Service Level Agreement

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


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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


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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,
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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:


- Maintenance of existing Multi-vendor Contracts
- Maintenance of Warranty on new Multi-Vendor Service Contracts
e.g. Dell, HP, IBM, Apple
- Off site repair for selected Compaq/Non Compaq products
- Remedial support services for Compaq Sold Carepaq's
- Installation support services for Compaq Sold Carepaq's
- Project based work such as, installation, migration & system
deployment services
- New service offers to be jointly developed by Compaq and Inacom
with the express intent of tailoring such offers for delivery by
Inacom
- 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.


- The maintenance and repair services fee schedule shall be
as specified in the Master Subcontract Agreement.


- 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.


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- 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.


- 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.


- 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


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representatives with appropriate training, documentation
and support materials, contingent upon Inacom's providing
such training, documentation and support materials to
Compaq.


- 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.


- 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.


- Offsite Client and server staging and deployment to customer
site


- Onsite client and server installation of hardware and
identified Operating Systems, desktop applications


- 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
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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


- 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:


- ensuring compliance with the terms and conditions set forth
in this Agreement
- addressing any issues that may arise over the course of the
term of this Agreement
- escalating any unresolved issues using the escalation
process outlined in the following subsection .
- conducting quarterly business reviews
- applying the appropriate resources from their respective
companies to achieve the stated objectives of this Agreement
- providing any coordination activity internal to their
respective companies required to support this Agreement


3.2 MANAGEMENT ESCALATION PROCESS.


- 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.


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3.3 BUSINESS REVIEW PROCESS.


- 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.


- 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


- 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.


- 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.


- 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.


- 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.


- 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


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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


- 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


- 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.


- 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:


- If Inacom does not have local service capability in the
required locations.


- 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.


- 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:


- Leveraging Compaq's purchase agreements


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- Utilizing Compaq's on-site and off-site delivery capability
- 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


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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 recei ...