UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
February 16, 2000
InaCom Corp.
(Exact name of registrant as specified in its charter)
Delaware 0-16114 47-0681813
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
10810 Farnam Drive, Suite 200, Omaha Nebraska 68154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(402) 758-3900
<PAGE>
This report contains certain forward-looking statements and information relating
to Inacom Corp. ("Inacom" or the "Company") that are based on the beliefs of
Inacom management as well as assumptions made by and information currently
available to Inacom management. Such statements reflect the current view of
InaCom with respect to future events and are subject to certain risks,
uncertainties, and assumptions, including the risk factors and uncertainties
described in Inacom's 1998 Form 10-K annual report. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
believed, estimated or expected.
Item 2. Acquisition or Disposition of Assets.
On February 16, 2000, Inacom completed the sale of certain net assets of its
product customization and logistics operations (collectively referred to as
"Distribution Net Assets") to Compaq Computer Corporation ("Compaq") for $369.5
million in cash, subject to certain post-closing adjustments as provided in the
Asset Purchase Agreement dated January 4, 2000, as amended. These Distribution
Net Assets sold by the Company included five configuration and distribution
centers. A copy of the Asset Purchase Agreement was previously filed with the
Company's Current Report on Form 8-K dated January 4, 2000 and is incorporated
by this reference; First Amendment thereto is attached as an exhibit and is
incorporated by this reference.
In connection with the sale of the Distribution Net Assets, the Company and
Compaq entered into a three-year Services, Supply and Sales Agreement and a
related Service Level Agreement (collectively the " Services Agreement"). The
Services Agreement will give the Company access to the product customization and
logistics capabilities that were sold to Compaq and also provides, subject to
certain conditions, for Compaq's use of the Company's lifecycle and professional
service offerings over the same three-year period. Copies of these agreements
are attached as exhibits and are incorporated by this reference.
Item 5. Other Events.
Liquidity
On December 25, 1999, the Company's primary sources of liquidity were provided
through a $450.0 million revolving credit and amortizing term loan facility with
Deutsche Bank, as agent, and a $350.0 million asset securitization program with
Nesbitt Burns Securities, Inc., as agent. The Company's capital resources also
included $201.3 million in Company-obligated mandatorily redeemable convertible
preferred securities (the "Trust Preferred Securities") of a subsidiary trust
holding solely convertible subordinated debt securities of the Company. The
Company also maintained a floor planning facility for IBM product purchases with
IBM Credit Corp. ("IBMCC") and a floor planning facility for Compaq product
purchases with Deutsche Financial Services Corporation.
In April 1999, the Company entered into a $450.0 million revolving credit and
amortizing term loan facility with Deutsche Bank, as agent. This facility is a
combined senior secured $250.0 million revolving credit facility and $200.0
million amortizing term loan. On December 25, 1999, $407.5 million was
outstanding under the facility ($245.0 million under the revolving credit
portion and $162.5 million under the amortizing term loan portion) at an
interest rate of 8.2%.
In December 1996, the Company established an asset securitization facility,
which was amended in May 1999 to provide the Company with up to $300.0 million
in available credit. This amount was increased to $350.0 million in July 1999.
Pursuant to this asset securitization facility, the Company sells, on a
revolving basis, certain pooled trade accounts receivable to a separate
non-consolidated wholly-owned special purpose corporation, which in turn sells a
percentage ownership interest in the pooled trade accounts receivable to a
commercial paper conduit sponsored by an unrelated financial institution. As of
December 25, 1999, the gross proceeds resulting from the sale of the percentage
ownership interests in the pooled trade accounts receivable totaled $312.0
million. On December 25, 1999, the implicit interest rate on the asset
securitization transaction was 6.6%. On February 4, 2000, the Company agreed to
wind down the asset securitization facility due to an undercollateralization of
the pooled trade accounts receivable. In connection with this winding down, the
Company agreed to direct all cash receipts from its direct product trade
accounts receivables to the paydown of the facility. Although the final payoff
of all obligations under the asset securitization facility depends on the timing
of collections for the accounts receivable involved in the program, the Company
anticipates that all amounts owing in connection with this program will be
repaid by March 31, 2000.
In October 1996, the Company's subsidiary trust issued the Trust Preferred
Securities, raising gross proceeds of $201.3 million. The holders of the Trust
Preferred Securities are entitled to cumulative cash distributions at an annual
rate of 6 3/4% of the liquidation amount of $50 per security. The distributions
are payable quarterly in arrears in the aggregate amount of approximately $3.5
million per quarter, unless the Company has elected to defer such interest
payments in accordance with the provisions governing such distributions. The
aggregate net proceeds to the Company from this offering totaled $194.4 million
after selling expenses, discounts, and commissions. The Trust Preferred
Securities are convertible at the option of the holder into Inacom common stock
at a conversion rate of 1.113 shares of Inacom common stock for each Trust
Preferred Security (equivalent to a conversion price of $44.92 per share).
In connection with the sale of the Distribution Net Assets to Compaq, the
Company amended its $450.0 million revolving credit and amortizing term loan
facility with Deutsche Bank, as agent, to a $225.0 million revolving credit
facility. As part of the amendment to this facility, the Company agreed to
defer, until at least January 1, 2001, the quarterly cash distributions payable
on the Trust Preferred Securities. As a result of the sale of the Distribution
Net Assets to Compaq, the Company suspended floor planning advances under the
IBMCC facility and agreed to repay all advances outstanding thereunder by May
15, 2000. In connection with the Compaq transaction, Compaq assumed all the
Company's obligations owed to Deutsche Financial Services Corporation relating
to the Company's floor planning facility for Compaq product.
On February 16, 2000, the Company received a written commitment from Compaq (the
"Commitment") for a new $55.5 million revolving credit facility with funding
available beginning in the second quarter of 2000. The new credit facility with
Compaq will contain various conditions to funding, including satisfaction of
certain financial covenants and the absence of defaults. A copy of the
Commitment is attached as an exhibit and is incorporated by this reference.
The Company's credit facilities contain certain restrictive covenants, including
the maintenance of minimum levels of working capital, net worth and EBITDA,
limitations on the amount of funded debt and interest expense, limitations on
incurring additional indebtedness, and restrictions on the amount of dividends
the Company can pay to stockholders. As of December 25, 1999, the Company was in
compliance with the covenants contained in these agreements or has received
written waivers to the covenants contained in these agreements.
Board of Directors
The Board of Directors of the Company consists of eight members as of February
28, 2000. The Board of Directors has determined that there will be two
committees of the Board for fiscal year 2000. Effective February 28, 2000, the
Audit Committee members are Gary Schwendiman (Chairman), John Oltman and Linda
Wilson; and the Compensation Committee members are William Janeway (Chairman),
James Crowe and Linda Wilson. The remaining members of the Board of Directors
are G. A. Gagliardi (Chairman), Joseph Auerbach and William Tauscher. The
following directors have resigned since the Company's 1999 annual stockholders
meeting: Richard Bard, Mogens Bay, Bill Fairfield, Grant Gregory, Joseph Inatome
and Rick Inatome.
Legal Proceedings
On February 25, 2000, a class action lawsuit was filed against Inacom and
certain of its former directors and current and former officers. The lawsuit
alleges violations of the Securities Act of 1933 and the Securities Exchange Act
of 1934 through, among other things, false and misleading statements made by
Inacom and the other defendants. The complaint alleges, among other things, that
Inacom issued materially false and misleading statements regarding its ability
to recognize growth and remain profitable in light of significant changes in
manufacturers' distribution of computers, and as a result of the materially
false and misleading statements, the price of Inacom common stock was
artificially inflated during the class period. The action is brought on behalf
of a purported class of persons who allegedly purchased Inacom common stock
between October 9, 1998 and January 4, 2000. The plaintiff seeks compensatory
damages in an unspecified amount, together with other relief. The suit was filed
in the United States District Court for Nebraska and is entitled Softest, Inc.
Pension and Profit Sharing Plan v. Inacom Corporation, et. al. Case No.
8100CV120. Inacom believes the lawsuit is without merit and plans to vigorously
defend the action.
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information.
The Pro Forma Consolidated Financial Statements taking into account the
transaction described in Item 2 will be filed pursuant to an amendment to this
Report.
<PAGE>
The following exhibits are filed with this Form 8-K:
2.1 First Amendment dated February 16, 2000 to the Asset Purchase Agreement
dated January 4, 2000 by and between Inacom Corp. and Compaq Computer
Corporation.
2.2 Services, Supply and Sales Agreement dated as of February 16, 2000, by
and between Inacom Corp. and Compaq Computer Corporation.*
2.3 Service Level Agreement dated February 16, 2000 by and between Inacom
Corp. and Compaq Computer Corporation.
2.4 Revolving Credit Facility Commitment Letter dated as of February 16,
2000, by and between Inacom Corp. and Compaq Computer Corporation.
2.5 Third Amendment dated January 4, 2000 to the Senior Secured Revolving
Credit Agreement dated April 9, 1999 between Inacom Corp. and Deutsche
Bank, as agent.
2.6 Fourth Amendment dated February 15, 2000 to the Senior Secured
Revolving Credit Agreement dated April 9, 1999 between Inacom Corp. and
Deutsche Bank, as agent.
* Concurrently with the filing of this Form 8-K, the Company has filed with the
Securities and Exchange Commission a Confidential Request Letter pursuant to
Rule 24b-2 requesting confidential treatment of certain portions of Exhibit 2.2,
which exhibit has been redacted accordingly in this filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Inacom Corp.
March 2, 2000 By: /s/ Thomas J. Fitzpatrick
-------------------------
Thomas J. Fitzpatrick
Executive Vice President and
Chief Financial Officer
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") dated as
of February 16, 2000 among Compaq Computer Corporation, a Delaware corporation
("Parent"), ITY Corp., a Delaware corporation ("Buyer") and wholly-owned
subsidiary of Parent, and InaCom Corp. a Delaware corporation ("Seller").
W I T N E S S E T H :
WHEREAS, Compaq Sub and InaCom (the "Parties") have entered into an
Asset Purchase Agreement dated as of January 4, 2000 (the "Asset Purchase
Agreement") whereby Compaq Sub will purchase from InaCom the Purchased Assets
and will assume the Assumed Liabilities;
WHEREAS, the Parties hereto wish to amend the Asset Purchase Agreement
as set forth below:
NOT, THEREFORE, it is agreed:
1. Adjustment of Purchase Price. Section 2.09 of the Asset Purchase
Agreement is hereby amended by deleting subsection 2.09(a)(ii) in its entirety
and substituting in lieu thereof the following:
"(ii) If Final Net Worth is less than $275 million, Seller
shall pay to Buyer, in the manner and with interest as
provided in 2.09(b), an amount equal to the excess, if any, of
$275 million over Final Net Worth (the "Make-Up Payment").
2. Grounds for Termination. Section 12.01 of the Asset Purchase Agreement
is hereby amended by deleting the section in its entirety and substituting in
lieu thereof the following:
"SECTION 12.01. Grounds for Termination. This Agreement shall terminate
prior to Closing if:
(a) the Closing shall not have been consummated on or before
March 31, 2000 unless the parties otherwise agree; provided
that any party whose breach of any provision of this Agreement
has resulted in the failure of the Closing to be consummated
by such time shall be deemed to have consented to any
extension approved by the other party.
(b) Seller and Buyer shall agree;
(c) there shall be any law or regulation that makes
consummation of the transaction contemplated hereby illegal or
otherwise prohibited or consummation of the transactions
contemplated hereby would violate any nonappealable final
judgment, injunction, order or decree of any court of
competent jurisdiction.
3. Defined Terms. Defined terms used herein but not otherwise defined
herein shall have the meanings specified in the Asset Purchase Agreement.
4. Captions. The captions in this Amendment are included for convenience of
reference only and shall be ignored in the construction or interpretation of the
provisions of this Amendment.
5. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective when each party to this Amendment shall have
received a counterpart hereof signed by the other party hereto.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law rules of such state.
7. Agreement as Amended. From and after the effective date hereof, all
references to the Asset Purchase Agreement shall be deemed references to the
Asset Purchase Agreement as amended and supplemented hereby.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed in their respective corporate names by their respective officers, each
of whom is duly and validly authorized and empowered, all as of the day and year
first written above.
INACOM CORP.
By: /s/ Gerald A. Gagliardi
Name: Gerald A. Gagliardi
Title: President and Chief Executive Officer
COMPAQ COMPUTER CORPORATION
By: /s/ Ben K. Wells
Name: Ben K. Wells
Title: Vice President and
Corporate Treasurer, Acting CFO
ITY CORP.
By: /s/ Ben K. Wells
Name: Ben K. Wells
Title: Vice President and Treasurer
Note: Certain material, indicated by three asterisks (***), has been omitted
from this document, pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. The omitted material has been filed
separately with the Securities and Exchange Commission.
SERVICES, SUPPLY AND SALES AGREEMENT
SERVICES, SUPPLY AND SALES AGREEMENT (the "Agreement"), dated as of
February 16, 2000, by and between Compaq Computer Corporation, a Delaware
corporation ("Compaq"), ITY Corp., a Delaware corporation and a wholly-owned
subsidiary of Compaq ("Compaq Sub"), and InaCom Corp., a Delaware corporation
("Inacom").
RECITALS
WHEREAS, Compaq Sub, Compaq and Inacom have entered into an Asset
Purchase Agreement dated as of January 4, 2000, as amended (the "Asset Purchase
Agreement");
WHEREAS, the execution of this Agreement is a condition to Compaq Sub
acquiring, and Inacom disposing of, the Purchased Assets (as defined in the
Asset Purchase Agreement) in connection with the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
AGREEMENT TO COOPERATE
SECTION 1.1. Services Agreement. Compaq agrees to assist Inacom in the
generation of incremental revenues for InaCom's service business as provided in
the Service Level Agreement dated as of February 16, 2000 between Compaq and
Inacom (the "Service Level Agreement"), and the terms of the Service Level
Agreement are incorporated by reference herein.
SECTION 1.2. Supply. In connection with Inacom's computer services
business, Compaq Sub and Inacom agree as follows:
The parties agree that when Inacom places an order with Compaq Sub for
hardware and Procurement Services, as defined below, Compaq Sub will invoice the
amount directed by Inacom and collect from the customer for the invoiced amount;
provided that Inacom, acting as an agent of Compaq Sub, shall have entered into
an agreement with the customer relating to the acquisition of such hardware and
Procurement Services, in form and substance reasonably acceptable to Compaq Sub.
Such agreement shall include a grant of a purchase money security interest in
favor of Compaq or Compaq Sub, as appropriate, on all hardware and related
software licenses supplied by Compaq Sub. From these collected amounts, Compaq
Sub will retain its sales price for hardware and Procurement Services, and pay
the remaining proceeds to Inacom as an agency fee. As used herein, "sales price"
shall mean, (i) with respect to hardware, Compaq's actual cost (excluding the
impact of volume incentive rebates) with respect to third party hardware and US1
or TOSS price, whichever is applicable, with respect to Compaq's hardware, and
(ii) with respect to Procurement Services, the fees as per the Fee Schedule. In
the event that the invoiced amounts are insufficient to cover the sales price of
the hardware and Procurement Services as per the Fee Schedule (defined below),
Inacom agrees to pay the difference to Compaq Sub.
1. Inacom agrees to make Compaq Sub its preferred provider of the
procurement services listed in Exhibit 1 ("Procurement Services"), meaning only
that Inacom shall direct at least 75% of its requirements for such services to
Compaq Sub. The obligations set forth in this Section 1.2(1) shall be subject to
Compaq Sub's ability to competitively price its services (which for these
purposes shall not require Compaq Sub to be the lowest-priced service provider)
and to satisfy Service Level Agreements for service capabilities and
performance, as mutually agreed to by the parties.
2. Inacom will pay a fee to Compaq Sub for the Procurement Services
based on the fee schedule, attached hereto as Exhibit 2 (the "Fee Schedule").
Compaq Sub agrees to provide Inacom with a fixed rate structure for the
Procurement Services, which does not depend on rebates for volume attainment. In
any event, Compaq Sub will offer Inacom the most favored procurement service
customer fees of Compaq Sub or any of its affiliates, i.e. the lowest fees which
it charges any of its customers for the Procurement Services except in the
instance where lower pricing is offered to "meet competition" in response to a
documented lower bid, as such term is commonly used in the relevant industry.
Upon reasonable notice, Compaq Sub will give Inacom's independent third party
auditor access, on a quarterly basis, to Compaq and multi-vendor sales price
information at the SKU level, including but not limited to product cost and
freight information, for the sole purpose of verifying Compaq Sub's pricing of
the Procurement Services. All such information shall be subject to the terms of
the Confidentiality and Non-disclosure Agreement executed by the parties.
3. In the event that Compaq Sub must go outside of the normal
distribution agreements with third party vendors in order to obtain third party
products, it will absorb commercially reasonable increases in product costs
associated with such procurement. If Compaq Sub determines that such costs are
not commercially reasonable, Compaq Sub will offer Inacom the right to procure
such products from its own channels. Inacom shall be responsible for product
sourcing cost increases resulting from instances where Compaq has a distribution
agreement with a particular vendor, but product is unavailable, provided Inacom
has agreed to incur such additional costs.
4. Compaq and Compaq Sub agree that any marketing funds or other
vendor funding (including rebates) provided to Compaq by third party vendors for
sales of product to customers where Inacom acted as agent, shall be paid to
Inacom within a reasonable time following receipt by Compaq, provided that
Inacom agrees to independently satisfy any vendor requirements for such funding.
5. Inacom has provided Compaq Sub with a list of current and potential
accounts, attached hereto as an appendix to Exhibit 3, and Compaq Sub will
determine a credit limit and any other appropriate limitations or requirements
for each such account. To the extent that Inacom sells products within each
customer's credit limit, Compaq Sub will assume the credit risk. However, to the
extent that Inacom sells products in excess of any customer's credit limit,
Inacom must bear the credit risk. Inacom agrees that all payment terms for its
customer invoices shall be net 30 days from receipt of invoice by customer.
6. As part of its Procurement Services, Compaq Sub will provide
invoice and collection services for accounts receivable on product procured by
customers through Inacom from Compaq Sub under the name of Compaq Sub or Inacom
(as agent for Compaq Sub), whichever Inacom prefers. These invoice and
collection services will only be available for hardware and/or Procurement
Services. Inacom agrees to pay agreed upon fees for customer invoices that are
not paid when due in accordance with the Fee Schedule, to the extent the payment
period is in excess of the payment period calculated into the assumptions for
the Fee Schedule. Compaq's obligation for collections of accounts receivables in
this provision is only effective for hardware and Procurement Services delivered
by Compaq and sold by Inacom after the close of the Asset Purchase Agreement.
7. Inacom will not bear any inventory price protection risk. If Inacom
or a customer requires Compaq Sub to hold inventory beyond the normal stocking
period, then Inacom agrees to pay to Compaq Sub a price protection risk fee in
accordance with the Fee Schedule to the extent the inventory holding period is
in excess of the inventory price protection element calculated into the
assumptions for the Fee Schedule.
SECTION 1.3. Sales Agreement.
1. Compaq and Inacom will jointly develop Compaq-branded service
offerings for end users ("Services"). These services will be performed by Inacom
and will be sold through the Compaq sales force.
