event that for any reason Grantee shall have received dividends upon such stock after such forfeiture, Grantee shall repay to the Company any amount equal to such dividends.

7. No Right of Continued Employment. Nothing in this Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee’s employment or service at any time, nor confer upon Grantee any right to continue in the employ or service of the Company or any Affiliate.

8. Payment of Taxes. The Grantee acknowledges that the Company and/or its Affiliates are entitled to make arrangements to withhold payroll or other taxes as required by applicable law, and will, to the extent permitted by

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law, have the right to deduct any such tax from any payment of any kind otherwise due to the Grantee. The Grantee acknowledges that the Company has made no warranties or representations to the Grantee with respect to the tax consequences (including but not limited to income tax consequences) with respect to the grant of the Award or receipt or disposition of the Shares (or any other benefit), and the Grantee is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Grantee acknowledges that there may be adverse tax consequences upon the grant of the Award and/or the acquisition or disposition of the Shares subject to the Award and that the Grantee has been advised that he should consult with his own attorney, accountant and/or tax advisor regarding the decision to enter into this Certificate and the consequences thereof. The Grantee also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Grantee.

9. Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Certificate and this Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Certificate, the provisions of the Plan shall be controlling and determinative.

10. Successors. This Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Certificate and the Plan.

11. Severability. If any one or more of the provisions contained in this Certificate is invalid, illegal or unenforceable, the other provisions of this Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. Notice. Notices and communications under this Certificate must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to ScanSource, Inc., 6 Logue Court, Greenville, South Carolina 29615, Attn: Secretary, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

13. Nontransferability. The Award and underlying Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered unless and until the Award (or portion thereof) has vested and the underlying Shares have been issued.

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EX-10.20

Exhibit 10.20

RESTRICTED STOCK AWARD CERTIFICATE

US EMPLOYEES

Non-transferable

GRANT TO

Andrea D. Meade

(“Grantee”)

by ScanSource, Inc. (the “Company”) of

6,103 shares of its common stock, no par value (the “Shares”)

on: May 21, 2009 (the “Grant Date”)

pursuant to and subject to the provisions of the ScanSource, Inc. Amended and Restated 2002 Long-Term Incentive Plan (the “Plan”) and to the terms and conditions set forth in this Award Certificate (the “Certificate”). By accepting the Restricted Stock Award described herein, the Grantee shall be deemed to have agreed to the terms and conditions set forth on this Certificate and the Plan and understands and agrees that this Certificate constitutes an agreement between the Grantee and the Company. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

The Award shall become earned and vested only if and to the extent that the conditions stated in Section 2 or Section 3 of the Certificate are met, subject to the other terms of the Certificate and the Plan.

IN WITNESS WHEREOF, ScanSource, Inc., acting by and through its duly authorized officers, has caused this Certificate to be duly executed.

SCANSOURCE, INC.
By:	/s/ John J. Ellsworth
Its:	Authorized Officer
Grant Date: May 21, 2009

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TERMS AND CONDITIONS

1. Grant of Shares. The Company hereby grants to the Grantee, subject to the restrictions and the other terms and conditions set forth in the Plan and in this Certificate, a Restricted Stock Award (the “Award”) for up to the number of Shares indicated on Page 1 hereof.

2. Vesting and Earning of the Award.

(a) The Award shall be deemed earned and vested only if (and to the extent that) the conditions stated in Section 2 are met. The Committee has sole discretion to determine if the Award (or portion thereof) has been earned and vested.

(b) The Award is subject to both continued service and performance requirements as follows:

(i) First tranche: Up to fifty percent (50%) of the Shares subject to the Award (that is, 3,052 shares) shall (except as otherwise provided in Section 2(c) herein) vest and be earned if (A) the Grantee is employed by the Company on June 30, 2010 and has been an employee continuously since the Grant Date and (B) operating income (as defined below, “operating income”) for the Company for the fiscal year ended June 30, 2010 equals or exceeds $51,000,000. If both the continued service condition described in Section 2(b)(i)(A) and the performance condition described in Section 2(b)(i)(B) are not met, then none of the Shares subject to the first tranche shall vest; that is, both conditions must be met in order for any of such Shares to vest.

(ii) Second tranche: Up to fifty percent (50%) of the Shares subject to the Award (that is, 3,051 shares) shall (except as otherwise provided in Section 2(c) herein) vest and be earned if (A) the Grantee is employed by the Company on June 30, 2011 and has been an employee continuously since the Grant Date and (B) operating income for the fiscal year ended June 30, 2011 equals or exceeds $67,000,000. If both the continued service condition described in Section 2(b)(ii)(A) and the performance condition described in Section 2(b)(ii)(B) are not met, then none of the Shares subject to the second tranche shall vest; that is, both conditions must be met in order for any of such Shares to vest.

(iii) The Award shall not be deemed vested and earned with respect to a particular tranche until both of the following events have occurred: (A) the completion of the Company’s audited financial statements for the particular fiscal year and (B) the Committee’s written certification regarding if and to the extent the applicable performance goals have been met.

(iv) For the purposes herein, “operating income” shall mean the amount reflected for the line item identified as Operating Income on the Company’s audited consolidated financial statements for each respective fiscal year referenced above. The Company’s calculation of operating income shall be conclusive and binding absent fraud or manifest and material error .

(c) Notwithstanding that the conditions referenced in Section 2(b)(i) and/or Section 2(b)(ii) herein may have been met, the Committee shall have sole discretion to reduce (but not increase) the number of Shares deemed earned and vested (but not below 1,526 shares, that is 50% of the number of shares subject to the particular tranche) if the Committee determines that such reduction is appropriate based on the Committee’s evaluation of the Grantee’s performance in the following areas: (A) acquisitions and integration of acquisitions: (B) restructuring alternatives; (C) achievement of cost reduction goals; (D) acquisition and implementation of the Company-wide information technology project involving a new enterprise resource planning software package; or (E) such other corporate, divisional or individual goals as may be applied by the Committee.

The period during which the Shares (or portion thereof) have not yet vested and been earned (or been forfeited) shall be referred to herein as the “Restriction Period.”

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3. Effect of Termination; Forfeiture.

(a) If the Grantee’s employment with the Company terminates for any reason other than as set forth in Section 3(b) herein, then the Grantee shall forfeit all of the Grantee’s right, title and interest in the Award (and the underlying Shares), to the extent not vested and earned as of the date of the Grantee’s termination of employment, and such Restricted Shares shall revert to the Company (without the payment by the Company of any consideration for such Shares) immediately following the event of forfeiture.

(b) Notwithstanding the provisions of Section 2 and Section 3(a) herein, the Award shall be deemed earned and vested on the earliest to occur of the following:

(i) as to all of the Shares, upon the termination of the Grantee’s employment due to death or Disability; or

(ii) as to all of the Shares, upon a Change in Control.

4. Restrictions. The Award and the Shares are subject to the following additional restrictions: “Restricted Shares” mean those Shares underlying the Award (or portion thereof) that are subject to the restrictions imposed hereunder which restrictions have not then expired or terminated. Restricted Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered. The restrictions imposed under this Section shall apply to all Shares or other securities issued with respect to Restricted Shares hereunder in connection with any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock of the Company.

5. Delivery of Shares. The Shares will be registered in the name of Grantee as of the Grant Date and may be held by the Company during the Restricted Period in certificated or uncertificated form. If a certificate for Restricted Shares is issued during the Restricted Period with respect to such Shares, such certificate shall be registered in the name of Grantee and shall bear a legend in substantially the following form: “This certificate and the shares of stock represented hereby are subject to the terms and conditions contained in a Restricted Stock Award Certificate between the registered owner of the shares represented hereby and ScanSource, Inc. Release from such terms and conditions shall be made only in accordance with the provisions of such Certificate, copies of which are on file in the offices of ScanSource, Inc.” Stock certificates for the Shares or portion thereof without the first above legend, shall be delivered to Grantee or Grantee’s designee upon request of Grantee after the expiration of the Restricted Period, but delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply, if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of any stock exchange, and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.

6. Voting and Dividend Rights. Grantee, as beneficial owner of the Shares, shall have full voting and dividend rights with respect to the Shares during and after the Restricted Period. Each dividend payment, if any, shall be made no later than the end of the calendar year in which the dividend is paid to the shareholders or, if later, the 15^th day of the third month following the date the dividend is paid to shareholders. If Grantee forfeits any rights she may have under this Certificate, Grantee shall no longer have any rights as a stockholder with respect to the Restricted Shares or any interest therein and Grantee shall no longer be entitled to receive dividends on such stock. In the event that for any reason Grantee shall have received dividends upon such stock after such forfeiture, Grantee shall repay to the Company any amount equal to such dividends.

7. No Right of Continued Employment. Nothing in this Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee’s employment or service at any time, nor confer upon Grantee any right to continue in the employ or service of the Company or any Affiliate.

8. Payment of Taxes. The Grantee acknowledges that the Company and/or its Affiliates are entitled to make arrangements to withhold payroll or other taxes as required by applicable law, and will, to the extent permitted by

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law, have the right to deduct any such tax from any payment of any kind otherwise due to the Grantee. The Grantee acknowledges that the Company has made no warranties or representations to the Grantee with respect to the tax consequences (including but not limited to income tax consequences) with respect to the grant of the Award or receipt or disposition of the Shares (or any other benefit), and the Grantee is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Grantee acknowledges that there may be adverse tax consequences upon the grant of the Award and/or the acquisition or disposition of the Shares subject to the Award and that the Grantee has been advised that she should consult with her own attorney, accountant and/or tax advisor regarding the decision to enter into this Certificate and the consequences thereof. The Grantee also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Grantee.

9. Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Certificate and this Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Certificate, the provisions of the Plan shall be controlling and determinative.

10. Successors. This Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Certificate and the Plan.

11. Severability. If any one or more of the provisions contained in this Certificate is invalid, illegal or unenforceable, the other provisions of this Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. Notice. Notices and communications under this Certificate must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to ScanSource, Inc., 6 Logue Court, Greenville, South Carolina 29615, Attn: Secretary, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

13. Nontransferability. The Award and underlying Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered unless and until the Award (or portion thereof) has vested and the underlying Shares have been issued.

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EX-10.34

Exhibit 10.34

DISTRIBUTION AGREEMENT BETWEEN AVAYA INC. AND

SCANSOURCE, INC., d.b.a. CATALYST TELECOM

MASTER TERMS AND CONDITIONS

This Distribution Agreement (“Agreement”) is effective as of (REDACTED) and is between Avaya Inc. (“Avaya”), a Delaware corporation, with offices at 211 Mount Airy Road, Basking Ridge, New Jersey 07920, and ScanSource, Inc., d.b.a. Catalyst Telecom, its subsidiaries and affiliates, including without limitation Channel Max (“Distributor”) a South Carolina corporation, with its principal place of business at 6 Logue Court, Suite G Greenville, SC 29615.

Avaya and Distributor hereby agree as follows:

1.0 DEFINITIONS

For the purposes of this Agreement, the following terms and their definitions shall apply:

1.1 “Affiliate” means with respect to any party, any person or entity that is under common control with, controls, or is controlled by, that party.

1.2 “Agreement” means this Distributor Agreement and all Appendices and Attachments hereto which are incorporated by reference herein.

1.3 “Applicable Price” means the list price or catalog price in effect on the date of Avaya’s receipt of Distributor’s order, subject to any Avaya discount schedule or price plan or policy which may serve to modify the list price.

1.4 “Authorized Distributor” means any distributor that has entered a Distribution Agreement with Avaya.

1.5 “Confidential Information” means all information furnished under or in contemplation of the Agreement, which is marked with a restrictive notice or otherwise designated as proprietary, or which the receiving party knows or should know is being disclosed on a confidential basis, including without limitation, this Agreement and its terms and conditions, all trade secrets and price, discount and rebate lists and schedules.

1.6 “Distribution Functions” means Distributor’s services related to Resellers, including but not limited to warehousing of Products, resale and shipping of Products to Resellers, provision of technical and marketing information about Products to Resellers, provision of information about promotional offers to Resellers, and provision of credit to Resellers, all as set forth herein.

1.7 “Effective Date” means the date of this Agreement as stated above.

1.8 “End User” means a third party to whom a Reseller markets or sells Products within the Territory for use by such third party in the ordinary course of its business and not for resale.

1.9 “Licensed Materials” means the object code Software furnished by Avaya and intended for use in or provided for use with Products and also includes the information in the Related Documentation furnished to Reseller for use therewith. Unless otherwise specified, no source code version of Software will be included in Licensed Materials.

1.10 “Licensed Trademarks” means those certain Avaya designated trademarks, insignia and symbols which are associated with the Products.

1.11 “Permission to Connect” means any necessary approval by the duly authorized governing authorities for use of a Product or Product Component in the Territory. The term includes but is not limited to “type acceptance”, “type approval”, “prior connection inspection”, homologation” or any similar process, which would provide authorization to connect a Product or Product Component to the public telecommunications network and/or to sell a Product in the Territory.

1.12 “Product(s)” means those products and/or services identified in a Product Appendix and which Distributor has been authorized to distribute under this Agreement. The authorized products and services may be amended and supplemented by Avaya from time to time. Each Product consists of one or more Product Components selected by Avaya at its sole discretion.

1.13 “Product Component” means an item or part of equipment identified by an Avaya equipment code, whether manufactured by Avaya or a third-party.

1.14 “Related Documentation” means all materials in printed, written or electronic form used to describe the products or Product Components, excluding marketing materials.

1.15 “Reseller” means a reseller that has entered a Reseller Agreement with Avaya and is thereby authorized to purchase and resell Product and Product Components to End Users only.

1.16 “Software” means any computer program that is composed of routines, subroutines, instructions, processes, algorithms, and like ideas or know-how, owned by or licensed to Avaya and or one or more of its suppliers, regardless of the medium of delivery, including revisions, patches and updates of the same.

1.17 “Territory” means the following geographic area: the fifty (50) states of the United States of America and the District of Columbia.

1.18 “Toll Fraud” means the unauthorized use of telecommunications services or facilities accessed through or connected to Products.

1.19 “Unused Product” means a Product or Product Component originally manufactured by Avaya (or an entity controlled by, controlling or under common control with Avaya), never used, frequently still in original packaging with original documentation, but which does not carry and Avaya factory warranty because of an improper acquisition of the Product or Product Component, such as theft or sale or resale of the Product or Product Component. Purchase and/or sale of Unused Product is a violation of this Agreement.

2.0 TERM

2.1 This Agreement shall be effective as of the date stated above and shall have a term of one year beginning on said date, unless terminated sooner pursuant to the provisions of this Agreement. Unless either party gives written notice of its intent not to renew to the other ninety (90) days in advance of the termination date, this Agreement will automatically renew for subsequent one-year terms.

3.0 DISTRIBUTOR APPOINTMENT

3.1 Avaya hereby appoints Distributor, and Distributor hereby accepts an appointment, to be an authorized Avaya Distributor for the limited purpose of: marketing and selling from authorized marketing locations in the Territory the Products, listed in the Product Group Attachments(s) which are attached hereto, to Resellers within the Territory in accordance with the terms and conditions of this Agreement. The appointment of Distributor is predicated on Distributor’s agreement to perform its obligations under this Agreement and to achieve the Territory annual commitment of Products for Distributor determined pursuant to Section 12 of this Agreement. Distributor may not sell Products outside of the Territory without Avaya’s prior written consent, which may be withheld in its discretion.

3.2 Distributor shall have no right to authorize any other entity to resell or market Products and any such authorization or attempted authorization shall be void and without effect. Distributor’s sales of Products to third parties that are not Resellers as defined herein shall be grounds for termination.

3.3 Distributor is not authorized to employ sales agents (other than an employee of Distributor located at an authorized Distributor marketing location) or other independent contractors to market Products. Distributor agrees that it has not exclusive right to market the Products set forth in a Product Appendix hereto in the Territory. Avaya expressly reserves both the right to contract with other to market Products in the Territory and elsewhere and to itself directly engage in such marketing.

3.4 The relationship of the parties under this Agreement shall be, and shall at all times remain, one of independent contractors and not that of franchiser and franchisee, joint ventures, or principal and agent, and no fiduciary relationship exists between the parties. Neither party shall have any authority to assume or created obligations on the other’s behalf with respect to Products, and neither party shall take any action that has the effect of creating the appearance of its having such authority.

3.5 All persons furnished by Distributor to perform its Distribution Functions shall be considered solely Distributor’s employees, and Distributor shall be solely responsible for payment of all their unemployment, Social Security and other payroll taxes including contributions from Distributor when required by law.

3.6 No payment of any fee is required of Distributor as a condition of this Agreement.

4.0 DISTRIBUTOR RESPONSIBILITIES

4.1 Performance of Obligations: Distributor represents that it has the necessary resources to perform its obligations hereunder including, without limitation, the necessary financial, marketing capabilities, integrity and dedication to sell forecast quantities of Products. Distributor agrees to provide annual audited and quarterly internal financial statements to Avaya, upon request. Distributor agrees to devote its reasonable commercial efforts to promoted and market Products to Avaya’s Resellers. Distributor also warrants that it will conduct its business in a manner that reflects favorably on the quality image of the Products and on the good name, goodwill or reputation of Avaya and will not employ deceptive, misleading or unethical practices detrimental to Avaya or its Products.

4.2 Alternative Sources: Distributor shall not purchase or otherwise obtain Products for resale from any source other than Avaya. If a product is not available through Avaya on a timely basis, Distributor may purchase the Product from another Authorized Distributor that purchased it from Avaya, using the Avaya alternate source policy set forth in the Business Partner Policy and Process Handbook (Distributors) and with Avaya’s prior approval, provided that such purchases are only to meet a specific customer need. Distributor’s purchase or resale of an unused Product shall be grounds for termination of this Agreement.

4.3 Training: Distributor shall retain sales and service personnel sufficiently trained to perform its obligations under the Agreement, including but not limited to a knowledge of the industry, the Products and the servicing of the Products. Distributor shall participate in sales training provided by Avaya, including annual sales training updates or refresher courses with options to satisfactorily pass Avaya’s written examination in lieu of such training. Distributor shall ensure that Distributor’s employees or representative engaged in marketing the Products are qualified and competent to do so, are knowledgeable of the specifications, features and advantages of the Products and are capable of demonstrating the use and capabilities of the Products and their applications to End-Users, obtain relevant training from Avaya and conduct such marketing activities in a professional manner. If applicable, Distributor shall meet any individual certification requirements to sell the Products.

4.4 Notice: Distributor and Avaya shall report promptly to each other all known or suspected Avaya Product defects or safety problems and Distributor shall keep Avaya informed of Reseller or End User complaints.

4.5 Access to Distributor’s Premises: Distributor shall provide Avaya reasonable access to Distributor’s premises during normal business hours to inspect and verify Distributor performance of its obligations under this Agreement, including the right to inspect and audit Distributor’s records relating to Product transactions in and out of Distributor’s Territory, Distributor’s purchases and sales of Unused Products, and Distributor’s performance of Distribution Functions.

4.6 Compliance with Laws: (a) Distributor shall not directly or indirectly pay, offer, promise or give or authorize to pay, offer or give money or anything of value to any employee or official of a government or department thereof, political party or candidate for political office or to any employees or officials of public international organizations, or to any other person while being aware of or having a belief that such money or item of value will be passed on to one of the above, to influence any act or decision by such person or by any governmental body for the purpose of obtaining, retaining or directing business or to otherwise obtain an improper advantage. Distributor will no undertake any action that may cause Avaya to be in breach of the rules and regulations of the U.S. Foreign Corrupt Practices Act or any similar legislation of any other country.

(b) Distributor furthermore shall comply with all applicable laws and regulations of the territory and the United States, including without limitation the anti-boycott laws and laws pertaining to data protection and all requirements of Part 68, 50 U.S.C. app. Sections 2401-2414. If at any time after the effective date hereof, this Agreement or the performance by Distributor or Avaya of its obligations is no longer in compliance with any federal, state or local law or regulation, this Agreement shall be appropriately amended by the parties so as to be in compliance with those laws or regulations or, if such an amendment would materially change this Agreement, this Agreement may be terminated by either party.

4.7 Records: Distributor shall keep accurate accounts, books and records relating to the business of Distributor with respect to Products and Distributor services, which shall be kept in accordance with generally accepted accounting principles, if applicable.

4.8 Quality Reviews: Distributor agrees to maintain Avaya’s high standards for Products a service quality. Distributor agrees to abide by all Avaya quality policies and periodically visit Business Partner website for policy and procedure changes. Distributor agrees to participate in Avaya’s Customer Satisfaction Surveys. Avaya may conduct performance reviews of all Distributor responsibilities and Distributor fulfillment of Avaya’s quality policies.

