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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-20751
1,132,491 SHARES
VANSTAR CORPORATION
COMMON STOCK
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Vanstar Corporation, a Delaware corporation (the "Company"), originally
issued the 1,132,491 shares (the "Shares") of Company common stock, par value
$.001 per share (the "Company Common Stock"), to the stockholders named herein
(the "Selling Stockholders") in unrelated, private transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(2) of the Securities Act and/or
Regulation D promulgated thereunder. All of the Shares offered hereby are being
offered on behalf of and for the account of the Selling Stockholders. The Shares
consist of (i) a maximum of 952,491 shares of Company Common Stock issued to or
for the benefit of the shareholders of Contract Data Services, Inc., a North
Carolina corporation ("CDS"), in connection with the merger of CDS with and into
a wholly owned subsidiary of the Company and (ii) a maximum of 180,000 shares of
Company Common Stock issued for the benefit of DCT Systems, Inc., a Minnesota
corporation, Niloy, Inc., a Georgia corporation, and NCT Systems, Inc., an
Illinois corporation (collectively, "DCT"), in connection with the sale of
certain assets by DCT to the Company (collectively, the "Transactions"). The
Company anticipates that the Shares will be offered for sale under this
Prospectus, from time to time after the effectiveness of the Registration
Statement of which this Prospectus forms a part, until the earlier of (a) the
sale of all of such Shares or (b) February 11, 2000. See "Selling Stockholders."
The Company has agreed to pay all of the expenses of registration in connection
with this offering (other than commissions, concessions or discounts to
broker-dealers), but will not receive any of the proceeds from the sale of the
Shares offered hereby. The aggregate proceeds to the Selling Stockholders from
the sale of the Shares will be the purchase price of the Shares sold less the
aggregate brokerage commissions and discounts, if any, and other expenses of
issuance and distribution not borne by the Company. See "Plan of Distribution"
and "Selling Stockholders."
This offering of Shares is currently not being underwritten. However, the
Selling Stockholders and brokers, dealers or underwriters that participate with
the Selling Stockholders in the distribution of the Shares may be deemed
"underwriters," as that term is defined in the Securities Act, and any
commissions received by broker-dealers, agents or underwriters and any profit on
the resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. It is anticipated that all
Shares being offered hereby, when sales thereof are made, will be made in one or
more transactions (which may involve one or more block transactions) through
customary brokerage channels, either through brokers acting as brokers or agents
for the sellers, or through dealers or underwriters acting as principals who may
resell the Shares on the New York Stock Exchange (the "NYSE") or in privately
negotiated sales, or otherwise, or by a combination of such methods of offering.
Each sale may be made either at market prices prevailing at the time of the
sales or at negotiated prices. See "Plan of Distribution."
To the extent required, the specific Shares to be sold, the names of the
Selling Stockholders, the purchase price, the public offering price, the names
of any agents, dealers or underwriters and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement.
The Company Common Stock is listed on the NYSE under the symbol "VST." On
October 22, 1997, the closing price of the Company Common Stock on the NYSE
Composite Tape was $14.50 per share.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 2.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 22, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Seven World Trade Center, Suite
1300, New York, New York 10048 and at the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Reports, proxy and information
statements and other information filed electronically by the Company with the
Commission are available at the Commission's Web site at http://www.sec.gov. In
addition, copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Shares offered by this
Prospectus. This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, a certain portion of which has been omitted as permitted by the Rules
and Regulations of the Commission. For further information with respect to the
Company and the securities offered by this Prospectus, reference is made to the
Registration Statement, which is on file at the offices of the Commission and
may be obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the offices of the Commission or at the Commission's
Web site. Statements contained in this Prospectus as to the contents of any
documents referred to are not necessarily complete, and in each such instance,
are qualified in all respects by reference to the applicable documents filed
with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act are hereby incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1997, as amended by the Form 10-K/A Amendment No. 1
thereto;
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 1997; and
(3) The description of the Company Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on February 8, 1996 and in any amendments or reports
filed for the purpose of updating such description.
All reports and other documents filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering of Company
Common Stock made hereby shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing of such reports and documents.
Any statement contained herein or in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement to the extent that a subsequently filed document
which also is, or is deemed to be, incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the Registration Statement.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of this Prospectus is delivered a copy of any and all
of the documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
this prospectus or any document incorporated by reference herein). Requests
should be directed to Vanstar Corporation, Building 500, Suite 1200, 1100
Abernathy Road, Atlanta, Georgia 30328, Attention: H.
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Christopher Covington, Esq., Senior Vice President, General Counsel and
Secretary, telephone (770) 522-4700.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Certain of the matters discussed in this Prospectus include forward-looking
statements that involve risks and uncertainties. Among the risks and
uncertainties to which the Company is subject are the risks inherent in the
Company's substantial indebtedness, the fact that the Company has experienced
significant fluctuations in revenues and operating results, the risks associated
with managing the Company's inventory and service offerings in light of product
life cycles and technological change, the risks associated with implementing
management responses to changing technology and market conditions, the Company's
relationship with its significant customers, intense price competition in the
Company's markets and the Company's dependence upon its key vendors. As a
result, the actual results realized by the Company could differ materially from
the statements made herein. Words or phrases such as "will continue,"
"anticipate," "expect," "believe," "intend," "estimate," "project," "plan" or
similar expressions are intended to identify forward-looking statements.