2. Compaq and Inacom have jointly developed and agreed on Rules of
Engagement, attached hereto as Exhibit 3, which include, among other things,
Relationship Management and Joint Account Planning. Compaq and Compaq Sub agree
(and agree to cause their affiliates) not to directly solicit, the Inacom
customers with contracts that include the purchase of Compaq hardware or a
demonstrated run-rate of the purchase of Compaq hardware, as set forth in
Exhibit 3, where Compaq's direct product sales and services offerings are
competitive with those offered by Inacom as of the date hereof, for a period of
one year from the date hereof, provided the customer continues to purchase
Compaq product from Inacom.
ARTICLE II.
MISCELLANEOUS
SECTION 2.1. Definitive Agreements; Binding Effect. The parties agree
to use their reasonable best efforts to complete definitive agreements with
respect to the matters described in Section 1.2 and Section 1.3 within 30 days
of the date hereof. Until superseded by such definitive agreements, this
Agreement shall be binding on the parties.
SECTION 2.2. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
If to Inacom, to:
Inacom Corporation
Attention: Dick Anderson
2001 Westside Parkway
Suite 260
Alpharetta, GA 30004
Facsimile: (770) 619-6082
If to Compaq or Compaq Sub, to:
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Attention: Mike Pocock
Facsimile: (281) 514-0851
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 2.3. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(a)(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 2.4. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto.
SECTION 2.5. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement.
SECTION 2.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
the conflicts of law rules of such state.
SECTION 2.7. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 2.8. Term. This Agreement shall terminate upon termination of
the Service Level Agreement in accordance with Section 5.7(a) or (b) thereof.
Following the first anniversary of the date of execution of the Asset Purchase
Agreement, the parties agree to renegotiate pricing for Procurement Services for
pricing periods to be mutually agreed to by the parties to the extent necessary
to ensure that pricing for Procurement Services remains competitively priced in
the marketplace for each of the parties.
SECTION 2.9. Single Agreement. This Agreement and the agreements
identified on Exhibit 4 hereto (this Agreement and such other agreements,
collectively, the "Operating Agreements") were entered into pursuant to the
Asset Purchase Agreement. The undertakings of each party hereunder and
thereunder constitute consideration for the undertakings of the other parties
under all of the Operating Agreements, and all of the Operating Agreements shall
constitute a single agreement. The material performance of the obligations of
each party under each Operating Agreement shall be a condition to the
performance of the obligations of each other party under each Operating
Agreement The rightful rejection of any Operating Agreement (which shall not
include an expiration or termination thereof) requires the rejection of all
Operating Agreements.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
Inacom Corporation
By: /s/ Gerald A. Gagliardi
-----------------------
Name: Gerald A. Gagliardi
Title: President and Chief Executive Officer
Date: February 16, 2000
Compaq Computer Corporation
By: /s/ Michael J. Winkler
-----------------------
Name: Michael J. Winkler
Title: Senior Vice President and Group Manager
Date: February 16, 2000
ITY Corp.
By: /s/ Michael J. Winkler
----------------------
Name: Michael J. Winkler
Title: President
Date: February 16, 2000
<PAGE>
Exhibit 1
PROCUREMENT SERVICES
Compaq Sub agrees to offer the following Procurement Services pursuant to this
Agreement:
Program Development & Management
Program Design
Scope of Work
Statement of Work
Process Alignment
Transition & Implementation
Technology Selection
Provide evaluation hardware
Establish hardware standards
Identification and cataloging of existing images
Create and implement design process
Design software images
Create software images
Create proof-of-concept system
Test and validate proof-of-concept system
Global Project Management
Single point of accountability
International standards
Order Fulfillment
Account Setup
Create account(s)
Implement financing methods & processes
Pricing and Availability
90-Day forecast
Client-specific purchasing
Client-owned inventory
Pre-customized inventory
Special bid pricing
Create and maintain client-specific pricing profiles
Assign and maintain client-specific SKUs
Create and maintain convenience bundles
Pre-sales Consulting
Create & provide client-specific web-based catalog
Provide configuration manual
Provide live pre-sales support (standards only)
Provide live pre-sales support (any products)
Provide on-site pre-sales support
Order Creation
Create adhoc system order
Create adhoc order for upgrade/peripheral/supplies
Create refresh plan
Obtain Client internal approval
Generate purchase order
Order Entry, Confirmation, ETAs
Provide web-based order entry tool
Provide centralized order entry contact
Provide on-site order entry contact
Provide X.12 EDI connection to client system
Review order for completeness
Review order for technical correctness
Review order for credit availability
Release order on fulfillment system
Verbally confirm order and ETA to client contact
Electronically confirm order and ETA to client contact
Order Management
Ensure product acquisition and allocation
Answer order status inquires
Escalate issues
Advance ship notification (ASN)
Returns and DOAs
Track and review SLA compliance
Measure and report client satisfaction
Manufacturing and Customization
Manage image and instructions
Assemble system (JMAS)
Customize hardware
Third-party component setup
Partition/format fixed disk drives
Asset tagging and recording
Custom labeling or bar-coding
Install software
Operating System
Shrink-wrapped applications
Proprietary applications
Image load
Personalized system settings
IP address
Workgroup name
Other
Perform dial-out and/or leased line connectivity testing
Apply client-specific data via dial-out or leased line
Burn-in
Troubleshoot and repair image issues
Perform client-specific quality check
Logistics
Pick and pack/repack products
Special overpack
Design packing per client specifications
Acquire packaging
Pack orders per client specifications
Ensure shipment integrity
Ship/Deliver products
Standard ground
Three-day
Two-day
Next-day
Crisis transport service
Carrier-specific delivery
Time/place specific delivery
Invoicing and Reporting
Customized packing list
Provide proof-of-delivery (POD) confirmation
Standard invoice
Summary invoice
EDI invoice
Invoice acceptance
Payment generation (standard)
Payment generation (EFT)
Reports
Product Purchase
Purchase history
Standard vs. non-standard
By manufacturer
By business unit
Standards price list
Order Management
Daily Status Report
Backorder report - open orders
Proof-of-delivery (POD) Notification
SLA Performance
order turnaround
SLA attainment
Invoices
Invoices billed
Invoices paid
Asset Management feed
Client Satisfaction
<PAGE>
Exhibit 2
FEE SCHEDULE
In addition to payment owed for hardware purchases as set forth in Section 1.2
of this Agreement, Compaq agrees that it will charge Inacom the following fees
for Procurement Services performed under this Agreement:
Procurement Services Base Fee ***% of invoice price per customer invoice
Additional Fees (Fees for special procurement and configuration services)
Total Compensation for Services ***% of invoice price per customer invoice
Compaq will retain ***% of the invoice price per customer order as total
compensation for services performed. The total services fee of ***% will be used
in calculating any agency fee payment owed to Inacom. The agency fee will be
calculated and paid monthly by Compaq Sub and adjusted quarterly to ***%. The
parties agree to negotiate appropriate SLA metric standards during 2000 to be
used to further adjust the quarterly fee rate to recognize changes in Inacom's
business and Compaq Sub's cost model.
SLA METRICS
The parties agree that the above fee structure (***%) will be adjusted
using the following SLA metrics to be agreed between the parties:
1. The percentage of Customization Fees charged to Inacom as compared to
the total revenue Compaq Sub invoiced for Inacom customers is TBD, as
based on Q399 numbers. The method to be used for this calculation will
be the Commission Cost Basis (CCB).
2. The percentage of Restock Fees charged Inacom as compared to the total
revenue Compaq Sub invoiced for Inacom customers customer is TBD, based
on Q399 numbers.
3. The percentage of Expedite Fees charged Inacom as compared to the total
revenue Compaq Sub invoiced for Inacom customers is TBD, based on Q399
numbers.
4. The percentage of Cancellation Fees charged Inacom as compared to the
total revenue Compaq Sub invoiced for Inacom customers is TBD, based on
Q399 numbers.
QUARTERLY ADJUSTMENT CALCULATION
Following the end of each calendar quarter, if the aggregate of the above
amounts are within plus or minus ***%of the baseline assumptions set forth
above, there will be no adjustment. If any of the above aggregate amounts are
greater than plus or minus ***% of the baseline assumptions, then an adjustment
will be made by Compaq Sub for the difference. This adjustment will be made at
the end of the Compaq Sub fiscal quarter and added or deducted from the agency
fee payment to Inacom. For example (these figures used in this example are for
illustrative purposes only):
Fee Type Q399 Baseline Current Quarter
- -------- ------------- ---------------
Customization Fees TBD ***%
Restock Fees TBD ***%
Expedite Fees TBD ***%
Cancellation Fees TBD ***%
Total ***% ***%
1) The adjustment baseline is +/-***% (***% - ***%)
2) Current quarter deviation is -***% (***% - ***%)
3) Total fee adjustment -.04% (***% - ***%)
4) This .04% is a rebate (added to agency fee payment) to Inacom since the
current quarter is lower than the Q399 baseline
The quarterly adjustment will be made following the end of the third month of
the applicable Compaq fiscal quarter. The adjustment will include any adjustment
accrued during the first two months of the quarter.
Compaq Sub reserves the right to pay agency fees when invoices are collected
from Inacom customers, as indicated in Section 1.2 of the Agreement.
<PAGE>
Exhibit 3
Rules of Engagement for Field Purpose
Working proactively with Inacom to create a consistent engagement process when a
current Inacom/Compaq customer is at risk. Designed to facilitate communication
needed to best serve customers and to facilitate customer choice, where each
party will act unilaterally.
Guiding Principles
Allow customer choice for manufacturer or reseller (Direct or Indirect) in an
end customer's decision making process.
While remaining competitors, Compaq will operate in a consistent, predictable &
fair manner with Inacom.
As required by Asset Purchase transaction, Compaq will not directly solicit
listed accounts for one year. If customer requests Compaq to sell directly to
the account, Compaq will follow agreed upon escalation path.
Through proactive planning and review activities, Compaq and Inacom will work
together to grow market share for Compaq, and proactively put plans in place to
effectively compete against Compaq product competitors in existing and
identified partnership accounts.
All special product pricing from Compaq will be managed by Compaq Field Team
exclusively (each party sets its own pricing independently).
It is very important we follow the rules of engagement. They are designed to
ensure consistency of approach to Compaq/Inacom joint customers.
Rules of Engagement (ROE)
The companies will continue to operate as separate entities until the
acquisition is complete (expected during 1Q00) and continue to compete
aggressively.
Post acquisition, Compaq and Inacom will work together to communicate the joint
value proposition in the new partnership.
Compaq and Inacom will publish a list of existing and identified partnership
accounts for their field sales organizations.
Upon completion of the acquisition, Compaq will proactively engage in account
planning sessions with Inacom for existing and identified partnership accounts
to determine the current account state, opportunities to partner, and agreed
upon strategy to partner. Pricing, margins, and profitability shall not be
discussed.
An escalation path will be communicated between the companies to process
customer requests to move to a direct model in existing and identified
partnership accounts.
A post acquisition Program Office will be established to be the final point of
escalation for any issues and to answer questions. The goal of the Program
Office will be to ensure customer satisfaction, communicate changes to current
incumbency, and to do due diligence around issue resolution for the Customer
Engagement Process. Due diligence includes making sure that the ROE have been
followed, and communication occurred between Inacom and Compaq, but each party
shall act unilaterally.
Next Steps
Develop a Communication Plan with timeline for internal and joint
communications.
Identify and communicate a framework for the Account Planning Process. Output to
include a one page document designed to review current account state,
opportunities to partner, and agreed upon strategy to partner.
Create and communicate a joint value proposition to be used by field teams for
customer communication.
Post acquisition, communicate the defined Escalation Path. (see below)
o Compaq Area Director/Inacom District Director of Sales (48 hours Response)
o Compaq Regional Vice President/Inacom Area Vice President (48 hours Response)
o Program Office (Don Weatherson/Dick Andersen/Steve Ramsland)
Finalize dates to manage a quarterly review of account status by the Program
Office for existing and identified partnership accounts.
<PAGE>
Appendix - List of Accounts ***
<PAGE>
EXHIBIT 4
OPERATING AGREEMENTS
Separation and Sharing Agreement
InaCom Services Service Level Agreement with Compaq Computer Corporation and the
other agreements referred to therein
CONFORMED COPY
INACOM SERVICES
SERVICE LEVEL AGREEMENT
WITH
COMPAQ COMPUTER CORPORATION
Service Level Agreement (the "Agreement"), dated as of February 16,
2000, by and between Compaq Computer Corporation, a Delaware corporation, on
behalf of itself and its wholly owned subsidiaries ("Compaq"), and Inacom Corp.,
a Delaware corporation ("Inacom"). In the event of any inconsistency between
this Agreement and the Services, Supply and Sales Agreement between the parties
dated as of February 16, 2000 (the "Services, Supply and Sales Agreement") as to
the subject matter hereof, this Agreement shall control.
WHEREAS, Compaq, ITY Corp., a newly formed subsidiary of Compaq
("Compaq Sub") and Inacom have entered into an Asset Purchase Agreement dated as
of January 4, 2000, as amended (the "Asset Purchase Agreement");
WHEREAS, the execution of this Agreement is a condition to Compaq Sub
acquiring, and Inacom disposing of, the Purchased Assets (as defined in the
Asset Purchase Agreement) in connection with the Asset Purchase Agreement;
WHEREAS, Compaq has agreed to assist Inacom in the generation of
incremental revenue for Inacom's service business during the three one-year
periods following the closing of the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
SECTION 1. SERVICES CATEGORIES AND REVENUE TARGETS, APPLICATION AND
-------------------------------------------------------------------
RECONCILIATION.
- ---------------
1.1 Compaq agrees to assist Inacom in the generation of incremental
revenues for InaCom's service business as follows:
(a) During the one year period commencing on April 1, 2000
(the "year 2000 period"), Compaq will assist Inacom in the generation of
revenues for Inacom's service business derived from the five service categories
("Service Categories") specified in Section 2.1 through 2.5 below in an
aggregate amount of $85 million (as summarized in Exhibit 1).
(b) If Inacom shall have satisfied in all material respects
the conditions to Compaq's obligations as set forth in the last paragraph of
this Section 1.1 for the year 2000 period, this Agreement shall be extended
automatically, except as otherwise terminated pursuant to Section 5.7, for an
additional one year period commencing immediately after the termination of the
year 2000 period (the "year 2001 period"). During the year 2001 period, Compaq
will assist Inacom in the generation of revenues for Inacom's service business
derived from the Service Categories in an aggregate amount of $140 million (as
summarized in Exhibit 1).
(c) If Inacom shall have satisfied in all material respects
the conditions to Compaq's obligations as set forth in the last paragraph of
this Section 1.1 for the year 2001 period, this Agreement shall be extended
automatically, except as otherwise terminated pursuant to Section 5.7, for an
additional one year period commencing immediately after the termination of the
year 2001 period (the "year 2002 period"). During the year 2002 period, Compaq
will assist Inacom in the generation of revenues for Inacom's service business
derived from the Service Categories in an aggregate amount of $195 million (as
summarized in Exhibit 1).
Compaq shall provide to Inacom for planning purposes at each quarterly
business review a rolling four-quarter forecast of estimated revenue for each
Services Category for each year. Compaq's first forecast is attached as Exhibit
1. Compaq's intent is to use commercially reasonable efforts to direct revenue
to Inacom above Compaq's annual revenue targets. It is understood that any
business above the targeted amounts will depend on the percentage of Compaq's
business that is direct to end-user.
Compaq's obligations set forth in this Section 1 shall be subject to
Inacom's ability to reasonably competitively price its services (which for these
purposes shall not require Inacom to be the lowest-priced service provider) and
to fulfill its service level obligations set forth in this Agreement and in the
associated services agreements referenced herein. If Compaq believes Inacom has
not satisfied in any material respect the foregoing conditions at any time,
Compaq shall, to the extent permitted by law, deliver a written notice to Inacom
to such effect indicating its intention to enforce its rights under this
paragraph, and Inacom shall have 90 days after the date of such notice to cure
the matters referenced in such notice. The provisions of this paragraph will not
limit the termination provisions of Section 5.7(c).
1.2 Application of Revenue. Qualifying revenue (i.e., that Inacom
service revenue that qualifies for application against Compaq's annual revenue
targets) shall be applied when paid by Compaq or when due from a party other
than Compaq.
1.3 Reconciliation of Revenue.
(a) Within sixty days of the end of each of the three annual
periods specified in Subsection 1.1 above, Compaq and Inacom will confirm
whether or not Compaq met its annual revenue target for the preceding year. If
it is determined that Compaq did not meet its revenue target for the preceding
year, Compaq shall pay to Inacom an amount equal to fifty percent (50%) of the
revenue target shortfall for that year.
(b) If Compaq had a shortfall to its revenue target for the
year 2000 period and/or year 2001 period, but meets its three-year aggregate
revenue target as set forth in Exhibit 1, as amended from time to time, before
the end of the year 2002 period, Inacom shall credit to Compaq's account an
amount equal to the total shortfall payments made by Compaq to Inacom for the
years 2000 and 2001. Such credit shall be applied against subsequent purchases
of services by Compaq from Inacom as specified by Compaq.
SECTION 2. SERVICES CATEGORIES.
--------------------
2.1 On-Site/Off-Site Compaq Warranty Services.
------------------------------------------
(a) Definition of Work. On-site and off-site warranty services
for Compaq products as those services are more fully described in the Compaq
Guaranteed Service Provider Program "Maintainer Agreement - United States
Warranty Service" dated May 19, 1998, as from time to time may be amended by
mutual agreement of the parties ("GSP Maintainer Agreement") and in any
successor agreement.
(b) Service Capabilities. Inacom shall maintain throughout the
term of this Agreement all service capabilities, and associated training,
certification, logistics, communications and other capabilities as described in
the "GSP Maintainer Agreement".
(c) Performance Criteria. Inacom shall maintain throughout the
term of this Agreement a level of service performance which meets or exceeds the
level of satisfaction generally considered by end-users to be acceptable within
the industry. It is agreed that Compaq shall have the sole right using
reasonable and prudent judgment to determine if Inacom is providing such level
of performance.
(d) Fee Schedule. Subject to the labor rates specified in
the GSP Maintainer Agreement.
2.2 Multi-Vendor Services, Non-Warranty Compaq Product Services and Other
-----------------------------------------------------------------------
Services.
- ---------
(a) Definition of Work. The services described in and
contemplated by the Master Subcontract Agreement for Warranty and Remedial
Maintenance Services between Compaq and Inacom dated August 5, 1999, as from
time to time may be amended by mutual agreement of the parties (the "Master
Subcontract Agreement"), and those installation, migration, system deployment
and other project based services as specified in the applicable project
agreement and/or statement of work; including but not limited to the following:
o Maintenance of existing Multi-vendor Contracts
o Maintenance of Warranty on new Multi-Vendor Service Contracts e.g.
Dell, HP, IBM, Apple o Off site repair for selected Compaq/Non Compaq
products
o Remedial support services for Compaq Sold Carepaq's
o Installation support services for Compaq Sold Carepaq's
o Project based work such as, installation, migration & system deployment
services
o New service offers to be jointly developed by Compaq and Inacom with
the express intent of tailoring such offers for delivery by Inacom
o Other services which are not specifically designated to one of the
other Services Categories
(b) Service Capabilities. Inacom shall maintain throughout the
term of this Agreement all service capabilities, and associated training,
certification, logistics, communications and other capabilities as described in
the Master Subcontract Agreement. In addition, Inacom shall maintain for the
term of any installation, migration, system deployment or other project based
services engagement all service capabilities specified in the applicable project
agreement and/or statement of work.
