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
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.
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