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,
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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.
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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:____________________________________
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:______________________________________
Name:
Title:
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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.
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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.
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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
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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 The Facility shall become effective on the date (the
EFFECTIVENESS: "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 The obligations of the Lender to make the initial
BORROWING: 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.
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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.
5. 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").
6. (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
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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.
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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.
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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
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