(c) Performance Criteria. Inacom shall maintain throughout the
term of this Agreement a level of service performance which meets or exceeds the
level of satisfaction generally considered by end-users to be acceptable within
the industry. It is agreed that Compaq shall have the sole right using
reasonable and prudent judgment to determine if Inacom is providing such level
of performance.
(d) Fee Schedule.
o The maintenance and repair services fee schedule shall be as specified
in the Master Subcontract Agreement.
o Prices and fees for installation, migration, system deployment and other
project based services shall be as specified in an amended version of
the Master Subcontract Agreement or in the applicable purchase order,
project agreement and/or statement of work.
2.3 Call Handling Services.
-----------------------
(a) Definition of Work.
o Remedial Call Center Support. Inacom will take calls that are redirected
from Compaq's Customer Support Centers (CSCs), and on an as needed basis
will take overflow calls from the CSCs. A fuller description of the
services will be contained in a definitive Call Handling Services
Agreement to be entered into by the parties subsequent to the execution
of this Agreement. Such Call Handling Services Agreement shall be
substantially in the form of the Call Handling Services Agreement,
including its Service Capabilities attachment, attached hereto as
Exhibit 2.
o Customer Help Desk. Inacom will take calls from Client end users in
support of hardware and software problems. Inacom will maintain call
records, provide multi-tier support, escalations and diagnosis before
dispatch. Inacom will manage these calls in Inacom's call handling
system utilizing knowledge-based tools. Standard reports will be
provided monthly. A fuller description of the services contemplated by
this paragraph will be contained in the executed Call Handling Services
Agreement.
(b) Service Capabilities. Inacom shall maintain throughout the
term of this Agreement all service capabilities, and associated training,
certifications, communications and other capabilities as described in a
definitive Call Handling Services Agreement, including its Service Capabilities
attachment, to be entered into by the parties subsequent to the execution of
this Agreement, substantially in the form and content of the Compaq Call
Handling Services Agreement, including its Service Capabilities attachment
attached hereto as Exhibit 2.
(c) Performance Criteria. Inacom shall maintain throughout the
term of this Agreement a level of service performance that meets or exceeds the
level of satisfaction generally considered by end-users to be acceptable within
the industry. It is agreed that Compaq shall have the sole right using
reasonable and prudent judgment to determine if Inacom is providing such level
of performance.
(d) Fee Schedule. Subject to the fee schedule specified in
the Call Handling Services Agreement.
2.4 Inacom Branded Services.
------------------------
(a) Definition of Work. Compaq's sale of Inacom branded
services.
(b) Service Capabilities.
o Compaq shall professionally represent Inacom's branded service
offerings. Compaq will make commercially reasonable attempts to sell
such services to its customer base and to new customers. Compaq will
provide its Sales representatives with appropriate training,
documentation and support materials, contingent upon Inacom's providing
such training, documentation and support materials to Compaq.
o Inacom shall maintain throughout the term of this Agreement all
necessary capabilities to deliver and support the Inacom branded
services sold by Compaq. Inacom shall make available to Compaq the same
level of training, sales support, literature and information that Inacom
makes available to its own sales force and resellers.
o The parties shall enter into an appropriate service agreement for this
category of services substantially in the form of the Master Agreement
for Professional Services or Master Subcontract Agreement, as
appropriate.
(c) Performance Criteria. Inacom shall maintain throughout the
term of this Agreement a level of service performance that meets or exceeds the
level of satisfaction generally considered by end-users to be acceptable within
the industry. It is agreed that Compaq shall have the sole right using
reasonable and prudent judgment to determine if Inacom is providing such level
of performance.
(d) Fee Schedule. Subject to the fee schedule in the applicable
service agreement.
2.5 Professional Services.
----------------------
(a) Definition of Work.
o Offsite Client and server staging and deployment to customer site
o Onsite client and server installation of hardware and identified
Operating Systems, desktop applications
o Project based work such as, installation, migration & system deployment
services
(b) Service Capabilities. Inacom shall maintain throughout the
term of this Agreement all service capabilities, and associated training,
certifications, communications and other capabilities as described in a
definitive Master Agreement for Professional Services to be entered into by the
parties subsequent to the execution of this Agreement, substantially in the form
and content of the Compaq Master Agreement for Professional Services attached
hereto as Exhibit 3.
(c) Performance Criteria. Inacom shall maintain throughout the
term of this Agreement a level of service performance that meets or exceeds the
level of satisfaction generally considered by end-users to be acceptable within
the industry. It is agreed that Compaq shall have the sole right using
reasonable and prudent judgment to determine if Inacom is providing such level
of performance.
(d) Fee Schedule. Subject to the labor rates specified in the
Master Agreement for Professional Services.
(e) Premier Service Partner. Compaq shall designate InaCom as
a "Premier Service Provider for Distributed Desktop Infrastructure Services."
SECTION 3 RULES OF ENGAGEMENT.
--------------------
3.1 Management Operating Model
--------------------------
o Services Executive Coordinators. Compaq and Inacom will each assign a
mutually agreed to "Services Executive Coordinator" to provide
management oversight to this Agreement relationship. These Services
Executive Coordinators will be responsible for:
o ensuring compliance with the terms and conditions set forth in this
Agreement
o addressing any issues that may arise over the course of the term of
this Agreement
o escalating any unresolved issues using the escalation process outlined
in the following subsection
o conducting quarterly business reviews
o applying the appropriate resources from their respective companies to
achieve the stated objectives of this Agreement
o providing any coordination activity internal to their respective
companies required to support this Agreement
3.2 Management Escalation Process.
------------------------------
o If in the course of the performance of this Agreement the two Services
Executive Coordinators are unable to mutually resolve an issue, the
issue will be brought to the Compaq Vice President and General Manager,
Customer Services and Inacom Senior Vice President, Solutions Delivery
for management resolution. Should these two individuals fail to achieve
mutually acceptable management resolution, the issue will be raised to
the Chief Executive Officer of the respective companies for management
resolution. Thereafter, if an issue is not mutually resolved, the
parties shall resolve such issue in accordance with Section 5.8 hereof.
3.3 Business Review Process.
------------------------
o A business review will be held once each calendar quarter over the term
of this Agreement. These business reviews will review performance to
date against this Agreement, review out-quarter business opportunities,
and address any open issues related to this Agreement and its
performance. The attendees, timing, location and specific agenda for
each of these business reviews will be decided upon by the two Services
Executive Coordinators.
o An executive review will be conducted on or before August 1, 2000 by the
Compaq Vice President and General Manager, Customer Services and the
Inacom Senior Vice President, Solutions Delivery, to review the year to
date performance under this Agreement and to consider the need for any
changes to this Agreement, to be mutually agreed upon by the parties.
3.4 Bid/Win Situations
------------------
o Inacom and Compaq will agree upon a schedule of packaged solutions,
including their rate structures, that Compaq will use as the basis for
responding to customer solicitations, without the need for Inacom to
review or approve any engagement that meets the criteria for such
packaged solutions.
o For customer opportunities that are eligible for custom solutions and/or
pricing, Inacom will respond in a timely and commercially reasonable
manner to Compaq's four Customer Services Bid/Win Teams or not more than
ten designated Professional Services Acquisition Consultants requests
for information, bid resources and acceptance/refusal to bid
opportunities; and in any event in sufficient time for Compaq to respond
to a documented customer response request.
o Any revenue recognized by Inacom as a result of a services sales lead
brought to Inacom by Compaq, provided Inacom was not already engaged in
the bid process with the customer, will be applied to the annual revenue
target. Compaq and Inacom agree that the maximum sales lead revenue
applied to an annual revenue target will not exceed 30% of the total
annual revenue target for that year.
o Should Compaq and Inacom find themselves in a competitive bid situation
and Compaq wins the bid, any service business made available to Inacom
by Compaq, will be applied to the annual revenue target.
o Should Inacom refuse to accept any service business presented to them by
Compaq that meets the criteria of any of the Services Categories, the
applicable services agreement and agreed to rate schedules, the revenue
associated with such business will be applied to the annual revenue
target.
3.5 On-going Deal Management Situations
-----------------------------------
o Revenue from renewals of Compaq service contract business awarded to
Inacom in previous years will be applied to the applicable annual
revenue target.
3.6 New Service Offers
------------------
o Compaq and Inacom shall commence within thirty days of the closing of
the Asset Purchase Agreement a joint effort to develop new service
offers with the express intent of tailoring such offers for delivery by
Inacom. Once established, these service offers from time to time may be
amended, replaced, added to or eliminated by mutual agreement of the
parties.
SECTION 4. OVERALL REVENUE ALLOCATION AND PERFORMANCE CRITERIA.
-----------------------------------------------------
4.1 Revenue Application Criteria. The purpose of this section is to set
forth or reiterate certain criteria that will be used to identify revenue to be
applied to Compaq's annual revenue targets.
o All business opportunities presented to Inacom for services anywhere in
the United States that fall within the five Services Categories will be
counted toward the annual revenue target, including:
o If Inacom does not have local service capability in the required
locations.
o If, with respect to any individual customer engagement, Inacom's service
quality is not maintained at the levels specified in Section 2 and the
applicable service agreement, Compaq at its sole discretion may
terminate Inacom with respect to that engagement in accordance with the
applicable service agreement in the area of non-performance, provided
that Inacom has not cured such service quality deficiency within 15 days
after written notice thereof (or such shorter period as required by the
applicable customer). All revenues Inacom would have received but for
such termination will be counted toward the annual revenue targets.
o The value Inacom derives from utilizing Compaq's infrastructure to
support the sale through delivery of service will be quantified (as
mutually agreed upon in good faith by Inacom and Compaq) and applied to
the annual revenue targets. Examples of such Compaq infrastructure
support include:
o Leveraging Compaq's purchase agreements
o Utilizing Compaq's on-site and off-site delivery capability
o Training that is not already included as a benefit of GSP or other
applicable service agreements.
SECTION 5 GENERAL.
--------
5.1 Most Favored Customer. Inacom agrees that Inacom will offer Compaq
its most favored customer fees (i.e. the lowest fees which it charges any of its
customers for comparable services under similar service environments) for the
services described in this Agreement, except in the instance where lower pricing
is offered to "meet competition" in response to a documented lower bid, as such
term is commonly used in the relevant industry.
5.2 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
If to Inacom, to:
Inacom Corp.
Attention: Contracts Department
10810 Farnam Drive
Omaha, NE 68154
With a copy to:
Inacom Corp.
Attention: Bob Lewis
2001 Westside Parkway
Suite 220
Alpharetta, GA 30004
If to Compaq, to:
Compaq Computer Corporation
Attention: John Kelley
MS530112
24500 Highway 290
Cypress, TX 77429-2318
With a copy to:
Compaq Computer Corporation
Attention: Law Department
40 Old Bolton Road
Stow, MA 01775
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
5.3 Amendments and Waivers. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
5.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of
each other party hereto.
5.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New York without regard to the
conflicts of law rules of such state.
5.6 Counterparts; Third Party Beneficiaries. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
5.7 Term and Termination.
(a) This Agreement shall terminate at the end of the year 2000
period, except to the extent extended pursuant to Section 1.1, subject to
Sections 5.7(b), (c) and (d).
(b) This Agreement shall terminate upon a Fundamental Change
of Inacom (unless otherwise agreed by Compaq) or upon a Fundamental Change of
Compaq (unless otherwise agreed by InaCom). "Fundamental Change" means, with
respect to either party to this Agreement, (i) the acquisition by any person,
entity or group of beneficial ownership of voting securities representing more
than 50% of the total voting power of all voting securities of such party then
outstanding, (ii) the merger or consolidation of such party with any other
person or entity and (iii) the conveyance, transfer or leasing of all or
substantially all of the assets of such party.
(c) This Agreement shall terminate with respect to any Service
Category (unless otherwise agreed by Compaq) if Inacom is in material breach of
its service capability requirements or performance criteria with respect to such
Service Category hereunder or under the applicable service agreement, if any;
provided that Inacom has not cured such breach within 30 days after written
notice thereof. To the extent this Agreement is so terminated with respect to
any Service Category, Compaq's aggregate revenue target for each remaining year
or portion thereof will be reduced by the remaining revenue target forecast
specified in Exhibit 1, as amended from time to time, relating to such Service
Category.
(d) This Agreement shall terminate with respect to any Service
Category within 120 days after Inacom delivers a written notice to Compaq that
Inacom intends to terminate its capabilities in such Service Category. To the
extent this Agreement is so terminated with respect to any Service Category,
Compaq's aggregate revenue target for each remaining year or portion thereof
will be reduced by the remaining revenue target forecast specified in Exhibit 1,
as amended from time to time, relating to such Service Category.
5.8 Dispute Resolution. The parties wish to use reasonable measures to
avoid the litigation of any dispute under this Agreement. Therefore, any dispute
arising out of or relating to this Agreement or the breach, termination or
validity thereof shall be settled in accordance with one of the following
procedures. The parties shall use the procedures in the following order of
priority. Unless otherwise agreed, the parties shall each bear all of their
expenses incurred during the procedures. All negotiations pursuant to this
Subsection 5.8 shall be negotiated in good faith and are confidential and shall
be treated as compromise and settlement negotiations for purposes of applicable
rules of evidence.
(a) Negotiation. At the request of either party to initiate
this dispute resolution process, the parties shall negotiate for a resolution of
the dispute in a meeting or series of meetings held at the site of the
non-requesting party. The meeting shall be attended by appropriate executives of
both parties who are at a higher level of management than the persons with
direct responsibility for the administration of this Agreement.
(b) Mediation. In the event that the dispute is not resolved
by negotiation within sixty (60) days of the original request to initiate this
dispute resolution process, the parties shall negotiate for a non-binding
mediation process which is appropriate for the dispute at issue in a meeting or
series of meetings held at the site of the original non-requesting party.
(c) Binding Arbitration. In the event that the parties are
unable to agree on a mediation process within ninety (90) days of the original
request to initiate this dispute resolution process, or the mediation process
does not settle the dispute within one hundred twenty (120) days of the original
request to initiate this dispute resolution process, the parties shall consider
settlement of the dispute by binding arbitration. If the parties mutually agree
to binding arbitration, the dispute shall be settled by arbitration in
accordance with the then current CPR Institute For Dispute Resolution
Non-Administered Arbitration Rules by three independent and impartial
arbitrators, of whom each party shall appoint one and the third to be appointed
by the two appointed by Compaq and Inacom . The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C., Sections 1-16, and judgment upon
the award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be in the city of the
original non-requesting party. The arbitrators are not empowered to award
damages in excess of compensatory damages up to any limit specified in this
Agreement and each party hereby irrevocably waives any right to recover such
damages with respect to any dispute resolved by arbitration. The statute of
limitations of the State of New York applicable to the commencement of a lawsuit
shall apply to the commencement of an arbitration hereunder, except that no
defenses shall be available based upon the passage of time during any
negotiation or mediation called for by Subsections 5.8 (a) through (c).
5.9 Reports and Audit Rights. Inacom shall maintain records and ensure
proper accounting of revenue applied toward Compaq revenue targets by Service
Category. Inacom shall provide a quarterly report to Compaq of revenue applied
against each Service Category. In the event of any disagreement with Compaq
regarding the content of any reports, Inacom agrees to permit Compaq upon
reasonable request and during normal business hours, to review Inacom's records
relating to Inacom's Compaq-related services business. Such records shall
include all records pertaining to the provision of services at Compaq customer
locations and revenue generated from Compaq-related services.
5.10 Confidentiality. This Agreement shall be considered a confidential
document of both parties. Except as required by law, neither party shall
disclose the contents or existence of this Agreement without the prior written
permission of the other party.
5.11 Subcontracting. Should Inacom wish to use resources other than
Inacom employees to deliver services via a subcontracting, franchise or other
form of business arrangement, except as specified in the applicable services
agreement, Compaq will have the right to refuse or accept such an arrangement;
provided that such acceptance by Compaq shall not be withheld unreasonably. If
Compaq does accept such an arrangement, Inacom shall be responsible for ensuring
the subcontractor, franchisee or other entity complies with all requirements of
this Agreement and any other applicable service agreement. Such subcontractor,
franchisee or other entity shall be deemed Inacom's agent for purposes of this
Agreement.
5.12 CONSEQUENTIAL DAMAGES
IN NO EVENT WILL EITHER PARTY HERETO BE LIABLE FOR DAMAGES CAUSED BY THE OTHER
PARTY'S NEGLIGENCE, OR FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, INDIRECT OR
PUNITIVE DAMAGES, LOST PROFITS, LOST USE OF EQUIPMENT, LOSS OF STORED MEMORY,
COST OF SUBSTITUTE EQUIPMENT OR OTHER DOWNTIME COSTS, REGARDLESS OF WHETHER SUCH
LIABILITY IS BASED ON BREACH OF CONTRACT, TORT, STRICT LIABILITY, BREACH OF
WARRANTIES, FAILURE OF ESSENTIAL PURPOSE OR OTHERWISE AND EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM AGAINST THE OTHER BY ANY OTHER
PARTY.
5.13 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter of this Agreement.
5.14 Single Agreement. This Agreement and the agreements identified on
Exhibit 4 of the Services, Supply and Sales Agreement (the Services, Supply and
Sales Agreement and such other agreements, collectively, the "Operating
Agreements") were entered into pursuant to the Asset Purchase Agreement. The
undertakings of each party hereunder and thereunder constitute consideration for
the undertakings of the other parties under all of the Operating Agreements, and
all of the Operating Agreements shall constitute a single agreement. The
material performance of the obligations of each party under each Operating
Agreement shall be a condition to the performance of the obligations of each
other party under each Operating Agreement. The rightful rejection of any
Operating Agreement (which shall not include an expiration or termination
thereof) requires the rejection of all Operating Agreements.
5.15 No Offset. Neither party shall be permitted to offset any payments
to be made or credits to be applied under this Agreement with any payments to be
made or credits to be applied under the Asset Purchase Agreement or the credit
agreement contemplated by the Revolving Credit Facility Commitment Letter dated
as of February 15, 2000 from Compaq to Inacom.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
Inacom Corp.
By: /s/ Gerald A. Gagliardi
------------------------
Name: Gerald A. Gagliardi
Title: President and Chief Executive Officer
Date: February 16, 2000
Compaq Computer Corporation
By: /s/ Peter A. Mercury
----------------------
Name: Peter A. Mercury
Title: Vice President and General Manager
Customer Services Division
Date: February 16, 2000
<PAGE>
EXHIBIT 1
FORECASTS OF ESTIMATED REVENUE BY SERVICES CATEGORIES
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------- ------------------- ----------------- ------------------
Services Categories 2000 2001 2002
- ----------------------------------------- ------------------- ----------------- ------------------
- ----------------------------------------- ------------------- ----------------- ------------------
1. On-Site/Off-Site Warranty Service $10 million $20 million $25 million
- ----------------------------------------- ------------------- ----------------- ------------------
- ----------------------------------------- ------------------- ----------------- ------------------
2. Non-Warranty Maintenance Services $50 million $75 million $100 million
- ----------------------------------------- ------------------- ----------------- ------------------
- ----------------------------------------- ------------------- ----------------- ------------------
3. Call Handling Services $5 million $10 million $20 million
- ----------------------------------------- ------------------- ----------------- ------------------
- ----------------------------------------- ------------------- ----------------- ------------------
4. Asset Management Services $15 million $25 million $35 million
- ----------------------------------------- ------------------- ----------------- ------------------
- ----------------------------------------- ------------------- ----------------- ------------------
5. Professional Services $5 million $10 million $15 million
- ----------------------------------------- ------------------- ----------------- ------------------
- ----------------------------------------- ------------------- ----------------- ------------------
Aggregate Revenue $85 million $140 million $195 million
- ----------------------------------------- ------------------- ----------------- ------------------
</TABLE>
<PAGE>
EXHIBIT 2
CALL HANDLING SERVICES AGREEMENT
This Call Handling Services Agreement ("Agreement"), made this _________________
day of _____________, 2000, is by and between _________________________, having
a principal place of business at ________________________________
("Subcontractor"), and Compaq Computer Corporation, having a principal place of
business at 40 Old Bolton Road, Stow Massachusetts 01775 ("Compaq"). The parties
agree that the terms and conditions of this Agreement and any applicable
Purchase Order(s) that may be issued hereunder will govern the purchase of
Services by Compaq from Subcontractor for the purpose of Subcontractor providing
such Services on behalf of Compaq to a customer or customers of Compaq
(hereinafter referred to as "Customer").