4.9 Use of Website: The terms of Web Site Use appearing on any Avaya Website used by Distributor, as such terms may be amended from time to time, are hereby incorporated by reference into this Agreement as if set forth herein.

4.10 Reporting: Distributor agrees to provide point of sales reporting as specified in the Business Partner Policy and Process Handbook (Distributors).

4.11 Security: Distributor agrees to immediately deauthorize the password of any employee or contractor with password access to Avaya information systems (e.g., the TeamWorks, and BusinessPartner websites) upon termination of employment. Notification of such deauthorization shall be made to the Avaya information administrator within two (2) business days of the employee or contractor termination.

4.12 No Additional Warranty: Distributor shall not grant any Reseller or End User a warranty greater than the limited warranty granted by Avaya to the Reseller or End User, and any such grant shall be Distributor’s own responsibility, and shall not be binding upon Avaya.

4.13 Distributor shall have the capability of providing Resellers reasonable financing alternative (i.e., net 30 days) to facilitate the procurement of Avaya Products and distributor services. Distributor shall furnish evidence of such capability to Avaya upon request.

5.0 DISTRIBUTOR ORDERS

5.1 Orders for Products (including Product Components) submitted by Distributor shall refer to the identification number of this Agreement and shall contain the information necessary for proper delivery and invoicing, including without limitation, the date of the order, a description of and the Avaya order code (currently referred to as PECode or Comcode) for Products and Products and Product Components to be furnished and any shipping instructions. All orders submitted by Distributor shall be deemed to incorporate and be subject to the terms and conditions of this Agreement as well as any supplemental terms and conditions agreed to in a writing signed by the authorized representatives of both parties. All other terms and conditions, including any pre-printed terms and conditions contained on any order form or correspondence originated by Distributor are rejected and shall have no effect. Avaya may require that Products and Product Components be ordered only in factory-packed quantities or in minimum order amounts.

5.2 Avaya will ship Products (including Product Components) ordered by Distributor only to Distributor’s authorized shipping location(s) or, on request, to the premises of a Reseller within the Territory. Avaya will use its reasonable commercial efforts to fill promptly Distributor’s written orders for Products and Products

Components, insofar as practical and consistent with Avaya’s then-current lead-time schedule, shipping schedule, access to supplies on acceptable terms and allocation of available products and capacity among Avaya customers.

6.0 DISTRIBUTOR CANCELLATION OF ORDERS

6.1 Distributor may, upon written notice to Avaya, cancel any order or portion thereof in accordance with the applicable Avaya returns policy, a copy of which will be provided to Distributor upon execution of this Agreement, and which Avaya may, in its sole discretion, change from time to time.

7.0 PRODUCT, PRODUCT COMPONENTS AND SOFTWARE LICENSE CHANGES

7.1 Avaya may, at any time without advising Distributor, and without liability to Distributor, make changes in the Products or Product Components, modify the drawings and specifications relating thereto, or substitute Products or Product Components of later design to fill an order, or change the terms of its End User Software license, provided the changes, modifications or substitutions under normal and proper use do not adversely impact upon form, fit or function, or are recommended by Avaya to enhance safety. Such additions, deletions and changes will be communicated to Distributor within a reasonable time of the decision to add, delete or change. Replacement, spare, and maintenance Product Components provided to Distributor or purchased by Distributor under this Agreement, may at Avaya’s option, be either new or refurbished.

8.0 DISTRIBUTOR PRICES, DISCOUNTS AND REBATES

8.1 The prices applicable to Distributor orders requesting shipment within Avaya’s then current Avaya Product shipment intervals shall be determined in accordance with Avaya’s Applicable Price. Avaya’s current Applicable Prices and Distributor discount and rebate schedules will be provided to Distributor upon execution of this Agreement, and which Avaya, may, in its sole discretion, change from time to time. Distributor orders requesting delayed shipment (i.e. shipment on dates beyond Avaya’s then current Avaya Product shipment intervals) shall be subject to price increases and discount decreases that become effective before shipment.

9.0 DISTRIBUTOR PRICE LIST, DISCOUNT, AND REBATE CHANGES

9.1 Avaya may decrease current applicable prices or increase discounts or rebates in the Distributor discount or rebate schedules without advance notice to or the prior consent of Distributor. Avaya agrees to provide written notice of any such price or discount changes and the effective date thereof and a recomputation of pricing on Distributor’s inventory set forth in the Business Partner Policy and Process Handbook (Distributors). The difference between the recomputed amounts and previously invoiced amounts will be reflected as a credit to Distributor’s account. Avaya will make reasonable commercial efforts to advise Distributor 30 days in advance of any price decreases.

9.2 Avaya also may institute promotional price decreases or discount increases at any time under such terms and conditions as Avaya in its sole discretion shall determine are appropriate. Promotional prices and discounts shall apply only during the period specified by Avaya and there shall be no recomputation of amounts payable by Distributor for orders placed before such period. A promotional event for a particular product will not exceed 120 calendar days in duration. Such promotional events will not be run in consecutive periods. Avaya will make reasonable efforts to provide Distributor with thirty (30) days advance notice of promotional programs to Resellers.

9.3 Avaya may, without the prior consent of Distributor, increase current applicable prices as published by Avaya from time to time, provided Avaya furnishes Distributor written notice of any such changes sixty (60) days in advance of the effective date. All other components of the Distributor compensation plan are variable and dependent on Distributor performance and commitment. Avaya may annually revise its Distributor compensation plan.

9.4 Unless expressly stated to the contrary, current applicable prices do not include taxes or Avaya’s charges for related domestic transportation or storage services. Avaya’s Reseller list prices do include its standard packing for domestic shipment. All Product prices are F.O.B. Avaya’s shipping point. Unless Distributor furnishes Avaya a valid tax exemption certificate, Distributor shall pay all applicable taxes, however designated, resulting from this Agreement or any activities hereunder (exclusive of any tax based on or measure by net income)

10.0 AVAYA BILLING AND DISTRIBUTOR PAYMENT

10.1 Invoices for Products will be sent by Avaya upon shipment of the Product, or as soon thereafter as practicable. (REDACTED). The amount of Distributor credit or terms of payment may be changed or credit withdrawn by Avaya at any time upon notice to Distributor credit or terms of payment may be changed or credit withdrawn by Avaya at any time upon notice to Distributor in writing, unless Distributor provides Avaya with adequate assurance of performance, as that phrase is used in Section 2-609 of the Uniform Commercial Code as adopted in New York, within ten days of any such written notice.

11.0 DISTRIBUTOR FORECASTS

11.1 Distributor shall submit annual commitments of Product sales on a basis and in a format specified by Avaya. Distributor shall also submit quarterly forecasts specifying the expected sales volume for the coming quarter on a month by month basis.

11.2 Avaya may reject any forecast submitted by Distributor if, in Avaya’s sole judgment, such forecast does not project either: (1) the level of Product sales Avaya reasonably requires of Distributor to achieve its marketing objectives in the Territory; or (2) a realistic assessment of Distributor’s potential successful marketing opportunities in the Territory during the forecast period. Avaya shall notify Distributor in writing within thirty (30) days of receipt of Distributor’s forecast if Avaya has rejected such forecast or it will be deemed to have been accepted by Avaya.

12.0 TITLE AND RISK OF LOSS

12.1 Title (except for firmware and Software) and risk of loss or damage to Products shall pass to Distributor: (i) at the time Avaya or its supplier delivers possession of the Products to a carrier; or (ii) if there is no carrier, at the time Distributor takes possession of the Products at Avaya’s or its supplier’s plant or warehouse or their facility.

13.0 INSURANCE

13.1 Distributor shall maintain, during the term of this Agreement, all insurance and bonds required by any applicable law, including but not limited to: (1) worker’s compensation insurance as prescribed by the laws of all states in which work pursuant to this Agreement is performed; (2) employer’s liability insurance with limits of at least $1 million per occurrence; and (3) comprehensive personal liability insurance coverage (including product liability coverage and comprehensive automobile liability coverage) with limits of at least $1 million for bodily injury, including injury to any one person and $1 million on account of any single occurrence, and $1 million for each occurrence of property damage, or in lieu of such limits, bodily injury and property damage liability insurance (including products liability and comprehensive automobile coverage) with a combined single limit of at least $2 million per occurrence. Distributor shall name Avaya as an Additional Insured on all such policies. Upon request of Avaya, Distributor shall furnish a certificate of insurance evidencing such coverage.

13.2 Distributor agrees that Distributor, Distributor’s insurers and anyone claiming by, through, under or in Distributor’s behalf shall have no claim, right of action or right of subrogation against Avaya based on any loss or liability insured against under the foregoing insurance. Upon request of Avaya, Distributor and Distributor’s agents shall furnish prior to the commencement of this Agreement or any time thereafter, certification or adequate proof of the foregoing insurance. Certificates furnished by Distributor and Distributor’s agents shall contain a clause stating that Avaya is to be notified in writing at least ten (10) days prior to cancellation of, or any material change in, this policy.

14. USE OF CONFIDENTIAL INFORMATION

14.1 All Confidential Information shall remain the property of the furnishing party. Unless the furnishing party otherwise expressly agrees in writing, such Confidential Information (i) shall be treated in confidence by the receiving party and used only for the purposes of performing the receiving party’s obligations under this

Agreement; (ii) shall not be disclosed to anyone, except to employees of the receiving party on a need-to-know basis; (iii) shall not be reproduced or copied in whole or in part, except as necessary for use as authorized in this Agreement; and (iv) shall, together with any copies thereof, be returned, destroyed or, if recorded on an erasable storage medium, erased when no longer needed or when this Agreement terminates, whichever occurs first. Any copies made as authorized herein shall contain the same copyright notice or proprietary notice, or both, that appear on the confidential Information copied. The above conditions do no apply to any part of the Confidential Information (i) which is or becomes known to the receiving party free of any obligation to keep same in confidence; (ii) which is or becomes generally available to the public without breach of this Agreement; or (iii) which is independently developed by the receiving party. The obligation of confidentiality and restrictions on use of Confidential Information shall exist for a period of (i) two (2) years after the termination of this Agreement, or (ii) seven (7) years after the receipt of such Confidential Information, whichever is longer.

15.0 LIMITED LICENSE

15.1 Upon delivery of Product firmware of Software to Distributor, Avaya grants to Distributor a limited, personal, non-exclusive and non-transferable right to use the Licensed Materials in the Territory solely in connection with its personal use of such Product firmware of Software, including testing of, training on or demonstration of such Product. No title or other ownership rights in the Licensed Materials, including any intellectual property rights included therein, shall pass to Distributor under this Agreement or as a result of any performance hereunder.

15.2 Distributor agrees: (i) to make only those copies of Licensed Materials necessary for its personal use under this Agreement and to assure that such copies contain any proprietary or copyright notice appearing on the Licensed Materials being copied; (ii) not to reverse engineer, decompile or disassemble the Licensed Materials or otherwise attempt to learn the source code, structure, algorithms or ideas underlying the Licensed Materials; (iii) not to export the Licensed Materials out of the Territory and (iv) not to use the Licensed Materials directly for any third person or permit any third person to use the Licensed Materials except as necessary under this Agreement.

15.3 Avaya further grants to Distributor the right to furnish Licensed Materials to Resellers coincident with the sale of Products utilizing such Licensed Materials provided that, unless the Licensed Materials come with a limited use license, which may be in the form of a shrink-wrap (break-the-seal) agreement, provided by Avaya, the Resellers shall have signed a Reseller Agreement with Avaya on or before the delivery of the Licensed Materials.

15.4 All Licensed Materials, and all copies thereof, including translations, compilations, derivative works and partial copies, are and shall at all times remain the property of Avaya or its licensor.

15.5 Avaya may, at its discretion, electronically audit each system configuration containing Products sold under the Agreement, to verify compliance with the license provisions of this Agreement, including (among other things) the terms of the software license as it relates to the enablement of any separately licensed features or incremental units of capacity. Such and audit may be conducted on 24 hour notice. Distributor shall cooperate with Avaya in conducting such audits.

15.6 Avaya will furnish Related Documentation to Distributor in English. Distributor will have the right, at its own expense, to reproduce and translate Related Documentation, provided that: (a) each copy or part thereof includes Avaya copyright and other relevant notices; (b) any translation is accurate and complete and reproduces the information in a manner consistent with the original literature; (c) such translation confirms to Avaya’s then current documentation standards provided to Distributor by Avaya from time to time; and (d) all intellectual property rights in any publication produced by Distributor referring to any Product, Product Component, or Licensed Materials will be assigned to Avaya upon publication and Distributor will take such actions and execute such documents from time to time as requested by Avaya to ensure that Avaya obtains and retains such rights. If Avaya determines that any publication produced by Distributor fails to comply with the preceding sentence, Distributor will do any or all of the following as requested by Avaya in its sole discretion: (a) cease distribution of such publications; (b) reclaim as many copies thereof as is reasonably practical; (c) destroy all copies of such publications within Distributor’s control; and (d) amend the publication in accordance with Avaya’ instructions.

16.0 WARRANTY OF TITLE; EXCLUSION OF WARRANTIES

16.1 Avaya hereby warrants to Distributor the title of the Avaya Products and Product Components purchased under this Agreement. This warranty of title is the only warranty provided to Distributor.

16.2 EXCEPT FOR THE WARRANTY OF TITLE TO DISTRIBUTOR AVAYA, ITS AFFILIATES AND SUPPLIERS MAKE NO WARRANTIES TO DISTRIBUTOR, EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCTS, PRODUCT COMPONENTS, THE LICENSED MATERIALS AND OTHER SOFTWARE AND DOCUMENTATION, AND SPECIFICALLY DISCLAIM ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.

17.0 TRADEMARK LICENSE

17.1 Avaya hereby grants to Distributor a limited nonexclusive, non-transferable license and right to use the Licensed Trademarks (i) in connection with the advertisement, promotion, sale or marketing of Products, (ii) subject to the terms and conditions of the Section and (iii) solely in the Territory.

17.2 Distributor shall apply the Licensed Trademarks only to materials which have been created, in accordance with the standards of quality in materials, design, workmanship, use, advertising and promotion set forth in the Trademark Guidelines. the Guidelines for Use of Avaya Business Partner Promotional Signatures are set forth on the BusinessPartner website and are incorporated herein by reference. Trademark Guidelines are Confidential Information of Avaya.

17.3 Distributor agrees that no variations of the Licensed Trademarks may be created, adopted or used by Distributor.

17.4 Avaya shall have the right at any time to conduct during regular business hours an examination of materials created by Distributor or its contractors and suppliers to determine compliance of such materials with eh applicable Trademark Guidelines. If at any time such materials shall, in the sole opinion of Avaya, fail to conform with the standards of quality in materials, design, workmanship, use, advertising, and promotion set forth in such Trademark Guidelines, Avaya or its authorized representative shall so notify Distributor. Upon such notification Distributor shall promptly cease using the Licensed Trademarks on such materials and not distribute or publicize such nonconforming materials until the standards of quality contained in the applicable Trademark Guidelines have been met to the sole satisfaction of Avaya.

17.5 Avaya acknowledges that it owns the Licensed Trademarks and all registrations and applications therefore in the US and throughout the world but makes no warranties regarding the validity or enforceability of said Licensed trademarks.

17.6 Distributor is not authorized to use the Licensed Trademarks in any manner or media except as set forth herein or in the Trademark Guidelines.

17.7 Distributor shall comply with conditions set forth in the Trademark Guidelines or otherwise established in writing from time-to-time by Avaya with respect to the style, appearance and manner of use of the Licensed Trademarks. Any use of the Licensed Trademarks not specifically provided for by such conditions shall be adopted by Distributor only upon prior approval in writing by Avaya. In addition, Avaya may request that a notice or notices acceptable to Avaya be used on the materials bearing the Licensed Trademarks to indentify the licensed use under the Agreement and the proprietary rights of Avaya.

17.8 All materials using Licensed Trademarks shall be subject to prepublication review an approval, with respect to, but not limited to, content, style, appearance, composition, context, timing, media (including but no limited to broadcast, fax, placement on a web site, Yellow Pages deadline, or any other advertising or marketing medium), and geographic distribution plans. One copy of all such marketing material shall be provided to Avaya (As instructed in the Coop information on the BusinessPartner Website) prior to publication. Avaya agrees to use its reasonable commercial efforts to respond to any request for approval within ten (10) business days of receipt thereof. Within one month after publication, Distributor shall supply Avaya with representative specimens in final form showing the Licensed Trademarks, and their location on any marketing materials.

17.9 In all marketing, advertising, and promotional and instructional literature, Distributor shall (a) always use each Licensed Trademark as a proper adjective modifying the common descriptive terms “software program, server, modem, switching unit, etc.”; and (b) always use the following legend in type size and style as to reasonably seen.

17.10 On Licensed Materials, on signage used at trade shows or at Distributor’s office, Distributor shall not be required to use the common descriptive term, so long as Distributor uses an ^® next to the Licensed Trademarks.

17.11 On all materials relating to Products, Distributor shall identify the product as manufactured by Avaya (i.e. Avaya Cajun^® 550) where that is not possible Distributor shall place an asterisk by the Licensed Trademarks and cause the following expression to appear as a legend:

*Registered Trademark of Avaya Inc., Licensed to             

17.12 Distributor shall not use the Licensed Trademarks in the possessive or as a noun nor shall it pluralize or abbreviate the Licensed Trademarks.

17.13 Distributor shall always capitalize the first letter of each mark.

17.14 Distributor agrees to the ownership by Avaya and validity of the Licensed Trademarks and agrees never to challenge the ownership of validity of the Licensed Trademarks. Distributor also agrees that any and all rights that may be acquired by the use of the Licensed Trademarks by Distributor shall inure to the sole benefit of Avaya. Distributor further agrees to execute all papers reasonably requested by Avaya to effect further registration, maintenance and renewal of the Licensed Trademarks, and where applicable, to record Distributor as a registered user of the Licensed Trademarks. Distributor shall no use the Licensed Trademarks or any other marks of Avaya. Distributor shall not directly or indirectly hold itself out as having an ownership interest in the Licensed Trademarks or as having any relationship or affiliation with or authority from Avaya or its Affiliates other than as is provide herein.

17.15 The Licensed Trademarks are not to be used by Distributor in any way to imply Avaya’s endorsement of products, services or materials, other than those furnished to Distributor under this Agreement, such as used or Unused Products originally manufactured by Avaya. Distributor will never alter or remove any of the Licensed Trademarks applied to a Product, without the prior written approval of Avaya.

17.16 Distributor further agrees to register in any country any name or mark identical to, resembling or confusingly similar to the Licensed Trademarks. If any application for registration is, or has been filed in the Territory or elsewhere by Distributor which relates to any name or mark which, in the sole opinion of Avaya, is

confusingly similar, deceptive or misleading with respect to the Licensed Trademarks, Distributor shall immediately abandon any such application or registration or, at Avaya’s sole discretion, assign it to Avaya. Distributor shall reimburse Avaya for all the costs and expenses of any opposition, cancellation or related legal proceedings, including attorney’s fees, incurred by Avaya or its authorized representative, in connection with any such registration or application.

17.17 In the event that Distributor learns of any infringement or threatened infringement of the Licensed Trademarks or any passing-off or that any third party alleges or claims that the Licensed Trademarks are liable to cause deception or confusion to the public, or are liable to dilute or infringe any right, Distributor shall forthwith notify Avaya and the office of Avaya’s Trademark Counsel, giving particulars thereof and Distributor shall provide necessary information and assistance to Avaya or its authorized representative in the event that Avaya decides that proceedings should be assistance to Avaya or its authorized representatives in the event that Avaya decides that proceedings should be commenced or defended. Any such proceedings shall be at the sole expense of Avaya; and any recoveries shall be combined solely by Avaya. Nothing herein, however, shall be deemed to require Avaya to enforce the Licensed Trademarks against others.

17.18 In the performance of this Agreement, Distributor shall comply with all applicable laws and regulations, and those laws and regulations particularly pertaining to the proper use and designation of trademarks. Should Distributor be or become aware of any applicable laws or regulations which are inconsistent with the provisions of this Agreement, Distributor shall promptly notify Avaya of such inconsistency. Avaya may, at its option, either waive the performance of such inconsistent provisions or terminate the license and rights granted hereunder.

17.19 The benefit of this Agreement shall be personal to Distributor, which shall not assign the same, nor part with any of its rights or obligations hereunder, nor grant or purport to grant any sublicense in respect to the Licensed Trademarks. Avaya may assign the Licensed Trademarks and this Agreement to any other party.

