<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1996
REGISTRATION NO. 333-08453
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INGRAM MICRO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5045 62-1644402
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1600 E. ST. ANDREW PLACE
SANTA ANA, CA 92705
(714) 566-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES E. ANDERSON, JR., ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
INGRAM MICRO INC.
1600 E. ST. ANDREW PLACE
SANTA ANA, CA 92705
(714) 566-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
WINTHROP B. CONRAD, JR., ESQ. LARRY W. SONSINI, ESQ.
DAVIS POLK & WARDWELL WILSON SONSINI GOODRICH & ROSATI
450 LEXINGTON AVENUE 650 PAGE MILL ROAD
NEW YORK, NEW YORK 10017 PALO ALTO, CALIFORNIA 94304
(212) 450-4000 (415) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains three forms of prospectus. Two forms
of prospectus will be used by the Underwriters in connection with offerings of
Common Stock: (i) one to be used in connection with an offering by the U.S.
Underwriters in the United States and Canada (the "U.S. Prospectus") and (ii)
the other to be used in connection with a concurrent offering by the
International Underwriters outside of the United States and Canada (the
"International Prospectus"). The U.S. Prospectus and the International
Prospectus are identical in all respects except for the front cover page of the
International Prospectus, which is included herein after the final page of the
U.S. Prospectus and is labeled "Alternate Page for International Prospectus."
The third form of prospectus (the "Company Prospectus") will be used in
connection with an offering of 200,000 shares of Common Stock directly by the
Company to Mr. Jerre L. Stead, the Company's Chief Executive Officer and
Chairman of the Board of Directors. The Company Prospectus is identical in all
respects to the U.S. Prospectus except for (i) the front cover page of the
Company Prospectus, which is included herein after the front cover page of the
International Prospectus and is labeled "Alternate Page for Company Prospectus,"
and (ii) the fact that the information in "Underwriters" is not applicable to
purchases pursuant to the Company Prospectus. Final forms of each of the
Prospectuses will be filed with the Securities and Exchange Commission under
Rule 424(b).
i
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Issued October 30, 1996
20,000,000 Shares
LOGO
CLASS A COMMON STOCK
---------------------------
OF THE 20,000,000 SHARES OF CLASS A COMMON STOCK (THE "COMMON STOCK") OFFERED
HEREBY, 16,000,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND
CANADA BY THE U.S. UNDERWRITERS, AND 4,000,000 SHARES ARE BEING OFFERED
INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS. SEE "UNDERWRITERS." UP TO 2,300,000 OF THE SHARES OF COMMON
STOCK OFFERED HEREBY ARE BEING RESERVED FOR SALE TO CERTAIN INDIVIDUALS
AND INGRAM INDUSTRIES INC. SEE "EMPLOYEE AND PRIORITY OFFERS." ALL SUCH
SHARES ARE BEING OFFERED ON THE SAME TERMS AND CONDITIONS AS THE SHARES
BEING OFFERED TO THE PUBLIC GENERALLY, AND ANY PURCHASERS OF SUCH
SHARES WHO ARE AFFILIATES OF THE COMPANY WILL REPRESENT THAT ANY
PURCHASES ARE BEING MADE FOR INVESTMENT PURPOSES ONLY. ALL OF THE
SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING ISSUED AND SOLD BY
THE COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC
MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN
$17 AND $19 PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE. THE COMPANY HAS TWO CLASSES OF AUTHORIZED
COMMON STOCK, THE COMMON STOCK OFFERED HEREBY AND THE CLASS B
COMMON STOCK (THE "CLASS B COMMON STOCK," AND COLLECTIVELY
WITH THE COMMON STOCK, THE "COMMON EQUITY"). THE RIGHTS OF
HOLDERS OF COMMON STOCK AND CLASS B COMMON STOCK ARE
IDENTICAL EXCEPT FOR VOTING AND CONVERSION RIGHTS AND
RESTRICTIONS ON TRANSFERABILITY. HOLDERS OF THE COMMON
STOCK ARE ENTITLED TO ONE VOTE PER SHARE, AND HOLDERS OF
THE CLASS B COMMON STOCK ARE ENTITLED TO TEN VOTES
PER SHARE ON MOST MATTERS SUBJECT TO STOCKHOLDER
VOTE. UPON THE CLOSING OF THIS OFFERING, THE INGRAM
FAMILY STOCKHOLDERS (AS DEFINED HEREIN) WILL HAVE
APPROXIMATELY 80.8% OF THE COMBINED VOTING POWER
OF THE COMMON EQUITY (80.5% IF THE U.S.
UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT
OPTION IN FULL). THE COMMON STOCK HAS BEEN
APPROVED FOR LISTING, SUBJECT TO OFFICIAL
NOTICE OF ISSUANCE, ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "IM."
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
RISKS ASSOCIATED WITH THIS OFFERING.
---------------------------
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.
---------------------------
PRICE $ A SHARE
---------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------- -------------- -----------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total(3)............................... $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $1,400,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
3,000,000 additional Shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions, and proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriters."
---------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, counsel for the Underwriters. It is
expected that delivery of the Shares will be made on or about , 1996
at the office of Morgan Stanley & Co. Incorporated, New York, New York, against
payment therefor in immediately available funds.
---------------------------
MORGAN STANLEY & CO.
Incorporated
THE ROBINSON-HUMPHREY COMPANY, INC.
ALEX. BROWN & SONS
INCORPORATED
HAMBRECHT & QUIST
J.C. BRADFORD & CO.
, 1996
<PAGE> 4
INGRAM
MICRO LEADING THE WAY IN WORLDWIDE DISTRIBUTION(TM)
LOGO
SUPPLYING OVER 36,000 PRODUCTS
FROM 1,100 VENDORS WORLDWIDE
[LOGOS OF VARIOUS VENDORS]
PCS, PERIPHERALS, WORKSTATIONS
[LOGOS OF VARIOUS VENDORS]
SOFTWARE
[LOGOS OF VARIOUS VENDORS]
NETWORKING
WORLDWIDE PRESENCE
CUSTOMERS IN 120 COUNTRIES
[FACILITIES MAP]
SUPERIOR EXECUTION AND
VALUE-ADDED SERVICES
<TABLE>
<S> <C> <C>
LOGISTICS BANKING
- Warehousing - Credit
- Order Fulfillment - Financing Programs
- Product Tracking COST-EFFICIENT
- Bullet-Proof Shipping SALES & SERVICES
- Configuration - Telesales
- Labeling - Field Sales
- Returns - Customer Service
- Forecasting - Marketing
</TABLE>
PRODUCT KNOWLEDGE
<TABLE>
<S> <C> <C>
- Cross-Platform - Customer Information
Technical Support Systems
- Technical Training
</TABLE>
<PAGE> 5
OVER 100,000 RESELLER
CUSTOMERS IN 3 MARKET SECTORS
- Commercial
- Corporate Resellers
- Dealer Affiliates
- Direct Marketers
- VAR
- Systems Integrators
- Application VARs
- OEMs
- Government/Education Resellers
- Consumer
- Computer Superstores
- Office Product Superstores
- Mass Merchants
- Consumer Electronics Stores
- Warehouse Clubs
IMPULSE
WORLD CLASS
INFORMATION SYSTEMS
COMPETITIVE ADVANTAGE
THROUGH REAL-TIME
WORLDWIDE INFORMATION
ACCESS AND PROCESSING
- - 12 million on-line transactions per day
- - 26,000 orders per day
- - 37,000 shipments per day
[GLOBE]
<PAGE> 6
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS 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 OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1996 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
For investors outside the United States: No action has been or will be
taken in any jurisdiction by the Company or by any Underwriter that would permit
a public offering of the Common Stock or possession or distribution of this
Prospectus in any jurisdiction where action for that purpose is required, other
than in the United States. Persons into whose possession this Prospectus comes
are required by the Company and the Underwriters to inform themselves about and
to observe any restrictions as to the offering of the Common Stock and the
distribution of this Prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 5
The Company............................ 15
Use of Proceeds........................ 17
Dividend Policy........................ 17
Capitalization......................... 18
Dilution............................... 19
Selected Consolidated Financial Data... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 21
Business............................... 31
Management............................. 49
<CAPTION>
PAGE
----
<S> <C>
Employee and Priority Offers........... 60
Certain Transactions................... 61
The Split-Off and the Reorganization... 62
Principal Stockholders................. 67
Description of Capital Stock........... 68
Shares Eligible for Future Sale........ 72
Certain U.S. Federal Income Tax
Considerations....................... 74
Underwriters........................... 76
Legal Matters.......................... 79
Experts................................ 79
Additional Information................. 80
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
Ingram Micro and the Ingram Micro logo are registered trademarks of the
Company. Ingram Alliance, IMpulse, "Leading the Way in Worldwide Distribution,"
and "Partnership America" are trademarks of the Company. All other trademarks or
tradenames referred to in this Prospectus are the property of their respective
owners.
------------------------
Unless the context otherwise requires, the "Company" or "Ingram Micro"
refers to Ingram Micro Inc., a Delaware corporation, and its consolidated
subsidiaries. In addition, unless otherwise indicated, all information in this
Prospectus assumes (i) the occurrence of the Split-Off (as defined herein)
immediately prior to the closing of this offering, (ii) the purchase of 200,000
shares in the Company Offering (as defined herein), and (iii) no exercise of the
U.S. Underwriters' over-allotment option. See "Underwriters." The fiscal year of
the Company is a 52- or 53-week period ending on the Saturday nearest to
December 31. Unless the context otherwise requires, references in this
Prospectus to "1991," "1992," "1993," "1994," and "1995" represent the fiscal
years ended December 28, 1991 (52 weeks), January 2, 1993 (53 weeks), January 1,
1994 (52 weeks), December 31, 1994 (52 weeks), and December 30, 1995 (52 weeks),
respectively. The Company's next 53-week fiscal year will be fiscal year 1997.
2
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
Ingram Micro is the leading wholesale distributor of microcomputer products
worldwide. The Company markets microcomputer hardware, networking equipment, and
software products to more than 100,000 reseller customers in approximately 120
countries worldwide. Ingram Micro distributes microcomputer products through
warehouses in eight strategic locations in the continental United States and 22
international warehouses located in Canada, Mexico, most countries of the
European Union, Norway, Malaysia, and Singapore. The Company believes that it is
the market share leader in the United States, Canada, and Mexico, and the second
largest full-line distributor in Europe. In 1995, approximately 31% of the
Company's net sales were derived from operations outside the United States.
Ingram Micro offers one-stop shopping to its reseller customers by providing a
comprehensive inventory of more than 36,000 products from over 1,100 suppliers,
including most of the microcomputer industry's leading hardware manufacturers,
networking equipment suppliers, and software publishers. The Company's suppliers
include Apple Computer, Cisco Systems, Compaq Computer, Creative Labs,
Hewlett-Packard, IBM, Intel, Microsoft, NEC, Novell, Quantum, Seagate, 3Com,
Toshiba, and U.S. Robotics.
The Company conducts business with most of the leading resellers of
microcomputer products around the world, including, in the United States,
AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City, Electronic
Data Systems, En Pointe Technologies, Entex Information Services, Micro
Warehouse, Sam's Club, Staples, and Vanstar. The Company's international
reseller customers include Complet Data A/S, Consultores en Diagnostico
Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre Europe, B.V.,
GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk Datasenter, Owell
Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema SPA.
The Company has grown rapidly over the past five years, with net sales and
net income increasing to $8.6 billion and $84.3 million, respectively, in 1995
from $2.0 billion and $30.2 million, respectively, in 1991, representing
compound annual growth rates of 43.8% and 29.3%, respectively. The Company's
growth during this period reflects substantial expansion of its existing
domestic and international operations, resulting from the addition of new
customers, increased sales to the existing customer base, the addition of new
product categories and suppliers, and the establishment of Ingram Alliance
Reseller Company ("Ingram Alliance"), the Company's master reseller business
launched in late 1994, as well as the successful integration of ten acquisitions
worldwide. Because of intense price competition in the microcomputer products
wholesale distribution industry, the Company's margins have historically been
narrow and are expected in the future to continue to be narrow. In addition, the
Company is highly leveraged and has relied heavily on debt financing for its
increasing working capital needs in connection with the expansion of its
business.
