Document:

Exhibit 10.3

 

To:                     Genco Shipping & Trading Limited

 

Copy:      Genco Bay Limited

Genco Ocean Limited

Genco Avra Limited

Genco Mare Limited

Genco Spirit Limited

(the “Company Parties”)

 

1 April 2014

 

Dear Sirs

 

US$100,000,000 secured loan agreement dated 12 August 2010 (as amended by the first amendment dated 21 December 2011, as further amended by the second amendment dated 1 August 2012, and as further amended, supplemented or restated from time to time, the “Loan Agreement”) made between (1) Genco Shipping & Trading Limited, as borrower, (2) the Company Parties, as guarantors, (3) the Lenders (as defined therein) and (4) Crédit Agricole Corporate and Investment Bank, as Agent and Security Trustee.

 

1.                                     Definitions

 

1.1                              In this letter:

 

“Enforcement Action” means:

 

(a)                                in relation to any Liabilities (with the exception of Liabilities arising as a result of the termination of existing interest protection agreements and other hedging agreements entered into in connection with the DnB Credit Facility):

 

(i)                         the acceleration of any Liability or the making of any declaration that any Liabilities are due and payable or payable on demand;

 

(ii)                      any demand against any Group Member under any security, guarantee or surety provided of that Group Member;

 

(iii)                   the exercise of any right of set-off, account combination or payment netting against any Group Member in respect of any Liabilities other than ordinary netting under any swap or derivative contract; and

 

(iv)                  the premature termination or close-out of any swap or derivative transaction under any swap or derivative contract entered into with any Group Member;

 

(b)                           the taking of any steps to enforce or require the enforcement of any encumbrance granted by any Group Member (including any arrest of any vessel for a claim in excess of $5,000,000 or any other enforcement of any mortgage over any vessel or any other asset of any Group Members the crystallisation of any floating charge or redirecting the earnings of any vessel or the other assets of any Group Member), except for any enforcement of assignment of insurances in relation to a total loss or other significant insured event; or

 

(c)                                 the petitioning or applying for any Insolvency Proceeding;

 

 

“Group” means the Borrower and each of its Subsidiaries other than Baltic Trading Limited and its Subsidiaries, and a “Group Member” means any of them;

 

“Insolvency Proceedings” means any bankruptcy, liquidation, reconstruction, winding up, dissolution, administration or reorganisation of any Group member, or any of such Group Member’s assets or a composition, compromise, assignment or arrangement with any creditor of any Group Member or any suspension of payments or moratorium of any indebtedness of any such Group Member, or any other insolvency proceedings or any analogous procedure or step in any jurisdiction (including the appointment of any liquidator, receiver, administrator, trustee or similar officer), including but not limited to, any chapter 11 cases in the United States of America;

 

“Liability” means any and all Financial Indebtedness of any Group Member in excess of $5,000,000; and

 

“Termination Event” shall have the meaning given to it in paragraph 4.1 below.

 

1.2                              All other terms and expressions used in this letter shall have the same meaning given to them in the Loan Agreement.

 

1.3                              This letter is designated as a Finance Document.

 

2.                                      Request

 

We refer to the Loan Agreement and to your letter to us dated 24 March 2014 requesting a temporary waiver (the “Waivers”) of:

 

(a)                                the Consolidated Interest Coverage Ratio in clause 12.2(e) (Minimum Consolidated Interest Coverage Ratio) of the Loan Agreement and the Leverage Ratio in clause 12.2(d) (Maximum Leverage Ratio) of the Loan Agreement (the “Financial Covenants”) for the fiscal quarter ending 31 March 2014 through and including 11:59 pm (New York Time) 21 April 2014 (the “Waiver Period”);

 