17.20 Unless sooner terminated in accordance with this Agreement, the Trademark license granted under this Agreement shall commence on the date of this Agreement and shall terminate immediately on the termination of this Agreement. Upon termination of the license and rights granted under this Agreement, Distributor shall cease and discontinue completely further use of the Licensed Trademarks except that in the event the license and rights granted under this Agreement expire after their full terms without renewal, Distributor shall have a period of ninety (90) days from the date of such expiration to use up its supplies of materials on which the Licensed Trademarks have been applied prior to the date of expiration as authorized under Section 22.2.1, provide that such use of the Licensed Trademarks shall otherwise be in accordance with the provisions of this Agreement.

18.0 LIMITATION OF LIABILITY; LIMITATION OF REMEDY

18.1 EXCLUSIVE REMEDIES; LIMITATIONS OF LIABILITY

(a) For purposes of the exclusive remedies and limitations of liability set forth in this Section, each party shall be deemed to include its Affiliates and the directors, officers, employees, agents, representatives, subcontractors, and suppliers of each party and each of its Affiliates; and “damages” shall be deemed to refer collectively to all injury, damage, loss, costs or expense (including reasonable attorneys fees).

(b) Avaya’s entire liability and Distributor’s exclusive remedies against Avaya for any damages caused by any Product defect or failure, or arising from the performance or non-performance of Avaya’s obligations hereunder, regardless of the form of action, whether in contract, tort including negligence, strict liability or otherwise shall be:

(i) For infringement, the remedies set forth in the section entitled Infringement;

(ii) For any breach of the confidentiality duty in section 14, any remedies available under applicable law;

(iii) For failure to deliver or for delays in delivery of Product quantities, Avaya shall have no liability unless the delivery is delayed by more than thirty (30) days (other than due to causes not attributable to Avaya, including, but not limited to, causes beyond Avaya’s reasonable control), in which case Distributor shall have the right, as its sole remedy, to terminate the order without incurring termination charges or to require Avaya to deliver the Products using Avaya’s expense for the incremental freight charges;

(iv) For bodily injury or death to any person, or any damage to tangible property, proximately caused by Avaya’s negligence or any Product defect or failure, the amount of proven direct damages;

(v) For any claims under section 22.3 (Repurchase of Distributor’s Inventory Upon Termination), the applicable amount of Avaya’s repurchase obligation as specified in such section; and

(vi) (REDACTED)

(c) Distributor’s entire liability and Avaya’s exclusive remedies against Distributor for any damages caused by or arising from the performance or non-performance of Distributor’s obligations hereunder, regardless of the form of action, whether in contract, tort including negligence, strict liability or otherwise shall be:

(i) For infringement of intellectual property rights (including through a breach of any software license or reverse engineering), any remedies available under this Agreement or applicable law;

(ii) For any breach of the confidentiality duty in section 15, any remedies available under applicable law;

(iii) For Distributor’s failure or delay in making any payment, any remedies available under this Agreement or applicable law;

(iv) For bodily injury or death to any person, or any damage to tangible property, proximately caused by Distributor’s negligence, the amount of proven direct damages; and

(v) (REDACTED)

(d) Except only for Distributor’s infringement of Avaya’s intellectual property rights (including through a breach of any software license or reverse engineering), notwithstanding any other provision of this Agreement, neither party shall be liable for incidental, indirect, special exemplary or consequential damages including, but not limited to, lost profits, savings or revenues of any kind or charges for Toll Fraud, whether or not any such party has been advised of the possibility of such damages.

(e) This Section 18.1 shall survive failure of an exclusive remedy.

18.2 No suit, action or proceeding (including a claim for arbitration under Section 30.1) may be commenced against Avaya or any of its Affiliates or suppliers more than one (1) year after the cause of action arises.

18.3 THE PARTIES AGREE THAT THE PRICES FOR PRODUCTS REFLECT THE ALLOCATION OF RISKS IN THIS AGREEMENT.

19.0 INDEMNITY

19.1 Unless a party’s liability is otherwise limited or excluded in other sections of this Agreement, each party (the “Indemnifying Party”) will indemnify and save harmless the other party (the “Indemnified Party”) from and against all losses, damages, claims, demands, suits and liabilities (including court costs and reasonable attorney’s fees) (collectively, the “Liabilities”) to the extent that the Liabilities arise out of or result from (a) bodily injuries or death to persons or damage to tangible property proximately caused by the Indemnifying Party’s negligent or willful misconduct acts or omissions, or those of persons furnished by the Indemnifying Party, or in any way arising out of Indemnifying Party’s performance or failure of performance of this Agreement; (b) any improper or unauthorized use of the Licensed Trademarks by the Indemnifying Party or any of its Affiliates; (c) assertions made by persons furnished by the Indemnifying Party under Workers’ Compensation or similar acts; or (e) claims from the Indemnifying Party’s customers for warranty service, breach of warranty, and representations made by the Indemnifying Party or otherwise arising out of the Indemnifying Party’s transactions or other dealings with Resellers or End Users. At Indemnified Party’s request,

Indemnifying Party agrees to defend the Indemnified Party against any such claims, demands or suits at the Indemnifying Party’s expense, but the Indemnified Party in such event shall have the right to be represented in such action at its expense with advisory counsel of its choice. The Indemnified Party agrees to notify the Indemnifying Party in writing within a reasonable time of any written claims or demands against the indemnified Party for which the Indemnifying Party is responsible under this Section and agrees to cooperate with the Indemnifying Party in connection with the defense of such action.

19.2 This provision shall survive the termination of this Agreement.

20.0 INFRINGEMENT

20.1 Avaya shall defend or settle all suits against Distributor alleging that any Product furnished under the Agreement infringes any United States patent, and Avaya shall pay all damages and costs which, by final judgment of a court or competent jurisdiction, may be assessed against Distributor on account of such infringement, but such defense, settlement and payments are conditioned on the following: (a) Distributor gives Avaya prompt written notice of all such infringement claims and suits, and full opportunity and authority in the name of Distributor or otherwise to assume the sole defense and settlement of such suits; and (b) Avaya shall have sole control of the defense of any action on such claim and all negotiations of its settlement or compromise; and (c) Distributor furnishes Avaya with all information and assistance available to Distributor for such defense.

20.2 In the event of a claim of infringement, or a threatened claim of infringement, Distributor agrees that Avaya, in its sole discretion, may make commercially reasonable efforts to either: (a) produce for Distributor the right to continue selling the Product; (b) replace the Product subject to the claim with non-infringing Product which is functionally equivalent; (c) modify the Product so that it becomes non-infringing. In the event Avaya cannot accomplish such remedial measures specified in subsections (a), (b) or (c) through commercially reasonable efforts, then Avaya shall have the option to re-acquire the infringing Product and refund the purchase price less a reasonable allowance for use and damage.

20.3 Sections 20.1 and 20.2 state the entire liability of Avaya for intellectual property infringement by any Product furnished under the Agreement.

20.4 Avaya’ obligations under Section 20.1 shall not apply to, and Distributor agrees to indemnify and save Avaya harmless from, all costs, expenses, liabilities and claims for infringement of any intellectual property rights: (a) arising from adherence to instructions, specifications or drawings which Avaya is directed by Distributor to follow; (b) relating to use or sale of the Products in combination with other item(s) not furnished by Avaya; or (c) arising from any modifications made to the Products by Distributor or any of its End-Users.

21.0 TERMINATION OF AGREEMENT

21.1 Either party may terminate the Agreement at any time without cause by giving the other party one hundred and eighty (180) days prior written notice of the termination. During said one hundred and eighty (180) day period, Avaya will complete any pending orders for Product and Product Components upon receipt of pre-payment from Distributor for any such orders unless the parties agree otherwise. Distributor shall not submit any orders for Product or Product Components on or after the date of notice of termination and Avaya has no obligation to process any orders or deliver Product or Product Components pursuant to any order that violates this Section.

21.2 Either party may terminate this Agreement for material breach or default of any term or condition of this Agreement (other than payment to Avaya) if such breach or default is not cured within thirty (30) days of written notice of such breach or default from the non-breaching party.

21.3 In addition to its other rights under this Section 21, Avaya may, upon notice to Distributor immediately terminate the Agreement upon the occurrence of any of the following:

(a) if Distributor breaches or otherwise violates any of the provisions of Sections 3.2 and 4.2 hereof; or

(b) if Distributor breaches or violates any provision of this Agreement which is capable of cure, including the failure to pay Avaya under this Agreement, and Distributor fails to cure such breach or violation within five (5) days after notice of such breach or violation is given to Distributor; or

(c) if there is a 50% or more change of direct or indirect ownership of Distributor or a change of direct or indirect control of Distributor (excluding a change of ownership of the shares of a publicly traded company which does not result in a change in control).

21.4 Neither party shall be liable to the other on account of the termination of the Agreement pursuant section or otherwise pursuant to the Agreement, either for compensation or for damages of any kind or character whatsoever, or on account of the loss of present or prospective profits, good will, or expenditures, investments or commitments made in contemplation of, or in the performance of, the Agreement, provided, however that the termination of the Agreement shall not prejudice or otherwise affect (a) the rights or liabilities of the parties with respect to Products already sold under the Agreement, (b) any indebtedness then owing by either party to the other, and (c) any other obligations of the parties, such as those arising under Sections 18.1 and 19.0, which by their nature continue beyond termination of the Agreement and which shall survive such termination.

22.0 EFFECTS OF TERMINATION

22.1 Notwithstanding any other provisions of this Agreement, termination of this Agreement shall automatically accelerate the due date of all invoices for Products, such that they shall become immediately due and payable not later than the effective date of termination.

22.2 Upon termination of this Agreement, Distributor shall immediately:

22.2.1 Discontinue any and all use of Licensed Trademarks, including but not limited to such use in advertising or business material of Distributor, except to identify the Products; provided that if Avaya does not repurchase Distributor’s remaining inventory, Distributor may continue using Licensed Trademarks as authorized in this Agreement and will remain authorized to resell Products to Resellers in the Territory for an additional one hundred twenty (120) days for the limited purpose of marketing such inventory to Resellers, subject to all other terms and conditions of this Agreement;

22.2.2 Remove and return to Avaya or destroy at Avaya’s request, any and all promotional materials supplied without charge by Avaya except those necessary for the limited purpose of marketing existing Distributor inventory pursuant to Section 22.2.1

22.2.3 Return all Avaya Confidential Information (including Licensed Materials), except that which Avaya determines is necessary to operate and maintain previously furnished Products.

22.2.4 Cease holding itself out, in any manner, as an Avaya authorized Distributor of the Products; and

22.2.5 Notify and arrange for all publishers and others (including, but not limited to, publisher of telephone and business directories) who may identify, list or publish Distributor’s name as a Avaya authorized Distributor of Products, to discontinue such listings.

22.3(REDACTED)

23.0 SURVIVAL OF OBLIGATIONS

23.1 The respective obligations of Distributor and Avaya under this Agreement that by their nature would continue beyond the termination of this Agreement, shall survive termination hereof, such as, by way of example only, the obligations pursuant to the following Sections: USE OF INFORMATION, LIMITED LICENSE, TRADEMARK LICENSE, WARRANTY OF TITLE, EXCLUSION OF WARRANTIES, TERMINATION OF AGREEMENT, EFFECTS OF TERMINATION, LIMITATION OF LIABILITY, INDEMNITY and ARBITRATION AND DISPUTE RESOLUTION.

24.0 FORCE MAJEURE

24.1 Except for Distributor’s obligation to make timely payments, neither party shall be held responsible for any delay or failure in performance to the extent that such delay or failure is caused by fires, embargoes, explosions, labor disputes, government requirements, civil or military authorities, acts of God, inability to secure raw materials or transportation facilities, acts or omissions of carriers or suppliers or any other causes beyond the parties’ reasonable control whether or not similar to the foregoing. Each party shall endeavor to give the other party reasonable notice of any such delay or failure.

25.0 SEVERABILITY

25.1 If any section, or clause thereof, in this Agreement is held to be unenforceable, then the meaning of such section or clause will be construed so as to render it enforceable, to the extent feasible; and if no such interpretation would save such section or clause, it will be severed from this Agreement and the remainder will remain in full force and effect. However, in the event such section or clause is considered an essential element of this Agreement by either Avaya or Distributor, the parties shall promptly negotiate a replacement therefore.

26.0 ASSIGNMENT

26.1 Distributor acknowledges that Avaya has appointed it as a Distributor in reliance upon the qualifications, business reputation and financial soundness of itself and its controlling persons and management. Distributor shall not assign any right or interest under this Agreement without the prior written consent of Avaya. Any assignment or delegation by Distributor without such consent shall be void and ineffective.

26.2 Avaya shall have the right to assign this Agreement and to assign its rights and delegate its obligations and liabilities under this Agreement, either in whole or in part (an “Assignment”), to any entity that is, or that was immediately preceding such Assignment, a current subsidiary, business unit, division or other affiliate of Avaya. Avaya shall give Distributor notice of an Assignment, which shall state the effective date thereof. Upon the effective date and to the extent of the Assignment, Avaya shall be released and discharged from all obligations and liabilities under this Agreement. Such Assignment, release and discharge shall be complete and shall not be altered by the termination of the affiliation between Avaya and the entity assigned rights or delegated obligations and liabilities under this Agreement.

26.3 Avaya may subcontract any or all of the work to be performed by it under this Agreement, but Avaya shall retain responsibility for the subcontracted work.

27.0 NON-WAIVER

27.1 No course of dealing, course or performance or failure or delay of either party to enforce or exercise (in whole or in part) any term, right or condition of this Agreement shall be construed as a waiver of any term, right or condition.

28.0 CHOICE OF LAW; EXCLUSIVE JURISDICTION; WAIVER OF JURY TRAIL.

28.1 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA, excluding its choice of law principles.

28.2 Any suit or other action arising out of this Agreement, whether commenced in conformity with or contrary to this Agreement, shall only be brought in the federal or state courts of the State of New York, with the sole exception that any party may commence a suit in any jurisdiction to enforce an arbitration award or judgment obtained pursuant to Section 18. In the event of any suit in the federal or state courts of the State of New York, (a) the parties hereby consent to personal jurisdiction therefore and waive any defense based on a lack of personal jurisdiction, improper venue, or the inconvenience of the forum, (b) the parties agree that delivery of any process in the manner provided for in this Section 28.2 shall constitute lawful and valid service of process, and (c) THE PARTIES HEREBY WAIVE TRIAL BY JURY.

29.0 ARBITRAITON AND DISPUTE RESOLUTION

29.1 Except as otherwise expressly provided in this Agreement, any dispute, controversy or claim arising out of or relating to this Agreement, its interpretation or enforcement shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association conducted by one arbitrator. The arbitration shall be conducted at Avaya’s offices at 211 Mt. Airy Road, Basking Ridge, New Jersey unless otherwise agreed by the parties. Any ruling by the arbitrator shall be final and binding on the parties and may be entered in any court of competent jurisdiction. The arbitrator shall have no authority to modify or expand this Agreement or any of the provisions of this Agreement. The arbitrator is specifically authorized to render partial or summary judgment. Subject to the provisions of Section 29.3, each party will bear its own attorney’s fees associated with the arbitration, and each party shall bear an equal share of all fees, costs and expenses of the arbitrator. The arbitration proceeding and all testimony, filings, documents, and other information produced or given in connection with the arbitration shall be treated as Confidential Information, except as may be necessary to enter any arbitration ruling in a court of competent jurisdiction or as otherwise may be required by law.

29.2 Nothing in the Agreement shall preclude either party from specific performance or other equitable relief, including but not limited to temporary restraining orders and preliminary injunctions, from any court of competent jurisdiction, in order to protect its rights or prevent harm pending the obtaining of an arbitration ruling, nor shall anything herein prevent Avaya from seeking monetary damages from any court of competent jurisdiction for monies owed to it hereunder. Without limiting the foregoing

provisions of this Section, Distributor acknowledges that remedies at law including by means of an arbitration for a breach or threatened breach of any of the covenants contained in Sections 4.2, 14.1, and 17.0, will be inadequate and in the event of a breach or threatened breach of any such covenants, Avaya shall be entitled to an injunction specifically enforcing Distributor’s compliance with such covenants.

29.3 The prevailing party in any dispute relating to this Agreement resulting in a final judgment by any court or arbitration panel, including but not limited to actions to collect money owed to Avaya by Distributor, shall be entitled to the payment of all attorneys fees and costs incurred (including all fees, costs and expenses of an arbitration).

30.0 ENTIRE AGREEMENT

30.1 The terms and conditions contained in this Agreement supersede all prior oral or written understandings between the parties and constitute the entire Agreement between them concerning the subject matter of this Agreement and shall not be contradicted, explained or supplemented by any course of dealing between Avaya or any of its Affiliates and Distributor or any of its Affiliates. This Agreement shall not be modified or amended except by writing signed by an authorized representative of the party to be charged.

31.0 GENERAL

31.1 This Agreement has been signed in the English language. In case of conflict between this Agreement and any translation from English, the English language Agreement shall control.

31.2 In the event of a conflict between provisions of the Agreement and any Product Group Attachment hereto, priority shall be given to a provisions of the Product Group Attachment over a provision of the Agreement, unless such priority is expressly overridden in the Agreement; and in the event of a conflict between the provisions of the Product Group Attachment and a Product Appendix, priority shall be given to provisions of the Product Appendix over a provision of the Product Group Attachment, unless such priority is expressly overridden in the Product Group Attachment or the Agreement.

31.3 The headings contained in the Agreement are for convenience only and are not intended to affect the meaning or interpretation of the Agreement.

31. 4 Words importing a particular gender shall include every other gender and words importing the singular shall include the plural and vice-versa, unless the context clearly indicates otherwise.

31.5 Except as expressly provided in this Agreement, all notices, consents, waivers, requests or other instruments or communications given pursuant to this Agreement shall be in writing and shall be delivered by hand or sent by registered or certified United States mail, return receipt requested, postage prepaid, or by a recognized

overnight delivery service, addressed as listed below. Any party may, by notice to the other party, specify any other address for the receipt of such notices, instruments or other communications. Except as expressly provided in this Agreement, any notice, instrument or other communication shall be deemed properly given when hand delivered, one business day after being sent by overnight courier service and three days after being sent by United States mail in the manner prescribed in this Section.

DISTRIBUTOR PRODUCT GROUP ATTACHEMENT

For

ENTERPRISE COMMUNICATION

AND INTERNETWORKING SOLUTION PRODUCT

This Product Group Attachment (“Product Group Attachment”) shall be effective as of (REDACTED) (“Effective Date”) between Avaya, Inc. (“Avaya”), and ScanSource, Inc., d.b.a. Catalyst Telecom (“Distributor”). This Product Group Attachment hereby incorporates by reference the Distributor Master Terms and Conditions negotiated between Avaya and Distributor. The terms set forth in this Product Group Attachment shall be applicable to Avaya Enterprise Communications (“EC”) and Internetworking Solutions (“IS”) Products as defined in Product Appendices attached.

In addition to the terms of the Reseller Master Terms and Conditions specifying the relationship of the parties and their responsibilities, the parties agree as follows:

1.0 DISTRIBUTOR APPOINTMENT FOR ENTERPRISE COMMUNICATIONS, AND INTERNETWORKING SOLUTIONS PRODUCTS

1.1 Distributor may sell Avaya Product, listed in the Product Appendices attached hereto, to Authorized Avaya Resellers to resale to End Users. Distributor may only sell to these Resellers during the time that the Reseller has an active contract with Avaya. In the case of EC Product, Distributor must be the name choice in the Resellers Agreement with Avaya. Avaya will notify Distributor, in writing, of Reseller additions and changes in status.

2.0 PRODUCT, PRODUCT COMPONENTS AND SOFTWARE LICENSE CHANGES

2.1 Avaya may without the consent of Distributor, but with thirty (30) days advance written notice to Distributor, delete any Avaya Product or Product from any Product Appendix.

3.0 TERMINATION OF AGREEMENT

3.1 In addition to the termination conditions in the Distributor Master Terms and Conditions, Avaya may terminate this Agreement upon twenty-four (24) hours notice, if Distributor has remotely accessed PBX locations maintained by Avaya directly.

Distributor agrees that by executing this Product Group Attachment, it is bound by the terms and conditions of the Master Terms and Conditions, the terms and conditions contained in the Product Group Attachment, and any additional terms and conditions set forth in a Product Appendix associated with those Products which Distributor has been authorized to sell.

IN WITNESS WHEREOF the parties have caused this Products Group Contract to be signed in two original copies by their duly authorized representatives.