The Company is currently a subsidiary of Ingram Industries Inc. ("Ingram
Industries"). Immediately prior to the closing of this offering, Ingram
Industries will consummate the Split-Off (as defined herein), and all
information in this Prospectus assumes the occurrence of the Split-Off at such
time. See "The Company" and "The Split-Off and the Reorganization." The
consummation of the Split-Off is a non-waiveable condition to the closing of
this offering.
3
<PAGE> 8
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered(1):
U.S. Offering................................... 16,000,000 Shares
International Offering.......................... 4,000,000 Shares
Company Offering(2)............................. 200,000 Shares
Total......................................... 20,200,000 Shares
Common Equity to be outstanding after this
offering(1)(3):
Common Stock.................................... 20,200,000 Shares
Class B Common Stock(4)......................... 109,813,762 Shares
Total......................................... 130,013,762 Shares
Voting rights:
Common Stock.................................... One vote per share
Class B Common Stock............................ Ten votes per share
Use of proceeds................................... To repay certain outstanding indebtedness. See
"Use of Proceeds."
NYSE Symbol....................................... IM
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR -----------------------------
---------------------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................... $2,016.6 $2,731.3 $4,044.2 $5,830.2 $8,616.9 $ 6,070.7 $ 8,474.7
Gross profit.................... 185.4 227.6 329.6 439.0 605.7 422.5 574.5
Income from operations.......... 67.6 68.9 103.0 140.3 186.9 123.9 175.9(5)
Net income(6)................... 30.2 31.0 50.4 63.3 84.3 56.3 77.6(5)
Earnings per share.............. 0.25 0.26 0.41 0.52 0.69 0.46 0.64(5)
Weighted average common shares
outstanding(7)................ 121.4 121.4 121.4 121.4 121.4 121.4 121.7
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-------------------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(8) ADJUSTED(8)(9)
-------- ----------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 828.1 $ 668.1 $ 654.6
Total assets.............................................. 2,843.7 2,706.3 2,706.3
Total debt(10)............................................ 625.0 487.6 145.2
Stockholders' equity...................................... 366.0 366.0 695.0
</TABLE>
- ---------------
(1) Assumes no exercise of the U.S. Underwriters' over-allotment option.
(2) The Company is offering 200,000 shares of Common Stock to its Chief
Executive Officer, Jerre L. Stead, at the initial public offering price set
forth on the cover page of this Prospectus (the "Company Offering"). Such
shares will be sold directly by the Company, with no underwriting discounts
or commission payable thereon. As used herein, the term "Combined Offering"
includes both the Company Offering and the underwritten initial public
offering. See "Management -- Employment Agreements" and "Employee and
Priority Offers -- Employee Directed Offer."
(3) See "Principal Stockholders." Excludes approximately 21,000,000 shares of
Common Equity issuable in connection with outstanding stock options. See
"Management -- 1996 Plan -- Options" and "-- Rollover Plan; Incentive Stock
Units."
(4) Each share of Class B Common Stock is convertible, at any time at the
option of the holder, into one share of Common Stock. In addition, the
Class B Common Stock will be automatically converted into Common Stock upon
the occurrence of certain events. See "Description of Capital Stock."
(5) Reflects a non-cash compensation charge of $8.9 million ($5.4 million, or
$0.04 per share, net of tax) in connection with the granting of the
Rollover Stock Options (as defined herein). See "The Split-Off and the
Reorganization -- The Split-Off" and Note 11 of Notes to Consolidated
Financial Statements.
(6) The 1992 results reflect the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109").
(7) See Note 2 of Notes to Consolidated Financial Statements.
(8) As adjusted to reflect (i) the assumption by the Company of the accounts
receivable securitization program of Ingram Industries in partial
satisfaction of amounts due to Ingram Industries (resulting in a $160.0
million decrease in each of working capital and total debt) and (ii)
approximately $22.6 million of indebtedness to be incurred by the Company
in connection with the acquisition of certain facilities currently utilized
by the Company, as if such transactions had occurred on September 28, 1996.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Certain
Transactions."
(9) As further adjusted to give effect to the issuance of the Common Stock
offered by the Company in the Combined Offering, the repayment of certain
indebtedness with the estimated net proceeds therefrom, and the estimated
additional $13.4 million non-cash compensation charge related to certain
Rollover Stock Options (as defined herein). See "Use of Proceeds,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
(10) Includes long-term debt, current maturities of long-term debt, and amounts
due to Ingram Industries.
4
<PAGE> 9
RISK FACTORS
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
contained in this Prospectus.
Intense Competition. The Company operates in a highly competitive
environment, both in the United States and internationally. The microcomputer
products distribution industry is characterized by intense competition, based
primarily on price, product availability, speed and accuracy of delivery,
effectiveness of sales and marketing programs, credit availability, ability to
tailor specific solutions to customer needs, quality and breadth of product
lines and services, and availability of technical and product information. The
Company's competitors include regional, national, and international wholesale
distributors, as well as hardware manufacturers, networking equipment
manufacturers, and software publishers that sell directly to resellers and large
resellers who resell to other resellers. There can be no assurance that the
Company will not lose market share in the United States or in international
markets, or that it will not be forced in the future to reduce its prices in
response to the actions of its competitors and thereby experience a further
reduction in its gross margins. See "-- Narrow Margins" and
"Business -- Competition."
The Company entered the "aggregator" or "master reseller" business by
launching Ingram Alliance in late 1994. See "Business -- Ingram Alliance." The
Company competes with other master resellers, which sell to groups of affiliated
franchisees and third-party dealers. Many of the Company's competitors in the
master reseller business are more experienced and have more established contacts
with affiliated resellers, third-party dealers, or suppliers, which may provide
them with a competitive advantage over the Company.
The Company is constantly seeking to expand its business into areas closely
related to its core microcomputer products distribution business. As the Company
enters new business areas, it may encounter increased competition from current
competitors and/or from new competitors, some of which may be current customers
of the Company. For example, the Company intends to distribute media in the new
digital video disc format and may compete with traditional music and printed
media distributors. In addition, certain services the Company provides may
directly compete with those provided by the Company's reseller customers. There
can be no assurance that increased competition and adverse reaction from
customers resulting from the Company's expansion into new business areas will
not have a material adverse effect on the Company's business, financial
condition, or results of operations. See "Business -- The Industry" and "--
Competition."
Narrow Margins. As a result of intense price competition in the
microcomputer products wholesale distribution industry, the Company's margins
have historically been narrow and are expected in the future to continue to be
narrow. See "-- Intense Competition." These narrow margins magnify the impact on
operating results of variations in operating costs. The Company's gross margins
have declined from 8.1% for 1993 to 6.8% for the thirty-nine weeks ended
September 28, 1996. The Company receives purchase discounts from suppliers based
on a number of factors, including sales or purchase volume and breadth of
customers. These purchase discounts directly affect gross margins. Because many
purchase discounts from suppliers are based on percentage increases in sales of
products, it may become more difficult for the Company to achieve the percentage
growth in sales required for larger discounts due to the current size of the
Company's revenue base. The Company's gross margins have been further reduced by
the Company's entry into the master reseller business through Ingram Alliance,
which has lower gross margins than the Company's traditional wholesale
distribution business. See "-- Risks Associated with Ingram Alliance" and
"Business -- Ingram Alliance." The Company has taken a number of steps intended
to address the challenges of declining gross margins, particularly by
continually improving and enhancing its information systems and implementing
procedures and systems designed to provide greater warehousing efficiencies and
greater accuracy in shipping. However, there can be no assurance that these
steps will prevent gross margins from continuing to decline. If the Company's
gross margins continue to decline, the Company will be required to reduce
operating expenses as a percentage of net sales further in order to maintain or
increase its operating margins. While the Company will continue to explore ways
to improve gross margins and reduce operating expenses as a percentage of net
sales, there can be no assurance that the Company will be successful in such
efforts or that the Company's margins will not decline in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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Fluctuations in Quarterly Results. The Company's quarterly net sales and
operating results have varied significantly in the past and will likely continue
to do so in the future as a result of seasonal variations in the demand for the
products and services offered by the Company, the introduction of new hardware
and software technologies and products offering improved features and
functionality, the introduction of new products and services by the Company and
its competitors, the loss or consolidation of a significant supplier or
customer, changes in the level of operating expenses, inventory adjustments,
product supply constraints, competitive conditions including pricing, interest
rate fluctuations, the impact of acquisitions, currency fluctuations, and
general economic conditions. The Company's narrow margins may magnify the impact
of these factors on the Company's operating results.
Specific historical seasonal variations in the Company's operating results
have included a reduction of demand in Europe during the summer months,
increased Canadian government purchasing in the first quarter, and pre-holiday
stocking in the retail channel during the September to November period. In
addition, as was the case with the introduction of Microsoft Windows 95 in
August 1995, the product cycle of major products may materially impact the
Company's business, financial condition, or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Data; Seasonality." Changes in supplier supported
programs may also have a material impact on the Company's quarterly net sales
and operating results. The Company may be unable to adjust spending sufficiently
in a timely manner to compensate for any unexpected sales shortfall, which could
materially adversely affect quarterly operating results. 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 indicative of results to be expected
for a full fiscal year. In certain future quarters, the Company's operating
results may be below the expectations of public market analysts or investors. In
such event, the market price of the Common Stock would be materially adversely
affected.
Capital Intensive Nature of Business; High Degree of Leverage. The
Company's business requires significant levels of capital to finance accounts
receivable and product inventory that is not financed by trade creditors. The
Company is highly leveraged and has relied heavily on debt financing for its
increasing working capital needs in connection with the expansion of its
business. At December 30, 1995 and September 28, 1996, the Company's total debt
was $850.5 million and $625.0 million, respectively, and represented 73.6% and
63.0%, respectively, of the Company's total capitalization. Pro forma for the
Combined Offering, the application of the estimated net proceeds therefrom, and
the incurrence of approximately $22.6 million of indebtedness in connection with
the acquisition of certain facilities currently utilized by the Company, as of
September 28, 1996, the Company's total debt would have been $145.2 million and
would have represented 17.3% of the Company's total capitalization ($94.2
million and 11.2% assuming the U.S. Underwriters' over-allotment option is
exercised in full). See "Use of Proceeds," "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
order to continue its expansion, the Company will need additional financing,
including debt financing, which may or may not be available on terms acceptable
to the Company, or at all. The Company expects that the ratio of total debt to
total capitalization will likely increase over time. While a portion of the
Company's historical financing needs has been satisfied through internally
generated funds and trade creditors, a substantial amount has come from
intercompany borrowings under debt facilities and an accounts receivable
securitization facility maintained by Ingram Industries. No assurance can be
given that the Company will continue to be able to borrow in adequate amounts
for these or other purposes on terms acceptable to the Company, and the failure
to do so could have a material adverse effect on the Company's business,
financial condition, and results of operations.
The Company has a commitment from NationsBank of Texas N.A. and The Bank of
Nova Scotia providing for a $1 billion credit facility (the "Credit Facility")
with a syndicate of lenders, for whom such banks will act as Agents, and the
Company expects to enter into a formal agreement prior to the closing of this
offering. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." Concurrently with the
Split-Off, the Company intends to use borrowings under the Credit Facility to
repay (i) intercompany indebtedness in partial satisfaction of amounts due to
Ingram Industries (the Company is assuming Ingram Industries' accounts
receivable securitization program in satisfaction of the remaining amounts due
to Ingram Industries) and (ii) outstanding revolving indebtedness related to
amounts drawn by certain of the Company's subsidiaries, as participants in
Ingram Industries'
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<PAGE> 11
existing unsecured credit facility, which will terminate concurrently with the
closing of this offering. The net proceeds from the Combined Offering will be
used to repay a portion of the borrowings under the Credit Facility. See "Use of
Proceeds." The Company's ability in the future to satisfy its debt obligations
will be dependent upon its future performance, which is subject to prevailing
economic conditions and financial, business, and other factors, including
factors beyond the Company's control. See "-- Fluctuations in Quarterly
Results," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Certain
Transactions," and "The Split-Off and the Reorganization -- The Reorganization."