(b)                                the event of default that will arise pursuant to clauses 19.1(e)(i) and 19.1(e)(ii) (cross default) of the Loan Agreement resulting from (i) the failure to pay the required payment due in respect of the scheduled commitment reduction under the DnB Credit Facility on 31 March 2014, (ii) the failure by the Borrower to comply with the financial covenants set out in the DnB Credit Facility during the Waiver Period and (iii) the breach of the cross-default provisions in existing interest protection agreements and other hedging agreements as a result of the defaults set out above under the DnB Credit Facility (the “Cross Defaults”) for the Waiver Period; and

 

(c)                                 the events of default arising under:

 

(i)                                      clause 19.1(f)(i) of the Loan Agreement; and

 

(ii)                                   clause 19.1(f) of the Loan Agreement, solely:

 

(x)                                 to the extent that permits any Obligor to vote or authorise to commence proceedings under Chapter 11 of the Bankruptcy Code of the United States of America (the “Chapter 11 Proceedings”), which are undertaken for the purpose of implementing the proposed restructuring of the Borrower’s existing bank facilities and other indebtedness pursuant to a restructuring support agreement to be entered into by, among others, the lenders under the Loan Agreement, the lenders

 

 

under the Metrostar Credit Agreement and the lenders under the DnB Credit Facility (the “RSA”); and

 

(y)                                 to the extent that the current discussions and actions between the Group Members and their creditor groups for the purpose of implementing the Chapter 11 Proceedings and the RSA, including entering into this letter, the Collateral Letters and the RSA, fall within clause 19.1(f) of the Loan Agreement,

 

(iii)                              clause 12.1(a)(ii) of the Loan Agreement in respect of the financial statements of the Security Parties for the financial year ending on 31 December 2013,

 

(together, the “Specific Defaults”).

 

3.                                     Waiver and Conditions

 

We hereby agree to waive (i) your compliance with the Financial Covenants, (ii) the Cross Defaults and (iii) the Specific Defaults, in each case during the Waiver Period, subject to the following conditions being satisfied:

 

(a)                                the Waivers shall apply only in relation to the Waiver Period;

 

(b)                                prior to 23.59 hours (New York Time) on 1 April 2014, you provide us with evidence to our satisfaction that (i) the required lenders under the DB Credit Facility have consented to waivers under the DB Credit Facility on substantially similar terms to this letter (the “DB Waiver Letter”) and (ii) the majority lenders under the DnB Credit Facility have provided a forbearance under the DnB Credit Facility in form, content and effect similar to this letter including that the majority lenders thereunder have agreed, amongst other things, that during the Waiver Period they shall not exercise their rights resulting from the failure for the Borrower to pay the required payment due in respect of the scheduled commitment reduction under the DnB Credit Facility on 31 March 2014 (the “DnB Forbearance Letter” and together with the DB Waiver Letter, the “Collateral Letters”), such evidence being in the form of executed copies of the Collateral Letters and an email from the respective agent of the DB Credit Facility and the DnB Credit Facility or their legal counsels that the waivers under the Collateral Letters have taken effect.

 

4.                                      Termination of Waivers

 

4.1                              The Waivers shall cease to apply automatically and with immediate effect if any event specified in 4.1(a) to (h) below occurs (each a “Termination Event”), unless such Termination Events are expressly waived by the Agent, acting on the instructions of the Majority Lenders:

 

(a)                                an Event of Default has occurred (other than the Events of Default waived pursuant to this letter);

 

(b)                                you are in breach of any of your obligations under this letter;

 

(c)                                 the Waiver Period has expired;

 

(d)                                a Collateral Letter is terminated, repudiated or rescinded or ceases to have effect or is amended or varied in any way that would have a material adverse effect on any of the Creditor Parties;

 

(e)                                 any creditor takes Enforcement Action against any Group Member and such Enforcement Action triggers an event of default (however described in any

 

 

other agreement relating to Financial Indebtedness), which is not waived or forborne;

 

(f)                                  if any five (5) vessels owned by the Group are arrested during the Waiver Period and not released within three (3) Business Days of such arrest;

 

(g)                                 any Group Member petitions or applies for any Insolvency Proceedings; or

 

(h)                                any Group Member fails to pay any indebtedness (with the exception of Liabilities arising as a result of the termination of existing interest protection agreements and other hedging agreements entered into in connection with the DnB Credit Facility) owed to any of its creditors as and when they fall due and the same constitute an event of default (however described any agreement relating to Financial Indebtedness), which is not waived or forborne.