Avaya, Inc.		ScanSource, Inc., d.b.a. Catalyst Telecom
By:	/s/ Susan W. Bailey	By:	/s/ John Black
Typed Name:	Susan Bailey	Typed Name:	John Black
Title:	Vice President, Avaya	Title:	President Catalyst Telecom
Date:	(REDACTED)	Date:	(REDACTED)

Distributor:	Avaya:
ScanSource d/b/a Catalyst Telecom	Avaya, Inc.
General Counsel	Contract Manager
6 Logue Court	Rm. 2C220
Suite G	211 Mt. Airy Road
Greenville, SC 29615	Basking Ridge, NJ 07920

Intentionally left Blank

Distributor Product Appendix: Avaya Enterprise Communications Products

Key Systems

Products:

Merlin Magix Communications Systems, Associated Adjuncts, and Messaging Systems Partner ^® Advanced Communications Systems, Associated Adjuncts, and Messaging Systems

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Exhibit 1:

Distributor Product Appendix: Avaya Enterprise Communications Products

4. SOFTWARE LICENSE, ORANGE LABEL FLASH CARD MEDIUM

A. Avaya grants Distributor a personal, non-transferable and non-exclusive right to use, in object code form, DEFINITY^® ECS, DEFINITY^® PROLOGIX SOLUTIONS, DEFINITY ^® BCS, and DEFINITY ^® GuestWorks software (‘the Software”) solely for the purpose of providing maintenance service on, DEFINITY^® ECS, DEFINITY^® PROLOGIX SOLUTIONS, DEFINITY ^® BCS, and DEFINITY^® GuestWorks systems respectively. Title to and ownership of all Software shall remain with Avaya. Distributor will refrain from taking any steps, such as reverse assembly or reverse compilation, to derive a source code equivalent of the Software or to develop other software. Distributor will use its best efforts to ensure that its employees and users of the Software comply with these terms and conditions.

B. Distributor may make a single archive copy of software. Any such copy must contain the same copyright notice and proprietary markings that the original Software contains. Use of the Software on any equipment other than that for which it was obtained, removal of the Software from the United States, use of the Software for any purpose other than maintenance of DEFINITY^® ECS, DEFINITY^® PROLOGIX SOLUTIONS, DEFINITY^® BCS, and DEFINITY^® GuestWorks systems or other material breach of the software license shall immediately and automatically terminate this license and will be cause for immediate termination of all Authorized Distributor Agreements between Distributor and Avaya.

Distributor Product Appendix: Avaya Enterprise Communications Products

DEFINITY^®BCS & Associated Adjuncts

A. Products

DEFINITY BCS, Associate Adjuncts and Software

DEFINITY AUDIX

Intuity™AUDIX

BCMS (25 Agents)

Limited compatible DEFINITY^® BCS circuit packs and telephones, when ordered in conjunction with DEFINITY^® BCS Servers.

B. For the products covered by this Product Appendix, and for use with the DEFINITY^® BCS server, the following is added to the Distributor Product Group Attachment for Enterprise Communications Product as Section 1.3:

1.3 Circuit packs and 8400 Series DCP telephones offered under this Product Appendix for use only with the DEFINITY ^®BCS servers may only be use in conjunction with these servers. Orders for DCP telephones beyond those provided in the DEFINITY BCS packaged offers will be rejected if the number of telephones ordered exceeds 10% of the total telephone capacity of the system ordered. Several circuit packs are designed for use only on BCS systems only. Connection of such circuit packs to any other Avaya Managed Products will be considered on an exception basis only. Failure to meet the requirements of this subsection will be grounds for immediate termination of this Product Appendix, and depending on the circumstances, may lead to the Agreement to which this is appended.

C. [For Distributors licensing the Orange Label Flash Card only.] New Section 4 is added to the Distributor Product Group Attachment for Enterprise Communications Products with respect to this Product Appendix and may be found in Exhibit 1.

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

DEFINITY^® GuestWorks, & Associated Adjuncts

A. Products

DEFINITY^® GuestWorks, Associate Adjuncts and Software

Intuity^® Audix ™Lodging

Intuity ™ AUDIX

Limited compatible DEFINITY^® GuestWorks™ circuit packs and telephones, when ordered in conjunction with DEFINITY^® GuestWorks Servers.

B. For the DEFINITY^® GuestWorks Products covered by this Product Appendix, the following replaces Section 1.9 of the Agreement:

1.9 “End User” means a third party with a hotel or motel business to whom Distributor markets or sells Products within the Area for hotel or motel use by such third party in the ordinary course of its business and not for resale. End User does not include any Avaya Inc. Global Account or any office, department, agency, or defense installation of installation of the United States Government, except that Distributor may market and sell Products to any Avaya Inc.’ Global Account referred to Distributor specifically for the sale of Products by the Avaya Inc. Branch responsible for sales to that customer. No such reference to Distributor for the sale of Avaya Inc. products not Marketing opportunities for sales of GuestWorks systems to third parties for use in health care or senior citizens’ residence facilities must be individually reviewed with and approved by Avaya Inc. to be certain that the system will meet the customer’s needs and that the sale will not expose Avaya inc. to claims based on the system’s unsuitability for such uses or similar theories

C. For the products covered by this Product Appendix, and for use with DEFINITY^® GuestWorks server, the following is added to the Distributor Product Group Attachment for Enterprise Communications Product as Section 1.3:

1.3 Circuit packs and 8400 Series DCP telephones offered under this Product Appendix for use only with the DEFINITY^® GuestWorks servers may only be use in conjunction with these servers. Several circuit packs are designed for use only on GuestWorks systems only. Connection of such circuit packs to any other Avaya Managed Product will be considered on an exception basis only. Failure to meet the requirements of this subsection will be grounds for immediate termination of the Product Appendix, and depending on the circumstances, may lead to the Agreement to which this is appended.

D. [For Distributors licensing the Orange Label Flash Card only.] New Section 4 is added to the Distributor Product Group Attachment for Enterprise Communication Products with respect to this Product Appendix and may be found in Exhibit 1.

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

DEFINITY^® ProLogix Solutions & Associated Adjuncts

A. Products

DEFINITY ProLogix Solutions, Associate Adjuncts and Software

Intuity™ AUDIX

6400 Series Voice Terminals

8400 Series Voice Terminals

Basic Call Management Systems

BCMS VU

Centre Vu Call Management Systems

B. [For Distributors licensing the Orange Label Flash Card only.] New Section 4 is added to the Distributor Product Group Attachment for Enterprise Communications Products with respect to this Product Appendix and may be found in Exhibit 1.

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

DEFINITY ONE™ Communications System

A. Products and Related Software

DEFINITY ONE™ Communication System is a family of products, which consist of the following:

DEFINITY G3si Software

Intuity™ AUDIX^®

6400, 6200 AND 8400 Series Voice Terminals

Basic Call Management Systems

CentreVu Call Management Systems

Standby Power Systems

***Refer to the DEFINITY ONE™ product section of the BusinessPartner WEB site for a complete listing of products.

Avaya product coding for DEFINITY ONE™ is described in DEFINITY ONE™ product documentation posted on the BusinessPartner Website

B. Training

Distributor shall provide and consistently maintain a staff of adequately trained and competent sales personnel, knowledgeable of the specifications, features, and advantages of the Avaya Products and Software. Such personnel shall be made aware of the restrictions on use of Avaya information as set forth in the Distributor Agreement (Use of Confidential Information). Prior to executing this Product Appendix, Avaya will have provided Distributor with initial Sales, and Technical Training. Distributor represents that this training has been completed by its’ sales and support personnel. Distributor acknowledges that continuing authorization to sell DEFINITY ONE™ product is contingent on Distributor maintaining the required trained personnel on staff. Avaya may, at its sole option, offer training in person, through remote learning media, through interactive materials on the Avaya World Wide Web site, or through other self-learning devices.

Technical training will address configuration, networking, integration, installation and troubleshooting issues. Technical training will be made available at prevailing prices. The training will be offered at an Avaya facility or via electronic media periodically during the year. If new DEFINITY ONE™ product releases are introduced, they may be added to this Product Appendix by mutual agreement. Avaya will require Distributor to complete Update training before being authorized to sell each new release.

Training requirements for DEFINITY ONE™ are as follows:

1. Distributor will maintain a minimum of (1) technical person who has completed the DEFINITY ONE™ technical training program

2. Distributor agrees to have personnel, who are designated for DEFINITY ONE™ sales training program

3. Distributor agrees to have personnel, who are designated for DEFINITY ONE™ technical or sales training, attend the recommended / mandatory prerequisite training programs.

4. Distributor also agrees to meet any required prerequisite “general” convergence training that may be established from time to time by Avaya.

C. Professional Certifications

It is desirable, but not required that a Distributor, will maintain at least one employee on their staff certified in Microsoft Windows NT, as well as staff who have been certified in other networking and convergence technologies.

The Distributor is responsible for all costs associated with any such professional certification.

D. Software License and Replication

Avaya grants Distributor a personal, non-transferable and non-exclusive right to use, in object code form, DEFINITY ONE™ software (“the Software”) solely for the purpose of providing forward assembly, standard and custom configuration services, testing of servers, and maintenance service on DEFINITY ONE™. Title to and ownership of all Software shall remain with Avaya. Distributor will refrain from taking any steps, such as reverse assembly or reverse compilation, to derive a source code equivalent of the Software or to develop other software. Distributor will use its best efforts to ensure that its employees and users of the Software comply with these terms and conditions.

Unless modified, amended, or supplemented by this Products Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

DEFINITY^® ECS & Associated Adjuncts

A. Products

DEFINITY G3r, Associate Adjuncts and Software

DEFINITY G3vs, Associate Adjuncts and Software

DEFINITY G3si, Associate Adjuncts and Software

DEFINITY AUDIX

Intuity™ AUDIX

6400 Series Voice Terminals

8400 Series Voice Terminals

Basic Call Management Systems

Centre Vu Call Management Systems

B. [For Distributors licensing the Orange Label flash Card only.] New Section 4 is added to the Distributor Product Group Attachment for Enterprise Communications Products with respect to this Product Appendix, and may be found in Exhibit 1.

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

Avaya ECLIPS Products

A. Products and Related Software

The Avaya ECLIPS products included in this Appendix consist of the following:

Avaya IP600 Communication Server

Avaya IP Hard Phones

Avaya Soft Phones

Avaya R300 Remote Office Concentrator

Avaya Definity IP Solutions

Avaya product coding and other detailed information for Avaya ECLIPS products is described in documentation posted on the BusinessPartner WEB site.

As it pertains to the products listed in the Appendix, the attached Appendix: Avaya ECLIPS Products shall become part of the Agreement.

B. Training

Training requirements for ECLIPS are as follows:

4. Distributor will maintain a minimum of (1) technical person who has completed the ECLIPS technical training program.

5. Distributor will maintain a minimum of (1) sales person who has completed the ECLIPS sales training program.

6. Distributor agrees to have personnel, who are designated for ECLIPS technical or sales training, attend the recommended/mandatory prerequisite training programs.

4. Distributor also agrees to meet any required prerequisite “general” convergence training that may be established from time to time by Avaya.

5. The Distributor should refer to the ECLIPS training document posted in the BusinessPartner WEB site for a detailed listing specific training courses and descriptions for each of the above listed Avaya ECLIPS products.

C. Professional Certifications

Distributor, as a condition of being authorized to sell ECLIPS products, will maintain at least one employee on its staff certified in the following:

Microsoft - Microsoft Certified Professional on NT Server 4.0, must pass one of the three tests associated with this specialty. In the event that Microsoft discontinues MCP/NT certification a Distributor may substitute a Windows 2000 certification that includes the needed NT server training, as determined by Avaya. Acquiring the correct MCP certification is the obligation of the Distributor.

The certification and testing process will be according to the requirements of Microsoft.

The Distributor is responsible for all costs associated with professional certification. Avaya will require Distributor to furnish proof that the certification requirements have been successfully completed and that the certified individuals are employed by the Distributor. Failure to maintain employees with these certifications will result in the de-authorization of the Distributor to sell ECLIPS, if the situation is not corrected within 60 days. The Distributor must complete certification before they are authorized to sell ECLIPS.

The terms of this Appendix shall commence on the date this Appendix is signed by both parties. In the event of a conflict between the terms and conditions of the Agreement and this Appendix, the terms and conditions of Distributor Master Terms and conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

Intuity Conversant

A. Products:

Intuity Conversant

B. Licensed Materials

Intuity Conversant

C. Conversant Training

Course No.	Description
BTT509H	INTUITY CONVERSANT Install & Maintenance
BTC128H	Introduction to Scriptbuilder
BTC301H	INTUITY CONVERSANT VIS Advanced Scriptbuilding
BTC130H	INTUITY CONVERSANT Graphical Designer For New Application Design Customers
BTC302H	INTUITY CONVERSANT Graphical Designer For Experienced Scriptbuilder Users
BTC201H	Scriptbuilder Host Application Development Workshop
BTC421M	CONVERSANT VIS5.0/6.0 IBM Host Interface
BTC437M	CONVERSANT VIS 6.0 Hardware & AdminOverview

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Enterprise Communications Products

Video Networking Products

A. Products:

Avaya’ Multipoint Control Unit (MCU)

Avaya’ Conference Reservation and Control System (CRCS)

Unless modified, amended, or supplemented by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

Distributor Product Appendix: Avaya Internetworking Solutions Products

A. Products

Cajun family of products:

Cajun Campus Tthernet

Cajun Campus ATM

CajunView

CajunRules

Super Pipe

Access Point

LMF VPN Gateway (and subsequent products)

LSMS Security Management Server

Clear Trac

Avaya Wireless LAN - Indoor Data Networking (Open):

Client Devices:

PC Cards

Adapters

USB Client

Converters

Indoor Antennae

Residential Gateway

Infrastructure:

AccessPoint

Active Ethernet (Power over Ethernet)

Avaya Wireless LAN - Outdoor Data Networking (Managed):

Infrastructure Outdoor Networking

Access Server

Outdoor Kit

Outdoor Remote/Central Router

Outdoor Router Software

Antennae

Products for the US Government only

Residential Gateway (Open)

Access Point (Open)

Central/Remote Office Router (Managed)

B. Additional Distributor Responsibilities for Avaya Wireless Products:

Distributor will maintain a minimum of two in house technical experts to address all technical issues for Resellers prior to escalation to Avaya. Distributor is required to maintain a written technical support process and a dedicated technical support telephone line staffed by trained personnel.

C. Distributor may sell Avaya Wireless LAN Product designated as “Open”, in the Product listing above, to any reseller, including those not under agreement with Avaya.

D. Avaya’s standard End User warranties for the individual products covered under this Addendum will apply.

Unless modified, amended, or supplemental by this Product Appendix, all terms and conditions of Distributor Master Terms and Conditions remain in effect.

AMENDMENT TO

DISTRIBUTION AGREEMENT BETWEEN AVAYA INC. AND

SCANSOURCE, INC., d.b.a. CATALYST TELECOM

MASTER TERMS AND CONDITIONS

This Amendment dated (REDACTED) is entered into by and between Avaya inc. (“Avaya”), a Delaware corporation, with offices at 211 Mt. Airy Road, Basking Ridge, NJ 07920, and ScanSource, Inc. d.b.a. Catalyst Telecom, (“Distributor”), a South Carolina corporation, with its principal place of business at 6 Logue Court, Greenville, SC 29615.

WHEREAS, Avaya and Distributor entered into a Distribution Agreement Master Terms and Conditions effective (REDACTED) August 16, 2002 (the “Agreement”); and

WHEREAS, in accordance with the terms of the Agreement, the parties now wish to amend the agreement to accommodate for a direct credit arrangement between Avaya and Distributor;

NOW THEREFORE, in consideration of the terms and conditions stated in the Agreement and such other valuable consideration, the parties agree as follows:

Section 10.0 is hereby deleted in its entirety and replaced with the following:

10.0 AVAYA BILLING AND DISTRIBUTOR PAYMENT

10.1 Invoices for Products will be sent by Avaya upon shipment of the Product, or as soon thereafter as practicable. (REDACTED) In the case of special offers or sales by Avaya to Distributor, additional terms of sale may be negotiated between the parties hereto on a situation-specific basis.

10.2 (REDACTED)

10.3 The amount of Distributor credit or terms of payment may be changed or credit withdrawn by Avaya at any time upon notice to Distributor in writing, unless Distributor provides Avaya with adequate assurance of performance, as that phase is used in Section 2-609 of the Uniform Commercial Code as adopted in New York, within ten days of any such written notice.”

The following clause is hereby added in its entirety:

32.0(REDACTED)

Entire Agreement

Except as explicitly modified herein, all terms, conditions and provisions of the Agreement and Amendments thereto shall continue in full force and effect. In the event of any inconsistency or conflict between the Agreement, previous Amendments, and this Amendment, the terms, conditions an provisions of this Amendment shall govern and control. The Agreement, together with its Attachments, Exhibits and Amendments thereto, shall constitute the complete and exclusive statement of the Agreement between the parties and supersedes all prior agreement with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

Avaya Inc.		ScanSource, Inc. d.b.a. Catalyst Telecom
By:	/s/ J. Tammam	By:	/s/ Richard P. Cleys
Name:	Jaicky Tammam	Name:	Richard P. Cleys
Title:	Global Credit Officer	Title:	VP & Chief Financial Officer
Date:	(REDACTED)	Date:	(REDACTED)

DISTRIBUTOR PRODUCT GROUP ATTACHEMNT TO AVAYA INC.

DISTRIBUTOR MASTER TERMS AND CONDITIONS

FOR

AVAYA MICROSOFT CRM UNIFIED SOLUTION

This Product Group Attachment (“PGA”) shall be effective as of                             (“Effective Date”) between Avaya, Inc. (“Avaya”) and ScanSource d/b/a Catalyst Telecom, (“Distributor”). This PGA hereby incorporates by reference the Distributor Master Terms and Conditions entered into between Avaya and Distributor. The terms set forth in this PGA shall be applicable to Avaya Microsoft CRM Unified Solution (“Unified Solution”) Products as defined herein.

In addition to the terms of the Distributor Master Terms and Conditions specifying the relationship of the parties and their responsibilities, the parties agree as follows:

1.0 DEFINITIONS

Unless otherwise specified herein, terms which are defined in the Distributor Master Terms and Conditions shall have the meanings specified therein. The following terms shall have the meanings specified below:

1.1 “Avaya Products” means Avaya’s proprietary technology (excluding the Middleware) integrated by Avaya with Microsoft CRM to form a Unified Solution.

1.2 “Microsoft CRM” means the object code versions of the following Microsoft Business Solutions CRM modules that Microsoft provides to Avaya: Microsoft CRM Sales Professional, Microsoft CRM Customer Service Professional, and Microsoft CRM Suite Professional. “Microsoft CRM” shall also include all commercial release versions of all Update, Upgrades and New Versions to Microsoft CRM that are provided by Microsoft to Avaya.

1.3 “Middleware” means Avaya’s proprietary software developed for the purposes of integrating Microsoft CRM with the Avaya Products into the Unified Solution, such as but not limited to IP400 Microsoft CRM Integration RFA.

1.4 “Unified Solution” means an integrated product offering, such as IP Office Customer Management-powered by MS CRM, or any other offer comprising of an Avaya Product, the Middleware and all or part of Microsoft CRM, wherein the Avaya Product, the Middleware and the Microsoft CRM are sold or licensed (as applicable) together and are intended to be connected to operate as a bundled solution (and not on a stand-alone basis).

2.0 APPOINTMENT FOR AVAYA MICROSOFT CRM SOLUTIONS PRODUCTS

2.1 Appointment. Avaya hereby authorized Distributor to purchase the Unified Solution from Avaya for resale to Resellers authorized by Avaya to resell the Unified Solution. Distributor agrees not to distribute any Unified Solution to Resellers that have not executed the Reseller Product Group Attachment for Avaya Microsoft CRM Unified Solution.

2.2 Limitations. The rights granted in this Section 2 are subject to the following limitations:

(a) DISTRIBUTOR IS NOT RESPONSIBLE FOR ASCERTAINING EITHER ITS RESELLER’S OR THE RESELLER’S CUSTOMER’ S INTENDED PURPOSE FOR MICROSOFT CRM. DISTRIBUTOR MUST NOT KNOWINGLY RESELL OR SUBLICENSE MICROSOFT CRM OR THE UNIFIED SOLUTION FOR USE IN CONTROLLING THE OPERATION OF EQUIPMENT IN ANY NUCLEAR FACILITIES, AIRCRAFT NAVIAGATION, COMMUNICATIONS OR FLIGHT CONTROL SYSTEMS, AIR TRAFFIC CONTROL, MASS TRANSIT, MEDICAL EQUIPMENT (FDA CLASS 2 OR 3, OR EQUIVALENT), OR WEAPONS SYSTEMS, OR IN ANY OTHER INHERENTLY DANGEROUS APPLICATIONS IN WHICH THE FAILURE OF MICROSOFT CRM OR THE UNIFIED SOLUTION COULD LEAD DIRECTLY TO DEATH, PERSONAL INJURY, OR SEVERE PHYSICAL OR ENVIRONMENTAL DAMAGE.