Management of Growth. The rapid growth of the Company's business has
required the Company to make significant recent additions in personnel and has
significantly increased the Company's working capital requirements. Although the
Company has experienced significant sales growth in recent years, such growth
should not be considered indicative of future sales growth. Such growth has
resulted in new and increased responsibilities for management personnel and has
placed and continues to place a significant strain upon the Company's
management, operating and financial systems, and other resources. There can be
no assurance that the strain placed upon the Company's management, operating and
financial systems, and other resources will not have a material adverse effect
on the Company's business, financial condition, and results of operations, nor
can there be any assurance that the Company will be able to attract or retain
sufficient personnel to continue the expansion of its operations. Also crucial
to the Company's success in managing its growth will be its ability to achieve
additional economies of scale. There can be no assurance that the Company will
be able to achieve such economies of scale, and the failure to do so could have
a material adverse effect on the Company's business, financial condition, and
results of operations.
To manage the expansion of its operations, the Company must continuously
evaluate the adequacy of its management structure and its existing systems and
procedures, including, among others, its data processing, financial, and
internal control systems. When entering new geographic markets, the Company will
be required to implement the Company's centralized IMpulse information
processing system on a timely and cost-effective basis, hire personnel,
establish suitable distribution centers, and adapt the Company's distribution
systems and procedures to these new markets. There can be no assurance that
management will adequately anticipate all of the changing demands that growth
could impose on the Company's systems, procedures, and structure. In addition,
the Company will be required to react to changes in the microcomputer
distribution industry, and there can be no assurance that it will be able to do
so successfully. Any failure to adequately anticipate and respond to such
changing demands may have a material adverse effect on the Company's business,
financial condition, or results of operations. See "-- Dependence on Information
Systems" and "Business -- Information Systems."
Dependence on Information Systems. The Company depends on a variety of
information systems for its operations, particularly its centralized IMpulse
information processing system which supports more than 40 operational functions
including inventory management, order processing, shipping, receiving, and
accounting. At the core of IMpulse is on-line, real-time distribution software
which supports basic order entry and processing and customers' shipments and
returns. The Company's information systems require the services of over 350 of
the Company's associates with extensive knowledge of the Company's information
systems and the business environment in which the Company operates. Although the
Company has not in the past experienced significant failures or downtime of
IMpulse or any of its other information systems, any such failure or significant
downtime could prevent the Company from taking customer orders, printing product
pick-lists, and/or shipping product and could prevent customers from accessing
price and product availability information from the Company. In such event, the
Company could be at a severe disadvantage in determining appropriate product
pricing or the adequacy of inventory levels or in reacting to rapidly changing
market conditions, such as a currency devaluation. A failure of the Company's
information systems which impacts any of these functions could have a material
adverse effect on the Company's business, financial condition, or results of
operations. In addition, the inability of the Company to attract and retain the
highly skilled personnel required to implement, maintain, and operate IMpulse
and the Company's other information systems could have a material adverse effect
on the Company's business, financial condition, or results of operations. In
order to react to changing market conditions, the Company must continuously
expand and
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<PAGE> 12
improve IMpulse and its other information systems. From time to time the Company
may acquire other businesses having information systems and records which must
be converted and integrated into IMpulse or other Company information systems.
This can be a lengthy and expensive process that results in a significant
diversion of resources from other operations. The inability of the Company to
convert the information systems of any acquired businesses to the Company's
information systems and to train its information systems personnel in a timely
manner and on a cost-effective basis could materially adversely affect the
Company's business, financial condition, or results of operations. There can be
no assurance that the Company's information systems will not fail, that the
Company will be able to attract and retain qualified personnel necessary for the
operation of such systems, that the Company will be able to expand and improve
its information systems, or that the information systems of acquired companies
will be successfully converted and integrated into the Company's information
systems on a timely and cost-effective basis. See "Business -- Information
Systems."
Exposure to Foreign Markets; Currency Risk. The Company, through its
subsidiaries, operates in a number of countries outside the United States,
including Canada, Mexico, most of the countries of the European Union, Norway,
Malaysia, and Singapore. In 1994, 1995, and the first three quarters of 1996,
29.3%, 30.7%, and 30.0%, respectively, of the Company's net sales were derived
from operations outside of the United States, and the Company expects its
international net sales to increase as a percentage of total net sales in the
future. See "Business -- Geographic Tactics." The Company's international net
sales are primarily denominated in currencies other than the U.S. dollar.
Accordingly, the Company's international operations impose risks upon its
business as a result of exchange rate fluctuations. Although the Company
attempts to mitigate the effect of exchange rate fluctuations on its business,
primarily by attempting to match the currencies of sales and costs, as well as
through the use of foreign currency borrowings and derivative financial
instruments such as forward exchange contracts, the Company does not seek to
remove all risk associated with such fluctuations. Accordingly, there can be no
assurance that exchange rate fluctuations will not have a material adverse
effect on the Company's business, financial condition, or results of operations
in the future. In certain countries outside the United States, operations are
accounted for primarily on a U.S. dollar denominated basis. In the event of an
unexpected devaluation of the local currency in those countries, the Company may
experience significant foreign exchange losses. For example, the devaluation of
the Mexican peso, which began in December 1994, significantly affected the
Company's Mexican operations. The primary impact on the Company's operating
results was a foreign exchange pre-tax charge of approximately $6.9 million and
$7.8 million in 1994 and 1995, respectively. In addition, the Company's net
sales in Mexico were adversely affected in 1995 as a result of the general
economic impact of the devaluation of the Mexican peso. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's international operations are subject to other risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade
restrictions, tariff changes, difficulties in staffing and managing
international operations, difficulties in collecting accounts receivable and
longer collection periods, and the impact of local economic conditions and
practices. As the Company continues to expand its international business, its
success will be dependent, in part, on its ability to anticipate and effectively
manage these and other risks. There can be no assurance that these and other
factors will not have a material adverse effect on the Company's international
operations or its business, financial condition, and results of operations as a
whole.
Dependence on Key Individuals. The Company is dependent in large part on
its ability to retain the services of its executive officers, especially Messrs.
Jerre L. Stead (Chief Executive Officer and Chairman of the Board of Directors),
Jeffrey R. Rodek (Worldwide President and Chief Operating Officer), and David R.
Dukes (Vice Chairman of Ingram Micro and Chief Executive Officer of Ingram
Alliance). The loss of any of the Company's executive officers could have a
material adverse effect on the Company. The Company does not have employment
agreements with most of its executive officers, although it does have
agreements, primarily relating to severance arrangements, with certain of the
Named Executive Officers (as defined herein). See "Management -- Employment
Agreements." Several of the Company's executive officers currently perform
functions for both the Company and Ingram Industries, including Michael J.
Grainger, the Company's Executive Vice President and Worldwide Chief Financial
Officer, and James E. Anderson, Jr., the
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<PAGE> 13
Company's Senior Vice President, Secretary, and General Counsel. Concurrently
with the Split-Off, each of Messrs. Grainger and Anderson will resign from
Ingram Industries. See "Management -- Executive Officers and Directors." The
Company's continued success is also dependent upon its ability to retain and
attract other qualified employees to meet the Company's needs. See
"Business -- Employees."
Effective August 27, 1996, the Company appointed Jerre L. Stead as its
Chief Executive Officer and Chairman of the Board. Linwood A. (Chip) Lacy, Jr.,
the Company's Chief Executive Officer since 1985, resigned effective May 31,
1996. Although the Company believes that one of its distinguishing
characteristics is the strength of its senior and middle management personnel,
there can be no assurance that the Company will not experience a material
adverse effect on its business, financial condition, or results of operations as
a result of the resignation of Mr. Lacy. See "Management -- Employment
Agreements."
Product Supply; Dependence on Key Suppliers. The ability of the Company to
obtain particular products or product lines in the required quantities and to
fulfill customer orders on a timely basis is critical to the Company's success.
In most cases, the Company has no guaranteed price or delivery agreements with
its suppliers. As a result, the Company has experienced, and may in the future
continue to experience, short-term inventory shortages. In addition,
manufacturers who currently distribute their products through the Company may
decide to distribute, or to substantially increase their existing distribution,
through other distributors, their own dealer networks, or directly to resellers.
Further, the personal computer industry experiences significant 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. There can be
no assurance that suppliers will be able to maintain an adequate supply of
products to fulfill the Company's customer orders on a timely basis or that the
Company will be able to obtain particular products or that a product line
currently offered by suppliers will continue to be available. The failure of the
Company to obtain particular products or product lines in the required
quantities or fulfill customer orders on a timely basis could have a material
adverse effect on its business, financial condition, or results of operations.
Although Ingram Micro regularly stocks products and accessories supplied by
over 1,100 suppliers, approximately 36.5%, 41.4%, 53.2%, and 55.2% of the
Company's net sales in 1993, 1994, 1995, and the first three quarters of 1996,
respectively, were derived from products provided by its ten largest suppliers.
In 1995, 32.9% of the Company's net sales were derived from sales of products
from Microsoft (12.7%), Compaq Computer (10.7%), and Hewlett-Packard (9.5%). In
the first three quarters of 1996, 33.2% of the Company's net sales were derived
from sales of products from Compaq Computer (13.7%), Microsoft (10.4%), and
Hewlett-Packard (9.1%). Certain of the Company's non-U.S. operations are even
more dependent on a limited number of suppliers. In addition, many services that
the Company provides to its reseller customers, such as financing and technical
training, are dependent on supplier support. The loss of a major supplier, the
deterioration of the Company's relationship with a major supplier, the loss or
deterioration of supplier support for certain Company-provided services, the
decline in demand for a particular supplier's product, or the failure of the
Company to establish good relationships with major new suppliers could have a
material adverse effect on the Company's business, financial condition, or
results of operations. Such a loss, deterioration, decline, or failure could
also have a material adverse effect on the sales by the Company of products
provided by other suppliers.
The Company's ability to achieve increases in net sales or to sustain
current net sales levels depends in part on the ability and willingness of the
Company's suppliers to provide products in the quantities the Company requires.
Although the Company has written distribution agreements with many of its
suppliers, these agreements usually provide for nonexclusive distribution rights
and often include territorial restrictions that limit the countries in which
Ingram Micro is permitted to distribute the products. The agreements are also
generally short term, subject to periodic renewal, and often contain provisions
permitting termination by either party without cause upon relatively short
notice. The termination of an agreement may have a material adverse impact on
the Company's business, financial condition, or results of operations. See
"Business -- Products and Suppliers."
Risks Associated with Ingram Alliance. Ingram Micro entered the master
reseller (also known as "aggregation") business in late 1994 through the launch
of Ingram Alliance. Ingram Alliance is designed to
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<PAGE> 14
offer resellers access to products supplied by certain of the industry's leading
hardware manufacturers at competitive prices by utilizing a low-cost business
model that depends upon a higher average order size, lower product returns
percentage, and supplier-paid financing. The master reseller business is
characterized by gross margins and operating margins that are even narrower than
those of the U.S. microcomputer products wholesale distribution business and by
competition based almost exclusively on price, programs, and execution. In the
master reseller business, the Company has different supply arrangements and
financing terms than in its traditional wholesale distribution business. There
can be no assurance that the Company will be able to compete successfully in the
master reseller business. A failure by Ingram Alliance to compete successfully
could have a material adverse effect on the Company's business, financial
condition, or results of operations.
A substantial portion of Ingram Alliance's net sales (approximately 89.9%
during 1995 and 92.5% during the thirty-nine weeks ended September 28, 1996) is
derived from the sale of products supplied by Compaq Computer, IBM, Toshiba,
NEC, and Apple Computer. As a result, Ingram Alliance's business is dependent
upon price and related terms and availability of products provided by these key
suppliers. Although the Company considers Ingram Alliance's relationships with
these suppliers to be good, there can be no assurance that these relationships
will continue as presently in effect or that changes by one or more of such key
suppliers in their volume discount schedules or other marketing programs would
not adversely affect the Company's business, financial condition or results of
operations. Termination or nonrenewal of Ingram Alliance's agreements with key
suppliers would have a material adverse effect on the Company's business,
financial condition, or results of operations.
Although the Company's wholesale distribution division sells
Hewlett-Packard products, Ingram Alliance has not historically had authorization
to sell Hewlett-Packard products in the master reseller market. Because of
Hewlett-Packard's position as a major supplier of microcomputer hardware
products, the Company believes that sales of Hewlett-Packard products likely
account for a substantial portion of sales at Ingram Alliance's competitors in
the master reseller business. The inability to offer Hewlett-Packard's products
has placed Ingram Alliance at a competitive disadvantage to its competitors
because it has been unable to provide a full range of products to its customers.