Potential investors in this offering are cautioned not to place undue reliance
on the forward-looking statements made in this Prospectus, which speak only as
of the date hereof.
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This Prospectus includes product names, trade names and trademarks of the
Company and its subsidiaries and of other companies.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus or incorporated herein
by reference. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors." See "Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995."
THE COMPANY
The Company is a leading provider of services and products designed to
build, manage and enhance personal computer ("PC") network infrastructures for
Fortune 1000 companies and other large enterprises. The Company provides
customized, integrated solutions for its customers' network infrastructure needs
by combining a comprehensive offering of value-added services with its expertise
in sourcing and distributing PC hardware, network products, computer peripherals
and software from many vendors. The Company's services are organized around an
integrated model called "Life Cycle Management." Life Cycle Management includes
design and consulting, acquisition and deployment, operation and support, and
enhancement and migration services to support the customers' PC network
infrastructure throughout its life cycle. Service delivery is optimized through
the application of automated systems, highly trained technical personnel and
proven, repeatable processes to support the customer's network infrastructure
throughout its entire life cycle.
The principal executive offices of the Company are located at 1100
Abernathy Road, Building 500, Suite 1200, Atlanta, Georgia 30328, and its
telephone number is (770) 522-4700.
THE OFFERING
Shares Offered...................... 1,132,491 shares of Company Common
Stock(1)
Selling Stockholders................ The Shares offered hereby were
originally issued by the Company to the
Selling Stockholders in unrelated,
private transactions exempt from
registration under the Securities Act
pursuant to Section 4(2) of the
Securities Act and/or Regulation D
promulgated thereunder. These
stockholders or their transferees,
pledgees, donees or successors, may
from time to time offer and sell the
Shares pursuant to this Prospectus. See
"Selling Stockholders" and "Plan of
Distribution."
Percentage of Outstanding Common
Stock Offered by the Selling
Stockholders...................... 2.63%(2)
Use of Proceeds..................... The Selling Stockholders will receive
all of the proceeds from the sale of
the Shares. The Company will not
receive any proceeds from the sale of
the Shares.
NYSE Symbol......................... VST
Risk Factors........................ An investment in the Shares involves a
high degree of risk. See "Risk Factors"
for a discussion of certain factors
that should be considered in evaluating
an investment in the Shares.
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(1) Assumes that all of the shares of Company Common Stock held in escrow for
the benefit of the various Selling Stockholders pursuant to the terms of
certain Escrow Agreements are released to the Selling Stockholders. See
"Selling Stockholders."
(2) Percentage indicated is based upon 42,989,652 shares of Company Common Stock
outstanding on August 31, 1997 but does not include shares of Company Common
Stock issued or issuable by the Company thereafter.
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RISK FACTORS
In addition to the other information in this Prospectus and incorporated
herein by reference, the following risk factors should be considered carefully
in evaluating the Company and the Company's business before purchasing the
Shares. This Prospectus contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from the
results discussed in the forward looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below. See
"Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995."
SIGNIFICANT FLUCTUATIONS IN REVENUES AND OPERATING RESULTS
The Company's quarterly and annual revenues and operating results have
varied significantly in the past and are likely to continue to do so in the
future. In addition, the Company experienced operating losses in the fiscal year
ended September 30, 1993 and during the seven months ended April 30, 1994.
Revenues and operating results may fluctuate as a result of the demand for the
Company's products and services, the introduction of new hardware and software
technologies offering improved features, the introduction of new services by the
Company and its competitors, changes in the level of operating expenses, the
timing of major service projects, inventory adjustments, competitive conditions
and economic conditions generally. In particular, the Company's operating
results are highly sensitive to changes in the mix of the Company's product and
service revenues, product margins and interest rates. Further, the purchase of
the Company's products and services generally involves a significant commitment
of capital, with the attendant delays frequently associated with large capital
expenditures and authorization procedures within an organization. For these and
other reasons, the Company's operating results are subject to a number of
significant risks over which the Company has little or no control, including
customers' technology life cycle needs, budgetary constraints and internal
authorization reviews. The Company has also, from time to time in the past,
experienced revenue fluctuations because of shortages of supply from certain
vendors. Shortages of supplies from vendors have previously occurred due
primarily to credit limitations placed on the Company. Future limitations of
credit by vendors could have a material adverse effect on the Company. In
addition, the general availability of certain products, particularly
state-of-the-art computing and data communications products, is occasionally
restricted. While the Company has not historically experienced significant
product supply shortages, other than due to credit restrictions as described
above, any such shortages in the future could have a material adverse effect on
the Company. The Company may also experience fluctuations in its operating costs
in the future as it continues to make acquisitions, implement new information
management systems and adjust its business strategy in the light of changing
technology and market conditions. Accordingly, the Company believes that
period-to-period comparisons of its operating results should not be relied upon
as an indication of future performance. In addition, the results of any
quarterly period are not necessarily indicative of results to be expected for a
full fiscal year.