This Agreement will become effective on the date specified above and will
continue for a period of one (1) year, unless otherwise terminated as provided
herein or extended by the mutual consent of the parties. Any expiration of
termination of this Agreement will not alter the rights, duties, or obligations
of the parties relating to any Purchase Orders issued by Compaq under this
Agreement prior to the date of expiration or termination of this Agreement.
This Agreement does not obligate Compaq to purchase any Services from
Subcontractor. Purchases, if any, will be as specified on a Purchase Order(s)
issued by Compaq pursuant to Section 2.
1. DEFINITIONS
a) "Acceptance" means written notification from Compaq to Subcontractor
that indicates that the Services have been evaluated and satisfy the
completion and acceptance criteria set forth or referenced in the Statement
of Work or Purchase Order. Acceptance may be partial or complete, as
specified in such notification.
b) "Invention(s)" means any designs, techniques, inventions, discoveries,
or improvements, whether patentable or not, that are conceived of or
reduced to practice by Subcontractor in providing the Services to Compaq or
Customer under this Agreement.
c) "Services" means consulting, integration, implementation, installation,
maintenance, support, design, development, training, management, and any
other work provided by Subcontractor in connection with meeting
Subcontractor's responsibilities under this Agreement.
d) "Statement of Work" means a statement agreed upon by Compaq and
Subcontractor that specifies the Services to be provided by Subcontractor,
the price, payment schedule, delivery schedule, and acceptance criteria for
such Services and, if applicable, detailed technical and administrative
requirements for the Services. The Statement of Work may also include
additional terms or modifications to this Agreement. A Statement of Work
will be created and agreed upon for each Purchase Order issued under this
Agreement.
2. PURCHASE ORDER, ORDER OF PRECEDENCE, SERVICES COORDINATORS
a) Subcontractor will furnish the Services to Compaq or Customer as
specified in the Statement of Work upon Compaq's issuance of a Purchase
Order to Subcontractor.
b) The following order of precedence will control in the event of any
conflict in terms and conditions:
1) Statement of Work,
2) Purchase Order, and
3) this Agreement.
The pre-printed terms and conditions on the reverse side of the Purchase
Order will not apply to this Agreement or any Purchase Order issued under
this Agreement.
c) Each party will appoint a coordinator for the Services to be performed
under each Purchase Order and Statement of Work. Subcontractor's
coordinator will have the authority to represent Subcontractor. Compaq's
coordinator will represent Compaq and be responsible for determining the
adequacy and acceptability of the Services provided by Subcontractor.
3. PAYMENT
Unless otherwise set forth in the Statement of Work or Purchase Order,
payment for the Services will be due forty-five (45) days from the later of
the date of Acceptance or the date Compaq receives a proper invoice from
Subcontractor.
4. RECORDS
Subcontractor will maintain account records in accordance with generally
accepted accounting practices to substantiate all invoices. Such records
will be made available to Compaq during normal business hours and will
include payroll records, expense accounts, attendance cards, and job
summaries. Subcontractor will maintain such records for three (3) years
from the date of final payment for the Services.
5. OWNERSHIP AND LICENSE
a) All Inventions will be the sole and exclusive property of Compaq.
Subcontractor hereby assigns to Compaq the ownership of copyright in the
Inventions. Compaq will have the right to obtain and hold in its own name
copyrights, registrations, and similar protection which may be available in
the Inventions. Subcontractor agrees to assist Compaq as may be required to
perfect such rights.
b) To the extent that any Subcontractor's pre-existing technology is
contained in the Inventions, Subcontractor grants to Compaq an irrevocable,
nonexclusive, worldwide, royalty-free license to:
1) use, execute, reproduce, display, perform, and distribute
(internally or externally) such pre-existing technology; and
2) authorize Customer to do any, some, or all of the foregoing.
6. WARRANTY
a) Subcontractor warrants that all Services will (1) be performed in a good
and workmanlike manner and in accordance with generally accepted
professional standards for such Services, and (2) conform to the
requirements specified in the Statement of Work or Purchase Order.
b) Subcontractor warrants that Services will not in any manner limit,
impair, disrupt, or jeopardize any existing Year 2000 Compliance of any
equipment or software on which Services are performed. "Year 2000
Compliance" for purposes of this provision means the capability to
correctly process, calculate, compare, and sequence date data within and
between the 20th and 21st centuries, including leap year calculations.
c) In the event of any breach of warranty, Subcontractor, without charge
and without delay, will re-perform nonconforming Services.
7. CONFIDENTIAL INFORMATION
Subcontractor will maintain all information or data, whether written or
oral, relating to Compaq or Customer which Subcontractor obtains or
otherwise has access to in the performance of Services in confidence and
will not disclose any such information or data to any third party or to
employees, agents, subcontractors, or suppliers of Subcontractor who do not
have the need for access to such information or data.
8. PERSONNEL
a) Personnel provided by Subcontractor will not be considered employees of
Compaq for any purpose. Subcontractor personnel will make no commitments on
behalf of Compaq for any purpose. Subcontractor assumes full responsibility
for the actions of its personnel and will be responsible for their
supervision, daily direction, and control. Subcontractor will retain full
responsibility for payment of salary (including withholding of income taxes
and Social Security), worker's compensation, disability benefits, and the
like. Nothing in this Agreement grants Subcontractor or any Subcontractor
personnel any right under any Compaq employee benefit plan.
b) Subcontractor personnel specified or identified by name in the Statement
of Work or Purchase Order will be considered essential to the Services to
be performed. No substitution or diversion of such personnel will be made
without the prior written consent of Compaq and Customer.
c) Compaq and Customer will retain the right to reject any of
Subcontractor's personnel whose qualifications are insufficient in Compaq's
or Customer's judgment.
9. CHANGE IN SCOPE
Each Purchase Order and Statement of Work under this Agreement is based
upon Compaq's present understanding of Compaq's obligations to Customer. In
the event Compaq's understanding changes or Customer requests a change in
Compaq's obligations affecting Subcontractor's performance, Compaq will
notify Subcontractor of such change request in writing. Within ten (10)
days of receipt of such change request, Subcontractor will notify Compaq in
writing of any increase or decrease in Subcontractor's charges and/or
alteration to delivery schedules occasioned by the change. Upon Compaq's
acceptance of Subcontractor's modified charges and delivery schedule, the
parties will modify the terms of the applicable Purchase Order and
Statement of Work to effect the change. Subcontractor will not implement
the change without Compaq's written authorization.
10. TERMINATION
a) Compaq may terminate for convenience this Agreement, any Purchase Order,
or any portions thereof by written notice to Subcontractor. In any event,
the applicable Purchase Order will terminate immediately upon termination,
for any reason, of Compaq's agreement with Customer. Upon receipt of such
notice, Subcontractor will immediately stop all activities associated with
the terminated Purchase Order. Subcontractor will be paid for the Services
provided and accepted prior to the date of termination. Such payment will
constitute Compaq's entire liability.
b) In the event of a default by Subcontractor, Compaq will provide
Subcontractor written notice thereof. If the default is not remedied within
ten (10) days or within the time stated in the notice, Compaq may terminate
this Agreement, any Purchase Order, or any portions thereof.
c) The rights and obligations of Sections 4, 5, 6, 7, 10, 11, and 12 will
continue after expiration or termination of this Agreement and will bind
the parties and their legal representatives, successors, heirs, and
assigns.
11. INDEMNIFICATIONS
a) Subcontractor will indemnify, defend, and hold Compaq harmless from any
and all claims or demands (including all losses, damages, and liabilities
resulting from such claims or demands, and all related costs and expenses,
including reasonable legal fees) arising from or in connection with (1)
Subcontractor's performance of, or failure to perform, any of its
obligations under this Agreement or (2) an act or omission of Subcontractor
in its relationships with its employees, agents, subcontractors or
suppliers.
b) Subcontractor will indemnify, defend, and hold Compaq and Customer
harmless from any and all claims or demands (including all losses, damages,
and liabilities resulting from such claims or demands, and all related
costs and expenses, including reasonable legal fees) which may result by
reason of any infringement or claim of infringement of any intellectual
property rights associated with the Services or Inventions provided in
connection with this Agreement.
12. LIMITATION OF LIABILITY
a) EXCEPT AS PROVIDED BELOW, NEITHER COMPAQ NOR SUBCONTRACTOR WILL BE
LIABLE FOR ANY DAMAGES RESULTING FROM LOSS OF DATA, PROFITS, OR USE OF
PRODUCTS, OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. Subcontractor will be liable for any
damages, including incidental or consequential damages, which Compaq is
obligated to pay Customer or other third parties as a result of
Subcontractor's failure to perform its obligations in accordance with this
Agreement.
b) This limitation of liability does not apply to the liability of either
party for any personal injury, including death, or for willful, wanton, or
malicious acts of Subcontractor or to obligations of Subcontractor under
Section 7, "Confidential Information", or Section 11, "Indemnifications".
13. COMPLIANCE WITH LAWS
Subcontractor, at its own expense, will comply with all laws and
regulations of federal, state, and local government authorities relating to
its obligations under this Agreement.
14. GENERAL
a) Except as expressly provided in the Statement of Work or Purchase Order,
Subcontractor will be entitled to no further payment, cost reimbursement,
or other compensation for the Services provided hereunder.
b) Subcontractor shall carry during the term of this Agreement, and with
companies with a Best Rating of not less than A-:VII, insurance policies of
the kinds and in the amounts listed below:
1. Worker's Compensation - statutory limits in each state in which
Subcontractor is required to provide Worker's Compensation coverage
including Other States Endorsement or policy equivalent thereof. Policy
shall include a waiver of subrogation in favor of Compaq Computer
Corporation, its officers, directors, employees and agents
2. Employer's Liability - not less than $1,000,000
3. Comprehensive General Liability - including Contractual Liability,
Independent Contractor's Liability, Products and/or Completed
Operations Liability, and Personal Injury/Property Damage Coverage's in
a combined single limit of not less than $1,000,000 per occurrence
combined single limit and $2,000,000 General Aggregate. Compaq Computer
Corporation, its officers, directors, employees and agents shall be
named as Additional Insureds.
4. Automobile Liability - for owned, non-owned, and hired vehicles in a
combined single limit of not less than $1,000,000.
5. Umbrella Liability - a combined single limit of not less than
$2,000,000.
Subcontractor shall furnish Compaq with Certificates of Insurance
evidencing the specified insurance policies and stating that such insurance
policies may not be changed or terminated so as to not comply with the
foregoing insurance requirements without at least thirty (30) days prior
written notice to Compaq.
c) Nothing in this Agreement will be construed as prohibiting or
restricting Compaq from independently developing, acquiring, and/or
marketing services which are similar to and/or competitive with those
provided hereunder.
d) Any assignment, transfer, or subcontracting of rights or obligations by
Subcontractor under this Agreement in whole or in part without the prior
written consent of Compaq will be void and may subject Subcontractor to
termination.
e) During the performance by Subcontractor under a particular Purchase
Order and Statement of Work Compaq may require Subcontractor to temporarily
cease performance of some or all of the Services by issuing Subcontractor a
Work Suspension Order ("Order"). The Order will include the effective date
of the Order, a specific description of the Services to be suspended, and
the anticipated duration of the suspension. Upon receipt of an Order,
Subcontractor will take all reasonable measures to protect the Services in
progress. Compaq will notify Subcontractor in writing of the date on which
the suspended Services are to be resumed.
f) Subcontractor represents that it is not under any obligation or
restriction, nor will it assume any, which would interfere or present a
conflict of interest with the Services that it provides under this
Agreement.
g) Compaq is free to determine the price charged to Customer for the
Services that Subcontractor provides to Customer on behalf Compaq.
h) Subcontractor agrees to comply with security procedures of Compaq and
Customer.
i) Subcontractor agrees to be bound by applicable "flow down" provisions of
Compaq's agreement with Customer of which it is notified by Compaq.
j) Neither party may bring an action, regardless of form, arising out of
this Agreement more than two (2) years after the cause of action arises.
Subcontractor may not bring an action for nonpayment more than two (2)
years from the date final payment for the Services is due.
k) The laws of the State of Texas will govern this Agreement.
l) This Agreement and the documents referenced herein set forth the entire
understanding of the parties with respect to the subject matter described
herein and supersede all prior communications, whether oral or written, by
either party. Any modification to these terms and conditions must be in
writing and signed by authorized representatives of both parties.
Accepted by: Accepted by:
___________________________ COMPAQ COMPUTER CORPORATION
BY: BY:
PRINT NAME: PRINT NAME:
TITLE: TITLE:
DATE: DATE:
ATTACHMENT
SERVICE CAPABILITIES
o Inacom agrees to provide technical support to Compaq customers on
designated products. The detailed instructions, policies, and
procedures that define designated products and explain how Inacom
delivers technical support to Compaq's customers are found in
Compaq's Technical Support Work Instructions ("TSWI"). Compaq
agrees to provide Inacom with electronic access to a current
version of the TSWI and Inacom agrees to comply with all policies
incorporated in the TSWI.
o Inacom agrees to provide both Level 1 and Level 2 Technical
Support Engineers ("TSEs") to perform the work. Level 1 TSEs
provide the initial contact with customers and attempt to resolve
customers' questions or inquiries. These questions or inquires
shall be referred to heretofore as Cases. Level 2 TSEs resolve
Cases that the Level 1 TSEs cannot resolve from a technical
standpoint. Cases that Level 2 cannot resolve for technical
reasons are to be escalated to Compaq according to the procedures
documented in the Compaq Work Instructions. Inacom is allowed to
escalate to Compaq Level 2 no more than one (1) percent of the
Cases documented each month.
o Inacom agrees to provide Customer Relations support to Compaq
customers. Customer Relations support is non-technical customer
satisfaction or administrative assistance. Occasionally, there are
customers who wish to complain about Compaq offerings or policies.
Compaq expects Inacom to resolve Customer Relations Cases, but
Customer Relations Cases that Inacom cannot resolve to the
customer's satisfaction shall be escalated to Compaq according to
the process and time frames documented in the TSWI. Inacom is
allowed to escalate to Compaq Customer Relations no more than one
(1) percent of the Cases documented each month.
o Inacom will establish connectivity to the Compaq's Intranet to
gain access to Compaq electronic support resources, and Inacom
agrees to provide Compaq with a documented plan that reasonably
ensures that this information is protected from any form of
unauthorized access.
o Inacom personnel will identify themselves to Compaq customers as
Compaq at all times, without exception. Inacom may indicate, when
pressed by a Compaq customer, that they are the "Compaq location
in (City Name)."
o Inacom will not disclose or distribute any information related to
Compaq customers or Case activity to any outside party. Inacom
agrees to provide Compaq with a documented plan that ensures any
electronic access to Compaq is secured and limited to Inacom
personnel who have a business need to access to this information.
o Inacom shall document Cases in the call tracking system of
Compaq's choice.
o Inacom shall provide Compaq customers technical support without
interruption, twenty-four hours per day, seven days per week,
every day of the year. Inacom agrees to implement a documented
disaster recovery plan that ensures uninterrupted service in the
event of a power outage, internal systems outage, or internal
telecommunications system outage.
o Compaq will provide Inacom with a call volume forecast quarterly.
Inacom will staff enough TSEs to meet Compaq service levels at
call volumes up to 110% of the forecasted call volume. Compaq will
pay Inacom for actual calls, not forecasted calls. Compaq agrees
to pay the minimum minutes as specified in the Call Handling
Services Agreement.
o Compaq reserves the right to change the quarterly call volume
forecast at any time. Inacom shall have a thirty-day grace period
to adjust TSE staffing required to meet service levels in the
event that Compaq increases the call volume forecast by more than
ten (10) percent.
o Inacom agrees to maintain a point of contact for communications
with Compaq at all times. This individual shall be capable of
responding to a telephone call or page from Compaq within thirty
minutes. In addition, Inacom agrees to inform Compaq immediately
in the event of any system interruptions or performance
degradations that could potentially affect customer service.
o Inacom agrees to accommodate a Compaq employee at Inacom's
facility for any length of time. In addition, Inacom agrees to
provide Compaq employees unrestricted access to the areas in the
Inacom facility in which Compaq technical support services are
conducted. Inacom shall under no conditions prevent Compaq
employees from interviewing or conversing with any Inacom employee
assigned to Compaq technical support.
o Inacom agrees to provide Compaq with telephone statistics related
to technical support activity as defined by Compaq in the TSWI. At
minimum, Inacom shall report daily call center statistics to
Compaq. These statistics are due to Compaq by 7:00 a.m. every
business day.
o Inacom agrees to conduct business reviews with Compaq management
on a quarterly basis, conducted at mutually agreed to locations.
o Inacom agrees to provide Compaq with feedback on customer comments
and issues in formats and time frames documented in the TSWI.
Equipment and Facilities
o Compaq agrees to loan Inacom one or more of each Compaq product
model that Inacom supports. The purpose of these loaners is to
enhance TSE product knowledge and facilitate problem resolution.
Loaner models will be provided to Inacom as they become available,
and Inacom agrees to return all Compaq loaner units at such time
as the requirement to provide technical support for a specific
product ceases.
o Inacom agrees to provide a file server with adequate capacity to
support the operation of the Compaq call tracking system and
intranet data bases on each TSE's workstation. In addition the TSE
workstations must meet the minimum configuration recommended by
Compaq, which may change over time due to advances in technology.
o Inacom agrees to provide, at Inacom's expense, the following
telecommunications equipment and capabilities to support this
service:
o Compaq approved telephone switch
o T-1 dedicated access to MCI for voice (Installation cost only)
o T-1 access to MCI's Hyperstream PVC network for data and
electronic messaging. This connection is limited to Inacom
access to Compaq (Installation cost only)
o PBX with ACD statistical reporting capability
o PBX with ISDN capability on T-1's
o Ability to transfer calls to multiple Compaq telephone numbers
if the MCI ECR fails
o Dedicated primary rate ISDN T1 access to MCI
o Redundant routes to MCI via the local carrier
o Ability to accept inband signaling to carry a customer ID
number via DTMF signals
o Ability to outpulse DTMF signals to indicate readiness to
accept numbers
o Ability to conference callers to a credit card approval IVR
over an 800 number (Installation cost only)
o Compaq agrees to pay the monthly T1 charges and telephone line
usage charges, with associated inbound/outbound call charges, for
all Compaq customer technical support calls received by Inacom.
o Inacom agrees to provide Compaq technical support within a
dedicated Inacom facility. Compaq agrees to consider exceptions to
this requirement, but Compaq approval must be secured prior to
Inacom's performance of any non-Compaq related work in same
facility.
o Inacom agrees to provide, at no expense to Compaq, a training
facility that includes the Compaq hardware and software products
recommended by Compaq's Training Manager to support the hands-on
training of Inacom TSEs.