In late October 1996, Ingram Alliance, along with Tech Data Elect, was
authorized to sell Hewlett-Packard products in the master reseller market. The
arrangement with Hewlett-Packard provides that Ingram Alliance and Tech Data
Elect may commence sales of Hewlett-Packard products in January 1997. There can
be no assurance that Ingram Alliance will be able to compete effectively in the
sale of Hewlett-Packard products within the master reseller market. See
"Business -- Ingram Alliance."
Acquisitions. As part of its growth strategy, the Company pursues the
acquisition of companies that either complement or expand its existing business.
As a result, the Company is continually evaluating potential acquisition
opportunities, which may be material in size and scope. Acquisitions involve a
number of risks and difficulties, including expansion into new geographic
markets and business areas, the requirement to understand local business
practices, the diversion of management's attention to the assimilation of the
operations and personnel of the acquired companies, the integration of the
acquired companies' management information systems with those of the Company,
potential adverse short-term effects on the Company's operating results, the
amortization of acquired intangible assets, and the need to present a unified
corporate image.
The Company does not currently have any commitments or agreements with
respect to any material acquisitions. The Company is currently in negotiations
regarding potential acquisitions or joint ventures, none of which, if
consummated, would be material to the Company's business. The Company
anticipates that one or more potential acquisition opportunities, including some
that could be material to the Company, may become available in the future. The
Company may issue equity securities to consummate acquisitions, which may cause
dilution to investors purchasing Common Stock in the Combined Offering. In
addition, the Company may be required to utilize cash or increase its borrowings
to consummate acquisitions. No assurance can be given that the Company will have
adequate resources to consummate any acquisition, that any acquisition by the
Company will or will not occur, that if any acquisition does occur it will not
have a material adverse effect on the Company, its business, financial
condition, or results of operations or that any such
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<PAGE> 15
acquisition will be successful in enhancing the Company's business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Risk of Declines in Inventory Value. The Company's business, like that of
other wholesale distributors, is subject to the risk that the value of its
inventory will be adversely affected by price reductions by suppliers or by
technological changes affecting the usefulness or desirability of the products
comprising the inventory. It is the policy of most suppliers of microcomputer
products to protect distributors such as the Company, who purchase directly from
such suppliers, from the loss in value of inventory due to technological change
or the supplier's price reductions. Under the terms of many distribution
agreements, suppliers will credit the distributor for inventory losses resulting
from the supplier's price reductions if the distributor complies with certain
conditions. In addition, under many such agreements, the distributor has the
right to return for credit or exchange for other products a portion of the
inventory items purchased, within a designated period of time. A supplier who
elects to terminate a distribution agreement generally will repurchase from the
distributor the supplier's products carried in the distributor's inventory. The
industry practices discussed above are sometimes not embodied in written
agreements and do not protect the Company in all cases from declines in
inventory value. No assurance can be given that such practices will continue,
that unforeseen new product developments will not materially adversely affect
the Company, or that the Company will be able to successfully manage its
existing and future inventories. The Company's risk of declines in inventory
value could be greater outside the United States where agreements with suppliers
are more restrictive with regard to price protection and the Company's ability
to return unsold inventory. The Company establishes reserves for estimated
losses due to obsolete inventory in the normal course of business. Historically,
the Company has not experienced losses due to obsolete inventory materially in
excess of established inventory reserves. However, significant declines in
inventory value in excess of established inventory reserves could materially
adversely affect the Company's business, financial condition, or results of
operations.
The Company sometimes purchases from suppliers, usually at significant
discounts, quantities of products that are nearing the end of their product life
cycle. In addition, the Company's purchasing staff also seeks opportunities to
purchase quantities of products from suppliers at discounts larger than those
usually available. When the Company negotiates these purchases, it seeks to
secure favorable terms for the return to suppliers of products unwanted by
resellers and end-users. Because some of these purchase agreements contain terms
providing for a 60-day time limit on returns to suppliers, end-user or reseller
delays in returning the product to the Company may make it difficult for the
Company to meet the deadline for returns to suppliers, and the Company could be
left with unwanted product. Additionally, some suppliers may be unwilling or
unable to pay the Company for products returned to them under purchase
agreements, and this trend may accelerate as consolidation in the industry
increases. For products offered by major suppliers, each of these events, were
they to occur, could materially adversely impact the Company's business,
financial condition, or results of operations. See "Business -- Products and
Suppliers."
Dependence on Independent Shipping Companies. The Company relies almost
entirely on arrangements with independent shipping companies for the delivery of
its products. Products are shipped from suppliers to the Company through Skyway
Freight Systems, Yellow Freight Systems, APL Land Transport Services, and ABF
Freight Systems. Currently, Federal Express Corporation ("FedEx"), United Parcel
Service ("UPS"), Western Package Service, General Parcel Services, Roadway
Parcel Services, and Purolator Courier deliver the substantial majority of the
Company's products to its reseller customers in the United States and Canada. In
other countries, the Company typically relies on one or two shipping companies
prominent in local markets. The termination of the Company's arrangements with
one or more of these independent shipping companies, or the failure or inability
of one or more of these independent shipping companies to deliver products from
suppliers to the Company or products from the Company to its reseller customers
or their end-user customers could have a material adverse effect on the
Company's business, financial condition, or results of operations. For instance,
an employee work stoppage or slow-down at one or more of these independent
shipping companies could materially impair that shipping company's ability to
perform the services required by the Company. There can be no assurance that the
services of any of these independent shipping companies will continue to be
available to the Company on terms as favorable as those currently available or
that these
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companies will choose or be able to perform their required shipping services for
the Company. See "Business -- Operations -- Shipping."
Rapid Technological Change; Alternate Means of Software Distribution. The
microcomputer products industry is subject to rapid technological change, new
and enhanced product specification requirements, and evolving industry
standards. These changes may cause inventory in stock to decline substantially
in value or to become obsolete. In addition, suppliers may give the Company
limited or no access to new products being introduced. Although the Company
believes that it has adequate price protection and other arrangements with its
suppliers to avoid bearing the costs associated with these changes, no assurance
can be made that future technological or other changes will not have a material
adverse effect on the business, financial condition, or results of operations of
the Company. Outside North America, the supplier contracts can be more
restrictive and place more risks on the Company.
Net sales of software products have decreased as a percentage of total net
sales in recent years due to a number of factors, including bundling of software
with microcomputers; sales growth in Ingram Alliance, which is a hardware-only
business; declines in software prices; and the emergence of alternative means of
software distribution, such as site licenses and electronic distribution. The
Company expects this trend to continue. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview" and
"Business -- Products and Suppliers."
Relationship with Ingram Industries, Ingram Entertainment, and the Ingram
Family Stockholders. The Company has historically depended on Ingram Industries
and other subsidiaries of Ingram Industries for financing, cash management, tax
and payroll administration, property/casualty insurance, employee benefits
administration, and certain other administrative services. In conjunction with
the Split-Off, the Company, Ingram Industries, and Ingram Entertainment Inc.
("Ingram Entertainment"), a wholly-owned subsidiary of Ingram Industries, will
enter into agreements for the continued provision after the Split-Off of certain
services formerly shared among such entities (collectively, the "Transitional
Service Agreements"), as well as a tax sharing and tax services agreement. See
"The Split-Off and the Reorganization -- The Reorganization." The Company
believes that the terms of the Transitional Service Agreements will be on a
basis as favorable to the Company as those that would have been obtained from
third parties on an arm's length basis and that they will be adequate to allow
the Company to continue its business as previously conducted on an independent
basis. The Company's historical financial statements reflect an allocation of
expenses in connection with the services covered by the Transitional Service
Agreements. Although the Company expects the costs and fees to be paid by it in
connection with the Transitional Service Agreements to be higher than its
historical allocated costs, it does not believe the increase in costs will be
material to its results of operations. In addition, the Transitional Service
Agreements generally terminate on December 31, 1996, although payroll services
under the Transitional Service Agreements will be provided through December 31,
1997. After such termination, the Company will be required to provide such
services internally or find a third-party provider of such services. There can
be no assurance that the Company will be able to secure the provision of such
services on acceptable terms. Either the additional costs and fees associated
with the Transitional Service Agreements or the failure to obtain acceptable
provision of services upon termination of the Transitional Service Agreements
could have a material adverse effect on the Company's business, financial
condition, or results of operations. After the Split-Off, each of the Company
and Ingram Industries will be controlled by the Ingram Family Stockholders (as
defined herein). See "-- Control by Ingram Family Stockholders; Certain
Anti-takeover Provisions." After the Split-Off, Ingram Entertainment will
continue to be a wholly-owned subsidiary of Ingram Industries. Although there
can be no assurance, it is contemplated that, on or after June 20, 1997, certain
remaining stockholders of Ingram Industries will exchange their remaining shares
of Ingram Industries common stock for shares of Ingram Entertainment common
stock. See "The Split-Off and the Reorganization -- The Reorganization."
Furthermore, the Company has incurred, and anticipates incurring in the
future, higher payroll costs associated with the hiring of certain additional
personnel and the addition of certain officers, previously paid by Ingram
Industries, to the Company's payroll. There can be no assurance that the
Company's results of operations will not be materially adversely affected by
such additional costs. See "-- Capital Intensive Nature of Business; High Degree
of Leverage," "Management's Discussion and Analysis of Financial Condition and
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Results of Operations -- Liquidity and Capital Resources," "Certain
Transactions," and "The Split-Off and the Reorganization -- The Reorganization."
In connection with the Split-Off, the Company made a $20.0 million
distribution to Ingram Industries in the second quarter of 1996. The Company may
be obligated to Ingram Industries for certain liabilities, fees or costs
incurred in connection with the Split-Off. However, the Company believes such
obligations will be materially offset by amounts expected to be due from Ingram
Industries. See "The Split-Off and the Reorganization."
Control by Ingram Family Stockholders; Certain Anti-takeover
Provisions. Immediately after the Split-Off and the closing of this offering,
69.5% of the outstanding Common Equity (and 80.8% of the outstanding voting
power) will be held by the Ingram Family Stockholders (68.0% and 80.5%,
respectively, if the U.S. Underwriters' over-allotment option is exercised in
full). Martha R. Ingram, her children, certain trusts created for their benefit,
and two charitable trusts and a foundation created by the Ingram family
(collectively, the "Ingram Family Stockholders") are expected to enter into a
Board Representation Agreement (as defined herein) with the Company, which
provides that certain types of corporate transactions, including transactions
involving the potential sale or merger of the Company; the issuance of
additional equity, warrants, or options; certain acquisitions; or the incurrence
of significant indebtedness, may not be entered into without the written
approval of at least a majority of the voting power held by certain of the
Ingram Family Stockholders acting in their sole discretion. See "The Split-Off
and the Reorganization -- The Split-Off," "Principal Stockholders," and
"Description of Capital Stock." Voting control by the Ingram Family Stockholders
may discourage certain types of transactions involving an actual or potential
change of control of the Company, including transactions in which the holders of
the Company's Common Stock might receive a premium for their shares over the
prevailing market price of the Common Stock.
Section 203 of the Delaware General Corporation Law (as amended from time
to time, the "DGCL"), which is applicable to the Company, prohibits certain
business combinations with certain stockholders for a period of three years
after they acquire 15% or more of the outstanding voting stock of a corporation.
See "Description of Capital Stock -- Section 203 of the DGCL." In addition, the
authorized but unissued capital stock of the Company includes 1,000,000 shares
of preferred stock. The Board of Directors is authorized to provide for the
issuance of such preferred stock in one or more series and to fix the
designations, preferences, powers and relative, participating, optional or other
rights and restrictions thereof. Accordingly, the Company may issue a series of
preferred stock in the future that will have preference over the Common Equity
with respect to the payment of dividends and upon liquidation, dissolution or
winding-up or which could otherwise adversely affect holders of the Common
Equity or discourage or make difficult any attempt to obtain control of the
Company. See "Description of Capital Stock -- Preferred Stock."