SUBSTANTIAL INDEBTEDNESS AND FIXED OBLIGATIONS; DEPENDENCE ON IBMCC; INTEREST
RATE SENSITIVITY
The Company's business requires significant working capital to finance
product inventory and accounts receivable. The Company funds a significant
portion of its working capital requirements through its Financing Program
Agreement (the "Financing Program Agreement") with IBM Credit Corporation
("IBMCC"). As of July 31, 1997, the Company's outstanding indebtedness under the
Financing Program Agreement was approximately $347 million, out of total
availability of $350 million. Borrowings under the Financing Program Agreement
are secured by certain assets of the Company, including accounts receivable,
inventory and equipment. The Financing Program Agreement is currently available
through October 31, 1998. In the event of a termination of the Financing Program
Agreement, the outstanding borrowings thereunder mature at the end of the term
of the line of credit. Borrowings under the Financing Program Agreement bear
interest at various rates, depending upon the type of collateral advanced upon,
equal in each case to a predetermined margin over an established benchmark rate,
such as the London Interbank Offer Rate. As a result, the Company's operating
results are sensitive to changes in market interest rates. There can be no
assurance that IBMCC will continue to finance the Company's operations, or if
such financing is not continued, that the Company will be able to secure
additional debt financing.
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Effective December 20, 1996, the Company established a revolving funding
trade receivables securitization facility (the "Securitization Facility"), which
currently provides the Company with up to $200 million in available credit. In
connection with the Securitization Facility, the Company sells, on a revolving
basis through a wholly-owned subsidiary, an undivided interest in certain of its
trade receivables existing from time to time and which meet certain eligibility
requirements ("Pooled Receivables"). As of July 31, 1997, the gross proceeds of
those sales totaled $172.8 million. Proceeds received with respect to Pooled
Receivables sold from time to time are affected by then market interest rates,
among other factors.
On October 2, 1996 and October 26, 1996, respectively, Vanstar Financing
Trust, a statutory business trust formed under the laws of the State of Delaware
by the Company as sponsor (the "Trust") issued 3,500,000 and 525,000, 6 3/4%
Trust Convertible Preferred Securities ("Preferred Securities") to Robertson,
Stephens & Company, LLC; Alex. Brown & Sons Incorporated; Donaldson, Lufkin &
Jenrette Securities Corporation; and The Robinson-Humphrey Company, Inc.
(collectively the "Initial Purchasers") in connection with the Company's 144A
offering of such Preferred Securities. In addition, the Trust issued 124,484
common securities to the Company. The proceeds of these sales were invested by
the Trust in $207,474,200 aggregate principal amount of the Company's 6 3/4%
Convertible Subordinated Debentures due 2016 (the "Convertible Debentures"). The
Preferred Securities are mandatorily redeemable upon the maturity of the
Convertible Debentures on October 1, 2016 or earlier to the extent of any
redemption by the Company of any Convertible Debentures. Subject to the
Company's right to defer interest payments thereunder, the Company is obligated
to make quarterly interest payments under the Convertible Debentures of
approximately $3.5 million.
As of July 31, 1997, the Company's total amount of debt outstanding
(including debt evidenced by the Convertible Debentures) was approximately $867
million and the Company had stockholders' equity of approximately $173 million.
In addition to its substantial indebtedness, the Company has significant other
long-term liabilities and obligations. There can be no assurance that the
Company's operating results will be sufficient for payment of all of its fixed
obligations when due. The degree to which the Company is leveraged could have
important consequences to holders of the Shares, including the following: (i)
the Company's ability to obtain other financing in the future may be impaired or
may be available only on terms dilutive to the holders of the Company Common
Stock; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of principal and interest on its indebtedness;
and (iii) a high degree of leverage may make the Company more vulnerable to
economic downturns and may limit its ability to withstand competitive pressures.
The Company's ability to make scheduled payments on or, to the extent not
restricted pursuant to the terms thereof, to refinance its indebtedness depends
on its financial and operating performance, which is subject to prevailing
economic conditions and to financial, business and other factors beyond its
control.
DEPENDENCE ON KEY VENDORS AND PRODUCT SUPPLY
A significant portion of the Company's revenue is derived from sales of PC
network hardware, peripherals and software, including products of various major
vendors. Some of these revenues relate to sales made pursuant to fixed-price,
long-term contracts with governmental entities. The Company's agreements with
those vendors from which it purchases products directly, generally contain
provisions for periodic renewals and for termination by the vendor without
cause, generally upon relatively short notice. The loss of a major vendor, the
deterioration of the Company's relationship with a major vendor or the failure
of the Company to establish good relationships with major new vendors as they
develop could have a material adverse effect on the Company's business. As is
typical in its industry, the Company receives credits from most of its vendors
for market development, which are used to offset a portion of the Company's
sales and marketing expense. Any change in the availability of these credits
could materially adversely affect the Company's operating results. The Company
is also dependent, in part, upon vendor financing for working capital
requirements. The failure of the Company to obtain vendor financing on
satisfactory terms and conditions could have a material adverse effect on the
Company's business, financial condition and results of operations.