Training and Quality Assurance
o Compaq agrees to provide Inacom with a Compaq product training
curriculum for both new hire TSEs and new product training for
experienced TSEs. Inacom agrees to provide a sufficient number of
instructors to conduct training classes for its TSEs. Inacom
agrees to document training activity, including dates, attendees,
topics, Compaq products covered for Compaq's review.
o Compaq agrees to provide adequate training to Inacom instructors
on Compaq products, policies, and procedures. Both parties shall
mutually determine when and where this "Train the Trainer"
activity will take place.
o Compaq reserves the right to audit the Inacom facilities dedicated
to Compaq, telephone switch data related to Compaq customer
support, and training events related to Compaq support without
prior notice in order to verify compliance with the requirements
stated in the Call Handling Services Agreement.
o Inacom agrees to provide Compaq the necessary access to facilitate
remote monitoring of Compaq technical support calls taken by
Inacom TSEs. Compaq agrees to share the results of these audits
with Inacom.
o Inacom agrees to prepare and establish a procedure for employees
to obtain A+ certification, at the option of the employee. Inacom
training staff will be A+ certified.
o Inacom agrees to provide Compaq with TSE staffing reports to both
the designated Compaq representative and the Compaq Training
Manager on a weekly basis. These reports include, but are not
limited to, all TSE additions and deletions from the Compaq
assignment.
o Inacom agrees to notify Compaq Consumer Customer Service and
Support's ISO Coordinator or Manager of Training and Quality of
any changes regarding Inacom's Quality System. "Quality System"
refers to ISO 9000 certification, COPC certification, Malcolm
Baldridge, or any other certification that requires Inacom to
acquire and maintain a Quality System certification.
<PAGE>
EXHIBIT 3
MASTER AGREEMENT FOR PROFESSIONAL SERVICES
This Master Agreement for Professional Services ("Agreement"), made this
________________ day of _____________, 2000, is by and between
_________________________, having a principal place of business at
________________________________ ("Subcontractor"), and Compaq Computer
Corporation, having a principal place of business at 40 Old Bolton Road, Stow
Massachusetts 01775 ("Compaq"). The parties agree that the terms and conditions
of this Agreement and any applicable Purchase Order(s) that may be issued
hereunder will govern the purchase of Services by Compaq from Subcontractor for
the purpose of Subcontractor providing such Services on behalf of Compaq to a
customer or customers of Compaq (hereinafter referred to as "Customer").
This Agreement will become effective on the date specified above and will
continue for a period of one (1) year, unless otherwise terminated as provided
herein or extended by the mutual consent of the parties. Any expiration of
termination of this Agreement will not alter the rights, duties, or obligations
of the parties relating to any Purchase Orders issued by Compaq under this
Agreement prior to the date of expiration or termination of this Agreement.
This Agreement does not obligate Compaq to purchase any Services from
Subcontractor. Purchases, if any, will be as specified on a Purchase Order(s)
issued by Compaq pursuant to Section 2.
1. DEFINITIONS
a) "Acceptance" means written notification from Compaq to Subcontractor
that indicates that the Services have been evaluated and satisfy the
completion and acceptance criteria set forth or referenced in the Statement
of Work or Purchase Order. Acceptance may be partial or complete, as
specified in such notification.
b) "Invention(s)" means any designs, techniques, inventions, discoveries,
or improvements, whether patentable or not, that are conceived of or
reduced to practice by Subcontractor in providing the Services to Compaq or
Customer under this Agreement.
c) "Services" means consulting, integration, implementation, installation,
maintenance, support, design, development, training, management, and any
other work provided by Subcontractor in connection with meeting
Subcontractor's responsibilities under this Agreement.
d) "Statement of Work" means a statement agreed upon by Compaq and
Subcontractor that specifies the Services to be provided by Subcontractor,
the price, payment schedule, delivery schedule, and acceptance criteria for
such Services and, if applicable, detailed technical and administrative
requirements for the Services. The Statement of Work may also include
additional terms or modifications to this Agreement. A Statement of Work
will be created and agreed upon for each Purchase Order issued under this
Agreement.
2. PURCHASE ORDER, ORDER OF PRECEDENCE, SERVICES COORDINATORS
a) Subcontractor will furnish the Services to Compaq or Customer as
specified in the Statement of Work upon Compaq's issuance of a Purchase
Order to Subcontractor.
b) The following order of precedence will control in the event of any
conflict in terms and conditions:
1) Statement of Work,
2) Purchase Order, and
3) this Agreement.
The pre-printed terms and conditions on the reverse side of the Purchase
Order will not apply to this Agreement or any Purchase Order issued under
this Agreement.
c) Each party will appoint a coordinator for the Services to be performed
under each Purchase Order and Statement of Work. Subcontractor's
coordinator will have the authority to represent Subcontractor. Compaq's
coordinator will represent Compaq and be responsible for determining the
adequacy and acceptability of the Services provided by Subcontractor.
3. PAYMENT
Unless otherwise set forth in the Statement of Work or Purchase Order,
payment for the Services will be due forty-five (45) days from the later of
the date of Acceptance or the date Compaq receives a proper invoice from
Subcontractor.
4. RECORDS
Subcontractor will maintain account records in accordance with generally
accepted accounting practices to substantiate all invoices. Such records
will be made available to Compaq during normal business hours and will
include payroll records, expense accounts, attendance cards, and job
summaries. Subcontractor will maintain such records for three (3) years
from the date of final payment for the Services.
5. OWNERSHIP AND LICENSE
a) All Inventions will be the sole and exclusive property of Compaq.
Subcontractor hereby assigns to Compaq the ownership of copyright in the
Inventions. Compaq will have the right to obtain and hold in its own name
copyrights, registrations, and similar protection which may be available in
the Inventions. Subcontractor agrees to assist Compaq as may be required to
perfect such rights.
b) To the extent that any Subcontractor's pre-existing technology is
contained in the Inventions, Subcontractor grants to Compaq an irrevocable,
nonexclusive, worldwide, royalty-free license to:
1) use, execute, reproduce, display, perform, and distribute
(internally or externally) such pre-existing technology; and
2) authorize Customer to do any, some, or all of the foregoing.
6. WARRANTY
a) Subcontractor warrants that all Services will (1) be performed in a good
and workmanlike manner and in accordance with generally accepted
professional standards for such Services, and (2) conform to the
requirements specified in the Statement of Work or Purchase Order.
b) Subcontractor warrants that Services will not in any manner limit,
impair, disrupt, or jeopardize any existing Year 2000 Compliance of any
equipment or software on which Services are performed. "Year 2000
Compliance" for purposes of this provision means the capability to
correctly process, calculate, compare, and sequence date data within and
between the 20th and 21st centuries, including leap year calculations.
c) In the event of any breach of warranty, Subcontractor, without charge
and without delay, will re-perform nonconforming Services.
7. CONFIDENTIAL INFORMATION
Subcontractor will maintain all information or data, whether written or
oral, relating to Compaq or Customer which Subcontractor obtains or
otherwise has access to in the performance of Services in confidence and
will not disclose any such information or data to any third party or to
employees, agents, subcontractors, or suppliers of Subcontractor who do not
have the need for access to such information or data.
8. PERSONNEL
a) Personnel provided by Subcontractor will not be considered employees of
Compaq for any purpose. Subcontractor personnel will make no commitments on
behalf of Compaq for any purpose. Subcontractor assumes full responsibility
for the actions of its personnel and will be responsible for their
supervision, daily direction, and control. Subcontractor will retain full
responsibility for payment of salary (including withholding of income taxes
and Social Security), worker's compensation, disability benefits, and the
like. Nothing in this Agreement grants Subcontractor or any Subcontractor
personnel any right under any Compaq employee benefit plan.
b) Subcontractor personnel specified or identified by name in the Statement
of Work or Purchase Order will be considered essential to the Services to
be performed. No substitution or diversion of such personnel will be made
without the prior written consent of Compaq and Customer.
c) Compaq and Customer will retain the right to reject any of
Subcontractor's personnel whose qualifications are insufficient in Compaq's
or Customer's judgment.
9. CHANGE IN SCOPE
Each Purchase Order and Statement of Work under this Agreement is based
upon Compaq's present understanding of Compaq's obligations to Customer. In
the event Compaq's understanding changes or Customer requests a change in
Compaq's obligations affecting Subcontractor's performance, Compaq will
notify Subcontractor of such change request in writing. Within ten (10)
days of receipt of such change request, Subcontractor will notify Compaq in
writing of any increase or decrease in Subcontractor's charges and/or
alteration to delivery schedules occasioned by the change. Upon Compaq's
acceptance of Subcontractor's modified charges and delivery schedule, the
parties will modify the terms of the applicable Purchase Order and
Statement of Work to effect the change. Subcontractor will not implement
the change without Compaq's written authorization.
10. TERMINATION
a) Compaq may terminate for convenience this Agreement, any Purchase Order,
or any portions thereof by written notice to Subcontractor. In any event,
the applicable Purchase Order will terminate immediately upon termination,
for any reason, of Compaq's agreement with Customer. Upon receipt of such
notice, Subcontractor will immediately stop all activities associated with
the terminated Purchase Order. Subcontractor will be paid for the Services
provided and accepted prior to the date of termination. Such payment will
constitute Compaq's entire liability.
b) In the event of a default by Subcontractor, Compaq will provide
Subcontractor written notice thereof. If the default is not remedied within
ten (10) days or within the time stated in the notice, Compaq may terminate
this Agreement, any Purchase Order, or any portions thereof.
c) The rights and obligations of Sections 4, 5, 6, 7, 10, 11, and 12 will
continue after expiration or termination of this Agreement and will bind
the parties and their legal representatives, successors, heirs, and
assigns.
11. INDEMNIFICATIONS
a) Subcontractor will indemnify, defend, and hold Compaq harmless from any
and all claims or demands (including all losses, damages, and liabilities
resulting from such claims or demands, and all related costs and expenses,
including reasonable legal fees) arising from or in connection with (1)
Subcontractor's performance of, or failure to perform, any of its
obligations under this Agreement or (2) an act or omission of Subcontractor
in its relationships with its employees, agents, subcontractors or
suppliers.
b) Subcontractor will indemnify, defend, and hold Compaq and Customer
harmless from any and all claims or demands (including all losses, damages,
and liabilities resulting from such claims or demands, and all related
costs and expenses, including reasonable legal fees) which may result by
reason of any infringement or claim of infringement of any intellectual
property rights associated with the Services or Inventions provided in
connection with this Agreement.
12. LIMITATION OF LIABILITY
a) EXCEPT AS PROVIDED BELOW, NEITHER COMPAQ NOR SUBCONTRACTOR WILL BE
LIABLE FOR ANY DAMAGES RESULTING FROM LOSS OF DATA, PROFITS, OR USE OF
PRODUCTS, OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. Subcontractor will be liable for any
damages, including incidental or consequential damages, which Compaq is
obligated to pay Customer or other third parties as a result of
Subcontractor's failure to perform its obligations in accordance with this
Agreement.
b) This limitation of liability does not apply to the liability of either
party for any personal injury, including death, or for willful, wanton, or
malicious acts of Subcontractor or to obligations of Subcontractor under
Section 7, "Confidential Information", or Section 11, "Indemnifications".
13. COMPLIANCE WITH LAWS
Subcontractor, at its own expense, will comply with all laws and
regulations of federal, state, and local government authorities relating to
its obligations under this Agreement.
14. GENERAL
a) Except as expressly provided in the Statement of Work or Purchase Order,
Subcontractor will be entitled to no further payment, cost reimbursement,
or other compensation for the Services provided hereunder.
b) Subcontractor shall carry during the term of this Agreement, and with
companies with a Best Rating of not less than A-:VII, insurance policies of
the kinds and in the amounts listed below:
1. Worker's Compensation - statutory limits in each state in which
Subcontractor is required to provide Worker's Compensation coverage
including Other States Endorsement or policy equivalent thereof. Policy
shall include a waiver of subrogation in favor of Compaq Computer
Corporation, its officers, directors, employees and agents
2. Employer's Liability - not less than $1,000,000
3. Comprehensive General Liability - including Contractual Liability,
Independent Contractor's Liability, Products and/or Completed
Operations Liability, and Personal Injury/Property Damage Coverage's in
a combined single limit of not less than $1,000,000 per occurrence
combined single limit and $2,000,000 General Aggregate. Compaq Computer
Corporation, its officers, directors, employees and agents shall be
named as Additional Insureds.
4. Automobile Liability - for owned, non-owned, and hired vehicles in a
combined single limit of not less than $1,000,000.
5. Umbrella Liability - a combined single limit of not less than
$2,000,000.
Subcontractor shall furnish Compaq with Certificates of Insurance
evidencing the specified insurance policies and stating that such insurance
policies may not be changed or terminated so as to not comply with the
foregoing insurance requirements without at least thirty (30) days prior
written notice to Compaq.
c) Nothing in this Agreement will be construed as prohibiting or
restricting Compaq from independently developing, acquiring, and/or
marketing services which are similar to and/or competitive with those
provided hereunder.
d) Any assignment, transfer, or subcontracting of rights or obligations by
Subcontractor under this Agreement in whole or in part without the prior
written consent of Compaq will be void and may subject Subcontractor to
termination.
e) During the performance by Subcontractor under a particular Purchase
Order and Statement of Work Compaq may require Subcontractor to temporarily
cease performance of some or all of the Services by issuing Subcontractor a
Work Suspension Order ("Order"). The Order will include the effective date
of the Order, a specific description of the Services to be suspended, and
the anticipated duration of the suspension. Upon receipt of an Order,
Subcontractor will take all reasonable measures to protect the Services in
progress. Compaq will notify Subcontractor in writing of the date on which
the suspended Services are to be resumed.
f) Subcontractor represents that it is not under any obligation or
restriction, nor will it assume any, which would interfere or present a
conflict of interest with the Services that it provides under this
Agreement.
g) Compaq is free to determine the price charged to Customer for the
Services that Subcontractor provides to Customer on behalf Compaq.
h) Subcontractor agrees to comply with security procedures of Compaq and
Customer.
i) Subcontractor agrees to be bound by applicable "flow down" provisions of
Compaq's agreement with Customer of which it is notified by Compaq.
j) Neither party may bring an action, regardless of form, arising out of
this Agreement more than two (2) years after the cause of action arises.
Subcontractor may not bring an action for nonpayment more than two (2)
years from the date final payment for the Services is due.
k) The laws of the State of Texas will govern this Agreement.
l) This Agreement and the documents referenced herein set forth the entire
understanding of the parties with respect to the subject matter described
herein and supersede all prior communications, whether oral or written, by
either party. Any modification to these terms and conditions must be in
writing and signed by authorized representatives of both parties.
Accepted by: Accepted by:
___________________________ COMPAQ COMPUTER CORPORATION
BY: BY:
PRINT NAME: PRINT NAME:
TITLE: TITLE:
DATE: DATE:
February 15, 2000
Inacom Corp.
10810 Forman, Suite 200
Omaha, Nebraska 68154
Attention: Chief Financial Officer
Re: Revolving Credit Facility Commitment Letter
Ladies and Gentlemen:
Compaq Computer Corporation ("Compaq" or the "Lender") understands that
Inacom Corp. ("Inacom" or the "Company") is proposing to sell (the "Asset Sale")
to ITY Corp., a wholly-owned subsidiary of Compaq (the "Buyer"), certain assets
pursuant to an Asset Purchase Agreement dated as of January 4, 2000 among
Inacom, Compaq and the Buyer, as amended by the First Amendment to Asset
Purchase Agreement dated as of the date hereof (as so amended, the "Asset
Purchase Agreement"). You have asked Compaq to commit to provide up to $55.5
million of financing to Inacom following the consummation of the Asset Sale
pursuant to the secured credit facility (the "Facility") described below.
Compaq is willing to provide the Facility upon the terms and conditions
specified herein. Compaq's commitment hereunder shall become effective when the
Company signs copies of this Commitment Letter and returns it to Compaq.
Full Disclosure
You represent, warrant and covenant that (i) the pro forma financial
statements of the Company and its subsidiaries furnished by you did not contain,
as of the time they were furnished, any material misstatement of fact or omit,
as of such time, to state any material fact necessary to make the statements
therein taken as a whole not misleading, in the light of the circumstances under
which they were made; and (ii) the projections regarding the future performance
of the Company and its subsidiaries furnished by you have been prepared in good
faith based on assumptions believed to be reasonable at the time of preparation
thereof.
<PAGE>
Certain Conditions
Certain of the terms of the Facility are set forth in the Summary of
Terms and Conditions attached hereto (the "Term Sheet"). The Term Sheet is
intended as an outline only but does summarize all of the material terms,
conditions, covenants, representations, warranties and other provisions which
will be contained in definitive financing agreements for the Facility. Compaq's
commitment is subject to the satisfaction of the conditions set forth in the
Term Sheet and (i) the negotiation, execution and delivery of a credit agreement
(the "Credit Agreement") and other definitive financing agreements, prepared by
Davis Polk & Wardwell, special counsel to Compaq, containing terms and
conditions consistent with the Term Sheet and otherwise reasonably satisfactory
to Compaq, by not later than May 1, 2000 and (ii) the consummation of the Asset
Sale in accordance with the Asset Purchase Agreement.
Costs and Expenses
By your acceptance of this Commitment Letter, you agree that all costs and
expenses (including the reasonable fees and expenses of Davis Polk & Wardwell,
counsel for Compaq) incurred by Compaq in connection with the collection or
enforcement of this Commitment Letter and the definitive financing agreements or
any default under, or amendment or waiver of, the definitive financing
agreements shall be for your account.
Indemnification
By your acceptance of this Commitment Letter, the Company agrees to
indemnify and hold harmless Compaq and each of its affiliates (including,
without limitation, any controlling person) and the directors, officers,
employees and agents of each of the foregoing parties (each, an "Indemnified
Person") in accordance with the provisions of Schedule 1 hereto, which is
incorporated herein and made a part of this Commitment Letter.
Miscellaneous
This Commitment Letter is intended to be solely for the benefit of the
parties hereto and is not intended to confer, and shall not be deemed to confer,
any benefits upon, or create any rights in or in favor of, any Person other than
the parties hereto, except as provided above with respect to Indemnified
Persons.
The offer by Compaq set forth in this Commitment Letter will terminate at
5:00 p.m., New York time, on the closing date of the Asset Sale (the "Asset Sale
Closing Date"), unless on or before that date and time it has received a copy of
this Commitment Letter signed by you. The provisions set forth above under
"Costs and Expenses" and "Indemnification" shall survive any such termination of
the offer under this Commitment Letter, and shall be binding regardless of
whether a Credit Agreement or other definitive documentation is signed.
<PAGE>
This Commitment Letter shall be governed by and construed in accordance
with the laws of the State of New York. Each of you and Compaq hereby submits to
the jurisdiction of the United States District Court for the Southern District
of New York and of any New York State court sitting in New York City for
purposes of all legal proceedings arising out of or relating to this Commitment
Letter or the transactions contemplated hereby. Each of you and Compaq hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum and to the right to have a trial
by jury. All payments under this Commitment Letter shall be paid in U.S. Dollars
to the relevant payee in New York City, without set-off or counterclaim and free
and clear of any withholding or other taxes.