(b) Distributor may not provide commercial hosting, time share, service bureau or similar services with any copy of a Unified Solution or Microsoft CRM.

(c) Distributor may not reverse engineer, decompile or disassemble the Unified Solution or Microsoft CRM.

(d) Distributor must not distribute Microsoft CRM in a stand-alone form.

(e) Distributor may distribute the Unified Solution only on CD-ROM(s) or other tangible media, and not via the Internet; however, Distributor may distribute service packs and updates via the Internet.

(f) Distributor’s authorization to provide the Unified Solution and the United Solution license provided to a Reseller does not include any license, right, power or authority to cause the Unified Solution to become subject to any of the terms of an Excluded License. For purposes of this PGA, an “Excluded License” means any license that requires (A) disclosure of the source code of the Unified Solution or the Microsoft CRM or (B) redistribution of the Unified Solution or the Microsoft CRM at no charge.

3.0 OTHER OBLIGATIONS

3.1 Support. Avaya is responsible for providing End User support for the Unified Solution, in accordance with the term and conditions of the Distributor Master agreement.

3.2 Anti-piracy. Distributor will not knowingly engage in the manufacture, use or distribution of counterfeit, pirated or illegal copies of Microsoft CRM or the Unified Solution. Distributor agrees not to distribute any Unified Solution to customers that are known to Distributor to engage in the use, manufacture, distribution or transfer or counterfeit, pirated or illegal software. Distributor will reasonably cooperate with Avaya in the investigation of counterfeit, pirated or illegal copies of the Unified Solution. Distributor agrees to report to Avaya, as soon as reasonably possible after it comes to Distributor’s attention, any suspected counterfeiting, piracy or other infringement of copyright in the Unified Solutions, Unified Solutions’ manuals or marketing materials.

Distributor agrees that by executing this Product Group Attachment, it is bound by the terms and conditions of the Distributor Master Terms and Conditions and the terms and conditions contained in the Product Group Attachment which Distributor has been authorized to sell.

IN WITNESS WHEREOF the parties have caused this Product Group Attachment to be signed by their duly authorized representatives.

Avaya Inc.	Distributor
By:	By:	/s/ John Black
Typed Name:	Typed Name:	John Black
Title:	Title:	President Catalyst Telecom
Date:	Date:	(REDACTED)

AMENDMENT NO. 02

TO

DISTRIBUTION AGREEMENT BETWEEN AVAYA INC. AND

SCANSOURCE, INC., d.b.a. CATALYST TELECOM

MASTER TERMS AND CONDITIONS

This Amendment dated (REDACTED) (the “Effective Date”), is entered into by and between Avaya Inc. (“Avaya”), a Delaware corporation, with offices at 211 Mt. Airy Road, Basking Ridge, NJ 07920, and ScanSource, Inc., d.b.a. Catalyst Telecom, its subsidiaries and affiliates, including without limitation Channel Max and Outsourcing Unlimited, Inc., (“Distributor”), a South Carolina corporation, with its principal place of business at 6 Logue Court, Suite G, Greenville, SC 29615.

WHEREAS, Avaya and Distributor entered into a Distribution Agreement effective (REDACTED) (the “Agreement”);

WHEREAS, the parties entered into a Distributor Product Group Attachment For Services effective (REDACTED) (the “Distributor PGA”);

WHEREAS, in accordance with the terms set forth in Section 30.1 of the Agreement, the parties entered into Amendment No. 1, effective (REDACTED)

WHEREAS, also in accordance with the terms set forth in Section 30.1 of the Agreement, the parties now wish to further amend the Agreement to authorize Distributor to resell certain Avaya service offerings to authorized Avaya Resellers.

NOW THEREFORE, in consideration of the terms and conditions stated in the Agreement and such other valuable consideration, the parties agree as follows:

1. PURPOSE; AUTHORIZATION

1.1 Authorization. This Amendment sets forth (i) the terms and conditions under which Distributor is authorized to resell certain Avaya service offerings to authorized Avaya Services Resellers in the Territory; (ii) the Avaya service offerings that Distributor may resell under this Amendment, as described in Attachment A hereto and in the Distributor PGA separately executed by the parties; and (iii) the discounts and prices that Avaya shall make available to Distributor for reselling such Services under this Amendment (see Attachment B hereto). The parties agree that Avaya may change the discounts and prices set forth in Attachment B on each anniversary of the Effective Date of this Amendment.

1.2 Limitations. Distributor’s authorization as set forth in this Section is limited to solely those Avaya authorized Services Resellers who have executed, and are currently a party to, either (1) a Reseller Product Group Attachment to Avaya Inc. Reseller Master Terms and Conditions for Services (also known as a “Reseller PGA”); or, (2) an Avaya Master Reseller Agreement for Services; or, (3) any successor Avaya Reseller agreement.

1.3 Indemnification. Distributor shall indemnify Avaya for all claims, actions, costs, expenses, and damages suffered by Avaya as a result of Distributor’s failure to comply with Section 1.2 of this Amendment. Distributor’s indemnification shall survive any termination of this Amendment or the Agreement.

2. DISTRIBUTOR RESPONSIBILITIES

2.1 Recruitment of New Resellers. Distributor shall indentify and qualify potential new resellers of Avaya Services, as set forth in Attachment A, that Avaya may agree to authorize as an Avaya Reseller.

2.2 Prepaid Maintenance Services Agreements. The discounts for Maintenance Services set forth in Attachment B of this Amendment shall apply only to the resale of prepaid Maintenance Services agreements.

3. AVAYA RESPONSIBILITIES

3.1 Provision of Services to End User. Avaya will be responsible for providing the Services as described in the Distributor PGA directly to End Users following Avaya’s acceptance of the applicable order from Distributor.

4. TERMINATION

4.1 Termination for Convenience. Either party may terminate this Amendment for convenience upon ninety (90) days prior written notice to the other party.

4.2 Termination for Cause. Either party may terminate this Amendment with cause in the event of a material breach that has not been cured by the breaching party within thirty (30) days of receiving written notice of the breach. Notwithstanding the foregoing, Avaya may terminate this Amendment upon thirty (30) days written notice in the event Distributor is in material breach of any single provision set forth in this Amendment more than two (2) times within any discrete twelve (12) month period following the Effective Date.

Except as explicitly modified herein, all terms, conditions and provisions of the Agreement shall continue in full force and effect. In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms, conditions and provisions of this Amendment shall govern and control. The Agreement, together with its Attachments, Exhibits and Amendments thereto, and this Amendment, shall constitute the complete and exclusive statement of the Agreement between the parties and supersedes all prior agreement with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

Avaya Inc.		ScanSource, Inc., d.b.a. Catalyst Telecom
By:	/s/ Kevin P. Cook	By:	/s/ John Black
Name:	Kevin P. Cook	Name:	John Black
Title:	AGS-VP Worldwide Sales & Channels	Title:	President Catalyst Telecom
Date:	(REDACTED)	Date:	(REDACTED)

Attachment A

Authorized Services

• Avaya Voice Maintenance Services for

• DEFINITY^®/MultiVantage™

• Communications Applications Solutions

• Unified Communications

• PARTNER^®/MAGIX^®

• Avaya IP Office Maintenance Services for:

• IP Office Products

• Avaya Network Consulting Services

• Avaya Implementation/Installation Services for:

• DEFINITY^®/MultiVantage™

• Communications Applications Solutions

• Unified Communications

• IP Office Products

• PARTNER^®/MAGIX^®

Attachment B

Discount and Price Schedule

(REDACTED)

AMENDMENDMENT NO. 01

TO

DISTRIBUTION AGREEMENT BETWEEN AVAYA INC. AND

SCANSOURCE, INC., d.b.a. CATALYST TELECOM

MASTER TERMS AND CONDITIONS

This Amendment dated (REDACTED) (the “Effective Date”), is entered into by and between Avaya Inc. (“Avaya”), a Delaware corporation, with offices at 211 Mt. Airy Road, Basking Ridge, NJ 07920, and ScanSource, Inc., d.b.a. Catalyst Telecom, its subsidiaries and affiliates, including without limitation Channel Max and Outsourcing Unlimited, Inc. (“Distributor”), a South Carolina corporation, with its principal place of business at 6 Logue Court, Suite G, Greenville, SC 29615

WHEREAS, Avaya and Distributor entered into a Distribution Agreement effective (REDACTED) (the “Agreement”);

WHEREAS, the parties entered into a Distributor Product Group Attachment For Services effective (REDACTED) (the “Distributor PGA”)

WHEREAS, in accordance with the terms set forth in Section 30.1 of the Agreement, the parties now wish to amend the Agreement to authorize Distributor to offer certain Avaya service offerings to authorized Avaya Resellers on a commission basis as further described in this Amendment.

NOW THEREFORE, in consideration of the terms and conditions stated in the Agreement and such other valuable consideration, the parties agree as follows:

1. PURPOSE.

This Amendment sets forth the terms and conditions governing Distributor’s commitment to assist Avaya in increasing its voice maintenance Services revenue and Distributor’s entitlement to commission payments therefor.

2. DISTRIBUTOR AUTHORIZATION

2.1 Authorization. Avaya hereby authorizes Distributor to engage Avaya authorized Services Resellers, for such Resellers to offer or market certain Avaya voice Maintenance Services, as set forth in Attachment A hereto, to End Users for purchase by End Users directly from Avaya (“Channel Services”).

2.2 Limitations. Distributor authorization as set forth in Section 2.1 of this Amendment is limited solely to those Avaya authorized Services Resellers who have executed, and are currently a party to, either (1) a Reseller Product Group Attachment to Avaya Inc. Reseller Master Terms and Conditions for Services (also known as a “Reseller Services PGA”); or, (2) an Avaya Master Reseller Agreement for Services; or, (3) any successor Avaya Reseller agreement.

2.3 Indemnification. Distributor shall indemnify Avaya for all claims, actions, costs, expenses, and damages suffered by Avaya as a result of Distributor’s failure to comply with Section 2.2 of this Amendment. Distributor’s indemnification shall survive any termination of this Amendment or the Agreement.

3. DISTRIBUTOR RESPONSIBILITIES.

3.1 Orders. Distributor shall accept from Resellers written reseller and End User signed Services orders for Distributor’s review and Avaya’s subsequent acceptance (each, a “Channel Service Order”). (REDACTED)

3.2 Recruitment of New Resellers. Distributor shall identify and quality potential new resellers of Avaya Maintenance Services that Avaya may agree to authorize as an Avaya Reseller.

3.3 (REDACTED)

4.0 AVAYA RESPONSIBILITIES

4.1 (REDACTED)

4.2 Commission Payments. Avaya will pay commissions to Distributor based on the Commitment, and in accordance with the specific terms set forth in Attachment B hereto. Commissions will be payable in accordance with relevant sections of the then current Avaya maintenance commission policy available to Distributor online on the Avaya website, or upon Distributor’s request.

4.3 Provision of Channel Services To End User. Avaya will be responsible for providing the Channel Services directly to End Users following Avaya’s acceptance of the applicable order from Distributor. Avaya shall be solely responsible for the invoicing and collection of fees from End Users for such Channel Services.

5. TERMINATION

5.1 Termination for Convenience. Either party may terminate this Amendment for convenience upon ninety (90) days prior written notice to the other party.

5.2 Termination for Cause. Either party may terminate this Amendment with cause in the event of a material breach that has not been cured by the breaching party within thirty (30) days of receiving written notice of the breach. Notwithstanding the foregoing, Avaya may terminate this Amendment upon thirty (30) days of receiving written notice in the event Distributor is in material breach of any single provision set forth in this Amendment more than two (2) times within any discrete twelve (12) month period following the Effective Date.

Except as explicitly modified herein, all terms, conditions and provisions of the Agreement shall continue in full force and effect. In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms, conditions and provisions of this Amendment shall govern and control. The Agreement, together with its Attachments and Exhibits thereto, and this Amendment, shall constitute the complete and exclusive statement of the Agreement between the parties and supersedes all prior agreement with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

Avaya Inc.		ScanSource, Inc., d.b.a. Catalyst Telecom
By:	/s/ Kevin P. Cook	By:	/s/ John Black
Name:	Kevin P. Cook	Name:	John Black
Title:	AGS-VP Worldwide Sales & Channels	Title:	President Catalyst Telecom
Date:	(REDACTED)	Date:	(REDACTED)

Attachment A

Authorized Channel Services

• Avaya Voice Maintenance Services for:

• DEFINITY^®/MultiVantage™

• Communications Applications Solutions

• Unified Communications

• Small and Mid Business Solutions

• IP Office

• PARTNER^®/MERLIN MAGIX^®

Attachment B

(REDACTED)

ADDENDUM to

DISTRIBUTION AGREEMENT BETWEEN AVAYA INC. AND SCANSOURCE, INC. d.b.a.

CATALYST TECHNOLOGIES

(REDACTED)

ADDENDUM TO THE AVAYA AUTHORIZED DISTRIBUTOR AGREEMENT

BETWEEN

AVAYA INC.

AND

SCANSOURCE, INC. DBA CATALYST TECHNOLOGIES

WHEREAS, Avaya Inc. (“Avaya”) and ScanSource, Inc. dba Catalyst Technologies (“Catalyst”) entered into an Distribution Agreement dated (REDACTED), Agreement No. AVDIST1-021002 (the “Agreement”); and

WHEREAS, the parties wish to amend the Agreement to enable Catalyst to market and sell Avaya IP Office Products to Authorized Resellers.

NOW THEREFORE, the parties agree as follows:

1. As it pertains to the products listed in this Addendum, the Avaya IP Office Products shall become part of the Agreement.

A. Products and Related Software

IP Office Communications Systems and Software

Additional Product Authorizations associated with IP Office Communications System Configurations

Merlin Magic Series Terminals for connection to the IP Office Communications System Definity 6400 Series Terminals for connection to the IP Office communications System IP Series Terminals for connection to the IP Office Communications Systems Additional Avaya products, adjuncts, adapters and connectors, specifically identified for connection to the IP Office Communications System

B. Catalyst Responsibilities

Catalyst shall be in compliance with Avaya’s current Product Authorization (PA) Requirements for Distributors.

PA is a supplemental document provided by Avaya to Catalyst detailing current Catalyst responsibilities specific to IP Office Communications systems and Software.

The terms of this Addendum shall commerce on the date this Addendum is signed by both parties. In the event of a conflict between the terms and conditions for the Agreement and this Addendum, the terms and conditions of this Addendum shall control. Unless modified, amended, or supplemented by this Product Addendum, all terms and conditions of the Agreement shall remain in effect.

AVAYA INC		SCANSOURCE, INC. dba CATALYST TELECOM
By:	/s/ Susan W. Bailey	By:	/s/ John Black
Name:	Susan Bailey	Name:	John Black
Title:	Vice President, Avaya	Title:	President, Catalyst Telecom
Date:	(REDACTED)	Date:	(REDACTED)

AVAYA

AMENDMENT TO

DISTRIBUTION AGREEMENT BETWEEN AVAYA, INC. AND

SCANSOURCE, INC. D/B/A CATALYST TELECOM

MASTER TERMS AND CONDITIONS

This Amendment dated (REDACTED) (the “Effective Date”) is entered into by and between Avaya, Inc. (“Avaya”), a Delaware corporation, with offices at 211 Mt. Airy Road, Basking Ridge, NJ 07920, and ScanSource, Inc. d/b/a Catalyst Telecom (“Distributor”), a South Carolina corporation, with its principal place of business at 6 Logue Court, Greenville, SC 29615.

WHEREAS, Avaya and Distributor entered into a Distribution Agreement Master Terms and Conditions No. AVDIST1-021002 effective (REDACTED) (the “Agreement”); and

WHEREAS, in accordance with the terms of the Agreement, the parties now wish to amend the agreement to accommodate a revision to the payment terms between Avaya and Distributor;

NOW THEREFORE, in consideration of the terms and conditions stated in the Agreement and such other valuable consideration, the parties agree as follows:

1. Section 10.1 is hereby deleted in its entirety and replaced with the following for invoices dated (REDACTED) and any thereafter:

“10.1 Invoices for Products will be sent by Avaya upon shipment of the Product, or as soon thereafter as practicable. (REDACTED) In the case of special offers or sales by Avaya to Distributor, additional terms of sale may be negotiated between the parties hereto on a situation-specific basis.”

2. ENTIRE AGREEMENT. Except as explicitly modified herein, all terms, conditions and provisions of the Agreement and amendments thereto, shall continue in full force and effect. In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms, conditions and provisions of this Amendment shall govern and control. This Amendment shall constitute the complete and exclusive statement of the agreement between the parties with regard to the revision in payment terms and supersedes all prior agreement with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

Avaya, Inc.		ScanSource, Inc. d/b/a Catalyst Telecom
By:	/s/ Charles L. Ill	By:	/s/ Linda B. Davis
Name:	Charles L. Ill	Name:	Linda B. Davis
Title:	Senior VP Global Sales	Title:	VP and Treasurer
Date:	(REDACTED)	Date:	(REDACTED)

AMENDMENT TO

DISTRIBUTION AGREEMENT BETWEEN AVAYA, INC. AND

SCANSOURCE, INC. D/B/A CATALYST TELECOM

MASTER TERMS AND CONDITIONS

This Amendment dated (REDACTED) (the “Effective Date”), is entered into by and between Avaya, Inc. (“Avaya”), a Delaware corporation, with offices at 211 Mt. Airy Road, Basking Ridge, NJ 07920, and ScanSource, Inc. d/b/a Catalyst Telecom (“Distributor”), a South Carolina corporation, with its principal place of business at 6 Logue Court, Greenville, SC 29615.

WHEREAS, Avaya and Distributor entered into a Distribution Agreement Master Terms and Conditions No. AVDIST1-021002 effective (REDACTED) (the “Agreement”); and

WHEREAS, in accordance with the terms of the Agreement, the parties now wish to amend the agreement to accommodate a revision to the payment terms between Avaya and Distributor;

NOW THEREFORE, in consideration of the terms and conditions stated in the Agreement and such other valuable consideration, the parties agree as follows:

1. Section 10.1 is hereby deleted in its entirety and replaced with the following for invoices dated October 1, 2009 and any thereafter:

“10.1 Invoices for Products will be sent by Avaya upon shipment of the Product, or as soon thereafter as practicable. (REDACTED) In the case of special offers or sales by Avaya to Distributor, additional terms of sale may be negotiated between the parties hereto on a situation-specific basis.”

2. ENTIRE AGREEMENT. Except as explicitly modified herein, all terms, conditions and provisions of the Agreement and amendments thereto, shall continue in full force and effect. In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms, conditions and provisions of this Amendment shall govern and control. This Amendment shall constitute the complete and exclusive statement of the agreement between the parties with regard to the revision in payment terms and supersedes all prior agreement with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

Avaya, Inc.		ScanSource, Inc. d/b/a Catalyst Telecom
By:	(REDACTED)	By:	/s/ Michael L. Baur
Name:	(REDACTED)	Name:	Michael L. Baur
Title:	(REDACTED)	Title:	CEO
Date:	(REDACTED)	Date:	(REDACTED)

Avaya – Proprietary & Confidential

EX-10.35

Exhibit 10.35

AGREEMENT WITH DISTRIBUTOR

OEM DISTRIBUTOR ADDENDUM

[REDACTED]

Schedule A: Products and Pricing

Schedule B: Authorized OEM customers

Schedule C: Distributor Qualification Form

Schedule D: OEM Support Services

This OEM Distributor Addendum (the “Addendum”) to the Agreement, between Symbol Technologies, Inc. and its subsidiaries (“Symbol”), its principal address at One Symbol Plaza, Holtsville, New York 11742-1300, and ScanSource, Inc. (“OEM Distributor”), having its principal address at 6 Logue Court, Greenville, SC 29615 inclusive of all attached Schedules and supplements, modifies the terms and conditions of the Agreement with Distributor and sets forth the conditions by which OEM Distributor may purchase and remarket OEM Products to OEM Customers within the Territory.

1.0 Definitions All capitalized terms not defined in this Addendum shall have the same meaning given them in the Agreement. The following terms are used in this Addendum and shall mean the following:

1.1 “Addendum” shall mean this OEM Distributor Addendum to the Agreement.

1.2 “Agreement” shall mean the Agreement with Distributor entered into by the Parties dated April 19, 2001.

1.3 “OEM Distributor” A Symbol partner authorized by Symbol to purchase and remarket the OEM Products within the Territory only to OEM Customers.

1.4 “OEM Customer(s)” The purchaser of the OEM Products who integrates the OEM Products into purchaser-branded hardware products and/or system (the “Customer System”) that the OEM Customer delivers (directly or indirectly) to an end user as a complete solution. The Customer System provides functionality beyond that of the OEM Product. A list of OEM Customers as of the date of execution of this Addendum is provided in Schedule B which may be changed by Symbol from time to time.