The personal computer industry experiences product supply shortages and
customer order backlogs from time to time due to the inability of certain
manufacturers to supply certain products on a timely basis. In
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addition, certain vendors have initiated new channels of distribution that
increase competition for the available product supply. There can be no assurance
that vendors will be able to maintain an adequate supply of products to fulfill
the Company's customer orders on a timely basis. The Company has experienced
product supply shortages in the past and expects to experience such shortages
from time to time in the future. Failure to obtain adequate product supplies or
fulfill customer orders on a timely basis could have a material adverse effect
on the Company's business, financial condition and results of operations.
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON INFORMATION
SYSTEMS
The markets for the Company's product and service offerings are
characterized by rapidly changing technology and frequent new product and
service offerings. The introduction of new technologies can render existing
products and services obsolete or unmarketable. The Company's continued success
will depend on its ability to enhance existing products and services and to
develop and introduce, on a timely and cost-effective basis, new products and
services that keep pace with technological developments and address increasingly
sophisticated customer requirements. The Company's business, financial condition
and results of operations could be materially adversely affected if the Company
were to incur delays in sourcing and developing product and service enhancements
or new products and services or if such product and service enhancements or new
products and services did not gain market acceptance. In addition, the Company
depends upon complex information management systems in connection with its own
business. These systems support, among other things, inventory management, order
processing, shipping, receiving and accounting. The Company also utilizes
information management systems to receive orders from customers and to manage
its help desk, dispatch, repair, installation, move/add/changes and asset
management services. Operation of the Company's information management systems
requires significant numbers of highly skilled personnel, significant capital
investments and a continuing level of operating expense. In the event that any
of the Company's information management systems should fail or experience
significant downtime, the Company could be prevented from taking customer
orders, printing product pickup lists, shipping product or delivering services
in a timely manner. Failure of certain information management systems might also
place the Company at a significant disadvantage in determining appropriate
product pricing or maintaining appropriate inventory levels. A failure of the
Company's information management systems which impacts any of these functions,
even for a short period, could have a material adverse effect on the Company's
operating results. In addition, the inability of the Company to attract and
retain the highly skilled personnel necessary to implement, maintain and operate
its information management systems, or any delay in the Company's ability to
apply the benefits of its information management systems to its business could
have a material adverse effect on operating results. See "-- Dependence On and
Need to Recruit and Retain Key Management and Technical Personnel."
CONCENTRATION OF REVENUES
During the fiscal years ended April 30, 1995, 1996 and 1997, Microsoft
Corporation accounted for 10.8%, 12.0% and 9.5%, respectively, of the Company's
total revenues for such fiscal periods. During such periods, no other customer
accounted for more than 10% of the Company's total revenues. However, during
fiscal 1997, the Company derived approximately 54% of its revenues from its 50
largest customers. To the extent that the Company is successful in expanding its
relationship with new and existing customers among large enterprises such as the
Fortune 1000, its revenues may become more concentrated. While the Company seeks
to build long-term customer relationships, revenues from any particular customer
can fluctuate from period to period due to such customer's purchasing patterns.
Any termination or significant disruption of the Company's relationships with
any of its principal customers could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
a deterioration in the financial condition of any of its principal customers
could expose the Company to the possibility of large accounts receivable write-
offs, which would materially adversely affect the Company's financial condition
and results of operations.
INTENSE COMPETITION
The markets in which the Company operates are characterized by intense
competition from several types of technical service providers and computer
related equipment vendors, including mainframe and mid-range
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computer manufacturers and outsourcers entering the personal computer services
marketplace. These include Digital Equipment Corporation MultiVendor Services,
Electronic Data Systems Corporation, Hewlett-Packard Company Multi-Vendor
Services and IBM Global Services. Other competitors include VARs, systems
integrators and third-party service companies, including CompuCom Systems, Inc.;
DecisionOne Corporation; Entex Information Services, Inc.; InaCom Corp.;
MicroAge, Inc.; and Technology Service Solutions. The Company's markets require
it to maintain sales personnel to compete for commercial customers and to have
employees experienced in responding to the competitive bidding requirements of
government-related customers. The Company expects to face further competition
from new market entrants and possible alliances between competitors in the
future. Certain of the Company's current and potential competitors have greater
financial, technical, marketing and other resources than the Company. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, to devote greater resources to the
development, promotion and sale of their products and services or be more
effective in responding in competitive bidding situations than the Company. No
assurance can be given that the Company will be able to compete successfully
against current and future competitors.