Very truly yours,
Compaq Computer Corporation
By: /s/ Ben K. Wells
Name: Ben K. Wells
Title: Chief Financial Officer (Acting),
Vice President and Corporate Treasurer
Agreed and accepted as of the date first above written:
Inacom Corp.
By: /s/ Gerald A. Gagliardi
Name: Gerald A. Gagliardi
Title: President and Chief Executive Officer
<PAGE>
SCHEDULE 1
Capitalized terms used but not defined in this Schedule are used as
defined in the Commitment Letter (the "Commitment Letter") to which this
Schedule is attached and into which it is incorporated.
The Company agrees to indemnify, defend and hold harmless each
Indemnified Person from and against any and all losses, claims, demands,
damages, liabilities and other expenses of any kind (collectively, "Losses") to
which any Indemnified Person may become subject, insofar as such Losses (or
actions or other proceedings commenced or threatened in relation thereto) relate
to or in any way arise from the Facility or any proposed or actual use of the
proceeds of the Facility, and to reimburse each Indemnified Person for any legal
or other expenses incurred in connection with investigating, preparing to defend
or defending against any such Loss or action or other proceeding (whether or not
such Indemnified Person is a party to any action or proceeding out of which any
such Loss arises), it being understood that the indemnification provided for
herein shall not apply to any losses, claims, demands, damages, liabilities and
other expenses arising from the Asset Purchase Agreement or the performance, or
failure to perform, thereunder by any party thereto, any such indemnification to
be provided, if at all, under the Asset Purchase Agreement and the other
instruments, agreements and documents entered into pursuant thereto or in
connection therewith. The Company will not be responsible, however, for any such
Losses of any Indemnified Person that are determined by final and nonappealable
judgment of a court of competent jurisdiction to have resulted primarily from
actions taken or omitted to be taken by such Indemnified Person in bad faith or
from such Indemnified Person's gross negligence or willful misconduct. No
Indemnified Person shall be liable to any other person, firm, corporation or
other legal entity for consequential damages which may be alleged as a result of
the Commitment Letter or the Facility.
The Company shall not be liable for any settlement of any proceeding
effected without its prior written consent (which shall not be unreasonably
withheld), but if settled with such consent or if there is a final judgment for
the plaintiff, the Company agrees to indemnify each Indemnified Person from and
against any Loss (other than Losses determined by final and nonappealable
judgement of a court of competent jurisdiction to have resulted primarily from
actions taken or omitted to be taken by such Indemnified Person in bad faith or
from such Indemnified Person's gross negligence or willful misconduct) by reason
of such settlement or judgment. The Company shall not, without the prior written
consent of each Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which such Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability or claims that are the subject matter
of such proceeding.
<PAGE>
EXHIBIT A
SUMMARY OF TERMS AND CONDITIONS
Borrower: Inacom Corp., a Delaware corporation.
Facility: $55,500,000 revolving credit facility (the "Facility").
Purpose: Proceeds will be used for general corporate purposes,
including working capital.
Lender: Compaq Computer Corporation ("Compaq" or the "Lender").
Security: The Company's obligations under the Facility will be secured
by perfected "silent" second lien on all of the assets
securing the Company's obligations under the Credit
Agreement dated as of April 9, 1999 among the Company, the
lenders party thereto, IBM Credit Corporation, as
Documentation Agent, Banque Nationale de Paris, as
Syndication Agent, and Deutsche Bank AG, New York Branch,
as Administrative Agent (as amended through the closing date
of the Asset Sale, the "DB Credit Agreement"). The
Guarantees described below will be secured by perfected
"silent" second liens on all of the assets of the Guarantors
(as defined below) securing such Guarantors' obligations
under their guarantees of the DB Credit Agreement.
Guarantees: Each of the Company's subsidiaries that shall have
guaranteed the DB Credit Agreement (the "Guarantors") will
guarantee the Company's obligations under the Facility, up
to the maximum amount possible without violating applicable
fraudulent conveyance laws.
Borrowing Options and
Interest Periods: LIBOR and Base Rate. LIBOR and Base Rate will be determined
on a basis substantially similar to the basis used under the
DB Credit Agreement, except that the Company may only elect
interest periods for LIBOR loans of 1 month.
Interest Rates: Margins over adjusted LIBOR and margins over Base Rate will
be 2% above the corresponding margins set forth in the DB
Credit Agreement.
<PAGE>
Interest in respect of Base Rate loans shall be payable
quarterly in arrears on the last business day of each
quarter. Interest in respect of LIBOR loans shall be payable
in arrears at the end of the applicable interest period.
Interest will also be payable at the time of conversion or
repayment of any loans and at maturity. All interest and fee
calculations shall be based on a 360-day year and actual
days elapsed or, in the case of interest on Base Rate Loans
based on the prime rate, a 365/366-day year and actual days
elapsed.
Upon any default in the payment of principal or interest,
all overdue amounts shall bear interest at a rate per annum
equal to the rate which is 2% in excess of the rate
otherwise applicable to Base Rate loans from time to time
or, in the case of LIBOR loans prior to the end of the then
pending interest period, at the rate which is 2% in excess
of the rate otherwise then borne by such loans. Such
interest shall be payable on demand.
Commitment: From the Asset Sale
Closing Date through
the 90th day following
the Asset Sale Closing
Date: $0
From the 91st day
following the Asset
Sale Closing Date
through the 120th day
following the
Asset Sale Closing
Date: $25,000,000
From the 121st day
following the Asset
Sale Closing Date
and thereafter (subject
to reduction pursuant
to "Amortization" below): $55,500,000
Maturity Date: September 30, 2001.
Amortization: The Commitment shall be reduced in nine equal monthly
installments beginning on January 31, 2001. Any loans
outstanding in excess of the amount of the Commitment as
reduced from time to time shall be repaid.
Voluntary
Prepayments: Permitted at any time with one business day's notice for
Base Rate loans and three business days' notice for LIBOR
loans. The Company will compensate the Lender for any break-
funding losses if it prepays LIBOR loans at any time other
than the end of an Interest Period.
<PAGE>
Conditions
to Effectiveness: The Facility shall become effective on the date (the
"Effective Date") upon which all of the following conditions
precedent shall have been satisfied:
1. Completion of the Credit Agreement containing the terms
and conditions set forth in the Commitment Letter and this
Term Sheet and otherwise in form and substance reasonably
satisfactory to the Lender, and completion of other
customary documentation relating to the Facility in form
and substance reasonably satisfactory to the Lender,
including receipt by the Lender of reasonably satisfactory
opinions of counsel to the Company as to the transactions
contemplated thereby, together with customary closing
documentation.
2. The Asset Sale shall have been consummated in accordance
with the Asset Purchase Agreement.
3. Absence of any pending or threatened actions, suits or
proceedings against the Company or any of its subsidiaries
or otherwise relating to the Facility, that could
reasonably be expected to have a material adverse effect
on the rights or remedies of the Lender or the ability of
the Company or any Guarantor to perform its obligations
under the Credit Agreement, the guarantees thereof by the
Guarantors or any of the other financing documents or a
Material Adverse Effect (defined in a manner substantially
similar to the definition thereof in the DB Credit
Agreement).
Conditions to Initial
Borrowing: The obligations of the Lender to make the initial borrowing
under the Facility shall be subject to the following
conditions (in addition to the "Conditions to Each Borrowing"
set forth below):
1. The Effective Date shall have occurred.
2. Creation and perfection of security arrangements referred
to under "Security" above to the satisfaction of the
Lender, all in form and substance reasonably satisfactory
to the Lender.
3. The DB Credit Facility shall have been amended by an
amendment in the form of Exhibit A hereto or otherwise in
form and substance satisfactory to the Lender.
<PAGE>
4. The Agreement for Inventory Financing, dated April 27,
1998, between IBM Credit Corporation and the Company, as
amended, shall have been amended by an amendment in the
form of Exhibit B hereto or otherwise in form and substance
satisfactory to the Lender so as to permit the Asset Sale,
the Facility and the security therefor.
4. The Lender shall have received consolidated statements of
income and cash flows for the Company and its subsidiaries
for the month of April 2000, certified by the chief
financial officer of the Company as fairly presenting the
consolidated income and cash flows of the Company and its
subsidiaries for such month in accordance with GAAP (the
"April Financial Statements").
5. (i) EBITDA (as defined in the DB Credit Agreement) for the
month of April 2000 (as set forth in the April Financial
Statements) shall not have been less than $(14,000,000) or
(ii) EBITDA (as so defined) for the two month period of
April and May 2000 (as set forth in the April Financial
Statements and the May Financial Statements (as defined
below)) shall not have been less than $(23,000,000) or
(iii) the Company shall have been in compliance as of June
30, 2000 with all of the financial covenants set forth in
the Credit Agreement and shall have delivered consolidated
financial statements of the Company and its subsidiaries as
at such date and for the periods then ended and a
compliance certificate setting forth the calculations
necessary to demonstrate such compliance.
Conditions to the
First Borrowing that
Results in Outstanding
Loans Exceeding
$25,000,000: The obligations of the Lender to make the initial borrowing
under the Facility that results in there being outstanding
loans in an aggregate principal amount exceeding $25,000,000
shall be subject to the following conditions (in addition to
the "Conditions to Each Borrowing" set forth below):
1. The Lender shall have received consolidated statements of
income and cash flows for the Company and its subsidiaries
for the month of May 2000, certified by the chief financial
officer of the Company as fairly presenting the consolidated
income and cash flows of the Company and its subsidiaries
for such month in accordance with GAAP (the "May Financial
Statements")
<PAGE>
2. (i) EBITDA (as defined in the DB Credit Agreement) for the
two month period of April and May 2000 (as set forth in the
April Financial Statements and the May Financial Statements)
shall not have been less than $(23,000,000) or (ii) the
Company shall have been in compliance as of June 30, 2000
with all of the financial covenants set forth in the Credit
Agreement and shall have delivered consolidated financial
statements of the Company and its subsidiaries as at such
date and for the periods then ended and a compliance
certificate setting forth the calculations necessary to
demonstrate such compliance.
Conditions to
Each Borrowing: Each borrowing under the Facility will be subject to
satisfaction of the following conditions:
1. The Effective Date shall have occurred.
2. Absence of Default.
3. Accuracy of representations and warranties in all material
respects.
4. Loans in the full amount of the then available borrowing
base under the DB Credit Agreement are outstanding under the
DB Credit Agreement.
5. The cash and cash equivalent investments of the Company and
its subsidiaries, before giving effect to such borrowing,
shall not exceed $10,000,000 on the date of borrowing.
6. There shall exist no default under the DB Credit Agreement
that has not been cured or waived.
Representations
and Warranties: The representations and warranties will be substantially similar
to those contained in the DB Credit Agreement.
Covenants: The covenants will be substantially similar to those contained
in the DB Credit Agreement, except that the financial covenant
levels set forth in the DB Credit Agreement shall be modified as
set forth in Annex I hereto.
Events
of Default: The events of default will be substantially similar to those
contained in the DB Credit Agreement, except that the cross-
default provision will not apply to the DB Credit Agreement,
which will instead be subject to cross-acceleration and cross-
payment-default provisions.
Increased Costs/
Change of
Circumstances: The Credit Agreement will contain customary provisions
protecting the Lender in the event of unavailability of funding,
illegality, increased costs and funding losses.
Assignments and
Participations: The Lender will be able to assign all or a pro rata portion of
its outstanding loans and Commitment with the consent of the
Borrower (such consent not to be unreasonably withheld or
delayed).
<PAGE>
Indemnification: The Company will indemnify the Lender against all losses,
liabilities, claims, damages or expenses relating to the loans,
the Facility and the Company's use of the loan proceeds, or the
commitments, including but not limited to attorneys' fees and
settlement costs, except for losses, liabilities, claims,
damages or expenses caused by such indemnitee's gross
negligence or willful misconduct, it being understood that the
indemnification provided for herein shall not apply to any
losses, liabilities, claims, damages or expenses relating to
the Asset Purchase Agreement or the performance, or failure to
perform, thereunder by any party thereto, any such
indemnification to be provided if at all, under the Asset
Purchase Agreement and the other instruments, agreements and
documents entered into pursuant thereto or in connection
therewith.
Waiver
of Set-Off: The Borrower will provide customary waivers of set off rights.
The Lender will waive its rights to set off amounts owed by the
Lender to the Company against amounts owed by the Company to the
Lender under the Facility.
Governing Law
and Forum: State of New York.
Expenses: The Company will pay all reasonable legal and other out-of
-pocket expenses of Compaq, including the fees and expenses of
counsel to Compaq, in connection with collection under or
enforcement of, or any default under, or amendment or waiver of,
the definitive financing agreements.
Jurisdiction: The parties will submit to the jurisdiction of the federal and
state courts of the State of New York.
<PAGE>
ANNEX I
RELATIONSHIP BETWEEN DB CREDIT AGREEMENT AND COMPAQ FACILITY
FINANCIAL COVENANTS
DB Credit Compaq
Agreement Facility
MINIMUM EBITDA ($20) ($30) 6/30/00
($6) ($16) 9/30/00
$7 ($3) 12/31/00
$15 $5 3/31/00
MINIMUM NET WORTH $185 $178.5
MAXIMUM LEVERAGE RATIO Funded Senior 2.15x 2.55x Q1'01
1.95x 2.3x Thereafter
Funded Debt 5.2x 6.05x Q1'01
4.65x 5.35x Thereafter
MINIMUM EBITDA
TO INTEREST EXPENSE RATIO 5.5x 4.9x Q1'01
6.0x 5.3x Thereafter
MINIMUM CURRENT RATIO 0.95x 0.85x
THIRD AMENDMENT AND WAIVER
THIRD AMENDMENT AND WAIVER (the "Amendment"), dated as of January 4,
2000, among INACOM CORP., a Delaware corporation (the "Borrower"), the Banks
party to the Credit Agreement referred to below, IBM CREDIT CORPORATION, as
Documentation Agent, BANQUE NATIONALE DE PARIS, as Syndication Agent and
DEUTSCHE BANK AG, NEW YORK BRANCH, as Administrative Agent. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
to them in the Credit Agreement referred to below.
RECITALS
WHEREAS, the Borrower, the Banks, the Documentation Agent, the
Syndication Agent and Administrative Agent are parties to a certain Credit
Agreement, dated as of April 9, 1999 (as amended, modified or supplemented
through, but not including, the date hereof, the "Credit Agreement") pursuant to
which the Banks have agreed to extend credit to the Borrower; and
WHEREAS, the Borrower has requested that the undersigned Banks
provide certain waivers, and the parties hereto have agreed to amend the Credit
Agreement, in each case on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Waivers.
-------
The Banks hereby waive compliance with the covenants contained
in Sections 8.09, 8.11 and 8.12 of the Credit Agreement at all times during the
fiscal quarter ended on December 25, 1999, or for the Test Period ended on
December 25, 1999, as the case may be.
2. Amendments.
----------
(a) Section 2.01(b) of the Credit Agreement is hereby amended
by deleting the amount "$40,000,000" contained therein and inserting the amount
"$10,000,000" in lieu thereof.
(b) Section 3.03 of the Credit Agreement is hereby amended by
(i) redesignating clause (d) thereof as clause (e), and (ii) inserting therein
the following new clause (d):
"(d) On each date set forth below, the Total
Revolving Loan Commitment shall be automatically and
permanently reduced by the amount set forth opposite such date
below:
Date Amount of Reduction
January 1, 2001 $25,000,000
July 1, 2001 $25,000,000
January 1, 2002 $25,000,000"
(c) Section 7.01(e) of the Credit Agreement is hereby amended
by deleting the phrase "Sections 8.09, through and including 8.13," contained
therein and inserting in lieu thereof the phrase "Sections 8.09, 8.10, 8.11,
8.12, 8.24, 8.25 and 8.26".
(d) Section 7.01 of the Credit Agreement is hereby further
amended by (i) redesignating clause (m) thereof as clause (n), and (ii)
inserting therein the following new clause (m) immediately following clause (l)
thereof:
"(l) Borrowing Base Certificate. Within 15 days after
the end of each fiscal month of the Borrower, a certificate of
the chief financial officer or other Authorized Officer of the
Borrower setting forth the Borrowing Base as of the last day
of such fiscal month, which certificate shall be in a form,
and with an amount of detail, reasonably satisfactory to the
Administrative Agent."
(e) Section 7.12 of the Credit Agreement is hereby amended by
(i) deleting the phrase "two years" contained therein and inserting the phrase
"one year" in lieu thereof, and (ii) deleting the amount "$200,000,000"
contained therein and inserting the amount "$75,000,000" in lieu thereof.
(f) Section 8.02(a) of the Credit Agreement is hereby amended
by (i) deleting the amount "$10,000,000" contained in subclause (v) thereof and
inserting the amount "$5,000,000" in lieu thereof, and (ii) deleting the phrase
"Sections 8.09, 8.10, 8.11, 8.12 and 8.13" contained in subclause (v) thereof
and inserting the phrase "Sections 8.09, 8.10, 8.11, 8.12, 8.24, 8.25 and 8.26"
in lieu thereof.
(g) Section 8.02 of the Credit Agreement is hereby further
amended by (i) deleting the word "and" contained at the end of clause (k)
thereof, (ii) deleting the period appearing at the end of clause (l) thereof and
inserting "; and" in lieu thereof, and (iii) inserting therein immediately
following clause (l) thereof the following new clause (m):
"(m) the Borrower may convey, sell or otherwise
dispose of certain of its assets to Compaq Computer
Corporation and/or one of its Subsidiaries in accordance with
the terms of the Compaq Asset Purchase Agreement; provided,
however, that (i) the cash proceeds from such conveyance, sale
or disposition shall be applied (x) first, to repay the
outstanding Term Loans in full and (y) second, to repay
outstanding Revolving Loans, and (ii) concurrently with the
consummation of such conveyance, sale, or disposition, the
Total Revolving Loan Commitment shall be reduced by
$25,000,000 (which reduction shall be in addition to any
subsequent reduction of the Total Revolving Loan Commitment
pursuant to Section 3.03(d), and which reduction shall apply
proportionately to reduce the Revolving Loan Commitment of
each Bank with such a Commitment)."
(h) Section 8.03(e) of the Credit Agreement is hereby amended
by deleting the amount "$5,000,000" contained therein and inserting the amount
"$2,500,000" in lieu thereof.
(i) Section 8.04(f) of the Credit Agreement is hereby amended
by deleting the amount "$25,000,000" contained therein and inserting the amount
"$10,000,000" in lieu thereof.
(j) Section 8.05(a) of the Credit Agreement is hereby amended
by inserting the following phrase immediately following the phrase "Foreign Cash
Equivalents" contained therein:
", provided that during any time when Revolving Loans are
outstanding, the aggregate amount of cash, Cash Equivalents
and Foreign Cash Equivalents held by the Borrower and its
Subsidiaries shall not exceed $30,000,000 for any period of
four or more consecutive Business Days".
(k) Section 8.05(n) of the Credit Agreement is hereby amended
by deleting the amount "$25,000,000" contained therein and inserting the amount
"$10,000,000" in lieu thereof.
(l) Section 8.06(iii) of the Credit Agreement is hereby
amended by deleting the reference to "March 27, 1999" contained therein and by
inserting in lieu thereof a reference to "December 25, 1999".