1.5 “Parties” shall mean both Symbol and OEM Distributor and “Party” shall mean either Symbol or OEM Distributor.

1.6 “Product Price” The prices of the OEM Products as of the date of execution of this Addendum, are listed in Schedule A. Products Price may be changed by Symbol from time to time.

1.7 “OEM Product(s)” The Symbol hardware and software products offered for sale by Symbol under the terms of this Addendum and as of the date of execution of this Addendum are as set forth in Schedule A. OEM Products(s) may be changed by Symbol from time to time.

1.8 “Symbol OEM Distributor Program” [REDACTED]

1.9 “Territory” The territory for this Addendum is as stated in the current Agreement; however, the Distributor may ship OEM Products worldwide as directed on the OEM Customer’s Purchase Order for production/assembly purposes. Purchases for resale outside the Territory requires the prior written approval of Symbol.

2.0 Appointment. Symbol appoints OEM Distributor and OEM Distributor accepts appointment as a reseller of the OEM Products, symbol grants OEM Distributor a non-exclusive right to purchase OEM

Products, at the Product Prices, for resale only to the OEM Customers listed in Schedule B within the Territory. Symbol has the right to appoint other OM Distributors and agents in the Territory and/or to make direct sales in the Territory, without any obligation to OEM Distributor and without OEM Distributor’s prior consent. Symbol reserves the right not to sell OEM Products to OEM Distributor that it determines cannot be adequately supported by OEM Distributor in the Territory.

3.0 Duties of OEM Distributor.

3.1 OEM Distributor is authorized to sell OEM Products only to those OEM Customers listed in Schedule B (as updated by Symbol from time to time) in accordance with the Symbol OEM Distributor Program. Symbol may restrict specified OEM Products at its sole discretion, or may require its prior authorization to sell such specified OEM Products as may be indicated by Symbol in writing, from time to time. OEM Distributor will not sell OEM Products to third parties other than OEM Customers, and will not sell OEM Products outside the Territory except with the specific prior written consent of Symbol.

3.2 OEM Distributor acknowledges that Symbol has issued and pending patents covering the OEM Products and their sale, and that this Addendum has been expressly requested by OEM Distributor from Symbol to enable OEM Distributor to sell the OEM Products only to the OEM Customers listed in Schedule B within the Territory under a limited immunity from suit for infringement of the claims of Symbol’s patents.

3.3 Unless Schedule A includes OEM Products [REDACTED] (in which case additional terms and conditions will apply) OEM Distributor is only authorized to resell OEM Products, and not to incorporate OEM Products into OEM Distributor products or third party products. Additional information is provided in the OEM Distributor Program at the following URL: [REDACTED]

3.4 The track level indicated on the first page of this Addendum indicates the capabilities the OEM Distributor possesses to offer the Services defined in Schedule D to this Addendum.

4.0 Modification of Distributor Agreement

4.1 The following terms of the Distributor Agreement shall be modified and applicable to the purchase and sale of OEM Products under this Addendum.

4.1.1 [REDACTED] Standard Products for the purpose of this Addendum is OEM Products that have not been modified or customized to meet a specific customer requirement. Custom Products are not subject to return. For the purpose of this Addendum Custom Product is defined as Product purchased under this OEM Addendum that is modified to meet a specific customer requirement and is not ordinarily sold by Symbol in the modified form.

4.1.2 The purchase and sale of OEM Products that are Standard Products shall qualify as sales for the calculation of any Co-op Funds or rebate (or their equivalent) per the then-current OEM and/or rebate programs that are communicated by symbol to the Distributor in writing. Custom Products are not eligible for any Co-op funds or rebate calculations.

5.0 The term of this Addendum shall coincide with the Agreement; however, either party may terminate this Addendum without liability to the other party by providing 30 days prior written notice.

6.0 All other terms and conditions of the Agreement shall apply to the purchase and sale of the OEM Products hereunder.

IN WITNESS WHEREOF, the Parties have executed this Addendum on the date set forth opposite their names.

ScanSource, Inc.		Symbol Technologies, Inc.
By:	/s/ Jeffrey E. Yelton	By:	/s/ Thomas Gleason
Name:	Jeffrey E. Yelton	Name:	Thomas Gleason
Title:	President, ScanSource POS & Barcoding, N.A.	Title:	VP Sales
Date:	(REDACTED)	Date:	(REDACTED)

SCHEDULE A OEM PRODUCTS & PRICES

Track 1:         (REDACTED)

Track 1:         (REDACTED)

Track 2:         (REDACTED)

Schedule B OEM Customers

The OEM Supplemental Distribution List is updated and emailed periodically to Distributors. The List identifies OEM Customers authorized to purchase [REDACTED]. Note that the OEM Customer must present their Motorola SAP Number to the Distributor and Distributor must only sell those products to the OEM Customer that the OEM Customer is specifically eligible to buy. The eligibility date is also included on the List.

The appropriate OEM Customer and Products List follows this page.

[REDACTED]

Schedule C OEM Qualification Form

Based on Symbol’s evaluation of the Distributor’s services per the criteria set forth in Schedule D OEM Services and the OEM Distributor program, [REDACTED]

Schedule D OEM Services

[REDACTED]

AGREEMENT WITH DISTRIBUTOR

{ X } VALUE-ADD DISTRIBUTOR

{     } AUTO ID DISTRIBUTOR

{     } NICHE DISTRIBUTOR

ATTACHMENTS:

SCHEDULE A ADDITIONAL TERMS & CONDITIONS OF SALE

SCHEDULE B MUTUAL NON-DISCLOSURE AGREEMENT

SCHEDULE C PRODUCT & DISCOUNT SCHEDULE

THIS DISTRIBUTOR AGREEMENT (THE “AGREEMENT”), BETWEEN SYMBOL TECHNOLOGIES, INC. (“SYMBOL”; “SELLER”), ITS PRINCIPAL ADDRESS AT ONE SYMBOL PLAZA, HOLTSVILLE, NEW YORK, 11742-1300, AND SCANSOURCE, INC. (“DISTRIBUTOR”; BUYER”), ITS PRINCIPAL ADDRESS AT 6 LOGUE CT., GREENVILLE, SC 29615, INCLUSIVE OF ALL ATTACHED SCHEDULES, SETS FORTH THE CONDITIONS BY WHICH DISTRIBUTOR MAY PURCHASE AND REMARKET SYMBOL PRODUCTS TO RESELLERS.

1.0 DEFINITIONS. THE FOLLOWING TERMS ARE USED IN THE AGREEMENT AND SHALL MEAN THE FOLLOWING:

1.1 “AVAR.” AFFILIATE VALUE ADDED RESELLER AS DESCRIBED IN SYMBOL’S DISTRIBUTOR PROGRAM GUIDE.

1.2 “DISTRIBUTOR.” DISTRIBUTOR IS AUTHORIZED BY THIS AGREEMENT TO RESELL SYMBOL PRODUCTS TO RESELLERS. A DISTRIBUTOR IS FURTHER DEFINED AS ONE OF THE FOLLOWING TYPES:

1.2.1 “VALUE-ADD DISTRIBUTOR.” A SYMBOL DISTRIBUTOR THAT QUALIFIES TO PROVIDE COMPLETE VALUE-ADDED SERVICES TO RESELLERS WHICH SERVICES INCLUDE BANKING, LOGISTICS, SALES, MARKETING, CONFIGURATION, TECHNICAL SUPPORT AND PROFESSIONAL SERVICES IN SUPPORT OF SYMBOL PRODUCTS. A VALUE-ADD DISTRIBUTOR MAKES VOLUME PURCHASES FROM SYMBOL’S FULL PRODUCT LINE FOR RESALE TO RESELLERS WITHIN NORTH AMERICA.

1.2.2 “AUTO ID DISTRIBUTOR.” A SYMBOL DISTRIBUTOR THAT PROVIDES AUTOMATIC IDENTIFICATION APPLICATION SERVICES WHICH INCLUDES BANKING, LOGISTICS, SALES, MARKETING AND LIMITED TECHNICAL SUPPORT TO RESELLERS. AN AUTO ID DISTRIBUTOR MAKES VOLUME PURCHASES FROM A SELECT GROUP OR THE FULL LINE OF SYMBOL PRODUCTS FOR RESALE TO RESELLERS WITHIN THE TERRITORY.

1.2.3 “NICHE DISTRIBUTOR.” A TYPE OF AUTOMATIC IDENTIFICATION (AUTO ID) DISTRIBUTOR WHOSE BUSINESS IS FOCUSED IN ONE OR MORE OF THE

FOLLOWING AREAS: GEOGRAPHIC AREA, INDUSTRY, PRODUCT OR TECHNOLOGY.

1.3 “PRODUCT” OR “PRODUCTS.” HARDWARE AND LICENSED SOFTWARE PURCHASED FROM SYMBOL BY DISTRIBUTOR IN ACCORDANCE WITH THE TERMS AND CONDITIONS HEREIN FOR RESALE TO RESELLER.

1.4 “RESELLER.” RESELLER IS DISTRIBUTOR’S INDEPENDENT AND AUTHORIZED REMARKETER OF SYMBOL PRODUCTS. RESELLER SHALL PROVIDE PRODUCT, SALES, DELIVERY, INSTALLATION, USE, TRAINING, SERVICE, AND CUSTOMER SUPPORT TO END-USER.

1.5 “TERRITORY.” TERRITORY IS NORTH AND SOUTH AMERICA, INCLUDING THE UNITED STATES, CANADA, AND MEXICO, THE CARIBBEAN AND CENTRAL AMERICA.

2.0 SCOPE SYMBOL GRANTS DISTRIBUTOR A NON-EXCLUSIVE RIGHT TO PURCHASE PRODUCTS AND LICENSED SOFTWARE AT SPECIFIED DISCOUNTS, WHICH PRODUCTS AND DISCOUNTS ARE SET FORTH IN THE ATTACHED SCHEDULE C, FOR RESALE TO RESELLERS LOCATED WITHIN THE TERRITORY. DISTRIBUTOR SHALL NOTIFY SYMBOL OF ITS INTENT TO RESELL PRODUCT TO A CUSTOMER OUTSIDE OF THE TERRITORY BY WAY OF THE SYMBOL MULTINATIONAL PROGRAM. DISTRIBUTOR’S PARTICIPATION IN THE SYMBOL MULTINATIONAL PROGRAM IS SUBJECT TO SYMBOL’S REVIEW AND WRITTEN APPROVAL.

2.1 THE DISTRIBUTOR SHALL NOT RESELL PRODUCT TO AN END-USER. DISTRIBUTOR SHALL NOT RESELL TO OR THROUGH AN INDEPENDENT AGENT OR BROKER. DISTRIBUTOR SHALL NOT RESELL PRODUCT TO OR THROUGH CATALOGUE SALES OUTLETS, MAIL ORDER OUTLETS OR TELEMARKET RESELLERS EXCEPT THOSE PRODUCTS SPECIFIED IN AN APPENDIX TO SCHEDULE C TO THIS AGREEMENT, WHICH PRODUCTS SYMBOL, MAY MODIFY FROM TIME TO TIME, AT ITS SOLE OPTION, IN WRITING TO DISTRIBUTOR.

2.2 THE DISTRIBUTOR SHALL SUBMIT FOR SYMBOL APPROVAL DISTRIBUTOR APPLICATION, CREDIT APPLICATION, TAX EXEMPT CERTIFICATE, EDUCATION PROFILE, PRODUCT MARKETING PLAN, AND OTHER INFORMATION REASONABLY REQUIRED BY SYMBOL TO QUALIFY DISTRIBUTOR.

2.3 SUBSEQUENT TO THE INITIAL SUBMITTAL, AND PRIOR TO A RENEWAL TERM, DISTRIBUTOR SHALL PROVIDE SYMBOL WITH SEMI-ANNUAL UPDATES TO ITS PRODUCT MARKETING PLAN. EACH PRODUCT MARKETING PLAN SHALL INCLUDE INFORMATION IN SUPPORT OF DISTRIBUTOR’S RESPONSIBILITIES SET FORTH IN THIS AGREEMENT.

2.4 THE DISTRIBUTOR SHALL HAVE SUFFICIENT AND APPROPRIATE STAFFING AND CAPABILITIES TO PROMOTE AND SELL PRODUCTS TO ITS RESELLERS THROUGH DISTRIBUTOR’S OWN QUALIFIED SALESFORCE. THE VALUE-ADD DISTRIBUTOR SHALL ALSO MAINTAIN A DEDICATED SYMBOL MARKETING PERSON. DISTRIBUTOR SHALL BE RESPONSIBLE FOR ALL EXPENSES IT INCURS FOR PRODUCT PURCHASE AND RESALE. DISTRIBUTOR HAS FULL RESPONSIBILITY AND LIABILITY FOR ITS RESELLER’S OR AVAR’S ACTIVITIES WITH REGARD TO REMARKETING AND VALUE-ADDED ENHANCEMENT SOLUTIONS THAT THE AVAR HAS REGISTERED IN ITS APPLICATION TO THE DISTRIBUTOR THE DISTRIBUTOR IS RESPONSIBLE TO OBTAIN IN WRITING FROM THE AVAR NOTICE OF ANY SUBSTANTIAL CHANGE OR ANTICIPATED CHANGE TO THE INFORMATION SUPPLIED IN THE APPLICATION UNLESS RELEASE OF SUCH INFORMATION IS PRECLUDED BY LAW OR REGULATION.

2.5 THE DISTRIBUTOR SHALL HAVE SUFFICIENT AND APPROPRIATE STAFFING AND CAPABILITIES TO PROVIDE SALES SUPPORT, CUSTOMER SUPPORT

AND PROFESSIONAL SERVICES SUPPORT (AS APPLICABLE) FOR ITS RESELLERS AS DESCRIBED IN SYMBOL’S DISTRIBUTOR PROGRAM GUIDELINES. CUSTOMER SUPPORT SERVICES SUCH AS HELP DESK, PRODUCT CONFIGURATION, DIAGNOSTICS INSTALLATION SUPPORT AND TECHNICAL SUPPORT ARE REQUIRED AS DEFINED IN SYMBOL’S DISTRIBUTOR PROGRAM GUIDELINES.

2.6 THE DISTRIBUTOR SHALL CONDUCT BUSINESS IN ITS OWN NAME AS AN INDEPENDENT CONTRACTOR, AND SHALL NOT REPRESENT ITSELF AS AN EMPLOYEE OR AGENT OF SYMBOL.

2.7 THE VALUE-ADD DISTRIBUTOR AS WELL AS OTHER TYPES OF DISTRIBUTORS SHALL ATTEND AND SUCCESSFULLY COMPLETE CERTIFICATION TRAINING FOR ALL PRODUCT PLATFORMS TO BE RESOLD. DISTRIBUTOR SHALL BE RESPONSIBLE FOR ALL EXPENSES IT INCURS FOR PRODUCT TRAINING.

2.8 DISTRIBUTOR IS NOT AUTHORIZED TO RESELL USED PRODUCT OR PRODUCT WHICH HAS BEEN PREVIOUSLY SOLD WITHOUT SYMBOL’S PRIOR EXPRESS WRITTEN PERMISSION.

2.9 DISTRIBUTOR SHALL FURNISH SYMBOL WITH A (I) MONTHLY INVENTORY REPORT, AND (II) A MONTHLY SALES-OUT REPORT BY THE 5^TH BUSINESS DAY OF EACH MONTH FOR THE PREVIOUS THIRTY-(30) DAY PERIOD. DISTRIBUTOR SHALL ALSO FURNISH THE REQUIRED AVAR INFORMATION AS DEFINED IN SYMBOL’S MOST CURRENT PROGRAM CRITERIA. THE REPORTS SPECIFIED IN THIS SECTION SHALL BE IN A FORMAT PRESCRIBED BY SYMBOL. SYMBOL RESERVES THE RIGHT TO MODIFY DISTRIBUTOR’S REPORT REQUIREMENTS FROM TIME TO TIME WITH PRIOR WRITTEN NOTICE.

2.10 DISTRIBUTOR SHALL NOT RECRUIT A SYMBOL RESELLER WITHOUT SYMBOL’S PRIOR CONSENT.

2.11 DISTRIBUTOR AGREES NOT TO INTENTIONALLY ENGAGE IN ACTIVITIES THAT MAY DIMINISH SYMBOL’S RIGHTS OR INDUSTRY STANDING.

2.12 DISTRIBUTOR SHALL ADVISE SYMBOL IN WRITING WITHIN THIRTY (30) DAYS OF THE EFFECTIVE DATE OF A CHANGE IN MAJORITY OWNERSHIP OR LEGAL ADDRESS.

2.13 DISTRIBUTOR SHALL MAINTAIN AT ALL TIMES A SUFFICIENT INVENTORY OF PRODUCTS AS DEFINED IN SCHEDULE C TO ENSURE DELIVERY TO RESELLERS WITHIN FORTY-EIGHT (48) HOURS OF REQUEST.

2.14 DISTRIBUTOR AGREES TO ORDER AND TAKE DELIVERY OF THE MINIMUM ANNUAL NET SALES VOLUME OF PRODUCTS AS SPECIFIED IN SCHEDULE C OF THIS AGREEMENT.

2.15 DISTRIBUTOR SHALL FURNISH SYMBOL WITH A MONTHLY PURCHASE FORECAST WITH THE FIRST SUCH REPORT DUE WITHIN THIRTY (30) FROM THE DATE THIS AGREEMENT IS SIGNED BY THE PARTIES.

2.16 UPON PRIOR WRITTEN NOTICE, DISTRIBUTOR AGREES TO ALLOW SYMBOL TO CONDUCT A PHYSICAL INVENTORY OF PRODUCTS IN ANY OF DISTRIBUTOR’S STOCKING LOCATIONS. SYMBOL SHALL BE PERMITTED ACCESS TO DISTRIBUTOR’S RECORDS PERTAINING SOLELY TO PURCHASE AND DISTRIBUTION OF PRODUCTS.

2.17 DISTRIBUTOR SHALL PARTICIPATE IN AND ADHERE TO SYMBOL’S AVAR PROGRAM, AND SHALL COMPLY WITH SYMBOL’S THEN-CURRENT AVAR PROGRAM GUIDELINES. DISTRIBUTOR SHALL ENSURE THAT ITS RESELLERS COMPLY WITH SYMBOL’S CURRENT AVAR PROGRAM REGISTRATION GUIDELINES. DISTRIBUTOR IS FULLY RESPONSIBLE FOR PROVIDING ITS RESELLERS, IN A TIMELY MANNER, WITH PRODUCT INFORMATION PROVIDED BY SYMBOL FOR AVARS.

3.0 PURCHASE ORDERS. A PURCHASE ORDER FOR PRODUCT (“ORDER”, “ORDERS”) IS REQUIRED FOR PRODUCT DELIVERY AND SUCH ORDER IS SUBJECT TO SYMBOL ACCEPTANCE. ORDERS ARE BOUND BY AND SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, AND NO TERMS AND CONDITIONS OTHER THAN THOSE SET FORTH HEREIN SHALL APPLY TO AN ORDER. SYMBOL MAY, FROM TIME TO TIME, MODIFY THE SYMBOL BUSINESS PARTNER’S

GUIDE FOR ORDER PLACEMENT AND PRODUCT RETURNS, AND OTHER PROGRAM GUIDELINES ISSUED BY SYMBOL DURING THE TERM OF THIS AGREEMENT, TO REFLECT SYMBOL’S THEN CURRENT POLICIES AND PRACTICES, AND THE DISTRIBUTOR SHALL BE NOTIFIED OF ANY SUCH CHANGE TO THIS AGREEMENT IN WRITING PRIOR TO THE EFFECTIVE DATE OF SUCH CHANGE.

3.1 DISTRIBUTOR SHALL DELIVER TO SYMBOL, UPON EXECUTED AGREEMENT, AN INITIAL NON-CANCELLABLE ORDER FOR PRODUCT, IN THE AMOUNT SET FORTH IN SCHEDULE C, FOR DELIVERY WITHIN 90 DAYS FROM THE DATE OF THE ORDER.

3.2 AN ORDER MUST SPECIFY, AT A MINIMUM, CALENDAR DELIVERY DATE, COMPLETE DELIVERY AND BILLING LOCATION, PRODUCT MODEL NUMBER AND DESCRIPTION, SYMBOL PART NUMBER, QUANTITY, UNIT LIST PRICE, AUTHORIZED DISCOUNT AND RESALE/TAX IDENTIFICATION NUMBER. ORDERS RECEIVED WITHOUT THIS INFORMATION SHALL BE RETURNED TO DISTRIBUTOR FOR COMPLETION OR FULFILLED AT SYMBOL’S REASONABLE DISCRETION.