CONTROL OF THE COMPANY
As of June 1, 1997, Warburg, Pincus Capital Company, L.P. ("CapCo"), which
is controlled by Warburg, Pincus & Co., beneficially owned an aggregate of
16,482,501 shares of Company Common Stock (representing approximately 38.4% of
the issued and outstanding shares of Company Common Stock as of such date). Due
to its ownership position, CapCo has significant influence over the management
and policies of the Company. CapCo's ownership position also may render it more
difficult for a third party to effect a change of control of the Company without
the consent of CapCo and may thereby discourage third parties from any attempt
to acquire control of the Company, which could have a material adverse effect on
the price of the Company Common Stock. Moreover, as of June 1, 1997, the
principal stockholders (including Capco), directors and executive officers of
the Company beneficially owned approximately 45.8% of the Company Common Stock.
As a result, such stockholders, if they act in concert, may be able to
effectively control the election of members of the Company's Board of Directors
and generally to exercise control over the Company's corporate actions.
GOVERNMENT CONTRACTS
The Company and its subsidiaries act as prime contractors and
subcontractors to various governmental entities, including agencies of the
United States government. The Company and its subsidiaries primarily provide
computer equipment and related products to governmental entities pursuant to
fixed-price contracts. Under the contracts, the Company is obligated to deliver
products at a fixed price when and if ordered. All of the equipment sold by the
Company to governmental entities under those contracts is acquired from third
parties at then-prevailing market prices. Thus, the Company bears the burden of
any manufacturers' price increases. The Company's government contracts are
subject to specific procurement regulations and a variety of socio-economic and
other requirements. Failure to comply with such regulations and requirements
could lead to suspension or debarment, for cause, from additional government
contracting or subcontracting, either permanently or for a period of time. Among
the causes for debarment are violations of various statutes, including those
related to employment practices, the protection of the environment and the
accuracy of records. In addition, government contractors are subject to
oversight audits by government representatives and may become subject to profit
and cost control limitations.
Although certain of the Company's government contracts have a term of
several years, appropriations for purchases under such contracts are typically
made on a fiscal-year basis only. In addition, even if appropriations are made
for purchases by a governmental entity, that entity may not utilize all of its
appropriations authority with respect to acquisitions of equipment from the
Company. Consequently, there can be no assurance regarding the actual volume of
sales that may be made thereunder, if any, during any period of time. Finally,
government contracts are typically subject to termination, in whole or in part,
without notice at the convenience of the government or agency involved. Any
substantial reduction in purchases by governmental entities could have a
material adverse effect on the Company.
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DEPENDENCE ON AND NEED TO RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL
PERSONNEL
The Company's success depends to a significant extent on its ability to
attract and retain key personnel. In particular, the Company is dependent on its
senior management team and technical personnel. The Company has significantly
expanded its technical staff, including its systems engineering force, in recent
years. As of July 31, 1997, the Company employed more than 4,100 technical
professionals. Competition for such technical personnel is intense and no
assurance can be given that the Company will be able to recruit and retain such
personnel. The failure to recruit and retain management and technical personnel
could have a material adverse effect on the Company's growth, revenues and
results of operations. In addition, the Company's growth resulting from
expanding operations and acquisitions has placed significant demands on the
Company's management, operational and technical resources. Such growth is
expected to continue to challenge the Company's sales, marketing, technical and
support personnel and senior management. The Company's future performance will
depend in part on its ability to manage expanding domestic and international
operations and to adapt its operational systems to respond to changes in its
business. In particular, the Company's success will depend on its ability to
attract, retain and train adequate numbers of technical field personnel and
effectively integrate any acquired business operations.
ANTI-TAKEOVER EFFECTS OF UNISSUED PREFERRED STOCK AND DELAWARE LAW
Certain provisions of the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Delaware law may be deemed to have an
anti-takeover effect. The Certificate of Incorporation provides that the Board
of Directors may issue additional shares of Company Common Stock or establish
one or more classes or series of Preferred Stock with such designations,
relative voting rights, dividend rates, liquidation and other rights,
preferences and limitations as the Board of Directors deems appropriate without
stockholder approval. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL").
In general, the statute prohibits a publicly-held Delaware corporation from
engaging in a business combination with an "interested stockholder" for a period
of three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. Each of the foregoing provisions gives the Board of
Directors, acting without stockholder approval, the ability to prevent, or
render more difficult or costly, the completion of a takeover transaction that
stockholders might view as being in their best interests, including a takeover
transaction that might result in a premium over the market price for the shares
of Company Common Stock.
ABSENCE OF DIVIDENDS
The Company has not declared or paid any cash dividends on Company Common
Stock and does not presently intend to pay cash dividends on Company Common
Stock in the foreseeable future. The Company intends to retain future earnings
for investment in its business. The Company's Financing Program Agreement with
IBMCC limits the Company's ability to pay cash dividends on its capital stock.
In addition, the Indenture relating to the Convertible Debentures gives the
Company the right to defer interest payments on the Convertible Debentures. The
Company may not declare or pay dividends on, or make distributions with respect
to, the Company Common Stock (except dividends or distributions in shares of the
Company Common Stock) during any period when the Company is deferring interest
payments on the Convertible Debentures.