Shares Eligible for Future Sale. Upon completion of the Combined Offering,
the Company will have outstanding 20,200,000 shares of Common Stock (23,200,000
shares if the U.S. Underwriters' over-allotment option is exercised in full) and
109,813,762 shares of Class B Common Stock, and an additional approximately
16,200,000 shares of Common Stock and approximately 4,800,000 shares of Class B
Common Stock will be reserved for issuance upon exercise of outstanding stock
options held by employees and directors of the Company, Ingram Industries, and
Ingram Entertainment. See "Management." The 20,000,000 shares of Common Stock to
be sold by the Company in this offering will be freely tradable without
restriction. The Company and its directors and executive officers, and certain
stockholders of the Company, have agreed, subject to certain exceptions, not to
offer, sell, contract to sell or otherwise dispose of any Common Equity for a
period of 180 days after the date of this Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated. Morgan Stanley & Co. Incorporated
has informed the Company that it has no present intention to consent to any such
transactions. Despite these limitations, the sale of a significant number of
these shares could have an adverse impact on the price of the Common Stock or on
any trading market that may develop. See "Shares Eligible for Future Sale."
Absence of Public Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock or the Class B
Common Stock. There can be no assurance that an active trading market for the
Common Stock will develop, or, if one does develop, that it will be sustained
following
13
<PAGE> 18
this offering or that the market price of the Common Stock will not decline
below the initial public offering price. The initial public offering price will
be determined by negotiations between the Company and the Representatives of the
Underwriters. See "Underwriters -- Pricing of Offering." The market price of the
Common Stock could be subject to wide fluctuations in response to quarterly
variations in the Company's results of operations, changes in earnings estimates
by research analysts, conditions in the personal computer industry, or general
market or economic conditions, among other factors. In addition, in recent years
the stock market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices of many
technology companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could materially adversely affect
the market price for the Common Stock.
Dilution. The initial public offering price of the shares of Common Stock
offered hereby will be substantially higher than the net tangible book value per
share of the Common Equity. Therefore, purchasers of Common Stock in the
Combined Offering will experience an immediate and substantial dilution in net
tangible book value per share. See "Dilution."
14
<PAGE> 19
THE COMPANY
Ingram Micro is the leading wholesale distributor of microcomputer products
worldwide. The Company markets microcomputer hardware, networking equipment, and
software products to more than 100,000 reseller customers in approximately 120
countries worldwide in three principal market sectors: the VAR sector,
consisting of value-added resellers, systems integrators, network integrators,
application VARs, and original equipment manufacturers; the Commercial sector,
consisting of corporate resellers, direct marketers, independent dealers, and
owner-operated chains; and the Consumer sector, consisting of consumer
electronics stores, computer superstores, mass merchants, office product
superstores, software-only stores, and warehouse clubs. As a wholesale
distributor, the Company markets its products to each of these types of
resellers as opposed to marketing directly to end-user customers.
The Company conducts business with most of the leading resellers of
microcomputer products around the world, including, in the United States,
AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City, Electronic
Data Systems, En Pointe Technologies, Entex Information Services, Micro
Warehouse, Sam's Club, Staples, and Vanstar. The Company's international
reseller customers include Complet Data A/S, Consultores en Diagnostico
Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre Europe, B.V.,
GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk Datasenter, Owell
Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema SPA.
Ingram Micro offers one-stop shopping to its reseller customers by
providing a comprehensive inventory of more than 36,000 products from over 1,100
suppliers, including most of the microcomputer industry's leading hardware
manufacturers, networking equipment suppliers, and software publishers. The
Company's broad product offerings include: desktop and notebook personal
computers ("PCs"), servers, and workstations; mass storage devices; CD-ROM
drives; monitors; printers; scanners; modems; networking hubs, routers, and
switches; network interface cards; business application software; entertainment
software; and computer supplies. The Company's suppliers include Apple Computer,
Cisco Systems, Compaq Computer, Creative Labs, Hewlett-Packard, IBM, Intel,
Microsoft, NEC, Novell, Quantum, Seagate, 3Com, Toshiba, and U.S. Robotics.
Ingram Micro distributes microcomputer products worldwide through
warehouses in eight strategic locations in the continental United States and 22
international warehouses located in Canada, Mexico, most countries of the
European Union, Norway, Malaysia, and Singapore. The Company believes that it is
the market share leader in the United States, Canada, and Mexico, and the second
largest full-line distributor in Europe. In 1995, approximately 31% of the
Company's net sales were derived from operations outside the United States. The
Export Division fulfills orders from U.S. exporters and from foreign customers
in countries where the Company does not operate a distribution subsidiary,
including much of Latin America, the Middle East, Africa, Australia, and parts
of Europe and Asia. The Company participates in the master reseller business in
the United States through Ingram Alliance.
The Company's principal objective is to enhance its position as the
preeminent wholesale distributor of microcomputer products worldwide. The
Company is focused on providing a broad range of products and services, quick
and efficient order fulfillment, and consistent on-time and accurate delivery to
its reseller customers around the world. The Company believes that IMpulse, the
Company's on-line information system, provides a competitive advantage through
real-time worldwide information access and processing capabilities. This
information system, coupled with the Company's exacting operating procedures in
telesales, credit support, customer service, purchasing, technical support, and
warehouse operations, enables the Company to provide its reseller customers with
superior service in an efficient and low cost manner. In addition, to enhance
sales and support its suppliers and reseller customers, the Company provides a
wide range of value-added services, such as technical training, order
fulfillment, tailored financing programs, systems configuration, and marketing
programs.
The Company has grown rapidly over the past five years, with net sales and
net income increasing to $8.6 billion and $84.3 million, respectively, in 1995
from $2.0 billion and $30.2 million, respectively, in 1991, representing
compound annual growth rates of 43.8% and 29.3%, respectively. The Company's
growth during this period reflects substantial expansion of its existing
domestic and international operations, resulting from
15
<PAGE> 20
the addition of new customers, increased sales to the existing customer base,
the addition of new product categories and suppliers, and the establishment of
Ingram Alliance, as well as the successful integration of ten acquisitions
worldwide. Because of intense price competition in the microcomputer products
wholesale distribution industry, the Company's margins have historically been
narrow and are expected in the future to continue to be narrow. In addition, the
Company is highly leveraged and has relied heavily on debt financing for its
increasing working capital needs in connection with the expansion of its
business. See "Risk Factors -- Narrow Margins" and "-- Capital Intensive Nature
of Business; High Degree of Leverage."
The Company is currently a subsidiary of Ingram Industries, a company
controlled by the Ingram Family Stockholders. The Company, Ingram Industries,
and Ingram Entertainment will enter into certain agreements, pursuant to which
the operations of the three companies will be reorganized (the
"Reorganization"). In the Reorganization, the Company, Ingram Industries, and
Ingram Entertainment will allocate certain liabilities and obligations among
themselves. Immediately prior to the closing of this offering, Ingram Industries
will consummate an exchange, pursuant to which certain existing stockholders of
Ingram Industries will exchange all or a portion of their shares of Ingram
Industries common stock for shares of Class B Common Stock of the Company in
specified ratios. Immediately after the Split-Off and the closing of this
offering, none of the Common Equity will be held by Ingram Industries, other
than the approximately 250,000 shares to be purchased by Ingram Industries in
the Priority Offer. See "Employee and Priority Offers -- Priority Offer." At
such time, 69.6% of the outstanding Common Equity (and 80.7% of the outstanding
voting power) will be held by the Ingram Family Stockholders (68.0% and 80.5%,
respectively, if the U.S. Underwriters' over-allotment option is exercised in
full). See "Risk Factors -- Control by Ingram Family Stockholders; Certain
Anti-takeover Provisions." Such exchange of shares of Ingram Industries common
stock for shares of Class B Common Stock of the Company, together with those
elements of the Reorganization contemplated to occur prior to the closing of
this offering, are referred to herein as the "Split-Off." The consummation of
the Split-Off is a non-waiveable condition to the closing of this offering. See
"Principal Stockholders" and "The Split-Off and the Reorganization." After the
Split-Off, Ingram Entertainment will continue to be a wholly-owned subsidiary of
Ingram Industries. Although there can be no assurance, it is contemplated that,
on or after June 20, 1997, certain remaining stockholders of Ingram Industries
will exchange their remaining shares of Ingram Industries common stock for
shares of Ingram Entertainment common stock. See "The Split-Off and the
Reorganization."
The Company's earliest predecessor began business in 1979 as a California
corporation named Micro D, Inc. This company and its parent, Ingram Micro
Holdings Inc. ("Holdings"), grew through a series of acquisitions, mergers and
internal growth to encompass the Company's current operations. Ingram Micro Inc.
was incorporated in Delaware on April 29, 1996, in order to effect the
reincorporation of the Company in Delaware. The successor to Micro D, Inc. and
Holdings were merged into Ingram Micro Inc. in October 1996. The Company's
principal executive office is located at 1600 East St. Andrew Place, Santa Ana,
California 92705, and its telephone number is (714) 566-1000.
16
<PAGE> 21
USE OF PROCEEDS
The net proceeds to the Company from the Combined Offering, after deducting
estimated underwriting discounts and commissions and estimated offering
expenses, are assumed to be approximately $342.4 million ($393.4 million if the
U.S. Underwriters' over-allotment option is exercised in full). At September 28,
1996, the Company had total outstanding debt of $625.0 million, of which $479.7
million was due to Ingram Industries. Concurrently with the Split-Off, the
Company will assume Ingram Industries' accounts receivable securitization
program (expected to aggregate $173.0 million at the closing of this offering)
in partial satisfaction of amounts due to Ingram Industries. The Company intends
to use borrowings under the Credit Facility to repay (i) the remaining
intercompany indebtedness to Ingram Industries, which was incurred for general
corporate purposes, primarily working capital needs in connection with the
expansion of the Company's business and (ii) outstanding revolving indebtedness
related to amounts drawn by certain of the Company's subsidiaries ($82.4 million
at September 28, 1996), as participants in Ingram Industries' existing $380
million unsecured credit facility, which will terminate concurrently with the
closing of this offering.
The net proceeds from the Combined Offering will be used to repay a portion
of the borrowings under the Credit Facility. After giving effect to the
foregoing transactions, including the application of the net proceeds from the
Combined Offering, borrowings under the Credit Facility would have been
approximately $69.3 million on a pro forma basis at September 28, 1996. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," and Note 6 of
Notes to Consolidated Financial Statements.
DIVIDEND POLICY
The Company has never declared or paid any dividends on the Common Equity
other than the distribution made to Ingram Industries in connection with the
Split-Off. See "Risk Factors -- Relationship with Ingram Industries, Ingram
Entertainment, and the Ingram Family Stockholders." The Company currently
intends to retain its future earnings to finance the growth and development of
its business and therefore does not anticipate declaring or paying cash
dividends on the Common Equity for the foreseeable future. Any future
determination to declare or pay dividends will be at the discretion of the Board
of Directors and will be dependent upon the Company's financial condition,
results of operations, capital requirements, and such other factors as the Board
of Directors deems relevant. In addition, the Credit Facility and the Company's
other debt facilities will contain restrictions on the declaration and payment
of dividends.