4.0 PRICE DISCOUNTS. DISTRIBUTOR’S INITIAL PRODUCT DISCOUNT LEVEL SHALL BE DETERMINED BY SYMBOL BASED UPON DISTRIBUTOR’S PRODUCT MARKETING PLAN AND APPLICATION INFORMATION.

4.1 [REDACTED]

4.2 CHANGES TO PRODUCT LIST PRICE MAY OCCUR FROM TIME TO TIME. IN THE EVENT OF A: (1) PRICE DECREASE – [REDACTED]; (2) PRICE INCREASE- [REDACTED]

5.0 STANDARD PRODUCT SUPPORT. SYMBOL SHALL PROVIDE THE DISTRIBUTOR WITH SYMBOL’S STANDARD PRODUCT PROMOTIONAL MATERIALS. CUSTOMER SERVICE PRODUCT SUPPORT IS AVAILABLE TO DISTRIBUTOR BY TELEPHONE DURING SYMBOL STANDARD BUSINESS HOURS.

6.0 USE OF TRADEMARKS/TRADE NAMES. SYMBOL HAS THE EXCLUSIVE WORLDWIDE RIGHTS TO ITS TRADEMARKS AND TRADE NAMES. THIS AGREEMENT DOES NOT AUTHORIZE USE OF DUPLICATION BY DISTRIBUTOR OR ANY THIRD

PARTY OF SYMBOL TRADEMARKS OR TRADE NAME WITHOUT SYMBOL’S PRIOR REVIEW AND WRITTEN APPROVAL. NOTWITHSTANDING THE FOREGOING, THE DISTRIBUTOR MAY USE THE APPROPRIATE SYMBOL PARTNER MARK FOR WHICH DISTRIBUTOR QUALIFIES.

7.0 PRODUCT DISCONTINUANCE. SYMBOL MAY, FROM TIME TO TIME, AND AT ITS SOLE OPTION, DISCONTINUE THE MANUFACTURE AND SALE OF ANY PRODUCT. SYMBOL SHALL PROVIDE NINETY (90) DAYS WRITTEN NOTICE TO DISTRIBUTOR PRIOR TO DISCONTINUANCE OF ANY PRODUCT (“NOTICE OF DISCONTINUANCE”) (REDACTED)

8.0 PROPRIETARY INFORMATION. PROPRIETARY INFORMATION EXCHANGED HEREUNDER SHALL BE GOVERNED BY SCHEDULE B TO THIS AGREEMENT. PROPRIETARY INFORMATION SHALL INCLUDE, BUT IS NOT LIMITED TO, THE PROVISIONS OF THIS AGREEMENT, DEMONSTRATION PRODUCT, TRAINING DATA PRODUCT PRICING AND DISCOUNTS, AND INFORMATION PROVIDED BY THE DISTRIBUTOR IN ACCORDANCE WITH ITS OBLIGATIONS HEREUNDER.

9.0 PRODUCT AND STOCK ROTATION.

9.1 (REDACTED)

9.2 (REDACTED)

9.3 OUT OF BOX FAILURE AN OUT-OF-BOX PRODUCT FAILURE IS ELIGIBLE FOR DUPLICATE PRODUCT EXCHANGE OR CREDIT, AS NOTED ON THE DISTRIBUTOR’S REQUEST FOR RETURN. PRODUCT IS RETURNED TO SYMBOL IN ACCORDANCE WITH THE RETURN AUTHORIZATION PROCEDURE IN SECTION 9.1.

9.4 CUSTOM PRODUCT. CUSTOM PRODUCT IS NOT RETURNABLE. CUSTOM PRODUCT IS A PRODUCT MODIFIED TO MEET A SPECIFIC REQUIREMENT REQUESTED BY DISTRIBUTOR AND NOT ORDINARILY SOLD BY SYMBOL IN THE MODIFIED FORM.

10.0 ASSIGNMENT. THIS AGREEMENT IS PERSONAL BETWEEN SYMBOL AND DISTRIBUTOR. NEITHER PARTY MAY ASSIGN OR TRANSFER THIS AGREEMENT, IN WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY.

11.0 TERM & TERMINATION.

11.1 TERM. THE TERM OF THE AGREEMENT IS TWELVE (12) MONTHS FROM DATE OF EXECUTION FOR THE PURPOSE OF DETERMINING DISTRIBUTOR’S PURCHASE VOLUME APPLICABLE TO SYMBOL’S PROGRAM REQUIREMENTS. RENEWALS SHALL BE FOR TWELVE (12) MONTH TERMS AND SHALL BE AUTOMATIC, EXCEPT THAT SYMBOL MAY REQUEST DISTRIBUTOR UPDATE INFORMATION REQUIRED IN SECTION 2 (“SCOPE”) TO QUALIFY DISTRIBUTOR FOR A RENEWAL TERM.

11.2 TERMINATION.

11.2(A) EITHER PARTY UPON GIVING THE OTHER PARTY AT LEAST THIRTY (30) DAYS PRIOR WRITTEN NOTICE MAY TERMINATE THIS AGREEMENT AT ANY TIME, WITHOUT CAUSE. SUCH TERMINATION SHALL BE EFFECTIVE ON THE DATE STATED IN THE SAID NOTICE.

11.2(B) THIS AGREEMENT SHALL ALSO TERMINATE IN THE EVENT OF ANY OF THE FOLLOWING, EFFECTIVE THIRTY (30) DAYS FROM RECEIPT OF WRITTEN NOTICE: (1) FAILURE TO CURE A MATERIAL BREACH WITHIN TWENTY (20) BUSINESS DAYS FROM RECEIPT OF NOTIFICATION OF SUCH BREACH; (II) THE LIQUIDATION OR INSOLVENCY OF THE OTHER PARTY, (III) FILING OF A MERITORIOUS PETITION IN BANKRUPTCY BY OR AGAINST THE OTHER PARTY UNDER ANY BANKRUPTCY OR DEBTORS’ LAW FOR ITS RELIEF OF REORGANIZATION.

11.3 EFFECT OF TERMINATION.

11.3(A) IN THE EVENT THIS AGREEMENT IS TERMINATED BY SYMBOL FOR ITS CONVENIENCE, OR FOR ANY REASON OTHER THAN THOSE LISTED IN SUBPARAGRAPH 11.2(B), SYMBOL SHALL [REDACTED]

11.3(B) IN THE EVENT THIS AGREEMENT IS TERMINATED BY THE DISTRIBUTOR FOR ANY REASON LISTED IN SUBPARAGRAPH 11.2(B), SYMBOL SHALL [REDACTED]

11.3(C) IN THE EVENT THIS AGREEMENT IS TERMINATED BY SYMBOL FOR ANY REASON LISTED IN SUBPARAGRAPH 11.2(B), [REDACTED].

11.3(D) IN THE EVENT THIS AGREEMENT IS TERMINATED BY THE DISTRIBUTOR FOR ITS CONVENIENCE, OR ANY REASON OTHER THAN THOSE LISTED IN 11.2(B), [REDACTED].

11.4 RIGHTS UPON TERMINATION. DISTRIBUTOR SHALL HAVE THE RIGHT TO RETAIN AS MUCH PRODUCT AS IS NECESSARY TO FULFILL ITS CONTRACTUAL OBLIGATIONS TO SELL SUCH PRODUCTS TO A CUSTOMER PURSUANT TO AN OUTSTANDING TO AN OUTSTANDING PURCHASE ORDER OR OTHER CONTRACT IN PLACE AT THE TIME OR TERMINATION. TERMINATION OF THE AGREEMENT SHALL NOT AFFECT SYMBOL’S RIGHT TO BE PAID FOR UNDISPUTED INVOICES FOR PRODUCTS ALREADY SHIPPED. THE TERMINATION OF THIS AGREEMENT SHALL NOT AFFECT ANY OF SYMBOL’S WARRANTIES, INDEMNIFICATIONS OR OBLIGATONS RELATING TO RETURNS, CREDITS OR AN OTHER MATTERS SET FORTH IN THE AGREEMENT THAT ARE TO SURVIVE TERMINATION. UPON TERMINATION OF THIS AGREEMENT, DISTRIBUTOR SHALL DISCONTINUE REPRESENTING ITSELF AS A DISTRIBUTOR OF SYMBOL’S PRODUCTS. THE TERMINATION OF THIS AGREEMENT SHALL NOT EFFECT THE OBLIGATIONS OF EITHER PARTY TO THE OTHER PARTY PURSUANT TO ANY PURCHASE ORDER FORWARDED TO SYMBOL PRIOR TO THE LAST DATE OF THE AGREEMENT.

IN WITNESS WHEREOF, THE PARTIES HAVE SET THEIR SIGNATURES AS OF THE DATES SET FORTH BELOW. THE EFFECTIVE DATE OF THE AGREEMENT SHALL BE THE DATE THE LAST SIGNATURE IS AFFIXED.

DISTRIBUTOR: SCANSOURCE, INC.		SELLER: SYMBOL TECHNOLOGIES, INC.
By:	/s/ Buck Baker	By:	/s/ Thomas A. Zix
Name:	Buck Baker	Name:	Thomas A. Zix
Title:	V.P. Merchandising ScanSource	Title:	Director, Channels & Alliances Operations
Date:	(REDACTED)	Date:	(REDACTED)

Schedule A to Distributor Agreement

Additional Standard Terms and Conditions of Sales and Service

12. TERMS OF PAYMENT

(REDACTED)

13. TITLE & DELIVERY. (A) AT SELLER’S OPTION, SHIPMENT WILL BE FOB SELLER’S LONG ISLAND, NY PLANT, OR ITS PLANT OF MANUFACTURE. RISK OF LOSS OR DAMAGE SHALL PASS FROM SELLER TO BUYER UPON DELIVERY TO COMMON CARRIER OR BUYER’S REPRESENTATIVE AT THE FOB POINT, SELLER’S LONG ISLAND, NY FACTORY OR ITS PLANT OF MANUFACTURE. BUYER SHALL HAVE THE RESPONSIBILITY TO PAY FOR INSURANCE; ALL CLAIMS FOR DAMAGE MUST BE FILED BY BUYER DIRECTLY WITH CARRIER;(B) ABSENT SPECIFIC INSTRUCTIONS, SELLER WILL SELECT THE CARRIER FOR SHIPMENT, BUT BY DOING SO, WILL NOT THEREBY ASSUME ANY LIABILITY IN CONNECTION WITH SHIPMENT NOR SHALL THE CARRIER IN ANY WAY BE CONSTRUED TO BE THE AGENT OF SELLER; (C) SELLER SHALL NOT BE LIABLE FOR ANY DAMAGES OR PENALTY FOR DELAY CAUSED SOLELY BY TRANSPORTATION OR FAILURE TO GIVE NOTICE OF SUCH DELAY.

14. TAXES PRICES ARE EXCLUSIVE OF ALL FEDERAL, STATE, MUNICIPAL OR OTHER GOVERNMENT EXCISE, CUSTOM DUTIES, SALES, USE, OCCUPATIONAL OR LIKE TAXES IN FORCE AND ANY SUCH TAXES SHALL BE ASSUMED AND PAID FOR BY BUYER. IN ORDER TO EXEMPT A SALE FROM SALES OR USE TAX LIABILITY, BUYER WILL SUPPLY A CERTIFICATE OF EXEMPTION OR SIMILAR DOCUMENT TO SELLER AT THE TIME OF ORDER PLACEMENT.

15. SOFTWARE. ALL SOFTWARE (INCLUDING FIRMWARE) FURNISHED TO BUYER IS ON A LICENSED BASIS. SELLER GRANTS TO BUYER A NON-TRANSFERABLE AND NON-EXCLUSIVE LICENSE TO USE EACH SOFTWARE OR FIRMWARE PROGRAM DELIVERED HEREUNDER (“LICENSED PROGRAM”). EACH SUCH LICENSE GRANTED AUTHORIZES BUYER TO USE THE LICENSED PROGRAM IN MACHINE-READABLE FORM ONLY, AND IN THE CASE OF SOFTWARE SUPPLIED WITH HARDWARE, ONLY ON SYSTEMS SUPPLIED BY SELLER TO BUYER UNDER

THIS AGREEMENT. SUCH LICENSE MAY NOT BE ASSIGNED, SUBLICENSED OR OTHERWISE TRANSFERRED BY BUYER WITHOUT PRIOR WRITTEN CONSENT OF SELLER, EXCEPT THAT, REGARDING ANY LICENSED PROGRAM EMBODIED IN A PRODUCT, THE TRANSFER OF SUCH PRODUCT SHALL CONVEY TO BUYER’S TRANSFEREE A LICENSE TO USE SUCH LICENSED PROGRAM UNDER TERMS COMMENSURATE WITH THE LICENSE SET FORTH IN THIS AGREEMENT. NO RIGHT TO COPY A LICENSED PROGRAM IN WHOLE OR IN PART IS GRANTED EXCEPT AS PERMITTED UNDER THE COPYRIGHT LAW. BUYER SHALL NOT MODIFY, MERGE, OR INCORPORATE ANY FORM OR PORTION OF A LICENSED PROGRAM WITH OTHER PROGRAM MATERIAL, CREATE A DERIVATIVE WORK FROM A LICENSED PROGRAM, OR USE A LICENSED PROGRAM IN A NETWORK, UNLESS THE LICENSED PROGRAM IS SPECIFICALLY DESIGNED FOR USE IN A NETWORK AS SET FORTH IN SYMBOL’S STANDARD PRODUCT DOCUMENTATION. BUYER AGREES TO MAINTAIN SELLER’S COPYRIGHT NOTICE ON THE LICENSED PROGRAMS DELIVERED HEREUNDER, AND TO INCLUDE THE SAME ON ANY AUTHORIZED COPIES IT MAKES, IN WHOLE OR IN PART. BUYER AGREES NOT TO DECOMPILE, DISASSEMBLE, DECODE OR REVERSE ENGINEER ANY LICENSED PROGRAM DELIVERED TO BUYER OR ANY PORTION THEREOF.

16. INFRINGEMENT INDEMNIFICATION. SELLER SHALL DEFEND ANY CLAIM, SUIT OR PROCEEDING BROUGHT AGAINST BUYER INSOFAR AS IT IS BASED ON A CLAIM THAT THE USE OR TRANSFER OF ANY PRODUCT DELIVERED HEREUNDER CONSTITUTES AN INFRINGEMENT OF A UNITED STATES PATENT OR COPYRIGHT IN EXISTENCE AS OF THE DATE OF DELIVERY OF THE PRODUCT TO BUYER (AN “INFRINGEMENT CLAIM”) SO LONG AS SELLER IS NOTIFIED PROMPTLY IN WRITING BY BUYER AS TO ANY SUCH ACTION AND IS GIVEN FULL AUTHORITY, INFORMATION AND ASSISTANCE (AT SELLER’S EXPENSE) FOR THE DEFENSE. IN ADDITION TO SELLER’S OBLIGATION TO DEFEND, SELLER SHALL PAY ALL DAMAGES AND COSTS (EXCEPT CONSEQUENTIAL DAMAGES) AWARDED THEREIN

AGAINST BUYER. THE OBLIGATIONS SET FORTH ABOVE SHALL NOT, HOWEVER, EXTEND TO PRODUCTS DELIVERED HEREUNDER WHICH WOULD GIVE RISE TO A CLAIM, SUIT, PROCEEDING, FINDING OR CONCLUSION SOLELY FOR CONTRIBUTORY INFRINGEMENT OR INDUCEMENT OF INFRINGEMENT. SELLER SHALL NOT BE RESPONSIBLE FOR ANY COMPROMISE MADE BY BUYER WITHOUT ITS CONSENT. NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF AN INFRINGEMENT CLAIM, SELLER’S OBLIGATION UNDER THIS PARAGRAPH SHALL BE FULFILLED, AT SELLER’S SOLE OPTION AND EXPENSE, IF SELLER AT ANY TIME: (A) OBTAINS A LICENSE FOR BUYER TO CONTINUE THE USE OR TO SELL THE INFRINGING PRODUCT PURCHASED FROM SELLER; OR (B) REFUNDS THE PURCHASE PRICE PAID TO SELLER BY BUYER FOR SUCH INFRINGING PRODUCT LESS A REASONABLE AMOUNT FOR USE, DAMAGE, OR OBSOLESCENCE, AND REMOVES SUCH PRODUCT; OR (C) REPLACES OR MODIFIES THE INFRINGING PRODUCT SO AS TO BE SUBSTANTIALLY FUNCTIONALLY EQUIVALENT TO THE INFRINGING PRODUCT BUT NON-INFRINGING. BUYER AGREES THAT THE FOREGOING INDEMNIFICATION SHALL NOT APPLY AND MOREOVER, SHALL BE EXTENDED TO SELLER FOR ANY CLAIM OF U.S. PATENT INFRINGEMENT WHICH MAY BE BROUGHT AGAINST SELLER BECAUSE OF COMPLIANCE WITH BUYER’S PARTICULAR DESIGN REQUIREMENTS, SPECIFICATIONS OR INSTRUCTIONS. BUYER GRANTS TO SELLER THE BENEFIT OF ANY LICENSE TO BUYER UNDER ANY PATENT WHICH MAY BE THE SUBJECT OF AN INFRINGEMENT ALLEGATION HEREUNDER TO THE EXTENT PERMITTED BY SAID LICENSE.

SELLER SHALL HAVE NO LIABILITY TO BUYER UNDER THIS PARAGRAPH IF ANY INFRINGEMENT CLAIM IS BASED UPON THE (I) USE OF PRODUCTS DELIVERED HEREUNDER IN CONNECTION OR IN COMBINATION WITH EQUIPMENT, DEVICES OR SOFTWARE NOT DELIVERED BY SELLER, OR (II) USE OF PRODUCTS DELIVERED HEREUNDER IN A MANNER FOR WHICH THE SAME WERE NOT DESIGNED, OR (III) MODIFICATION BY BUYER OF PRODUCTS DELIVERED HEREUNDER TO THE EXTENT SUCH MODIFICATION IS THE CAUSE OF THE CLAIM OR SUIT. SELLER SHALL FURTHER HAVE NO LIABILITY TO BUYER FOR ANY INFRINGEMENT CLAIM BASED ON BUYER’S USE OR TRANSFER OF THE PRODUCT DELIVERED HEREUNDER AFTER SELLER’S NOTICE THAT BUYER SHALL CEASE USE OR TRANSFER OF SUCH PRODUCT DUE TO SUCH CLAIM. EXCEPT AS STATED ABOVE, SELLER DISCLAIMS ALL WARRANTIES AND INDEMNITIES, EXPRESS, IMPLIED OR STATUTORY, FOR PATENT OR COPYRIGHT INFRINGEMENT.

17. WARRANTY. (A) SELLER’S STANDARD SCANNER AND TERMINAL PRODUCTS ARE WARRANTED AGAINST DEFECTS IN WORKMANSHIP AND MATERIALS FOR A PERIOD OF FIFTEEN (15) MONTHS FROM THE DATE OF SHIPMENT, PROVIDED THE PRODUCT REMAINS UNMODIFIED AND IS OPERATED UNDER NORMAL AND PROPER CONDITIONS. THE SOLE OBLIGATION OF SELLER FOR DEFECTIVE HARDWARE PRODUCTS IS LIMITED TO REPAIR OR REPLACEMENT (AT SELLER’S OPTION) ON A “RETURN TO FACTORY” BASIS WITH PRIOR SELLER AUTHORIZATION. SHIPMENT TO AND FROM SELLER WILL BE AT SELLER’S EXPENSE, UNLESS NO DEFECT IS FOUND. NO CHARGE WILL BE MADE TO BUYER FOR REPAIR OR REPLACEMENT PARTS. (B) THE AFOREMENTIONED PROVISIONS DO NOT EXTEND THE ORIGINAL WARRANTY PERIOD OF ANY PRODUCT THAT HAD EITHER BEEN REPAIRED OR REPLACED BY SELLER. (C) THE ABOVE WARRANTY SHALL NOT APPLY TO ANY PRODUCT (I) WHICH HAS BEEN REPAIRED OR ALTERED, EXCEPT BY SELLER; (II) WHICH HAS NOT BEEN MAINTAINED IN ACCORDANCE WITH ANY OPERATING OR HANDLING INSTRUCTIONS SUPPLIED BY SELLER, OR (III) WHICH HAS BEEN SUBJECTED TO UNUSUAL PHYSICAL OR ELECTRICAL STRESS, MISUE, ABUSE NEGLIGENCE OR ACCIDENT. EXCEPT FOR THE WARRANTY OF TITLE AND THE EXPRESS WARRANTIES STATED ABOVE, SELLER DISCLAIMS ALL WARRANTIES ON PRODUCTS FURNISHED HEREUNDER INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR THE PARTICULAR USE. THE STATED EXPRESS WARRANTIES ARE IN LIEU OF ALL OBLIGATIONS OR LIABILITIES ON THE PART OF SELLER FOR DAMAGES, INCLUDING BUT NOT LIMITED TO, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE USE OR PERFORMANCE OF THE PRODUCT OR SERVICE. SELLER’S LIABILITY FOR DAMAGES TO BUYER OR OTHERS RESULTING FROM THE USE OF ANY PRODUCT OR SERVICE FURNISHED HEREUNDER SHALL IN NO WAY EXCEED THE PURCHASE PRICE OF SAID PRODUCT OR THE FAIR MARKET VALUE OF SAID SERVICE, EXCEPT IN INSTANCES OF INJURY TO PERSONS OR PROPERTY.