 

4.2                              After the termination of this letter, each of the Creditor Parties shall be released from all of its obligations under this letter and may take any Enforcement Action after such termination in accordance with the terms of the Finance Documents.

 

5.                                     Reservation of Rights

 

Nothing in this letter shall prevent the Creditor Parties from taking any Enforcement Action after the Waiver Period in respect of any Event of Default which has occurred or may occur during the Waiver Period or which occurs or continues after the termination of this letter, regardless of whether such Event of Default occurred prior to or during the Waiver Period.  Accordingly, this letter shall not constitute any waiver by the Creditor Parties of any breach or default by any Group Member and the Creditor Parties reserve all rights in relation thereto, except as otherwise expressly set out in this letter and subject only to the terms of this letter.

 

6.                                      Undertakings

 

6.1                              During the Waiver Period, you shall, on a reasonable best efforts basis, promptly provide us with any information that is provided to the creditors under the DnB Credit Facility and the DB Credit Facility if such information has an effect on the economic interests of any of the Creditor Parties.

 

6.2                              You shall promptly notify us if a Collateral Letter is capable of being terminated, is terminated or ceases to have effect, or a party to a Collateral Letter takes steps to amend, terminate, repudiate or rescind a Collateral Letter or if any waivers or amendments are made, proposed or requested to a Collateral Letter or if you or any Group Member breaches any of the terms contained in a Collateral Letter.

 

6.3                               You shall promptly notify us if:

 

(i)                                    a Termination Event occurs or is reasonably likely to occur; or

 

 

(ii)                                  any Enforcement Action is commenced against a Group Member.

 

6.4                              During the Waiver Period, you shall not enter into any waiver, modification or amendment to any of the DnB Credit Facility and the DB Credit Facility which grants more favourable provisions or treatment to the lenders thereunder unless each of the Creditor Parties receives the benefit of such more favourable provisions at the same time and on the same terms.

 

7.                                     Continuing Security

 

You confirm that any encumbrance created and/or any guarantee granted by the Obligors in favour of any of the Creditor Parties remains in full force and effect and is not in any way affected by this letter.

 

8.                                      Counterparts and applicable law

 

8.1                              This letter may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this letter.

 

8.2                              This letter and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

 

8.3                              For the exclusive benefit of the Creditor Parties, the parties to this letter irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any dispute (a) arising from or in connection with this letter or (b) relating to any non-contractual obligations arising from or in connection with this letter and that any proceedings may be brought in those courts.

 

Please confirm your agreement to the terms of this letter by signing and returning a duplicate of this letter to us.

 

Yours faithfully

 

 

For and on behalf of

Crédit Agricole Corporate and Investment Bank 
  (as Agent acting on the instructions of the Majority Lenders)

 

	
/s/   Jerome Duval
    	
 
    
	
Jerome   Duval
    	
 
    
	
Managing   Director
    	
 
    
	
 
    	
 
    
	
/s/   Michael Choina
    	
 
    
	
Michael   Choina
    	
 
    
	
Director
    	
 
    

 

 

Confirmed and agreed on 1 April 2014

for an on behalf of

 

 

	
/s/ John C.   Wobensmith
    	
 
    
	
Genco   Shipping & Trading Limited
    	
 
    
	
(as Borrower)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ John C.   Wobensmith
    	
 
    
	
Genco Bay Limited
    	
 
    
	
Genco Ocean   Limited
    	
 
    
	
Genco Avra Limited
    	
 
    
	
Genco Mare Limited
    	
 
    
	
Genco Spirit   Limited
    	
 
    