POSSIBLE VOLATILITY OF THE PRICE OF COMPANY COMMON STOCK
The market price of the Company Common Stock may be subject to wide
fluctuations in price and volume in response to quarterly variations and the
Company's results of operations, changes in earnings, estimates by research
analysts, conditions in the PC industry or general market or economic
conditions. In recent years, the stock market has experienced extreme price and
volume fluctuations. These fluctuations have had a substantial effect on the
market prices for many technology companies and often appear unrelated to the
operating performance of the specific companies involved. Such market
fluctuations could materially adversely affect the market price for the Company
Common Stock.
6
<PAGE> 10
THE COMPANY
The Company is a leading provider of services and products designed to
build, manage and enhance PC network infrastructures, for Fortune 1000 companies
and other large enterprises. The Company provides customized, integrated
solutions for its customers' network infrastructure needs by combining a
comprehensive offering of value-added services with its expertise in sourcing
and distributing PC hardware, network products, computer peripherals and
software from many vendors. The Company's services are organized around an
integrated model called "Life Cycle Management." Life Cycle Management includes
design and consulting, acquisition and deployment, operation and support, and
enhancement and migration to support the customers' network throughout its life
cycle. Service delivery is optimized through the proper application of automated
systems, highly trained technical personnel and proven, repeatable processes to
support the customer's PC network infrastructure throughout its entire life
cycle. The Company Common Stock was listed on the NYSE following the Company's
initial public offering (the "IPO") on March 11, 1996 and trades under the
symbol "VST."
The Company was incorporated in Delaware in September 1987 under the name
"ComputerLand Corporation" following the acquisition by William Y. Tauscher,
CapCo and Richard H. Bard of the majority of the capital stock of the Company's
predecessor, IMS Associates, Inc. ("IMS"), which was originally incorporated in
1976. IMS was merged with the Company after such acquisition. At the time of the
acquisition, the Company operated and franchised computer retail stores in the
United States.
The executive offices of the Company are located at 1100 Abernathy Road,
Building 500, Suite 1200, Atlanta, Georgia 30328, and the telephone number of
the executive offices is (770) 522-4700.
RECENT DEVELOPMENTS
On July 3, 1997, a trust claiming to have purchased shares of Company
Common Stock filed suit in the Superior Court of the State of California, County
of Santa Clara, against the following persons or entities: the Company; certain
directors and officers of the Company; the Company's principal stockholder,
CapCo, and certain of its affiliates; and Robertson Stephens & Co., Alex. Brown
& Sons Incorporated and The Robinson-Humphrey Company, Inc., each of which
served as an underwriter in the Company's IPO and as an Initial Purchaser in the
Trust's issuance of Preferred Securities. The plaintiff also seeks class action
status under California law and purports to represent a class of purchasers of
Company Common Stock between March 11, 1996 and January 23, 1997. In its
original complaint, the plaintiff purports to state three causes of action under
California law, alleging generally, among other things, that the defendants made
false or misleading statements or concealed information regarding the Company
and that the plaintiff, as a holder of Company Common Stock, suffered damages as
a result thereof. The plaintiff seeks compensatory and punitive damages in an
unspecified amount, together with other relief. The suit is entitled David T.
O'Neal Trust, Dated 4/1/77, v. Vanstar Corporation, et al., Case No. CV767266.
The Company believes that the plaintiff's allegations are without merit and
intends to defend the suit vigorously.
On July 7, 1997, the Company, through a wholly-owned subsidiary, acquired
certain of the assets and assumed certain of the liabilities of Sysorex
Information Systems, Inc. ("Sysorex"), a government technology provider which
reported revenues of approximately $150 million for its fiscal year ended
September 30, 1996. The purchase price was approximately $46 million, including
net liabilities assumed of approximately $11 million, subject to certain
post-closing adjustments, and a contingent payment of 500,000 shares of Company
Common Stock, based upon the future financial performance of the acquired
business. Sysorex is a prime government contractor to various United States
Government agencies. Under contracts with governmental entities, Sysorex has
agreed to deliver computer hardware and software, generally at fixed prices,
when and if ordered by the entities involved. Sysorex operates independently of
the Company's Government Systems Group, which will continue to maintain and
pursue relationships with systems integrators delivering services to
governmental entities. See "Risk Factors -- Government Contracts."
7
<PAGE> 11
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder and the
number of Shares that may be offered by each. The number of Shares that may be
actually sold by each of the Selling Stockholders will be determined by each
such Selling Stockholder, and may depend upon a number of factors, including,
among other things, the market price of the Company Common Stock. Because each
of the Selling Stockholders may offer all, some or none of the Shares that each
holds, and because the offering contemplated by this Prospectus is currently not
being underwritten, no estimate can be given as to the number of Shares that
will be held by each of the Selling Stockholders upon or prior to termination of
this offering. See "Plan of Distribution." The table below sets forth
information as of December 31, 1996, concerning the beneficial ownership of the
Shares of each of the Selling Stockholders. All information as to beneficial
ownership has been furnished by the Selling Stockholder in question. One or more
of the Selling Stockholders may have, in transactions exempt from the
registration requirements of the Securities Act, sold, transferred or otherwise
disposed of all or a portion of their shares since the date upon which they
provided information regarding their holdings of Shares.