(m) Section 8.09 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.09 Net Worth. The Borrower shall not permit Net
Worth at any time to be less than the sum of (i) 75% of Net
Worth as of December 25, 1999 plus (ii) 75% of net income, if
positive for the period from and after December 25, 1999 to
the last day of the then most recently ended fiscal quarter,
plus (iii) 100% of the aggregate Net Issuance Proceeds
received by the Borrower from the issuance or sale of its
capital stock (including any preferred stock) from and after
the Third Amendment Effective Date, plus (iv) 100% of the
principal amount of any Indebtedness( including, without
limitation, any Subordinated Debt and the Trust Preferred
Related Subordinated Debt), which is converted into equity
after the Third Amendment Effective Date (in each case on and
after the date of such conversion); such covenant to be
calculated as of the end of each fiscal quarter."
(n) Section 8.11 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.11 Leverage Ratios. (a) The Borrower shall not
permit the ratio of (a) the aggregate principal amount of
Funded Senior Debt outstanding at any time of the Borrower and
its Subsidiaries to (b) EBITDA for the Test Period then most
recently ended to exceed (i) at any time on and after the last
day of the Borrower's fiscal quarter ending on or about March
31, 2001 to but excluding the last day of the Borrower's
fiscal quarter ending on or about June 30, 2001, 1.10:1.00,
and (ii) at any time thereafter, 1.00:1.00.
(b) The Borrower shall not permit the ratio of (a) the
aggregate principal amount of Funded Debt outstanding at any
time of the Borrower and its Subsidiaries to (b) EBITDA for
the Test Period then most recently ended to exceed (i) at any
time on and after the last day of the Borrower's fiscal
quarter ending on or about March 31, 2001 to but excluding the
last day of the Borrower's fiscal quarter ending on or about
June 30, 2001, 4.20:1.00, and (ii) at any time thereafter,
3.95:1.00."
(o) Section 8.12 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.12 EBITDA to Interest Expense Ratio. The Borrower
shall not permit the ratio of EBITDA for any Test Period set
forth below to Interest Expense for such Test Period to be
less than the ratio set forth opposite such Test Period below:
Test Period ending on or about Ratio
------------------------------ -----
March 31, 2001 5.00:1.00
Thereafter 5.50:1.00
(p) Section 8.13 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.13 Intentionally Omitted."
---------------------
(q) Section 8.20(d) of the Credit Agreement is hereby amended
by deleting the reference to "$15,000,000" contained therein and inserting
"$10,000,000" in lieu thereof.
(r) Section 8.23(a) of the Credit Agreement is hereby amended
by deleting the amount "$90,000,000" contained therein and inserting the amount
"$35,000,000" in lieu thereof. The amendment effected pursuant to this clause
(r) shall be effective for the fiscal year ending on or about December 31, 2000
and each subsequent fiscal year, and no Capital Expenditure carryforwards shall
be permitted pursuant to Section 8.23(b) of the Credit Agreement until the
fiscal year ending on or about December 31, 2001.
(s) Section 8 of the Credit Agreement is hereby further
amended by inserting therein the following new Section 8.24:
<PAGE>
"8.24 Minimum EBITDA. The Borrower will not permit
EBITDA for the fiscal quarter ending on or about each date set
forth below to be less than the amount set forth opposite such
fiscal quarter below:
Fiscal Quarter Ending on or about Amount
--------------------------------- ------
June 30, 2000 ($12,000,000)
September 30, 2000 ($ 2,000,000)
December 31, 2000 $10,000,000
March 31, 2001 $20,000,000
(t) Section 8 of the Credit Agreement is hereby further
amended by inserting therein the following new Section 8.25:
"8.25 Borrowing Base. The Borrower will not permit
(a) the sum of the Effective Amount of all Loans and the
Effective Amount of all Letter of Credit Outstandings at any
time (commencing with the 15th day following the last day of
the fiscal month ending on or about February 29, 2000) to
exceed (b) the Borrowing Base in effect at such time."
(u) Section 8 of the Credit Agreement is hereby further
amended by inserting therein the following new Section 8.26:
"8.26 Maximum Funded Debt. The Borrower will not
permit the aggregate principal amount of Funded Debt of the
Borrower and its Subsidiaries outstanding at any time during
any fiscal quarter ending on or about a date set forth below
to exceed the amount set forth opposite such fiscal quarter
below:
Fiscal Quarter Ending on or about Amount
--------------------------------- ------
March 31, 2000 $960,000,000
June 30, 2000 $725,000,000
September 30, 2000 $575,000,000
December 31, 2000 $475,000,000
March 31, 2001 $400,000,000
(v) The definition of the term "Annual Cash Investment Limit"
contained in Section 10 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Annual Cash Investment Limit" shall mean, for any
fiscal year of the Borrower, (i) $50,000,000 for the fiscal
year ending on December 25, 1999 and (ii) $30,000,000 for each
fiscal year thereafter."
(w) The definition of the term "EBITDA" contained in Section
10 of the Credit Agreement is hereby amended to read in its entirety as follows:
"EBITDA" shall mean, with respect to the Borrower and
its Subsidiaries for any applicable period, Net Income for
such period, plus, to the extent deducted in determining Net
Income for such period, the aggregate amount of (i) Interest
Expense, (ii) federal, state, local and foreign income taxes
(but without reducing Net Income for the effect of any income
tax benefits), (iii) depletion, depreciation and amortization
of tangible and intangible assets, (iv) non-recurring non-cash
charges taken in such period and (v) non-recurring cash
charges in an aggregate amount (for all periods) not greater
than $20,000,000.
(x) The definition of the term "Test Period" contained in
Section 10 of the Credit Agreement is hereby amended to read in its entirety as
follows:
"Test Period" shall mean each period of four
consecutive fiscal quarters of the Borrower (or, if shorter,
the period beginning on the first day of the fiscal quarter
ending on or about March 31, 2001 and ending on the last day
of the then most recently ended fiscal quarter of the
Borrower), in each case taken as one accounting period;
provided that (A) for the purposes of calculating compliance
with Section 8.11, (i) for the Test Period ending on or about
March 31, 2001, EBITDA shall be EBITDA as calculated for the
fiscal quarter of the Borrower ending on or about such date
multiplied by 4.00, (ii) for the Test Period ending on or
about June 30, 2001, EBITDA shall be EBITDA as calculated for
the two fiscal quarter period of the Borrower ending on or
about such date multiplied by 2.00 and (iii) for the Test
Period ending on or about September 30, 2001, EBITDA shall be
EBITDA as calculated for the three fiscal quarter period of
the Borrower ending on or about such date multiplied by 1.33;
and (B) for the purposes of calculating compliance with
Section 8.12, (i) for the Test Period ending on or about March
31, 2001, each of EBITDA and Interest Expense shall be EBITDA
and Interest Expense as calculated for the fiscal quarter of
the Borrower ending on or about such date, (ii) for the Test
Period ending on or about June 30, 2001, each of EBITDA and
Interest Expense shall be EBITDA and Interest Expense
calculated for the two fiscal quarter period of the Borrower
ending on or about such date, and (iii) for the Test Period
ending on or about September 30, 2001, each of EBITDA and
Interest Expense shall be EBITDA and Interest Expense as
calculated for the three fiscal quarter period of the Borrower
ending on or about such date.
(y) Section 10 of the Credit Agreement is hereby further
amended by inserting therein the following new defined terms in appropriate
alphabetical order:
"Borrowing Base" shall mean, as at any date on which
the amount thereof is being determined, an amount equal to the
sum of (i) 60% of Eligible Inventory, (ii) 85% of Eligible
Receivables plus (iii) 50% of the outstanding principal amount
of the Nesbitt Burns Residual Notes, each as determined from
the Borrowing Base Certificate most recently delivered
pursuant to Section 7.01(l)."
"Borrowing Base Certificate" shall have the meaning
specified in Section 7.01(l).
"Compaq Asset Purchase Agreement" shall mean the
Asset Purchase Agreement to be entered into by and among
Compaq Computer Corporation, one of its Subsidiaries and the
Borrower, substantially on the same terms and conditions set
forth in the 12/30/99 draft thereof delivered to the
Administrative Agent.
"Eligible Inventory" shall mean the gross dollar
value (valued at the lower of cost or market value) of the
finished goods inventory of the Borrower and the Subsidiary
Guarantors located in any state of the United States or the
District of Columbia and which is readily marketable and is
then currently being held for sale in the ordinary course of
business and conforms in all material respects to the
representations and warranties contained in the Security
Agreement, except (i) any supplies (not including services
parts), goods returned or rejected (except to the extent that
such returned or rejected goods continue to conform in all
material respects to the other requirements of this
definition) by customers and goods to be returned to
suppliers, (ii) any inventory held on consignment, (iii) any
inventory which has been shipped to a customer, even if on a
consignment or "sale or return" basis, (iv) any inventory to
the extent that the Borrower or a Subsidiary Guarantor has
taken a reserve, but only to the extent of such reserve,
including any reserves required by the Administrative Agent in
its reasonable judgment, (v) any inventory not subject to a
valid and perfected first-priority Lien in favor of the
Collateral Agent under the Security Agreement, subject to no
prior or equal Lien, (vi) any inventory not produced in
compliance with the applicable requirements of the Fair Labor
Standards Act and (vii) other inventory which is not
acceptable to the Administrative Agent in its reasonable
judgment.
"Eligible Receivables" shall mean the total face
amount of all trade and vendor receivables of the Borrower and
the Subsidiary Guarantors which conform in all material
respects to the representations and warranties in the Security
Agreement and at all times continue to be acceptable to the
Administrative Agent in its reasonable judgment, except (i)
receivables relating to sales to account debtors outside the
United States, Latin America and Canada, (ii) any receivable
that does not comply in all material respects with all
applicable legal requirements, including, without limitation,
all laws, rules, regulations and orders of any governmental or
judicial authority, (iii) any receivable payable more than 60
days after the date of the original invoice therefor, (iv) any
receivable that remains unpaid for more than 120 days from the
time of the original issuance of the invoice therefor, (v) any
unbilled receivable and any receivable in respect of goods not
yet shipped, (vi) any receivable arising outside the ordinary
course of business of the Borrower or any Subsidiary
Guarantor, (vii) any receivable due from an account debtor
that is the subject of a case or proceeding of the type
described in Section 9.05, (viii) any receivable due from an
account debtor at any time, to the extent that the aggregate
outstanding amount of receivables due from such account debtor
and its Affiliates at such time exceeds 25% of the aggregate
amount of all receivables due to the Borrower and the
Subsidiary Guarantors at such time, but only to the extent of
such excess, (ix) any receivable not subject to a valid and
perfected first-priority Lien in favor of the Collateral Agent
under the Security Agreement, subject to no prior or equal
Lien, (x) contracts or sales to any Affiliate of the Borrower
or any of its Subsidiaries.
"Nesbitt Burns Residual Notes" shall mean the
"Company Notes" (issued to the Borrower and Vanstar
Corporation) under and as defined in the Amended and Restated
Nesbitt Burns Receivables Purchase Facility.
"Third Amendment Effective Date" shall mean the
Amendment Effective Date under and as defined in the Third
Amendment and Waiver to this Agreement, dated as of January 4,
2000.
3. Representations and Warranties. The Borrower hereby represents
and warrants to the Administrative Agent and the Banks that:
(a) After the effectiveness of this Amendment, no Default or
Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Borrower of
this Amendment has been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person in order to be effective and
enforceable. The Credit Agreement as amended by this Amendment constitutes the
legal, valid and binding obligation of the Borrower, enforceable against it in
accordance with its respective terms.
(c) All representations and warranties of the Borrower
contained in the Credit Agreement or in the other Credit Documents are true and
correct as of the date hereof and as of the Amendment Effective Date with the
same effect as though made on the date hereof or thereof and as though applied
to the Credit Agreement as herein amended.
(d) The Borrower is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Administrative Agent and the Banks or any other Person.
4. Amendment Effective Date. This Amendment shall become
effective as of the date (the "Amendment Effective Date") when (i) counterparts
(or if elected by the Administrative Agent, an executed facsimile copy) of this
Amendment have been executed and delivered to the Administrative Agent by the
Borrower and the Required Banks, and each Subsidiary Guarantor shall have
executed and delivered to the Administrative Agent a Guarantor Acknowledgment
and Consent (the "Acknowledgment") in the form attached hereto, and (ii) the
asset sale contemplated by the Compaq Asset Purchase Agreement (as defined
above) shall have been consummated substantially on the terms set forth in the
12/30/99 draft of such Agreement delivered to the Administrative Agent.
Notwithstanding the foregoing, the waivers set forth in Section 1 of this
Amendment shall become effective when the condition precedent contained in
clause (i) of the preceding sentence shall be satisfied.
5. Reservation of Rights. The Borrower acknowledges and agrees
that the execution and delivery by the Administrative Agent and the Banks of
this Amendment shall not be deemed (i) to create a course of dealing or
otherwise obligate the Administrative Agent or the Banks to forebear or execute
similar amendments under the same or similar circumstances in the future, or
(ii) to amend, relinquish or impair any right of the Administrative Agent or the
Banks to receive any indemnity or similar payment from any Person or entity as a
result of any matter arising from or relating to this Amendment.
6. Miscellaneous.
-------------
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of New York.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
documents required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Administrative Agent of a facsimile transmitted document
purportedly bearing the signature of a Bank or the Borrower shall bind such Bank
or the Borrower, respectively, with the same force and effect as the delivery of
a hard copy original. Any failure by the Administrative Agent to receive the
hard copy executed original of such document shall not diminish the binding
effect of receipt of the facsimile transmitted executed original of such
document of the party whose hard copy page was not received by the
Administrative Agent.
(e) This Amendment, together with the Credit Agreement and the
Credit Documents, contains the entire and exclusive agreement of the parties
hereto with reference to the matters discussed herein and therein. This
Amendment supersedes all prior drafts and communications with respect thereto.
This Amendment may not be amended except in accordance with the provisions of
Section 12.12 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Borrower covenants to pay to or reimburse the
Administrative Agent, upon demand, for all reasonable costs and expenses
(including allocated costs of in-house counsel) actually incurred by the
Administrative Agent in connection with the development, preparation,
negotiation, execution and delivery of this Amendment.
(h) The Borrower hereby agrees to pay each Bank which delivers
an executed copy of this Amendment (by hard copy or facsimile) to the
Administrative Agent by no later than 12:00 (Noon) (New York time) on January 4,
2000, a fee (the "Amendment Fee") in an amount equal to 0.75% of such Bank's
Revolving Loan Commitment (as such Revolving Loan Commitment will be in effect
immediately following the consummation of the Compaq Asset Purchase Agreement as
provided herein), which Amendment Fee shall be due and payable on the first
Business Day following the date on which the Required Banks shall have executed
and delivered this Amendment.
(i) The Borrower (and each Guarantor by execution of the
Acknowledgment) confirms that the Security Documents secure the Obligations
under the Credit Agreement as amended hereby. Each Guarantor by execution of the
Acknowledgment confirms that the Subsidiary Guaranty applies to all Obligations
under the Credit Agreement as amended hereby.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
INACOM CORP.
By: /s/ Richard C. Oshlo
Title: Vice President and Treasurer
DEUTSCHE BANK AG, NEW YORK
BRANCH, as Administrative Agent
By: /s/ Robert Wood
Title: Director
By: /s/ Ira Lubinsky
Title: Vice President
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLAND BRANCH
By: /s/ Robert Wood
Title: Director
By: /s/ Ira Lubinsky
Title: Vice President
IBM CREDIT CORPORATION, Individually and as
Documentation Agent
By: /s/ Ronald J. Bachner
Title: Manager, Commercial Financing
Solutions Americas
BANQUE NATIONALE DE PARIS,
Individually and as Syndication Agent
By: /s/ Jennifer Y. Cho
Title: Vice President
By: /s/ Stuart Darby
Title: Assistant Vice President
COMERICA BANK
By: /s/ Timothy O'Rourke
Title: Vice President
CREDIT LYONNAIS
CHICAGO BRANCH
By: /s/ Joseph A. Philbin
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
Title: Senior Manager Loan Operations
U.S. BANK NATIONAL ASSOCIATION
By: Merryll M. Hales
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Michael S. Barclay
Title: Vice President
MERCANTILE BANK, N.A.
By: /s/ Joseph L. Sooter, Jr.
Title: Vice President
ABN AMRO BANK, N.V.
By:
Title:
By:
Title:
TRANSAMERICA COMMERCIAL
FINANCE CORPORATION
By:
Title:
STERLING ASSET MANAGEMENT, LLC
By:
Title:
FINOVA CAPITAL CORP.
By: /s/ Patrick Smith
Title: Vice President Credit Manager
FIRST NATIONAL BANK OF OMAHA
By: /s/ Mark Barata
Title: Vice President
<PAGE>
GUARANTOR ACKNOWLEDGMENT AND CONSENT
The undersigned, each a guarantor or third party pledgor with respect
to the Borrower's obligations to the Administrative Agent and the Banks under
the Credit Agreement, each hereby (i) acknowledge and consent to the execution,
delivery and performance by the Borrower of the foregoing Third Amendment and
Waiver to Credit Agreement (the "Amendment"), and (ii) reaffirm and agree that
the respective guaranty, third party pledge or security agreement to which the
undersigned is party and all other documents and agreements executed and
delivered by the undersigned to the Administrative Agent and the Banks in
connection with the Credit Agreement are in full force and effect, without
defense, offset or counterclaim. (Capitalized terms used herein have the
meanings specified in the Amendment).
GUARANTORS
INACOM TENNESSEE, INC.
INACOM COMMUNICATIONS, INC.
INACOMP FINANCIAL SERVICES, INC.
INACOM INTERNATIONAL, INC.
INACOM SOLUTIONS, INC.
PERIGEE COMMUNICATIONS, INC.
GORHAM CLARK, INC.
KURE ASSOCIATES, INC.
NETWORKS, INC.
BOSTON COMPUTER EXCHANGE
CORPORATION
PC TECHNICAL SERVICES, INC.
INACOM PROFESSIONAL SERVICES, INC.
INACOM FINANCE CORP.
OFFICE PRODUCTS OF MINNESOTA, INC.
VANSTAR CORPORATION
INACOM LATIN AMERICA
COMPUTERLAND INTERNATIONAL DEVELOPMENT, INC.
COMPUTER PORT WORLD TRADE, INC.
VANSTAR INTERNATIONAL CORPORATION
VST WEST, INC.
VST ILLINOIS, INC.
VSTNC, INC.
CIAND TEX, INC.
INACOM GOVERNMENT SYSTEMS, INC.
CONTRACT DATA, INC.
COMPUTER PROFESSIONALS, INC.
VANSTAR PROFESSIONAL TECHNICAL RESOURCES, INC.
Dated as of: January 4, 2000 By:
Title:
FOURTH AMENDMENT AND WAIVER
FOURTH AMENDMENT AND WAIVER (the "Amendment"), dated as of February 15,
2000, among INACOM CORP., a Delaware corporation (the "Borrower"), the Banks
party to the Credit Agreement referred to below, IBM CREDIT CORPORATION, as
Documentation Agent, BANQUE NATIONALE DE PARIS, as Syndication Agent and
DEUTSCHE BANK AG, NEW YORK BRANCH, as Administrative Agent. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
to them in the Credit Agreement referred to below.
RECITALS
WHEREAS, the Borrower, the Banks, the Documentation Agent, the
Syndication Agent and Administrative Agent are parties to a certain Credit
Agreement, dated as of April 9, 1999 (as amended, modified or supplemented
through, but not including, the date hereof, the "Credit Agreement") pursuant to
which the Banks have agreed to extend credit to the Borrower; and
WHEREAS, the Borrower has requested that the undersigned Banks
provide certain waivers, and the parties hereto have agreed to amend the Credit
Agreement, in each case on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Waiver.