	
(as Guarantors)EX-10.1

 Exhibit 10.1 
  

 
 August 14, 2014 

PERSONAL AND CONFIDENTIAL 
 Rafael
Nassar Paloni 
 President 
 Intersmart Comércio
Importação Exportação de Equipamentos Eletrônicos, S.A. 
 Av. Independência 

941 Vila Colemar Natal e Silva 
 Goiânia—GO, 74633-010,
Brazil 
 Dear Mr. Paloni: 
 I am pleased to provide this
binding letter of intent (this “Letter Agreement”) for the purchase of Intersmart Comércio Importação Exportação de Equipamentos Eletrônicos, S.A. and related entities (“N1” or
“Company”). We believe that N1 is an excellent fit for ScanSource with N1’s leading market position in the communications market in Brazil. Both of our firms share a strong commitment to the vendor and reseller partners that we serve
and share a similar value-added philosophy. We are looking forward to working with you and the management of N1. 
 This Letter Agreement outlines the
material, key terms agreed to by the parties, which will be further developed in a Stock Purchase Agreement. The Parties have agreed on the approach to valuation and the purchase price structure, transaction conditions, as well as the other key
terms for the contemplated acquisition. Accordingly, the parties seek to make this Letter Agreement binding or enforceable as to all such key terms agreed. 
  

	 	1.	Basic Transaction Structure. ScanSource, Inc. or one of its affiliates (“ScanSource”) will acquire 100% of the outstanding shares of the Company (the “Shares”) from you and the other Company
shareholders (the “Sellers”) at Closing, December 31, 2014 (the “Acquisition”). A portion of the purchase price for the shares shall be paid in cash at Closing and the remainder will be paid as a “earn-out” as
follows: (a) R$159,628,000 (assuming US GAAP adjusted Trailing Twelve Month (“TTM”) EBITDA to be determined at Closing and currently as of December 31, 2014 of R$43,854M, which will include foreign currency contract gains
and losses), reduced by outstanding debt, net of cash (the “Initial Purchase Price”), will be paid to the Sellers at Closing, representing payment of 52% of the purchase price; (b) the remaining 48% of the purchase price will be paid
to the Sellers over a 4 year period following Closing as detailed in Paragraph 3 below. Subject to the Key Assumptions in section 6, Due Diligence in section 7 and Conditions in section 8, supra, the parties contemplate an initial purchase price
based upon a 7.0 multiple of the Company’s adjusted EBITDA for the TTM from Closing and a blended 7.3 multiple for all the purchase price payments pursuant to the table in section 3 (b) supra. The Closing initial purchase price payment
will be based upon the EBITDA as of June 30, 2014 or December 31, 2014, whichever is higher and the audit of the 2014 financial results will adjust either positive or negative the EBITDA and the initial purchase price calculation, which
will be performed by April 30, 2015. 

	 	2.	Initial Purchase Price; Adjustments. The Initial Purchase Price will be subject to adjustment as provided below and will be paid in the following manner: 

 

	 	a.	At the Closing, ScanSource will pay N1 the Initial Purchase Price by wire transfer of immediately available funds; 

  

	 	b.	The Initial Purchase Price assumes that at Closing N1 has a normalized Tangible Net Assets, excluding debt and cash, of a minimum amount to be determined in due diligence and assumes adjusted EBITDA of R$43,854 million
inclusive of foreign currency exchange contract gains and losses. A physical count of inventory will occur at Closing; 

  

	 	c.	All related party loans shall be settled prior to Closing and none of those obligations will remain obligations of the Company at Closing; 

 

	 	d.	N1 shall pay all sales, use, and transfer taxes related to the Closing of the transaction as well as all corporate income taxes due or accrued. 

 

	 	e.	ScanSource and N1 shall share equally the cost of any required regulatory filings, if applicable. 