<TABLE>
<CAPTION>
SHARES OF COMPANY SHARES OF COMPANY
COMMON STOCK OWNED COMMON STOCK OFFERED
BEFORE OFFERING IN THE OFFERING
--------------------- --------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT(1) NUMBER
--------------------------- ------- ---------- --------------------
<S> <C> <C> <C>
Malbert Smith, III................................. 428,621(2) 1% 428,621(2)
A. Jackson Stenner................................. 428,621(2) 1 428,621(2)
Creditanstalt American Corporation................. 95,249(3) * 95,249(3)
DCT Systems, Inc................................... 10,000(4) * 10,000(4)
Niloy, Inc......................................... 30,000(5) * 30,000(5)
NCT Systems, Inc................................... 140,000(6) * 140,000(6)
</TABLE>
- ---------------
* Less than one percent.
(1) Percentage indicated is based upon 42,984,652 shares of Company Common Stock
outstanding on August 31, 1997, but does not include shares of Company
Common Stock issued or issuable by the Company thereafter.
(2) Includes 42,862 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive October 31, 1997 upon the expiration of an escrow
established in connection with the Company's acquisition of CDS.
(3) Includes 9,525 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive October 31, 1997 upon the expiration of an escrow
established in connection with the Company's acquisition of CDS.
(4) Includes 6,667 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive January 9, 1998, 1,111 shares of Company Common
Stock that such Selling Stockholder may be entitled to receive January 9,
1999 and 2,222 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive January 9, 2000, pursuant to the terms of an
escrow established in connection with the Company's acquisition of certain
assets from DCT.
(5) Includes 20,000 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive January 9, 1998, 3,333 shares of Company Common
Stock that such Selling Stockholder may be entitled to receive January 9,
1999 and 6,667 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive January 9, 2000, pursuant to the terms of an
escrow established in connection with the Company's acquisition of certain
assets from DCT.
(6) Includes 93,333 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive January 9, 1998, 15,556 shares of Company Common
Stock that such Selling Stockholder may be entitled to receive January 9,
1999 and 31,111 shares of Company Common Stock that such Selling Stockholder
may be entitled to receive January 9, 2000, pursuant to the terms of an
escrow established in connection with the Company's acquisition of certain
assets from DCT.
8
<PAGE> 12
ACQUISITION OF CDS
On December 16, 1996, the Company consummated the merger of CDS with and
into a wholly owned subsidiary of the Company (the "CDS Merger"). The CDS Merger
has been accounted for by the Company under the "pooling of interests" method of
accounting. The aggregate consideration received by the shareholders of CDS in
connection with the CDS Merger consisted solely of 952,491 shares of Company
Common Stock (having an aggregate value on the closing date of approximately
$21.9 million). Ten percent (10%) of the shares issued in connection with the
CDS Merger (95,249 shares of Company Common Stock) were deposited into escrow
for a period of approximately 10 months to satisfy certain indemnification
obligations of CDS. The Company granted certain registration rights to the
persons receiving its stock in the CDS Merger and pursuant thereto has
registered for resale in the offering made hereby 952,491 shares of Company
Common Stock. The costs of this registration (other than brokerage commissions
and similar expenses) are being paid by the Company. To the extent any of the
shares of Company Common Stock issued in connection with the CDS Merger are
transferred back to the Company upon expiration of the applicable Escrow
Agreement, the Registration Statement of which this Prospectus forms a part will
be amended to deregister such number of Shares. CDS provides outsourcing of
integrated information technology services, related technical support services
and procurement of computer hardware and software. For the fiscal year ended
March 31, 1996, CDS reported total revenues of approximately $74.3 million.
ACQUISITION OF CERTAIN ASSETS FROM DCT
On January 9, 1997, the Company consummated the acquisition of inventory
and equipment from DCT. In connection therewith, the Company issued 180,000
shares of Company Common Stock (the "DCT Shares"), into escrow for the benefit
of DCT. DCT also received approximately $4.0 million in cash as additional
consideration for the transferred assets. Based on the closing market price of
the Company Common Stock on the closing date of the DCT acquisition, the DCT
Shares have an aggregate value of approximately $3.92 million. The DCT Shares
will be released from escrow as follows: (i) 120,000 on the first anniversary of
the closing, (ii) 20,000 on the second anniversary of the closing and (iii)
40,000 on the third anniversary of the closing, in each case subject to the
satisfaction of certain conditions described in a Servicing and Marketing
Agreement between the Company and DCT entered into on January 9, 1997 (the
"Service Agreement"). Under the Service Agreement, the Company will supply
certain computer products and billing services to DCT. DCT may earn commissions
under the Service Agreement based upon the level of DCT's product and service
revenue, payable at the election of DCT in cash or restricted shares of Company
Common Stock (such number not to exceed 40,000 shares of Company Common Stock).