------
(a) The Banks hereby waive any Event of Default pursuant to
Section 9.04 of the Credit Agreement that has occurred as a result of any
termination, liquidation, unwind or similar event under the Amended and Restated
Nesbitt Burns Receivables Purchase Facility.
(b) The Banks hereby waive compliance with the covenant
contained in Section 8.14(ii) of the Credit Agreement to the extent that there
is an increase in the collateralization under the IBM Inventory Finance Facility
pursuant to Section 8.03(r) of the Credit Agreement.
2. Amendments.
----------
(a) Section 6.10(c) of the Credit Agreement is hereby amended
to read in its entirety at follows:
"(c) Since November 27, 1999, nothing has occurred that has
had or could reasonably be expected to have a Material Adverse Effect
(it being understood that the Banks acknowledge having been informed by
the Borrower that (i) the Borrower incurred an EBITDA loss during
January, 2000 of approximately $23,000,000, (ii) the Borrower intends
to take two charges in the fourth quarter of fiscal year 1999, one of
which is expected to be a $100-150 million special charge which will be
primarily non-cash, and the other of which is expected to relate to a
$80-100 million write-off of accounts receivable, and (iii) the
Borrower is currently experiencing strained relations with its vendors
as a result of its liquidity problems)."
(b) Section 7 of the Credit Agreement is hereby amended by
inserting at the end thereof the following new Section 7.15:
"7.15 Lock-Box Arrangement. Within 60 days following the
Fourth Amendment Effective Date, (i) the Borrower and its Subsidiaries
shall enter into a lock-box arrangement with one or more lock-box banks
relating to all of their receivables subject to the Security Documents,
which arrangement (and the documentation governing such arrangement)
shall be reasonably satisfactory in form and substance to the
Collateral Agent and (ii) all lock-box banks shall enter into
agreements with the Collateral Agent relating to all amounts deposited
into the respective lock-box account on terms and conditions reasonably
satisfactory to the Collateral Agent."
(c) Section 8.03 of the Credit Agreement is hereby amended by
(i) deleting the word "and" contained at the end of clause (p) thereof, (ii)
deleting the period appearing at the end of clause (q) thereof and inserting ";
and" in lieu thereof and (iii) inserting therein immediately following clause
(q) thereof the following clause (r):
"(r) (i) Liens on the assets subject to the Security
Documents in favor of the lenders under the Compaq Credit
Facility, provided that such Liens shall be subordinated (on a
passive or "silent" basis) to the Liens on such assets in
favor of the Secured Creditors and (ii) Liens on the assets
subject to the Security Documents in favor of the lenders
under the IBM Inventory Finance Facility, provided that such
Liens shall be subordinated (on a passive or "silent" basis)
to the Liens on such assets in favor of the Secured Creditors
and the lenders under the Compaq Credit Facility (to the
extent there are outstanding loans under such Facility) (it
being understood and agreed that the Liens permitted under
this clause (r) may be created pursuant to the Security
Documents (as a result of amendments thereto or amendments and
restatements thereof) or other security agreements and related
intercreditor agreements, in each case in form and substance
reasonably satisfactory to the Collateral Agent)."
(d) Section 8.04 of the Credit Agreement is hereby amended by
(i) deleting the word "and" contained at the end of clause (l) thereof, (ii)
deleting the period appearing at the end of clause (m) thereof and inserting ";
and" in lieu thereof and (iii) inserting therein immediately following clause
(m) thereof the following new clause (n):
"(n) Indebtedness incurred pursuant to the Compaq
Credit Facility in an aggregate principal amount not to exceed
$55,500,000."
(e) Section 8.06(iv) of the Credit Agreement is hereby amended
by inserting therein, immediately following the phrase "in an amount" appearing
therein, the phrase "(net of income taxes)".
(f) Section 8.09 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.09 Net Worth. The Borrower shall not permit Net
Worth at any time to be less than the sum of (i) $185,000,000
plus (ii) 75% of net income, if positive for the period from
and after December 25, 1999 to the last day of the then most
recently ended fiscal quarter, plus (iii) 100% of the
aggregate Net Issuance Proceeds received by the Borrower from
the issuance or sale of its capital stock (including any
preferred stock) from and after the Fourth Amendment Effective
Date, plus (iv) 100% of the principal amount of any
Indebtedness (including, without limitation, any Subordinated
Debt and the Trust Preferred Related Subordinated Debt), which
is converted into equity after the Fourth Amendment Effective
Date (in each case on and after the date of such conversion);
such covenant to be calculated as of the end of each fiscal
quarter."
(g) Section 8.11 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.11 Leverage Ratios. (a) The Borrower shall not
permit the ratio of (a) the aggregate principal amount of
Funded Senior Debt outstanding at any time of the Borrower and
its Subsidiaries to (b) EBITDA for the Test Period then most
recently ended to exceed (i) at any time on and after the last
day of the Borrower's fiscal quarter ending on or about March
31, 2001 to but excluding the last day of the Borrower's
fiscal quarter ending on or about June 30, 2001, 2.15:1.00,
and (ii) at any time thereafter, 1.95:1.00.
(b) The Borrower shall not permit the ratio of (a) the
aggregate principal amount of Funded Debt outstanding at any
time of the Borrower and its Subsidiaries to (b) EBITDA for
the Test Period then most recently ended to exceed (i) at any
time on and after the last day of the Borrower's fiscal
quarter ending on or about March 31, 2001 to but excluding the
last day of the Borrower's fiscal quarter ending on or about
June 30, 2001, 5.20:1.00, and (ii) at any time thereafter,
4.65:1.00."
<PAGE>
(h) Section 8.12 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.12 EBITDA to Interest Expense Ratio. The Borrower
shall not permit the ratio of EBITDA for any Test Period set
forth below to Interest Expense for such Test Period to be
less than the ratio set forth opposite such Test Period below:
Test Period ending on or about Ratio
------------------------------ -----
March 31, 2001 5.50:1.00
Thereafter 6.00:1.00
(i) Section 8.10 of the Credit Agreement is hereby amended by
deleting the ratio "1.00:1.00" appearing therein and by inserting in lieu
thereof the ratio "0.95:1.00".
(j) Section 8.14 of the Credit Agreement is hereby amended by
(i) deleting the word "or" appearing at the end of clause (iii) thereof, (ii)
deleting the period appearing at the end of clause (iv) thereof and inserting ";
or" in lieu thereof and (iii) inserting therein the following new clause (v)
immediately following clause (iv) thereof:
"(v) amend, modify, or permit the amendment or
modification of, any provision of the Compaq Credit Facility."
(k) Section 8.24 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.24 Minimum EBITDA. The Borrower will not permit
EBITDA for the fiscal quarter ending on or about each date set
forth below to be less than the amount set forth opposite such
fiscal quarter below:
Fiscal Quarter Ending on or about Amount
--------------------------------- ------
June 30, 2000 ($20,000,000)
September 30, 2000 ($ 6,000,000)
December 31, 2000 $ 7,000,000
March 31, 2001 $15,000,000"
(l) Section 8.26 of the Credit Agreement is hereby amended to
read in its entirety as follows:
<PAGE>
"8.26 Maximum Funded Debt. The Borrower will not
permit the aggregate principal amount of Funded Debt of the
Borrower and its Subsidiaries outstanding at any time during
any fiscal quarter ending on or about a date set forth below
to exceed the amount set forth opposite such fiscal quarter
below:
Fiscal Quarter Ending on or about Amount
--------------------------------- ------
March 31, 2000 $600,000,000
June 30, 2000 $575,000,000
September 30, 2000 $525,000,000
December 31, 2000 $500,000,000
March 31, 2001 $450,000,000"
(m) Section 8 of the Credit Agreement is hereby further amended
by inserting at the end thereof the following new Section 8.27:
"8.27 Trust Preferred Securities. Notwithstanding
anything to the contrary contained in this Agreement
(including, without limitation, in Section 8.06 hereof), the
Borrower will not, and will not permit any of its Subsidiaries
(including, without limitation, Vanstar Corporation) to make
any interest payments on any Trust Preferred Related
Subordinated Debt in cash, and the Borrower will take or cause
its Subsidiaries to take all action necessary under Section
312 of the indenture governing the Trust Preferred Related
Subordinated Debt to defer the obligation to pay such cash
interest; provided that the Borrower or its respective
Subsidiaries may make such cash interest payments any time
after January 1, 2001, if at the time of such payment (i) all
commitments under the Compaq Credit Facility have been
terminated and all outstanding amounts thereunder have been
paid in full, (ii) no Default or Event of Default shall exist
or result therefrom, (iii) the Borrower shall be in compliance
with Section 8.25 of this Agreement (determined for this
purpose only without giving effect to clause (iv) of the
definition of Borrowing Base) and (iv) for the most recently
ended four consecutive quarter period ending prior to such
payment, (A) EBITDA less (B) Interest Expense less (C) the
proposed cash interest payment to be made on the Trust
Preferred Related Subordinated Debt (determined as if such
payment was made during such period) is greater than 0."
(n) Section 9 of the Credit Agreement is hereby amended by (i)
inserting the word "or" at the end of Section 9.12 thereof and (ii) inserting
therein immediately following Section 9.12 thereof the following new Section
9.13:
"9.13 Compaq Agreements." (a) Compaq shall default in
the observance or performance of or deny or disaffirm its
obligations under the Compaq Commitment Letter and Term Sheet
or, after the execution thereof, the Compaq Credit Facility or
(b) the Compaq Commitment Letter and Term Sheet shall expire
or terminate other than as a result of the execution of the
Compaq Credit Facility;".
(o) The definition of the term "Applicable Margin" contained
in Section 10 of the Credit Agreement is hereby amended by inserting the
following phrase immediately following the phrase "then in effect," appearing
therein:
", provided that on and after January 1, 2001 each of the
percentages set forth below (other than the Commitment Fee
percentage) shall be increased by 0.25%".
(p) The definition of the term "Borrowing Base" contained in
Section 10 of the Credit Agreement is hereby amended to read in its entirety as
follows:
"Borrowing Base" shall mean, as at any date on which
the amount thereof is being determined, an amount equal to the
sum of (i) 60% of Eligible Inventory, plus (ii) 85% of
Eligible Receivables plus (iii) 50% of the outstanding
principal amount of the Nesbitt Burns Residual Notes, each as
determined from the Borrowing Base Certificate most recently
delivered pursuant to Section 7.01(l) plus (iv) for the period
(and only for the period) from the Fourth Amendment Effective
Date to and including September 30, 2001, $25,000,000."
(q) Section 10 of the Credit Agreement is hereby further
amended by inserting therein the following new defined terms in appropriate
alphabetical order:
"Compaq" shall mean Compaq Computer Corporation, a
corporation organized under the laws of the State of Delaware.
"Compaq Commitment Letter and Term Sheet" shall mean
the Commitment Letter, dated February 15, 2000, between the
Borrower and Compaq, together with the Summary of Terms and
Conditions attached thereto.
"Compaq Credit Facility" shall mean that credit
agreement and related guaranties and ancillary documents
entered into by the Borrower, the Subsidiary Guarantors and
Compaq, having terms and conditions substantially the same as
those set forth in the Compaq Commitment Letter and Term Sheet
(and as to matters not covered by the Compaq Commitment Letter
and Term Sheet, having terms and conditions that are
reasonably satisfactory to the Administrative Agent), as the
same may be amended, supplemented or modified from time to
time in accordance with the terms thereof and hereof.
"Fourth Amendment Effective Date" shall mean the
Amendment Effective Date under, and as defined in, the Fourth
Amendment and Waiver, dated as of February 15, 2000, to this
Agreement.
3. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Administrative Agent and the Banks that:
(a) After the effectiveness of this Amendment, no Default or
Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Borrower of
this Amendment has been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person in order to be effective and
enforceable. The Credit Agreement as amended by this Amendment constitutes the
legal, valid and binding obligation of the Borrower, enforceable against it in
accordance with its respective terms.
(c) All representations and warranties of the Borrower
contained in the Credit Agreement or in the other Credit Documents are true and
correct as of the date hereof and as of the Amendment Effective Date with the
same effect as though made on the date hereof or thereof and as though applied
to the Credit Agreement as herein amended.
(d) The Borrower is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Administrative Agent and the Banks or any other Person.
4. Amendment Effective Date. This Amendment shall become
effective as of the date (the "Amendment Effective Date") when (i) counterparts
(or if elected by the Administrative Agent, an executed facsimile copy) of this
Amendment have been executed and delivered to the Administrative Agent by the
Borrower and the Required Banks, and each Subsidiary Guarantor shall have
executed and delivered to the Administrative Agent a Guarantor Acknowledgment
and Consent (the "Acknowledgment") in the form attached hereto, (ii) the
Commitment Letter from Compaq to the Borrower, substantially in the form of the
2/15/00 draft distributed to the Banks, shall have been executed by the Borrower
and Compaq and shall be in full force and effect, (iii) the asset sale
contemplated by the Compaq Asset Purchase Agreement (as defined in the Third
Amendment and Waiver) shall have been consummated substantially on the same
terms set forth in the 12/30/99 draft of such Agreement delivered to the
Administrative Agent (as amended by the first amendment thereto substantially in
the form of the 2/10/00 draft of such amendment delivered to the Administrative
Agent) and (iv) all accrued but unpaid fees, costs and disbursements of White &
Case LLP, counsel to the Administrative Agent, incurred in connection with the
Credit Agreement shall have been paid in full.
5. Reservation of Rights. The Borrower acknowledges and agrees
that the execution and delivery by the Administrative Agent and the Banks of
this Amendment shall not be deemed (i) to create a course of dealing or
otherwise obligate the Administrative Agent or the Banks to forebear or execute
similar amendments under the same or similar circumstances in the future, or
(ii) to amend, relinquish or impair any right of the Administrative Agent or the
Banks to receive any indemnity or similar payment from any Person or entity as a
result of any matter arising from or relating to this Amendment.
6. Miscellaneous.
-------------
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of New York.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
documents required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Administrative Agent of a facsimile transmitted document
purportedly bearing the signature of a Bank or the Borrower shall bind such Bank
or the Borrower, respectively, with the same force and effect as the delivery of
a hard copy original. Any failure by the Administrative Agent to receive the
hard copy executed original of such document shall not diminish the binding
effect of receipt of the facsimile transmitted executed original of such
document of the party whose hard copy page was not received by the
Administrative Agent.
(e) This Amendment, together with the Credit Agreement and the
Credit Documents, contains the entire and exclusive agreement of the parties
hereto with reference to the matters discussed herein and therein. This
Amendment supersedes all prior drafts and communications with respect thereto.
This Amendment may not be amended except in accordance with the provisions of
Section 12.12 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Borrower covenants to pay to or reimburse the
Administrative Agent, upon demand, for all reasonable costs and expenses
(including allocated costs of in-house counsel) actually incurred by the
Administrative Agent in connection with the development, preparation,
negotiation, execution and delivery of this Amendment.
(h) The Borrower (and each Guarantor by execution of the
Acknowledgment) confirms that the Security Documents secure the Obligations
under the Credit Agreement as amended hereby. Each Guarantor by execution of the
Acknowledgment confirms that the Subsidiary Guaranty applies to all Obligations
under the Credit Agreement as amended hereby.
(i) The undersigned Banks each hereby consent to the amendment
and/or modification to the Security Documents and/or the execution of any other
security agreements and intercreditor agreements to incorporate terms and
conditions of the Credit Agreement as amended by this Amendment, in each case on
such terms and conditions as shall be satisfactory to the Collateral Agent.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
INACOM CORP.
By: /s/ Thomas Fitzpatrick
Title: Executive Vice President and
Chief Financial Officer
DEUTSCHE BANK AG, NEW YORK
BRANCH, as Administrative Agent
By: /s/ Robert Wood
Title: Director
By: /s/ Ira Lubinsky
Title: Vice President
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLAND BRANCH
By: /s/ Robert Wood
Title: Director
By: /s/ Ira Lubinsky
Title: Vice President
IBM CREDIT CORPORATION, Individually and as
Documentation Agent
By: /s/ Sal Grasso
Title: Manager of Credit Operations
BANQUE NATIONALE DE PARIS,
Individually and as Syndication Agent
By:
Title:
By:
Title:
COMERICA BANK
By: /s/ Timothy O'Rourke
Title: Vice President
CREDIT LYONNAIS
CHICAGO BRANCH
By:
Title:
THE BANK OF NOVA SCOTIA
By: /s/ F. C. B. Ashby
Title: Senior Manager Loan Operations
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Merryll M. Hales
Title: Vice President
FLEET NATIONAL BANK
By:
Title:
MERCANTILE BANK, N.A.
By: /s/ Joseph L. Sooter, Jr.
Title: Vice President
ABN AMRO BANK, N.V.
By: /s/ Lee-Lee Miao
Title: Group Vice President
By: /s/ Paul S. Faust
Title: Vice President
TRANSAMERICA COMMERCIAL
FINANCE CORPORATION
By:
Title:
ML CLO XIX STERLING (CAYMAN) LTD.
By:
Sterling Asset Manager, L.L.C.,
as its Investment Advisor
Title:
FINOVA CAPITAL CORP.
By:
Title:
FIRST NATIONAL BANK OF OMAHA
By: /s/ Charles H. Fries, Jr.
Title: Senior Vice President
<PAGE>
GUARANTOR ACKNOWLEDGMENT AND CONSENT
The undersigned, each a guarantor or third party pledgor with respect
to the Borrower's obligations to the Administrative Agent and the Banks under
the Credit Agreement, each hereby (i) acknowledge and consent to the execution,
delivery and performance by the Borrower of the foregoing Fourth Amendment and
Waiver to Credit Agreement (the "Amendment"), and (ii) reaffirm and agree that
the respective guaranty, third party pledge or security agreement to which the
undersigned is party and all other documents and agreements executed and
delivered by the undersigned to the Administrative Agent and the Banks in
connection with the Credit Agreement are in full force and effect, without
defense, offset or counterclaim. (Capitalized terms used herein have the
meanings specified in the Amendment).
GUARANTORS
INACOM TENNESSEE, INC.
INACOM COMMUNICATIONS, INC.
INACOMP FINANCIAL SERVICES, INC.
INACOM INTERNATIONAL, INC.
INACOM SOLUTIONS, INC.
PERIGEE COMMUNICATIONS, INC.
GORHAM CLARK, INC.
KURE ASSOCIATES, INC.
NETWORKS, INC.
BOSTON COMPUTER EXCHANGE
CORPORATION
PC TECHNICAL SERVICES, INC.
INACOM PROFESSIONAL SERVICES, INC.
INACOM FINANCE CORP.
OFFICE PRODUCTS OF MINNESOTA, INC.
VANSTAR CORPORATION
INACOM LATIN AMERICA
COMPUTERLAND INTERNATIONAL DEVELOPMENT, INC.
COMPUTER PORT WORLD TRADE, INC.
VANSTAR INTERNATIONAL CORPORATION
VST WEST, INC.
VST ILLINOIS, INC.
VSTNC, INC.
CIAND TEX, INC.
INACOM GOVERNMENT SYSTEMS, INC.
CONTRACT DATA, INC.
COMPUTER PROFESSIONALS, INC.
VANSTAR PROFESSIONAL TECHNICAL RESOURCES, INC.
Dated as of: February 15, 2000 By:
Title:
