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.
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.
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
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.
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.
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.
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.
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")
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).
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.
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