The Company has granted certain registration rights to the entities receiving
its stock in the DCT acquisition and pursuant thereto has registered for resale
in the offering made hereby, 180,000 shares of Company Common Stock. The costs
of this registration (other than brokerage commissions and similar expenses) are
being paid by the Company. To the extent any of the DCT Shares are transferred
back to the Company pursuant to the terms of the applicable Escrow Agreement,
the Registration Statement of which this Prospectus forms a part will be amended
to deregister such number of Shares.
Other than as set forth in this section entitled "Selling Stockholders,"
none of the parties to the transactions described herein were affiliated with
the Company within the last three fiscal years.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from the sale of the Shares by the
Selling Stockholders. The Shares may be sold from time to time to purchasers
directly by the Selling Stockholders. Alternatively, the Selling Stockholders
may sell the Shares in one or more transactions (which may involve one or more
block transactions) on the NYSE, in privately negotiated transactions or
otherwise or in a combination of such transactions; each sale may be made either
at market prices prevailing at the time of such sale or at negotiated prices;
some or all of the Shares may be sold through broker-dealers acting as brokers
or agents on behalf of the Selling Stockholders or to broker-dealers acting as
principals for resale by such dealers; and in connection with such sales, such
broker-dealers may receive compensation in the form of commissions, discounts or
fees
9
<PAGE> 13
from the Selling Stockholders and/or the purchasers of such shares for whom they
may act as broker or agent. It is anticipated that the Selling Stockholders will
offer all of the Shares for sale. All expenses of registration incurred in
connection with this offering are being borne by the Company, but all brokerage
commissions and other similar expenses incurred by the Selling Stockholders will
be borne by the Selling Stockholders.
The Company anticipates that the Shares will be offered for sale under this
Prospectus, from time to time after the effectiveness of the Registration
Statement of which this Prospectus forms a part until the earlier of (a) the
sale of all of such Shares or (b) February 11, 2000 (the "Registration Period").
However, the Company may, from time to time, upon proper notice to the
shareholders receiving Company Common Stock in the CDS transaction, terminate or
suspend the effectiveness of the Registration Statement in certain circumstances
for a period of not more than 90 days. Additionally, certain holders of the
Company's Common Stock have the right to require the Company to register certain
shares held by or issuable to such holders with the Commission. The Company may,
upon the written request of any such holders, terminate or suspend the
effectiveness of the Registration Statement until the expiration of 90 days
after the date of the completion of any such underwritten offering. To the
extent that the Company terminates or suspends the effectiveness of the
Registration Statement as described herein, it is required, pursuant to the
terms of the Registration Rights Agreement executed in connection with the CDS
transaction, to extend the Registration Period beyond February 11, 2000 for a
like period.
At the time a particular offer of Shares is made, to the extent required, a
Prospectus Supplement will be distributed that will identify and set forth the
aggregate amount of Shares being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, the purchase
price paid by any underwriter for Shares purchased from the Selling
Stockholders, any commissions, discounts and other items constituting
compensation from the Selling Stockholders and any commissions, discounts or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public.
Each Selling Stockholder and any dealer acting in connection with the
offering of any of the Shares or any broker executing the selling orders on
behalf of any of the Selling Stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any profit on the sale
of any or all of the Shares and any commissions, discounts or concessions
received by any such dealers or brokers may be deemed to be underwriting
commissions and discounts under the Securities Act. Any dealer or broker
participating in any distribution of the Shares may be required to deliver a
copy of this Prospectus, including the Prospectus Supplement, to any person who
purchases any of the Shares from or through such dealer or broker.
The Selling Stockholders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of any of the Shares by the Selling
Stockholders. The foregoing may affect the marketability of such securities.
In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the Shares may not be sold unless the
Shares have been registered and qualify for sale in such state, or unless an
exemption from registration or qualification is available and is obtained.
In connection with the offering made hereby, the Company has agreed to
indemnify the Selling Stockholders jointly and severally against certain civil
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments in connection therewith. Additionally, the Selling
Stockholders severally have agreed to indemnify the Company against certain
civil liabilities, including certain liabilities under the Securities Act, or to
contribute to payments in connection therewith. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company, pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
10
<PAGE> 14
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Arter & Hadden, Dallas, Texas.
EXPERTS
The consolidated financial statements of Vanstar Corporation included in
the Company's Annual Report on Form 10-K for the fiscal year ended April 30,
1997 incorporated herein by reference have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
11
<PAGE> 15
======================================================
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THEIR
AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. ii
Incorporation of Certain Documents by
Reference........................... ii
Safe Harbor Statement Under the
Private Securities Litigation Reform
Act
of 1995............................. iii
Summary............................... 1
Risk Factors.......................... 2
The Company........................... 7
Recent Developments................... 7
Selling Stockholders.................. 8
Plan of Distribution.................. 9
Legal Matters......................... 11
Experts............................... 11
</TABLE>
======================================================
======================================================
1,132,491 SHARES
OF
VANSTAR CORPORATION
COMMON STOCK
[LOGO]
--------------------
PROSPECTUS
--------------------
DATED OCTOBER 22, 1997.
======================================================