  

	 	3.	Payment of Remainder of Purchase Price. At the end of each fiscal year (June 30) for the first 4 years after the Closing, ScanSource shall make payments to the Sellers as follows: 

 

	 	a.	(Adjusted EBITDA for the 12-month period ending June 30) * (the adjusted EBITDA multiple for such year as set forth in section 3(b) below) * (12%), (“Adjusted EBITDA” is defined as TTM taken from the
Company’s current E&Y Consolidated Audited Statements adjusted to and in accordance with US GAAP, as defined: Operating Income before Financial Income (expense) in accordance with US GAAP plus Depreciation and Amortization for TTM
minus FX results, which is the hedging costs associated with covering net FX balance sheet exposures per ScanSource’s corporate FX policy except that: 

  

	 	i.	Adjusted EBITDA shall be determined without application of the reserve for doubtful accounts, such that EBITDA shall be increased by the amount of the reserve for doubtful accounts receivable as of June 30.

  

	 	ii.	The amount of the reserve for doubtful accounts receivable will be established and based upon reserve percentages and methodologies determined in light of N1’s historical experience which will be identified from
due diligence and those as of June 30, 2018 shall be adjusted in a manner agreed upon by ScanSource and Sellers to render such reserve reasonable in light of N1’s actual experience between the Closing and June 30, 2018 and EBITDA
shall be increased or decreased accordingly; 

  

	 	iii.	The amount of the reserve for obsolete inventory will be established and based upon reserve percentages and methodologies determined in light of N1’s historical experience which will be identified from due
diligence and those as of June 30, 2018 shall be adjusted in a manner agreed upon by ScanSource and Sellers to render such reserve reasonable in light of N1’s actual experience between the Closing and June 30, 2018 and EBITDA shall be
increased or decreased accordingly. 

  

	 	iv.	A minimum normalized average annual Return on Invested Capital (or Return on Net Assets Employed) whichever is agreed more appropriate threshold shall be determined and achieved for the period ending June 30 as
more specifically defined and agreed in the definitive purchase agreement. 

	 	b.	The adjusted EBITDA multiple to be used for the calculation of each of the 4 years of the earn-out payments, as detailed in Paragraph 3(a), is as follows: 

 

									
	 Year
	  	 Year 1
	  	 Year 2
	  	 Year 3
	  	 Year 4

	Multiple	  	7.1	  	7.3	  	7.5	  	7.7

  

	 	4.	Currency. The currency for the Initial Purchase Price and the Remainder of Purchase Price will be the Brazilian Real. All references to currency herein mean the Brazilian Real. 

 

	 	5.	Language. The negotiations will be conducted in English and all legal documents relating to the purchase will be prepared in English. 

 

	 	6.	Key Assumptions. Following are ScanSource’s key assumptions as it relates to this Letter Agreement. These assumptions are subject to verification and any deviations, additions, or deletions from these
assumptions by either ScanSource or N1 may result in adjustments to any of the terms contained herein. 

  

	 	a.	N1’s financial statements were prepared in accordance with generally accepted accounting principles in Brazil and applied on a consistent basis with past practices; 

 

	 	b.	N1 has received a clean, unqualified audit opinion in accordance with Brazilian GAAP on its fiscal year 2013 financial statements; 

  

	 	c.	The profitability of N1 is as depicted in the financials and in the Intersmart Presentation provided to ScanSource, with accurate margins, costs, and reserve methodologies; 

 

	 	d.	Actual results for fiscal year 2014 are in line with the projections shown in the N1 Presentation provided to ScanSource and there were no significant changes in terms or conditions with customers, vendors, practices,
or accounting policies to achieve those results (such as relaxing underwriting standards); 

  

	 	e.	N1’s inventory is new, unopened, current and resalable as new with adequate reserves for obsolescence and slow-moving product. Product not resalable as new and/or not returnable to the vendor is adequately reserved
for, including any return or demo items; 

  

	 	f.	N1’s accounts receivable is collectible and within normal terms with adequate reserves for bad debt; 

  

	 	g.	100% of N1’s sales are through resellers, though the actual invoicing of the end-user is performed by N1; 

  

	 	h.	Key vendors will continue their contracts with N1 under existing terms post-Closing; 

  

	 	i.	N1, its subsidiaries and its affiliates (officers, directors and significant shareholders) will enter into a covenant not to compete; 

 

	 	j.	Key executives of N1 that will remain working in the Company after Closing will enter into employment agreements and non-competition agreements with ScanSource, in accordance with the Brazilian Labor Laws;

  

	 	k.	N1 management will work with ScanSource on an orderly transition; and 

  

	 	l.	N1 will conduct all of its business affairs in its usual and ordinary course, as provided in Section 12 below, from the date of execution of this Letter Agreement until the closing of the Acquisition.

	 	7.	Due Diligence. N1 shall allow ScanSource’s officers, employees, and professional advisers full access to all records, key employees, advisers, and operations of N1 as will allow them to complete the
investigations required. Key elements of the due diligence process include a review of corporate records, accounting policies, financial statements, tax returns, corporate agreements (including all vendor and customer contracts and leases), HR
records, government regulation and environmental compliance issues, and legal matters. Particular emphasis will be placed on inventory, accounts receivable, accounts payable, taxes and rebate accounting. 

 

	 	8.	Conditions. Consummation of the Acquisition will be conditioned on: 

  

	 	a.	Successful completion of due diligence; 

  

	 	b.	Absence of any material adverse change in N1’s business, financial condition, prospects, assets, or operations; 

  

	 	c.	Negotiation and execution of a stock purchase agreement (the “Stock Purchase Agreement”); 

  

	 	d.	Receipt of approval of the transaction and the Stock Purchase Agreement by the Board of Directors of ScanSource, Inc.; 

  

	 	e.	Receipt of any other approvals required to be obtained by ScanSource under current agreements and approvals by N1’s key vendors; 

 

	 	f.	Requisite regulatory approval. 

  

	 	9.	Closing. We anticipate closing will take place by December 31, 2014. 

  

	 	10.	Advisors. Each party is responsible for paying their own costs associated with the Acquisition, including, but not limited to, attorney fees, accounting fees, and investment banking fees. 

 

	 	11.	Good Faith Duty of Negotiation. Upon acceptance of this Letter Agreement by the Sellers, ScanSource and N1 shall negotiate in good faith toward execution of customary and mutually agreeable Stock Purchase
Agreement. 

  

	 	12.	Ordinary Course. From the date of N1’s acceptance of this Letter Agreement, N1 shall conduct and operate its business and affairs only in the ordinary course. For the purpose of this Letter Agreement,
the phrase “the ordinary course” and “the ordinary course of business” shall mean the conduct and operation of N1 following its usual and ordinary accounting practices, making ordinary accruals, incurring ordinary liabilities and
expenditures, and making ordinary commitments for inventory, supplies, insurance, rentals and other expenses. Without prior consent of ScanSource, which consent shall not be unreasonably withheld, N1 shall not make any commitments out of its
ordinary course of business. 

  

	 	13.	 Exclusivity. The parties acknowledge the valuation proposed and the time, effort, and other expense incurred or to be incurred by ScanSource in
connection with the negotiation of this Letter Agreement and the Stock Purchase Agreement. Neither N1, Sellers, nor any of their respective officers, directors, affiliates, agents or representatives (collectively, the “Seller Parties” or a
“Seller Party”) shall directly or 

	 	
indirectly, (a) solicit, (b) encourage the submission of offers or proposals from any person or entity (including by way of providing non-public information concerning N1 to any person
or entity, or otherwise) with respect to, (c) initiate or participate in any negotiations or discussions regarding, or (d) enter into (or authorize) any agreement or agreement in principle with respect to, any expression of interest, offer
or proposal to acquire or any acquisition of all or any material portion of the assets owned or used by N1 or any equity securities of N1, whether by stock purchase, merger, consolidation, purchase of assets, tender offer or otherwise (a
“Transaction”) during the Exclusivity Period (as defined below). During the Exclusivity Period each Seller Party shall cease all such activities that currently may be taking place. Each Seller Party shall notify ScanSource within three
(3) business days in writing regarding any contact between such Seller Party or any of such Seller Party’s officers, directors, agents or affiliates and any person making an offer, proposal or inquiry with respect to a Transaction. For
purposes of this letter, “Exclusivity Period” means the period from the date of execution of this Letter Agreement through the earlier of (i) December 31, 2014, (ii) the mutual written agreement of ScanSource and N1 not to
proceed with negotiations regarding the proposed acquisition, or (iii) the date on which a Stock Purchase Agreement with respect to the proposed acquisition is executed and delivered by Sellers, N1 and ScanSource. In the event of any breach of
this Exclusivity section by a Seller Party, the Company shall pay a break fee of R$20,000,000 within five (5) business days following written demand of such payment from ScanSource. The Parties agree that such break fee will compensate
ScanSource for all and any damages that it may have incurred in connection with the breach by N1 of this Exclusivity section. ScanSource shall not similarly solicit, commit or purchase another Brazilian communications wholesale distributor during
the Exclusivity Period. Subject to the Key Assumptions, section 6, Due Diligence, section 7, and the Conditions in section 8 being met to the satisfaction of ScanSource and there being no impact on the Company’s enterprise value from the
processes contemplated to complete these sections,6,7 and 8 (approval pursuant to 8.d) will not be unreasonably withheld provided sections 6, 7 and the balance of 8 are satisfactory) or a force majeure event, as well as the procurement of any and
all necessary governmental and vendor approvals for the transaction contemplated herein, ScanSource will close the transaction contemplated and a decision not to close based upon another reason not contemplated by this Agreement could give rise to a
breach for which N1 would be entitled to a break fee of R$20,000,000 payable within five (5) business days following written demand for such payment from N1. The Parties agree that such break fee will compensate N1 for all and any damages that
it may have incurred in connection with the breach by ScanSource of this Exclusivity section. 

 This Letter Agreement is the only agreement
between the parties and the parties will use reasonable best efforts to enter into a Stock Purchase Agreement which shall replace and supersede the terms of this Letter Agreement. This Letter Agreement will expire if a Stock Purchase Agreement is
not entered into by December 31, 2014, or such other date as may be mutually agreed upon in writing. Neither N1 nor ScanSource shall, and neither N1 nor ScanSource shall permit any of its subsidiaries or agents to, issue or cause the
publication of any press release or other public announcement with respect to the transactions contemplated by this Letter Agreement without the prior consent (which consent shall not be unreasonably withheld) of ScanSource, in the case of a
proposed announcement by N1 or N1, in the case of a proposed announcement by ScanSource; provided, however, that a party may, without the prior consent of the other party (but after prior consultation with the other party to the extent practicable
under the circumstances) issue or cause the publication 

 
of any press release or other public announcement to the extent required by law or by the rules and regulations of The Nasdaq Stock Market. This Letter Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware in the United States without regard to the conflicts of law provisions thereof. Any conflicts arising hereof shall be subject to the federal and state courts located in New Castle
County, Delaware, USA. Each party specifically consents to service of process by and the jurisdiction of and venue in those courts and waives any claim to venue in any other court, and if not a resident of the United States, hereby appoints the
Secretary of State of Delaware as its agent for service of process in the United States. 
 Thank you for this opportunity. We look forward to working with
you. 
  

	
	Sincerely,
	
	/s/ John J. Ellsworth
	John J. Ellsworth
	 EVP, General Counsel and Corporate Secretary

ScanSource, Inc.

 ACCEPTED AND AGREED TO: 
  

									
	By: 	 	Rafael Paloni	 		 	/s/ Rafael Paloni	 	 
		 	 For himself as the controlling
 shareholder of
N1 and on behalf of N1
	 		 	Signature	 	Date
					
		 	Walter Uzum	 		 	/s/ Walter Uzum	 	 
		 	 For himself as a shareholder of N1
 and on
behalf of N1
	 		 	Signature	 	Date

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