Exhibit 10.1
November 7, 2006
Branch Banking and Trust Company of South Carolina
P.O. Box 408
301 Main Street
Greenville, South Carolina 29602
Attention: Barry Maness
| | Re: | Amended and Restated Credit Agreement dated as of July 16, 2004 by and among ScanSource, Inc. and Netpoint International, Inc., as U.S. Borrowers, ScanSource Europe Limited and ScanSource UK Limited, as Non-U.S. Borrowers, the Initial Guarantors listed therein, Branch Banking and Trust Company of South Carolina, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, BB&T Capital Markets and Wachovia Bank, National Association, as Arrangers, and the Banks parties thereto, as amended (the “Credit Agreement”). Capitalized terms used but not defined herein shall have the meanings given in the Credit Agreement. |
Ladies and Gentlemen:
On October 26, 2006, the Company issued a press release announcing its financial results for the first quarter ended September 30, 2006. A copy of the press release is available through the Company’s website at www.scansource.com.
As previously announced, the Company’s Board of Directors has appointed a Special Committee, consisting entirely of independent directors, to conduct a review of the Company’s stock option grant practices and related accounting issues from the time of its initial public offering in 1994 to the present. The Special Committee is assisted in its review by independent legal counsel and advisors. The review of the Special Committee is in process, and, accordingly, no findings have been made regarding the Company’s stock option grant practices and related accounting issues or the materiality of any issues that may arise in that regard. The Company does not anticipate having additional comment on this topic until the review by the Special Committee is complete. The financial results included in the press release do not reflect adjustments, if any, that may be required as a result of the Special Committee’s review, including the impact of any unrecorded non-cash equity-based compensation charges, either on the current period or that may require adjustments to previously reported results.
On or before November 15, 2006, the Company will deliver to each of the Banks the information and documentation required by Sections 5.01(b) and Section 5.01(c) of the Credit Agreement in respect of the Fiscal Quarter ending September 30, 2006 provided
that the certifications contained therein by the Chief Financial Officer of the Company shall be subject to the impact, if any, of the pending review by the Special Committee (the “Qualified November Deliverables”). The Qualified November Deliverables shall not reflect adjustments, if any, that may be required as a result of the Special Committee’s review, including the impact of any unrecorded non-cash equity-based compensation charges, either on the current period or that may require adjustments to previously reported results.
The Borrowers and Guarantors request that the Administrative Agent seek the consent of the Banks to the following: (1) that any Default or Event of Default arising from the Qualified November Deliverables being subject to the impact, if any, of the pending review by the Special Committee shall not constitute a Default or Event of Default under the Credit Agreement so long as the information and documentation required by Section 5.01(b) and Section 5.01(c) of the Credit Agreement (containing the qualifications required therein without qualification to the pending review by the Special Committee or otherwise) in respect of the Fiscal Quarter ending September 30, 2006 are delivered on or before February 15, 2007 (the “Section 5.01 Waiver”); and (2) that the Applicable Margin and Applicable Non-Utilization Fee Rate shall be determined based upon the ratio of Consolidated Funded Debt to Consolidated EBITDA calculated on the basis of the Qualified November Deliverables; provided that if, as a result of the review by the Special Committee, any adjustments to the information set forth in the Qualified November Deliverables shall be necessary and if as a result thereof the Applicable Margin and the Applicable Non-Utilization Fee Rate for the Fiscal Quarter ending September 30, 2006 (as determined based upon the Qualified November Deliverables) shall be different from the Applicable Margin and the Applicable Non-Utilization Fee Rate for such period determined after making the adjustments, if any, required by the review by the Special Committee, such redetermined Applicable Margin and Applicable Non-Utilization Fee Rate shall be effective retroactive to the Rate Determination Date for the Fiscal Quarter ending September 30, 2006 and the Borrowers, the Administrative Agent and the Banks as applicable shall within ten days of such redetermination make a payment (in the case of amounts owing by the Borrowers to the Banks), or provide a credit applicable to future amounts payable by the Borrowers thereunder (in the case of amounts owing by the Banks to the Borrowers) equal to the difference between the interest, letter of credit fees, unused fees and other fees actually paid under the Credit Agreement and the interest, letter of credit fees, unused fees and other fees that would have been paid under the Credit Agreement had the Applicable Margin and the Applicable Non-Utilization Fee Rate as originally determined based upon the Qualified November Deliverables been equal to the Applicable Margin and the Applicable Non-Utilization Fee Rate as redetermined after giving effect to the adjustments, if any, resulting from the Special Committee’s review. In the event the information and documentation required by Section 5.01(b) and Section 5.01(c) of the Credit Agreement (containing the qualifications required therein without qualification to the pending review by the Special Committee or otherwise) in respect of the Fiscal Quarter ending September 30, 2006 are not delivered on or before February 15, 2007, an Event of Default shall be deemed to have occurred under the Credit Agreement effective as of February 15, 2007.