18. NOTICES. NOTICES OR OTHER COMMUNICATIONS REQUIRED HEREUNDER SHALL BE IN WRITING, SENT BY COURIER, REGISTERED OR CERTIFIED MAIL, AND SHALL BE DEEMED TO HAVE BEEN DULY GIVEN UPON RECEIPT THEREOF, TO SYMBOL TECHNOLOGIES, INC., ONE SYMBOL PLAZA, HOLTSVILLE, NY 11742, AND SCANSOURCE, 6 LOGUE

COURT, GREENVILLE, SC 29615, UNLESS A NOTICE OF CHANGE OF ADDRESS SHALL HAVE BEEN RECEIVED PRIOR TO THE NOTICE THEREOF.

19. SERVICE CHANGES; RENEWALS. (A) SELLER’S PRODUCTS TO BE SERVICES ARE LISTED BY SELLER’S PRODUCT NUMBER AND SERIAL NUMBER. SOFTWARE IS LISTED BY SELLER’S PRODUCT NUMBER AND QUANTITY. (B) BUYER MAY REQUEST TO CHANGE THE LIST OF ITEMS SERVICED BY SELLER UNDER THIS AGREEMENT BY ADDRESSING THOSE CHANGES IN WRITING TO SELLER AT THE ABOVE ADDRESS, ATTN: SERVICE CONTRACT ADMINISTRATION. CHANGES ARE EFFECTIVE UPON BUYER’S REQUEST DATE OR RECEIPT OF SUCH CHANGES SHOULD A REQUEST DATE NOT BE PROVIDED. (C) UPON BUYER’S AUTHORIZATION, SERVICE RENEWAL COVERAGE BEGINS UPON THE EXPIRATION DATE OF THE INITIAL COVERAGE PERIOD. A SERVICE RENEWAL WILL BE ANNUAL UNLESS OTHERWISE AGREED IN WRITING, SERVICE RENEWAL REQUIRES BUYER’S COMPLIANCE WITH SELLER’S PAYMENT TERMS.

20. FORCE MAJEURE. SHIPPING DATES ACKNOWLEDGED BY SELLER ARE APPROXIMATE AND SELLER WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE DUE TO ITS FAILURE TO MEET SCHEDULED SHIPPING DATES. SELLER SHALL IN NO EVENT BE LIABLE FOR ANY DELAY OR DEFAULT IN ITS PERFORMANCE OF ANY OBLIGATION UNDER THIS AGREEMENT CAUSED DIRECTLY OR INDIRECTLY BY AN ACT OR OMISSION OF BUYER, FIRE, FLOOD, ACT OF GOD, ACTS OF GOVERNMENT, AN ACT OR OMISSION OF CIVIL OR MILITARY AUTHORITY OF A STATE OR NATION, STRIKE, LOCKOUT OR OTHER LABOR PROBLEM, INABILITY TO SECURE, DELAY IN SECURING OR SHORTAGE OF LABOR, MATERIIALS, SUPPLIES, TRANSPORTATION OR ENERGY, FAILURES OF SUBCONTRACTORS OR SUPPLIERS, OR BY WAR, RIIOT, EMBARGO OR CIVIL DISTURBANCE, BREAKDOWN, OR DESTRUCTION OF PLAN OR EQUIPMENT ARISING FROM ANY CAUSE WHATSOEVER, OR ANY CAUSE OR CAUSES BEYOND SELLER’S REASONABLE CONTROL. AT SELLER’S OPTION AND FOLLOWING NOTICE TO BUYER, ANY OF THE FOREGOING CAUSES SHALL BE DEEMED TO SUSPEND SUCH OBLIGATIONS OF SELLER AS LONG AS ANY SUCH CAUSE SHALL PREVENT OR DELAY PERFORMANCE, AND SELLER AGREES TO MAKE AND BUYER AGREES TO ACCEPT PERFORMANCE OF SUCH OBLIGATIONS WHENEVER SUCH CAUSE HAS BEEN REMEDIED.

21. DISPUTES. IF LEGAL PROCEEDINGS ARE COMMENCED TO RESOLVE A DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER ALL OF ITS COST, ATTORNEY FEES, AND EXPERT WITNESS FEES, INCLUDING ANY COSTS OR ATTORNEY FEES IN CONNECTION WITH ANY APPEALS.

22 ENTIRE AGREEMENT; NO WAIVER. THIS AGREEMENT, ALONG WITH ANY SCHEDULES, EXHIBITS OR ATTACHMENTS WHICH ARE EXECUTED BY BUYER AND SELLER, SHALL CONSTITUTE THE ENTIRE AGREEMENT BETWEEN BUYER AND SELLER AND NO ATTEMPTED VARIATION, MODIFICTION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT SHALL HAVE ANY FORCE OR EFFECT UNLESS CONSENTED TO IN WRITING SIGNED BY THE THIRD PARTY AGAINST WHOM ENFORCEMENT THEREOF IS SOUGHT. SUCH VARIATION, MODIFICATION OR WAIVER SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE CONSENTED TO. A FAILURE BY ANY PARTY TO EXERCISE OR DELAY IN EXERCISING ANY RIGHT OR POWER CONFERRED UPON IT IN THIS AGREEMENT SHALL NOT OPERATE AS A WAIVER OF ANY SUCH RIGHT OR POWER.

23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEROF AND EXCLUDING THE CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, AND TO THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK, AND TO THE RESPECTIVE APPELLATE COURTS THEREOF IN CONNECTION WITH ANY APPEAL THEREFROM.

24. MISCELLANEOUS. (A) THE SECTION HEADINGS USED HEREIN ARE FOR DESCRIPTIVE PURPOSES ONLY AND SHALL NOT BE USED IN CONSTRUING THE PROVISIONS OF THIS AGREEMENT. (B) SERVICE EXCLUSIONS. SERVICE AGREEMENT COVERAGE DOES NOT INCLUDE PHYSICAL DAMAGE, MISUSE,

UNAUTHORIZED ALTERATIONS OR ATTEMPTS TO REPAIR, ABNORMAL OPERATING ENVIRONMENTS, MAN-MADE OR NATURAL DISASTERS, DIRECT LIGHTNING DAMAGE, NOR CONSUMABLE ITEMS SUCH AS TAPES, DISKETTES, RIBBONS, PAPER, CABLES PRINT HEADS, BATTERIES OR CHARGERS, AND ANY ASSOCIATED EQUIPMENT OR SYSTEM EXCEPT AS AFFECTED BY THE PARTICULAR COVERED PRODUCT. UNLESS ALSO SPECIFICALLY COVERED. (C) RIGHT TO INSPECT. SELLER RESERVES THE RIGHT TO INSPECT ANY PRODUCT THAT HAS NOT BEEN COVERED AND IS OUT OF WARRANTY AND MAKE OPERATIONAL AT A FEE, BEFORE PLACING UNDER COVERAGE OF THIS AGREEMENT. IF THE SYSTEM WAS INSTALLED BY OTHER THAN SELLER, SELLER SHALL NOT BE LIABLE FOR PHYSICAL BACKBONE. (D) UNLESS NOTICE OTHERWISE SPECIFIES, SELLER OBSERVES THE FOLLOWING HOLIDAYS: NEW YEARS DAY, PRESIDENTS DAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY, THANKSGIVING DAY, AND CHRISTMAS DAY.

END OF SCHEDULE A

Symbol Technologies, Inc.

Schedule C1

Distributor Product and Discount Schedule

Effective (REDACTED)

(REDACTED)

DISTRIBUTOR AGREEMENT

APPENDIX 1 TO SCHEDULE C: PRODUCT & DISCOUNT SCHEDULE

(REDACTED)

SCHEDULE B TO DISTRIBUTOR AGREEMENT: MUTUAL NON-DISCLOSURE AGREEMENT

1. SYMBOL AND DISTRIBUTOR MAY RECEIVE DATA (“PROPRIETARY INFORMATION”) FROM EACH OTHER DURING THE TERM OF THE OF THE BUSINESS RELATIONSHIP DEFINED BY THE DISTRIBUTOR AGREEMENT. THE PROVISIONS THAT FOLLOW SHALL SUPERSEDE THE PROVISIONS OF ANY LEGEND WHICH MAY BE AFFIXED TO THE PROPRIETARY INFORMATION BY THE DISCLOSING PARTY AND THE PROVISIONS OF SUCH LEGEND SHALL, TO THE EXTENT IT IS INCONSISTENT HEREWITH, BE WITHOUT ANY FORCE OR EFFECT.

2. NOTWITHSTANDING THAT THIS AGREEMENT SHALL HAVE TERMINATED OR EXPIRED, EACH PARTY AGREES TO KEEP IN CONFIDENCE AND PREVENT THE UNAUTHORIZED USE OR DISCLOSURE TO ANY UNAUTHORIZED PERSON OR PERSONS OF ALL PROPRIETARY INFORMATION WHICH IS DESIGNATED IN WRITING, OR BY AN APPROPRIATE STAMP OR LEGEND BY THE DISCLOSING PARTY TO BE OF A PROPRIETARY OR CONFIDENTIAL NATURE RECEIVED AND TO USE SUCH DATA ONLY FOR THE ABOVE STATED PURPOSE. PROPRIETARY INFORMATION SHALL INCLUDE INFORMATION ORALLY ONLY IF IDENTIFIED AS PROPRIETARY INFORMATION AT THE TIME OF THE FIRST ORAL DISCLOSURE AND REDUCED TO WRITING WITHIN THIRTY (30) DAYS THEREOF. NEITHER PARTY SHALL BE LIABLE FOR USE OR DISCLOSURE OF ANY SUCH CONFIDENTIAL INFORMATION IF SAME: (A) IS IN THE PUBLIC DOMAIN AT THE TIME IT IS DISCLOSED; OR (B) IS KNOWN TO THE RECEIVING PARTY AT THE TIME OF DISCLOSURE; OR (C) IS USED OR DISCLOSED WITH THE PRIOR, WRITTEN APPROVAL OF THE OTHER PARTY; OR (D) IS USED OR DISCLOSED AFTER FIVE (5) YEARS FROM THE DATE OF THIS AGREEMENT; OR (E) IS INDEPENDENTLY DEVELOPED BY THE RECEIVING PARTY; OR (F) BECOMES KNOWN TO THE RECEIVING PARTY FROM A SOURCE OTHER THAN THE DISCLOSING PARTY WITHOUT A BREACH OF THIS AGREEMENT BY THE RECEIVING PARTY. EITHER PARTY SHALL BE LIABLE FOR INADVERTENT, ACCIDENTAL OR MISTAKEN USE OR DISCLOSURE OF CONFIDENTIAL INFORMATION OBTAINED UNDER THIS AGREEMENT DESPITE THE EXERCISE OF THE SAME REASONABLE PRECAUTION AS THE RECEIVING PARTY TAKES TO SAFEGUARD ITS OWN PROPRIETARY INFORMATION.

3. THE DISCLOSURE OF CONFIDENTIAL INFORMATION HEREUNDER BY EITHER PARTY HERETO SHALL NOT BE CONSTRUED AS GRANTING TO THE OTHER, EITHER EXPRESSLY OR OTHERWISE,

ANY LICENSE UNDER ANY INVENTION OR PATENT NOW OR HEREAFTER OWNED OR CONTROLLED BY SUCH PARTY , NOR SHALL SUCH AGREEMENT OR DISCLOSURE CONSTITUTE ANY REPRESENTATION, WARRANTY OR ASSURANCE BY THE TRANSMITTING PARTY WITH RESPECT TO ANY INFRINGEMENT OF PATENTS OR OTHER RIGHTS OF THIRD PARTIES.

4. EACH PARTY SHALL PERFORM ITS OBLIGATIONS HEREUNDER WITHOUT CHARGE TO THE OTHER. NOTHING IN THIS AGREEMENT SHALL (A) GRANT EITHER PARTY THE RIGHT TO MAKE ANY COMMITMENT OF ANY KIND FOR OR ON BEHALF OF THE OTHER PARTY WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY; OR (B) CREATE OR BE INTERPRETED IN ANY WAY AS A JOINT VENTURE, PARTNERSHIP OR FORMAL BUSINESS ORGANIZATION OF ANY KIND.

5. UPON EXPIRATION OR TERMINATION OF THIS AGREEMENT, OR UPON BREACH OF ANY OBLIGATION OF THIS AGREEMENT BY THE RECEIVING PARTY, OR UPON REQUEST OF THE DISCLOSING PARTY, ALL RECORDED COPIES OF THE CONFIDENTIAL INFORMATION AND PORTIONS THEREOF REMAINING IN THE RECEIVING PARTY’S POSSESSION SHALL BE RETURNED TO THE DISCLOSING PARTY OR DESTROYED, AND SUCH RETURN OR DESTRUCTION CERTIFIED TO THE DISCLOSING PARTY.

6. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AS TO THE SUBJECT MATTER HEREOF, AND SUPERSEDES AND REPLACES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS, WRITTEN OR ORAL, AS TO SUCH SUBJECT MATTER.

7. THE PARTIES ACKNOWLEDGE THIS AGREEMENT IS PERSONAL IN NATURE AND AGREE THAT IT SHALL NOT BE ASSIGNED, IN WHOLE OR IN PART, BY EITHER PARTY WITHOUT THE WRITTEN CONSENT OF THE OTHER PARTY. ANY PURPORTED ASSIGNMENT OF THIS AGREEMENT OR ANY INTEREST THEREIN WITHOUT THE WRITTEN CONSENT OF BOTH PARTIES SHALL BE VOID.

8. NO SUBSEQUENT AGREEMENT, ARRANGEMENT, RELATIONSHIP OR UNDERSTANDING BETWEEN THE PARTIES SHALL BE VALID, EFFECTIVE OR ENFORCEABLE AND NO OBLIGATION OR LIABILITY SHALL BE CREATED ON BEHALF OF EITHER PARTY HERETO UNLESS AND UNTIL IT IS CONTAINED IN A WRITING, SIGNED BY DULY AUTHORIZED REPRESENTATIVES OF EACH PARTY.

9. IF ANY LEGAL PROCEEDINGS ARE COMMENCED TO RESOLVE ANY DISPUTE OR DIFFERENCE WHICH MAY ARISE BETWEEN THE PARTIES HERETO, OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE PREVAILING PARTY SHALL BE ENTITLED, IN ADDITION TO ANY OTHER AWARD THAT MAY BE MADE, TO RECOVER COSTS, ATTORNEYS FEES, AND EXPERT WITNESS FEES, INCLUDING ANY COSTS OR ATTORNEYS FEES INCURRED IN CONNECTION WITH ANY APPEALS.

10. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE COMMERCIAL LAWS BUT NOT THE CONFLICT OF LAW PROVISIONS OF THE STATE OF NEW YORK.

END OF SCHEDULE B

DISTRIBUTOR AGREEMENT

APPENDIX 2 TO SCHEDULE C: PRODUCT & DISCOUNT SCHEDULE

Only the following product may be sold by the Distributor to or through catalogue sales outlets, mail order outlets or telemarket resellers; as defined in Section 2.1 (referenced below) of this Agreement:

1.) LS 100X Series

2.) LS 21XX Series

3.) LT 18XX Series

4.) LL 500 Interface Controller

5.) LP 1500X Series

6.) LS 400X Series

7.) LS 9100 Series

8.) LS 3XXX Series

9.) Cyberpen ™

2.1 Criteria Distributor shall not resell Product to or through catalogue sales outlets, mail order outlets or telemarket resellers except those Products specified in an Appendix to Schedule C to this Agreement.

EX-21.1

Exhibit 21.1

ScanSource, Inc.

Schedule of Subsidiaries

Name of Subsidiary	State/Country of Incorporation	Percentage of Voting Securities Owned by Immediate Parent
4100 Quest, LLC	South Carolina	100	%
ScanSource Properties, LLC	South Carolina	100	%
Logue Court Properties, LLC	South Carolina	100	%
8650 Commerce Drive, LLC	Mississippi	100	%
Partner Services, Inc.	South Carolina	100	%
ScanSource Security Distribution, Inc.	South Carolina	100	%
ScanSource Communications, Inc.	South Carolina	100	%
ScanSource Canada, Inc.	Canada	100	%
ScanSource de Mexico S. de R.L. de C.V.	Mexico	99.9	%1
Outsourcing Unlimited, Inc.	Georgia	100	%
Netpoint International, Inc.	Florida	100	%
ScanSource France SARL	France	100	%
ScanSource Europe Limited	United Kingdom	100	%
ScanSource UK Limited	United Kingdom	100	%
ScanSource EDC Limited	United Kingdom	100	%
ScanSource Europe SPRL	Belgium2	99.9	%3
ScanSource Germany GmbH	Germany	100	%
ScanSource Communications Limited f/k/a MTV Telecom (Distribution) Limited	United Kingdom	99.9	%4

¹ Mr. Baur, the CEO of ScanSource, Inc., owns interests representing .000019%.

² ScanSource Europe SPRL has branch offices that operate under the names ScanSource Italia and ScanSource Netherlands.

³ Mr. Baur, the CEO of ScanSource, Inc., owns one share, representing .10%.

⁴ Mr. Baur, the CEO of ScanSource, Inc., owns one share, representing .10%.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-94640) of ScanSource, Inc. dated July 17, 1995;

(2) Registration Statement (Form S-8 No. 333-08884) of ScanSource, Inc. dated April 10, 1998;

(3) Registration Statement (Form S-8 No. 333-49879) of ScanSource, Inc. dated April 10, 1998;

(4) Registration Statement (Form S-8 No. 333-78281) of ScanSource, Inc. dated May 12, 1999;

(5) Registration Statement (Form S-8 No. 333-36766) of ScanSource, Inc. dated May 11, 2000;

(6) Registration Statement (Form S-8 No. 333-110220) of ScanSource, Inc. dated November 4, 2003;

(7) Registration Statement (Form S-8 No. 333-115534) of ScanSource, Inc. dated May 14, 2004;

(8) Registration Statement (Form S-8 No. 333-144121) of ScanSource, Inc. dated June 28, 2007; and

(9) Registration Statement (Form S-8 No. 333-153653) of ScanSource, Inc. dated September 24, 2008

of our reports dated August 27, 2009, with respect to the consolidated financial statements of ScanSource, Inc., and the effectiveness of internal control over financial reporting of ScanSource, Inc., incorporated by reference, included in this Annual Report (Form 10-K) of ScanSource, Inc. for the year ended June 30, 2009.

/s/ Ernst & Young LLP

Greenville, South Carolina

August 27, 2009

EX-31.1

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a) or 15d-14(a)

of the Exchange Act, as adopted Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Michael L. Baur, certify that:

1. I have reviewed this Annual Report on Form 10-K of ScanSource, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael L. Baur

Michael L. Baur, Chief Executive Officer

(Principal Executive Officer)

Date: August 27, 2009

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a) or 15d-14(a)

of the Exchange Act, as adopted Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Richard P. Cleys, certify that:

1. I have reviewed this Annual Report on Form 10-K of ScanSource, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Richard P. Cleys

Richard P. Cleys, Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: August 27, 2009

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer of ScanSource, Inc.

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to § 906

of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of ScanSource, Inc. (the “Company”) on Form 10-K for the year ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 27, 2009	/s/ Michael L. Baur
	Michael L. Baur, Chief Executive Officer
	(Principal Executive Officer)

This certification is being furnished solely to comply with the provisions of § 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the accompanying Report, including for purposes of Section 18 of the Exchange Act, or as a separate disclosure document. A signed original of this written certification required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written certification required by Section 906, has been provided to the Company and will be rendered by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer of ScanSource, Inc.

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to § 906

of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of ScanSource, Inc. (the “Company”) on Form 10-K for the year ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 27, 2009	/s/ Richard P. Cleys
	Richard P. Cleys, Vice President and Chief Financial Officer (Principal Financial Officer)

This certification is being furnished solely to comply with the provisions of § 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the accompanying Report, including for purposes of Section 18 of the Exchange Act, or as a separate disclosure document. A signed original of this written certification required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written certification required by Section 906, has been provided to the Company and will be rendered by the Company and furnished to the Securities and Exchange Commission or its staff upon request.