The Borrowers and Guarantors hereby agree to pay all expenses of the Administrative Agent including reasonable fees and disbursements of special counsel for the Administrative Agent in connection with the preparation of this letter agreement and any other documentation contemplated hereby.
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The Borrowers and Guarantors represent and warrant that, after giving effect to this consent and letter agreement, the Borrowers and Guarantors are in compliance with all of the terms and conditions of the Credit Agreement and the other Loan Documents and no Default or Event of Default exists thereunder.
This waiver is limited to the Default and Event of Default caused solely by the Qualified November Deliverables being subject to the impact, if any, of the pending review by the Special Committee. The Administrative Agent and each Bank expressly reserves all of its respective rights and remedies with respect to any other present or any future Default or Event of Default arising under the Credit Agreement or any of the Loan Documents (including without limitation any Default or Event of Default that may arise as a result of any adjustments to the Qualified November Deliverables resulting from the review by the Special Committee). The Banks’ consent as herein requested shall not constitute (a) a future waiver of, or affect or diminish in any way, any of the Banks’ rights under the Credit Agreement or the other Loan Documents, (b) an amendment, modification or alteration of the Credit Agreement or the other Loan Documents, and (c) a course of dealing or a waiver of the Banks’ right to withhold its consent for any similar request in the future.
IN WITNESS WHEREOF, the parties hereto have caused this waiver to be duly executed, under seal, by their respective authorized officers as of the day and year first above written.
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Very truly yours, |
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SCANSOURCE, INC. |
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By: | | /s/ Richard P. Cleys | | (SEAL) |
Name: | | Richard P. Cleys |
Title: | | VP and CFO |
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NETPOINT INTERNATIONAL, INC. |
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By: | | /s/ Richard P. Cleys | | (SEAL) |
Name: | | Richard P. Cleys |
Title: | | Director |
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| 4100 QUEST, LLC |
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By: | | ScanSource, Inc., its sole member |
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| | By: | | /s/ Richard P. Cleys | | (SEAL) |
| | Name: | | Richard P. Cleys |
| | Title: | | VP and CFO |
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| PARTNER SERVICES, INC. |
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By: | | /s/ Richard P. Cleys | | (SEAL) |
Name: | | Richard P. Cleys |
Title: | | Director |
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| SCANSOURCE EUROPE LIMITED |
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By: | | /s/ Richard P. Cleys | | (SEAL) |
Name: | | Richard P. Cleys |
Title: | | Director |
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| SCANSOURCE UK LIMITED |
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By: | | /s/ Richard P. Cleys | | (SEAL) |
Name: | | Richard P. Cleys |
Title: | | Director |
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CONSENT
| | Re: | Amended and Restated Credit Agreement dated as of July 16, 2004 by and among ScanSource, Inc. and Netpoint International, Inc., as U.S. Borrowers, ScanSource Europe Limited and ScanSource UK Limited, as Non-U.S. Borrowers, the Initial Guarantors listed therein, Branch Banking and Trust Company of South Carolina, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent and an Other Currency Lender, BB&T Capital Markets and Wachovia Bank, National Association, as Arrangers, and the Banks parties thereto, as amended (the “Credit Agreement”). Capitalized terms used but not defined herein shall have the meanings given in the Credit Agreement. |
The undersigned Banks consent to the Section 5.01 Waiver (as defined in the attached letter) and the other matters set forth in the letter from the Borrowers and Guarantors to the Administrative Agent dated as of November 7, 2006 and attached hereto.
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| BRANCH BANKING AND TRUST COMPANY OF SOUTH CAROLINA, as Administrative Agent, U.S. Dollar Issuing Bank, Other Currency Issuing Bank and as a Bank |
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By: | | /s/ Barry Maness | | (SEAL) |
Name: | | Barry Maness |
Title: | | SVP |
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| WACHOVIA BANK, NATIONAL ASSOCIATION, as an Other Currency Lender, Other Currency Issuing Bank and a Bank, |
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By: | | /s/ Thomas F. Snider | | (SEAL) |
Name: | | Thomas F. Snider |
Title: | | SVP |
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FIFTH THIRD BANK |
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By: | | /s/ Jennifer Schwartz | | (SEAL) |
Name: | | Jennifer Schwartz |
Title: | | Assistant Vice President |
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| FIRST TENNESSEE BANK NATIONAL ASSOCIATION |
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By: | | /s/ Rotcher Watkins | | (SEAL) |
Name: | | Rotcher Watkins |
Title: | | Senior Vice President |
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| CAPITAL ONE, N.A. |
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By: | | /s/ Julie Nasser | | (SEAL) |
Name: | | Julie Nasser |
Title: | | Assistant Vice President |
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