17
<PAGE> 22
CAPITALIZATION
The following table sets forth, as of September 28, 1996, (i) the actual
short-term debt and capitalization of the Company, (ii) such short-term debt and
capitalization as adjusted to give effect to the Split-Off, and (iii) such as
adjusted short-term debt and capitalization as further adjusted to reflect the
sale of the shares of Common Stock offered by the Company in the Combined
Offering at an assumed initial public offering price of $18.00 per share (after
deducting estimated underwriting discounts and commissions and estimated
offering expenses) and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
----------------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(1) ADJUSTED(1)(2)
-------- ----------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term debt:
Current maturities of long-term debt........................... $ 16,458 $ 16,458 $ 16,458
========== ======== ========
Long-term debt:
Long-term debt................................................. $128,855 $ 471,142 $128,742
Due to Ingram Industries....................................... 479,703 0 0
---------- -------- --------
Total long-term debt........................................ 608,558 471,142 128,742
Redeemable Class B Common Stock.................................. 17,223 17,223 17,223
---------- -------- --------
Stockholders' equity(3)(4):
Preferred Stock, $0.01 par value; 1,000,000 shares authorized;
0, 0, and 0 shares issued and outstanding, respectively..... 0 0 0
Class A Common Stock, $0.01 par value; 265,000,000 shares
authorized;
0, 0, and 20,200,000 shares issued and outstanding,
respectively................................................ 0 0 202
Class B Common Stock, $0.01 par value; 135,000,000 shares
authorized; 109,813,762 shares issued and outstanding
(including 2,460,400 redeemable shares)..................... 1,074 1,074 1,074
Additional paid in capital..................................... 23,140 23,140 365,338
Retained earnings.............................................. 339,689 339,689 326,254
Cumulative translation adjustment.............................. 2,680 2,680 2,680
Unearned compensation.......................................... (594) (594) (594)
---------- -------- --------
Total stockholders' equity.................................. 365,989 365,989 694,954
---------- -------- --------
Total capitalization........................................ $991,770 $ 854,354 $840,919
========== ======== ========
</TABLE>
- ---------------
(1) As adjusted to reflect (i) the assumption by the Company of the accounts
receivable program of Ingram Industries in satisfaction of amounts due to
Ingram Industries (resulting in an increase of $319.7 million in long-term
debt, a decrease of $479.7 million in amounts due to Ingram Industries, and
a decrease of $160.0 million in trade accounts receivable not reflected in
this table) and (ii) approximately $22.6 million of indebtedness to be
incurred by the Company in connection with the acquisition of certain
facilities currently utilized by the Company (resulting in an increase of
$22.6 million in long-term debt, which is reflected in this table, and a
similar increase in property and equipment, which is not reflected in this
table), as if such transactions had occurred on September 28, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain Transactions."
(2) As further adjusted to give effect to the issuance of the Common Stock
offered by the Company in the Combined Offering at an assumed initial public
offering price of $18.00 per share (after deducting estimated underwriting
discounts and commissions and estimated offering expenses), the repayment of
certain revolving indebtedness including certain amounts outstanding under
the Credit Facility with the entire net proceeds therefrom, and the
additional estimated $13.4 million non-cash charge related to certain
Rollover Stock Options. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."
(3) Each share of Class B Common Stock is convertible, at any time at the option
of the holder, into one share of Common Stock. In addition, the Class B
Common Stock will be automatically converted into Common Stock upon the
occurrence of certain events. See "Description of Capital Stock."
(4) Excludes approximately 21,000,000 shares of Common Equity issuable in
connection with outstanding stock options. See "Management -- 1996
Plan -- Options" and "-- Rollover Plans; Incentive Stock Units."
18
<PAGE> 23
DILUTION
The net tangible book value of the Common Equity of the Company as of
September 28, 1996 was $354.4 million or $3.23 per share of Common Equity. Net
tangible book value represents the amount of total tangible assets less total
liabilities.
Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of Common Stock in the Combined Offering and
the pro forma net tangible book value per share of Common Equity immediately
after the closing of this offering. After giving effect to the sale of
20,200,000 shares of Common Stock offered hereby by the Company at an assumed
initial public offering price of $18.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of September 28, 1996 would have been $683.4
million or $5.26 per share of Common Equity. This represents an immediate
increase in net tangible book value of $2.03 per share of Common Equity to
existing stockholders and an immediate dilution of $12.74 per share of Common
Equity to purchasers of Common Stock in the Combined Offering. The following
table illustrates the per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $18.00
Net tangible book value per share of Common
Equity as of September 28, 1996........................................ $3.23
Increase attributable to new investors.................................... 2.03
-----
Net tangible book value per share of Common Equity after this offering...... 5.26
------
Dilution per share of Common Equity to new investors........................ $12.74
======
</TABLE>
The following table summarizes, as of September 28, 1996, the difference
(before deducting estimated underwriting discounts and commissions and estimated
offering expenses) between existing stockholders and the purchasers of shares of
Common Stock in the Combined Offering (at an assumed initial public offering
price of $18.00 per share) with respect to: (i) the number of shares of Common
Equity purchased from the Company; (ii) the effective cash consideration paid;
and (iii) the average price paid per share of Common Equity.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........... 109,813,762 84.5% $ 83,783,800 18.7% $ 0.76
New investors...................... 20,200,000 15.5 363,600,000 81.3 18.00
----------- ----- ------------ -----
Total.................... 130,013,762 100.0% $447,383,800 100.0%
=========== ===== ============ =====
</TABLE>
- ---------------
(1) Excludes options issued under the Company's 1996 Plan and Rollover Plan, to
purchase an aggregate of 21,000,000 shares of Common Equity. To the extent
any of these options are exercised, there will be further dilution to new
investors. See "Management -- 1996 Plan -- Options" and "-- Rollover Plan;
Incentive Stock Units."
19
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data of the
Company. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements and notes
thereto included elsewhere in this Prospectus. The consolidated statement of
income data set forth below for each of the three years in the period ended
December 30, 1995 and the consolidated balance sheet data at December 31, 1994
and December 30, 1995 are derived from, and are qualified by reference to, the
audited consolidated financial statements included elsewhere in this Prospectus,
and should be read in conjunction with those financial statements and the notes
thereto. The consolidated balance sheet data as of January 1, 1994 are derived
from the audited consolidated balance sheet of the Company as of January 1,
1994, which is not included in this Prospectus. The consolidated statement of
income data for each of the two years in the period ended January 2, 1993 and
the consolidated balance sheet data as of December 28, 1991 and January 2, 1993
are derived from unaudited consolidated financial statements not included in
this Prospectus. The consolidated financial data as of and for the thirty-nine
weeks ended September 30, 1995, and as of and for the thirty-nine weeks ended
September 28, 1996, have been derived from unaudited consolidated financial
statements of the Company which are included in this Prospectus and which, in
the opinion of the Company, reflect all adjustments, consisting only of
adjustments of a normal and recurring nature, necessary for a fair presentation.
Results for the thirty-nine weeks ended September 28, 1996 are not necessarily
indicative of results for the full year. The historical consolidated financial
data may not be indicative of the Company's future performance and do not
necessarily reflect what the financial position and results of operations of the
Company would have been had the Company operated as a separate, stand-alone
entity during the periods covered. See "Consolidated Financial Statements."
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR -----------------------------
-------------------------------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1991 1992 1993 1994 1995 1995 1996
INCOME STATEMENT DATA: ---------- ---------- ---------- ---------- ---------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales........................ $2,016,586 $2,731,272 $4,044,169 $5,830,199 $8,616,867 $ 6,070,722 $ 8,474,710
Cost of sales.................... 1,831,140 2,503,702 3,714,527 5,391,224 8,011,181 5,648,210 7,900,223
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit..................... 185,446 227,570 329,642 438,975 605,686 422,512 574,487
Expenses:
Selling, general and
administrative............... 116,793 157,306 225,047 296,330 415,344 296,079 386,492
Charges allocated from Ingram
Industries................... 1,030 1,330 1,567 2,355 3,461 2,561 3,259
Non-cash compensation charge... 0 0 0 0 0 0 8,859(2)
---------- ---------- ---------- ---------- ---------- ---------- ----------
117,823 158,636 226,614 298,685 418,805 298,640 398,610(2)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations........... 67,623 68,934 103,028 140,290 186,881 123,872 175,877(2)
Other (income) expense:
Interest income................ (256) (103 ) (407) (937) (3,479) (3,049) (1,188)
Interest expense............... 3,233 5,556 5,003 8,744 13,451 8,918 10,608
Interest expense charged by
Ingram Industries............ 11,859 12,405 16,089 24,189 32,606 22,977 30,912
Net foreign currency exchange
loss......................... 0 0 111 6,873 7,751 6,572 447
Other.......................... 324 2,574 (623) 716 1,936 405 1,689
---------- ---------- ---------- ---------- ---------- ---------- ----------
15,160 20,432 20,173 39,585 52,265 35,823 42,468
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
minority interest.............. 52,463 48,502 82,855 100,705 134,616 88,049 133,409(2)
Provision for income taxes....... 22,286 17,529 31,660 39,604 53,143 34,755 55,459
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest....................... 30,177 30,973 51,195 61,101 81,473 53,294 77,950(2)
Minority interest................ 0 0 840 (2,243) (2,834) (2,986) 383
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income(1).................... $ 30,177 $ 30,973 $ 50,355 $ 63,344 $ 84,307 $ 56,280 $ 77,567(2)
========== ========== ========== ========== ========== ========== ==========
Earnings per share............... $ 0.25 $ 0.26 $ 0.41 $ 0.52 $ 0.69 $ 0.46 $ 0.64(2)
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
outstanding.................... 121,407 121,407 121,407 121,407 121,407 121,407 121,687
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, SEPTEMBER 28,
1991 1993 1994 1994 1995 1996
BALANCE SHEET DATA: ------------ ---------- ---------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash....................................... $ 15,510 $ 25,276 $ 44,391 $ 58,369 $ 56,916 $ 43,196
Working capital............................ 288,462 334,913 471,616 663,049 1,019,639 828,084
Total assets............................... 670,649 915,590 1,296,363 1,974,289 2,940,898 2,843,712
Total debt(3).............................. 244,785 295,389 398,929 552,283 850,548 625,016
Stockholder's equity....................... 78,972 109,418 155,459 221,344 310,795 365,989
</TABLE>
- ---------------
(1) The 1992 results reflect the adoption of FAS 109.
(2) Reflects a non-cash compensation charge of $8.9 million ($5.4 million, or
$0.04 per share, net of tax) in connection with the granting of Rollover
Stock Options. See Note 11 of Notes to Consolidated Financial Statements.
(3) Includes long-term debt, current maturities of long-term debt, and amounts
due to Ingram Industries.
20
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Ingram Micro is the leading wholesale distributor of microcomputer products
worldwide. The Company's net sales have grown to $8.6 billion in 1995 from $2.0
billion in 1991. This sales growth reflects substantial expansion of its
existing domestic and international operations, resulting from the addition of
new customers, increased sales to the existing customer base, the addition of
new product categories and suppliers, and the establishment of Ingram Alliance,
as well as the successful integration of ten acquisitions worldwide. Net income
has grown to $84.3 million in 1995 from $30.2 million in 1991.
The microcomputer wholesale distribution industry in which the Company
operates is characterized by narrow gross and operating margins, which have
declined industry-wide in recent years, primarily due to intense price
competition. The Company's gross margins declined to 7.0% in 1995 from 9.2% in
1991. To partially offset the decline in gross margins, the Company has
continually instituted operational and expense controls which have reduced
selling, general, and administrative ("SG&A") expenses (including charges
allocated from Ingram Industries) as a percentage of net sales to 4.8% in 1995
from 5.8% in 1991. As a result, the Company's operating margins and net margins
have declined less than gross margins. Operating margins declined to 2.2% in
1995 from 3.4% in 1991, and net margins declined to 1.0% in 1995 from 1.5% in
1991. There can be no assurance that the Company will be able to continue to
reduce operating expenses as a percentage of net sales to mitigate further
reductions in gross margins. Although the Company's international operations
have historically had similar gross margins to the Company's U.S. traditional
wholesale operations, the Company's international operations have historically
had lower operating margins due in part to greater economies of scale in the
U.S. operations. See "Risk Factors -- Narrow Margins."
Ingram Micro entered the master reseller (also known as "aggregation")
business in late 1994 through the launch of Ingram Alliance. Ingram Alliance is
designed to offer resellers access to certain of the industry's leading hardware
manufacturers at competitive prices by utilizing a lower cost business model
that depends upon a higher average order size, lower product returns percentage,
and supplier-paid financing. In 1995, Ingram Alliance contributed over $700
million of net sales to the Company. Since its inception in late 1994, Ingram
Alliance has operated with lower gross margins, lower SG&A expenses as a
percentage of net sales, and lower financing costs than the Company's
traditional wholesale distribution business. Accordingly, if Ingram Alliance's
sales continue to grow as a percentage of the Company's total net sales, the
Company expects such increase to cause its overall gross margins to decline.
The Company sells microcomputer hardware, networking equipment, and
software products. Sales of hardware products (including networking equipment)
represent a majority of total net sales and have historically generated a higher
operating margin than sales of software products, although operating margins on
both hardware products and software products have historically declined.
Hardware products and networking equipment have comprised an increasing
percentage, and software products a decreasing percentage, of the Company's net
sales in recent years, and the Company expects this trend to continue. Net sales
of software products have decreased as a percentage of total net sales in recent
years due to a number of factors, including bundling of software with
microcomputers; sales growth in Ingram Alliance, which is a hardware-only
business; declines in software prices; and the emergence of alternative means of
software distribution, such as site licenses and electronic distribution. See
"Risk Factors -- Rapid Technological Change; Alternate Means of Software
Distribution" and "Business -- Products and Suppliers."
Historically, the Company's sources of capital have primarily been
borrowings from Ingram Industries through debt facilities maintained by Ingram
Industries and guaranteed by the Company. The Company has a commitment providing
for the $1 billion Credit Facility, and the Company expects to enter into a
formal agreement prior to the closing of this offering. See "-- Liquidity and
Capital Resources." Concurrently with the Split-Off, the Company intends to use
borrowings under the Credit Facility to repay (i) intercompany indebtedness in
partial satisfaction of amounts due to Ingram Industries (the Company is
assuming Ingram Industries' accounts receivable securitization program in
satisfaction of the remaining amounts due to Ingram Industries) and (ii)
outstanding revolving indebtedness related to amounts drawn by certain of the
Company's
21
<PAGE> 26
subsidiaries, as participants in Ingram Industries' existing unsecured credit
facility, which will terminate concurrently with the closing of this offering.
The net proceeds from the Combined Offering will be used to repay a portion of
the borrowings under the Credit Facility. See "Use of Proceeds." The Company has
historically depended on Ingram Industries and other subsidiaries of Ingram
Industries for financing, management, tax and payroll administration,
property/casualty insurance, employee benefits administration, and certain other
administrative services. In conjunction with the Reorganization, the Company,
Ingram Industries, and Ingram Entertainment will enter into the Transitional
Service Agreements, as well as a tax sharing and tax services agreement. See
"The Split-Off and the Reorganization -- The Reorganization." The Company
believes that the terms of the Transitional Service Agreements will be on a
basis as favorable to the Company as those that would have been obtained from
third parties on an arm's length basis. The Company's historical financial
statements reflect an allocation of expenses in connection with the services
covered by the Transitional Service Agreements. Although the Company expects the
costs and fees to be paid by it in connection with the Transitional Service
Agreements to be higher than its historical allocated costs, it does not believe
the increase in costs will be material to its results of operations. On a
long-term basis, the Company will be required to hire personnel to perform such
services or contract with one or more independent third parties to provide such
services. See "Risk Factors -- Relationship with Ingram Industries, Ingram
Entertainment, and the Ingram Family Stockholders."
The microcomputer wholesale distribution business is capital intensive. The
Company's business requires significant levels of capital to finance accounts
receivable and product inventory that is not financed by trade creditors. The
Company is highly leveraged and has relied heavily on debt financing for its
increasing working capital needs in connection with the expansion of its
business. The Company will need additional capital to finance its product
inventory and accounts receivable as it expands its business. The Company's
interest expense for any current or future indebtedness will be subject to
fluctuations in interest rates and may cause fluctuations in the Company's net
income. In connection with the Split-Off, the Company will assume Ingram
Industries' accounts receivable securitization program, and financing costs
associated with this program will be classified as other expense. Prior to the
Split-Off, such expenses were reflected as interest expense charged by Ingram
Industries. While this structure will not increase the Company's cost of
financing, this change in the classification of financing costs will result in
an increase in the Company's other expenses of approximately $10.5 million per
year and a corresponding decrease in its interest expense.
In connection with the Split-Off, certain outstanding Ingram Industries
options, incentive stock units ("ISUs"), and stock appreciation rights ("SARs")
held by certain employees of Ingram Industries, Ingram Entertainment, and Ingram
Micro will be exchanged or converted to options to purchase up to an aggregate
of approximately 11,000,000 shares of Common Stock ("Rollover Stock Options").
See "Management -- Rollover Plan; Incentive Stock Units." The Company has
recorded a pre-tax non-cash compensation charge of approximately $8.9 million
($5.4 million net of tax) in the first three quarters of 1996 related to the
vested portion of certain of the Rollover Stock Options as the terms and grants
of the Rollover Stock Options were established in the first quarter of 1996.
This charge was based on the difference between the estimated fair value of such
options in the first quarter of 1996 and the exercise price of such options or
SARs. In addition, at the time of this offering, the Company will be required by
applicable accounting rules to record a non-cash compensation charge with
respect to the vested portion of approximately 1,300,000 formula plan Rollover
Stock Options included in the 11,000,000 shares. This non-cash charge is
expected to be approximately $13.4 million based on the difference between the
average exercise price of $2.63 per share and $18.00 per share, the assumed
initial public offering price of the Common Stock. The Company will be required
by applicable accounting rules to record additional non-cash compensation
charges over the remaining vesting periods of the Rollover Stock Options. The
Company expects these additional charges to be $1.0 million ($0.6 million net of
tax) for the fourth quarter of 1996, $7.1 million ($5.7 million net of tax) for
1997 and $4.6 million ($3.6 million net of tax) for 1998.
22
<PAGE> 27
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales by geographic region
(excluding intercompany sales), and the percentage of total net sales
represented thereby, for each of the periods indicated.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR --------------------------------
-------------------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES BY GEOGRAPHIC REGION(1):
United States................. $ 3,118 77.1% $ 4,122 70.7% $ 5,970 69.3% $ 4,287 70.6% $ 5,930 70.0%
Europe........................ 485 12.0 1,078 18.5 1,849 21.4 1,239 20.4 1,745 20.6
Other international........... 441 10.9 630 10.8 798 9.3 545 9.0 800 9.4
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total......................... $ 4,044 100.0% $ 5,830 100.0% $ 8,617 100.0% $ 6,071 100.0% $ 8,475 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Net sales are classified by location of the Company entity. For example,
products sold through Ingram Alliance or the U.S. Export Division are
classified as United States sales.
The following table sets forth certain items from the Company's
Consolidated Statement of Income as a percentage of net sales, for each of the
periods indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------------------------
THIRTY-NINE WEEKS ENDED
FISCAL YEAR -----------------------------
------------------------- SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................. 91.9 92.5 93.0 93.0 93.2
------ ------ ------ ------ ------
Gross profit............................... 8.1 7.5 7.0 7.0 6.8
Expenses:
SG&A expenses and charges allocated from
Ingram Industries..................... 5.6 5.1 4.8 5.0 4.6
Non-cash compensation charge............. 0.0 0.0 0.0 0.0 0.1
------ ------ ------ ------ ------
Income from operations..................... 2.5 2.4 2.2 2.0 2.1
Other expense, net......................... 0.5 0.7 0.6 0.5 0.5
------ ------ ------ ------ ------
Income before income taxes and minority
interest................................. 2.0 1.7 1.6 1.5 1.6
Provision for income taxes................. 0.8 0.6 0.6 0.6 0.7
Minority interest.......................... 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Net income................................. 1.2% 1.1% 1.0% 0.9% 0.9%
====== ====== ====== ====== ======
</TABLE>
FIRST THREE QUARTERS 1996 COMPARED TO FIRST THREE QUARTERS 1995
Consolidated net sales increased 39.6% to $8.5 billion in the first three
quarters of 1996 from $6.1 billion in the first three quarters of 1995.
Microsoft Windows 95 was launched in the third quarter of 1995 and sales of
Microsoft Windows 95 accounted for $289.1 million of consolidated net sales in
the first three quarters of 1995. The increase in worldwide net sales was
attributable to growth in the microcomputer products industry in general, the
addition of new customers, increased sales to the existing customer base, and
expansion of the Company's product offerings.
Net sales from U.S. operations increased 38.3% to $5.9 billion in the first
three quarters of 1996 from $4.3 billion in the first three quarters of 1995. In
addition to the factors above that impacted net sales worldwide, U.S. net sales
were positively impacted by the strong growth in Ingram Alliance sales. Net
sales from European operations increased 40.8% to $1.7 billion in the first
three quarters of 1996 from $1.2 billion in the first three quarters of 1995.
Other international net sales increased 46.9% to $799.8 million in the first
three quarters of 1996 from $544.5 million in the first three quarters of 1995,
principally due to the growth in net sales from the Company's Canadian
operations. In the first three quarters of 1996, net sales from U.S. operations
accounted for 70.0% of consolidated net sales, net sales from European
operations accounted for 20.6% of consolidated net sales, and other
international net sales accounted for 9.4% of consolidated net sales.
23
<PAGE> 28
In the first three quarters of 1995, net sales from U.S. operations accounted
for 70.6% of consolidated net sales, net sales from European operations
accounted for 20.4% of consolidated net sales, and other international net sales
accounted for 9.0% of consolidated net sales.
Cost of sales as a percentage of net sales increased to 93.2% in the first
three quarters of 1996 from 93.0% in the first three quarters of 1995. This
increase was largely attributable to competitive pricing pressures, especially
in Europe, and the increase as a percentage of net sales of the lower gross
margin Ingram Alliance business, which more than offset an increase in worldwide
purchase discounts and rebates from the Company's suppliers.
Total SG&A expenses and charges allocated from Ingram Industries increased
30.5% to $389.8 million in the first three quarters of 1996 from $298.6 million
in the first three quarters of 1995, but decreased as a percentage of net sales
to 4.6% in the first three quarters of 1996 from 5.0% in the first three
quarters of 1995. The increased level of spending was attributable to expenses
required to support expansion of the Company's business, consisting primarily of
incremental personnel and support costs, lease payments relating to new
operating facilities, and expenses associated with the development and
maintenance of information systems. The decrease in operating expenses as a
percentage of net sales was primarily attributable to the growth of Ingram
Alliance, which utilizes a lower cost business model, and economies of scale
from higher sales volumes.
During the first three quarters of 1996, the Company recorded a non-cash
compensation charge of $8.9 million or 0.1% of net sales in connection with the
Rollover Stock Options. The Company did not record any such charge during the
first three quarters of 1995.
Excluding the $8.9 million non-cash compensation charge in the first three
quarters of 1996, total income from operations increased as a percentage of net
sales to 2.2% in the first three quarters of 1996 from 2.0% in the first three
quarters of 1995. Income from operations in the United States increased as a
percentage of net sales to 2.7% in the first three quarters of 1996 from 2.6% in
the first three quarters of 1995. Income from operations in Europe decreased as
a percentage of net sales to 0.5% in the first three quarters of 1996 from 0.7%
in the first three quarters of 1995. This decrease was offset by an increase in
income from operations as a percentage of net sales for geographic regions
outside the United States and Europe to 2.0% in the first three quarters of 1996
from 0.7% in the first three quarters of 1995. The first three quarters of 1995
included the negative impact of an inventory valuation loss of $3.8 million
related to the decline in value of the Mexican peso and the associated impact on
the Mexican economy.
For the reasons set forth above, income from operations, including the $8.9
million non-cash compensation charge, increased 42.0% to $175.9 million in the
first three quarters of 1996 from $123.9 million in the first three quarters of
1995, and, as a percentage of net sales, increased to 2.1% in the first three
quarters of 1996 from 2.0% in the first three quarters of 1995.
Other expense, net, which consists primarily of net interest expense
(including interest expense charged by Ingram Industries), foreign currency
exchange losses, and miscellaneous non-operating expenses, increased 18.5% to
$42.5 million in the first three quarters of 1996 from $35.8 million in the
first three quarters of 1995, but remained constant as a percentage of net sales
at 0.5%. The increase in other expense was largely attributable to a higher
level of borrowings to finance the Company's worldwide business expansion,
partially offset by a period-over-period decrease in the amount of foreign
currency losses which were primarily related to the 1995 Mexican peso
devaluation.
The provision for income taxes increased 59.6% to $55.5 million in the
first three quarters of 1996 from $34.8 million in the first three quarters of
1995, reflecting the 51.5% increase in the Company's income before income taxes
and minority interest. The Company's effective tax rate was 41.6% in the first
three quarters of 1996 compared to 39.5% in the first three quarters of 1995.
The increase in the effective tax rate was primarily due to the effect of
certain international taxes in 1996.
Excluding the $5.4 million (net of tax) non-cash compensation charge, net
income increased 47.4% to $83.0 million in the first three quarters of 1996 from
$56.3 million in the first three quarters of 1995 and, as a percentage of net
sales, increased to 1.0% in the first three quarters of 1996 from 0.9% in the
first three quarters of 1995. Net income, including the $5.4 million (net of
tax) non-cash compensation charge,
24
<PAGE> 29
increased 37.8% to $77.6 million in the first three quarters of 1996 from $56.3
million in the first three quarters of 1995, but remained constant as a
percentage of net sales at 0.9%.
1995 COMPARED TO 1994
Consolidated net sales increased 47.8% to $8.6 billion in 1995 from $5.8
billion in 1994. The increase in worldwide net sales was attributable to growth
in the microcomputer products industry in general, the addition of new
customers, increased sales to the existing customer base, and expansion of the
Company's product offerings, as well as to the release of significant new
products, including the Microsoft Windows 95 operating system in August 1995.
Net sales from U.S. operations increased 44.8% to $6.0 billion in 1995 from
$4.1 billion in 1994. The increase in U.S. net sales was largely attributable to
the growth of Ingram Alliance in 1995, its first full year of operations, as
well as an increase in the Company's customer base and product lines. Net sales
from European operations increased 71.5% to $1.8 billion in 1995 from $1.1
billion in 1994. In addition to factors affecting sales worldwide, European net
sales were positively impacted by the full year contribution in 1995 of the
Company's Scandinavian operations, which were acquired in September 1994. Other
international net sales increased 26.7% to $798.0 million in 1995 from $629.6
million in 1994. The increase in net sales from other international operations
was entirely attributable to an increase in Canadian sales, partially offset by
a decrease in Mexican net sales resulting from the distressed Mexican economy
and the related peso devaluation. In 1995, net sales from U.S. operations
accounted for 69.3% of consolidated net sales, net sales from European
operations accounted for 21.4% of consolidated net sales, and other
international net sales accounted for 9.3% of consolidated net sales. In 1994,
net sales from U.S. operations accounted for 70.7% of consolidated net sales,
net sales from European operations accounted for 18.5% of consolidated net
sales, and other international net sales accounted for 10.8% of consolidated net
sales.
Cost of sales as a percentage of net sales increased to 93.0% in 1995 from
92.5% in 1994. This increase was largely attributable to competitive pricing
pressures worldwide and the growth of Ingram Alliance, which is characterized by
lower gross margins than the Company's traditional wholesale distribution
business. Gross margin was favorably impacted by effective operational controls
and an increase in worldwide purchase discounts and rebates from the Company's
suppliers.
Total SG&A expenses and charges allocated from Ingram Industries increased
40.2% to $418.8 million in 1995 from $298.7 million in 1994, but decreased as a
percentage of net sales to 4.8% in 1995 from 5.1% in 1994. The increased level
of spending was attributable to expenses required to support expansion of the
Company's business, consisting primarily of incremental personnel and support
costs, lease payments relating to new facilities, and expenses associated with
the development and maintenance of information systems. The decreased level of
spending as a percentage of net sales was primarily attributable to economies of
scale resulting from higher sales volumes, increased operating efficiencies, and
the growth of Ingram Alliance, which is characterized by lower SG&A expenses as
a percentage of net sales than the Company's traditional wholesale distribution
business.
For the reasons set forth above, income from operations increased 33.2% to
$186.9 million in 1995 from $140.3 million in 1994, but decreased as a
percentage of net sales to 2.2% in 1995 from 2.4% in 1994. Income from U.S.
operations decreased as a percentage of net sales to 2.6% in 1995 from 3.0% in
1994. This decrease was partially offset by an increase in income from European
operations as a percentage of net sales to 1.1% in 1995 from 0.7% in 1994.
Other expense, net increased 32.0% to $52.3 million in 1995 from $39.6
million in 1994, but decreased as a percentage of net sales to 0.6% in 1995 from
0.7% in 1994. The increase in other expense was largely attributable to a higher
level of borrowings to finance the Company's worldwide business expansion. The
Company was also negatively impacted by the continued effect of the distressed
Mexican economy and the related peso devaluation. Primarily due to events in
Mexico, the Company sustained a net foreign currency exchange loss of $7.8
million in 1995 as compared to a $6.9 million loss in 1994.
The provision for income taxes increased 34.2% to $53.1 million in 1995
from $39.6 million in 1994, reflecting the 33.7% increase in the Company's
income before income taxes and minority interest. The Company's effective tax
rate was 39.5% in 1995 as compared to 39.3% in 1994.
25
<PAGE> 30
Net income increased 33.1% to $84.3 million in 1995 from $63.3 million in
1994, but decreased as a percentage of net sales to 1.0% in 1995 from 1.1% in
1994.
1994 COMPARED TO 1993
Consolidated net sales increased 44.2% to $5.8 billion in 1994 from $4.0
billion in 1993. The increase in worldwide net sales was attributable to growth
in the microcomputer products industry in general, the acquisition of four
international distributors, the addition of new customers, increased sales to
the existing customer base, and expansion of the Company's product offerings.
Net sales from U.S. operations increased 32.2% to $4.1 billion in 1994 from
$3.1 billion in 1993. The increase in U.S. net sales was primarily attributable
to the same factors favorably impacting worldwide consolidated net sales. Net
sales from European operations increased 122.3% to $1.1 billion in 1994 from
$485.1 million in 1993. The increase in European net sales was due to improved
operating performance by several of the European subsidiaries (including the
addition of some of the Company's suppliers to the German operation), as well as
the Company's entry through acquisitions into the Spanish market in April 1994
and the Scandinavian market in September 1994. Net sales from other
international operations increased 42.9% to $629.6 million in 1994 from $440.7
million in 1993. The increase in net sales from other international operations
was largely attributable to the continued development of the Company's
operations in Canada and Mexico. In 1994, net sales from U.S. operations
accounted for 70.7% of consolidated net sales, net sales from European
operations accounted for 18.5% of consolidated net sales, and net sales from
other international operations accounted for 10.8% of consolidated net sales. In
1993, net sales from U.S. operations accounted for 77.1% of consolidated net
sales, net sales from European operations accounted for 12.0% of consolidated
net sales, and other international net sales accounted for 10.9% of consolidated
net sales.
Cost of sales as a percentage of net sales increased to 92.5% in 1994 from
91.9% in 1993. This increase was primarily attributable to competitive pricing
pressures worldwide.
Total SG&A expenses and charges allocated from Ingram Industries increased
31.8% to $298.7 million in 1994 from $226.6 million in 1993 but decreased as a
percentage of net sales to 5.1% in 1994 from 5.6% in 1993. The increased level
of spending was attributable to expenses required to support expansion of the
Company's business, consisting primarily of incremental personnel and support
costs, lease payments relating to new facilities, and expenses associated with
the development and maintenance of information systems. The decreased level of
spending as a percentage of net sales was primarily attributable to economies of
scale resulting from higher sales volumes, as well as increased operating
efficiencies.
For the reasons set forth above, income from operations increased 36.2% to
$140.3 million in 1994 from $103.0 million in 1993, but decreased as a
percentage of net sales to 2.4% in 1994 from 2.5% in 1993. Contributing to the
increase in income from operations was income from the European operations of
$8.1 million, compared to a $3.2 million loss from such operations in 1993.
Other expense, net increased 96.2% to $39.6 million in 1994 from $20.2
million in 1993, and increased as a percentage of net sales to 0.7% in 1994 from
0.5% in 1993. The increase in other expense was largely attributable to a higher
level of borrowings to finance the Company's worldwide business expansion,
including acquisitions, and foreign currency exchange losses of $6.9 million
primarily related to Mexico in 1994.
The provision for income taxes increased 25.1% to $39.6 million in 1994
from $31.7 million in 1993, reflecting the 21.5% increase in the Company's
income before income taxes and minority interest. The Company's effective tax
rate was 39.3% in 1994 as compared to 38.2% in 1993.
Net income increased 25.8% to $63.3 million in 1994 from $50.4 million in
1993, but decreased as a percentage of net sales to 1.1% in 1994 from 1.2% in
1993.
QUARTERLY DATA; SEASONALITY
The Company's quarterly net sales and operating results have varied
significantly in the past and will likely continue to do so in the future as a
result of seasonal variations in the demand for the products and services
offered by the Company, the introduction of new hardware and software
technologies and products offering improved features and functionality, the
introduction of new products and services by the Company
26
<PAGE> 31
and its competitors, the loss or consolidation of a significant supplier or
customer, changes in the level of operating expenses, inventory adjustments,
product supply constraints, competitive conditions including pricing, interest
rate fluctuations, the impact of acquisitions, currency fluctuations, and
general economic conditions. The Company's narrow operating margins may magnify
any such fluctuations. Specific historical seasonal variations in the Company's
operating results have included a reduction of demand in Europe during the
summer months, increased Canadian government purchasing in the first quarter,
and pre-holiday stocking in the retail channel during the September to November
period. In addition, as was the case with the introduction of Microsoft Windows
95 in August 1995, the product cycle of major products may materially impact the
Company's business, financial condition, or results of operations.
The following table sets forth certain unaudited quarterly historical
consolidated financial data for each of the eleven quarters up to the period
ended September 28, 1996. This unaudited quarterly information has been prepared
on the same basis as the annual information presented elsewhere herein and, in
the Company's opinion, includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the selected
quarterly information. This information should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Prospectus. The operating results for any quarter shown are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
INCOME BEFORE
INCOME INCOME TAXES AND
FROM MINORITY NET EARNINGS
NET SALES GROSS PROFIT OPERATIONS INTEREST INCOME PER SHARE
--------- ------------ ---------- ---------------- ------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1994
THIRTEEN WEEKS ENDED:
April 2, 1994............ $1,266.6 $ 92.4 $ 26.1 $ 19.4 $11.6 $0.10
July 2, 1994............. 1,298.9 96.8 28.3 19.5 12.1 0.10
October 1, 1994.......... 1,387.0 105.1 32.9 24.3 14.6 0.12
December 31, 1994........ 1,877.7 144.7 53.0 37.5 25.0 0.21
FISCAL YEAR ENDED DECEMBER 30, 1995
THIRTEEN WEEKS ENDED:
April 1, 1995............ $1,879.5 $132.4 $ 38.5 $ 24.3 $17.1 $0.14
July 1, 1995............. 1,859.6 138.9 40.2 30.0 18.4 0.15
September 30, 1995....... 2,331.6 151.2 45.2 33.8 20.8 0.17
December 30, 1995........ 2,546.2 183.2 63.0 46.5 28.0 0.23
FISCAL YEAR ENDED DECEMBER 28, 1996
THIRTEEN WEEKS ENDED:
March 30, 1996........... $2,752.7 $186.6 $ 54.9(1) $ 39.6(1) $23.8 (1) $0.20(1)
June 29, 1996............ 2,790.4 190.5 59.5(2) 44.9(2) 26.8 (2) 0.22(2)
September 28, 1996....... 2,931.5 197.5 61.4(3) 48.9(3) 26.9 (3) 0.22(3)
</TABLE>
- ---------------
(1) Reflects a non-cash compensation charge of $6.7 million ($4.1 million, or
$0.03 per share, net of tax) in connection with the granting of the Rollover
Stock Options.
(2) Reflects a non-cash compensation charge of $1.1 million ($0.7 million, or
less than $0.01 per share, net of tax) in connection with the granting of
the Rollover Stock Options.
(3) Reflects a non-cash compensation charge of $1.1 million ($0.6 million, or
less than $0.01 per share, net of tax) in connection with the granting of
the Rollover Stock Options.
As indicated in the table above, the increases in the Company's net sales
in the fourth quarter of each fiscal year have generally been higher than those
in the other three quarters in the same fiscal year. The trend of higher fourth
quarter net sales is attributable to calendar year-end business purchases and
holiday period purchases made by customers. Additionally, gross profit in the
fourth quarter of each year has historically been favorably impacted by
attractive year-end product buying opportunities which have often resulted in
higher purchase discounts. Net sales in the third quarter of 1995 were
positively impacted by the release of Microsoft Windows 95. However, gross and
operating margins were lower in the third quarter of 1995 due to the significant
volume of Microsoft Windows 95 sales, which had lower than average gross
margins.
27
<PAGE> 32
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth and cash needs largely through income
from operations and borrowings (primarily from Ingram Industries), as well as
from trade and supplier credit.
Cash provided by operating activities increased to $273.3 million in the
first three quarters of 1996 from $32.5 million in the first three quarters of
1995. The significant increase in cash provided by operating activities was
partially due to higher net income and the difference between accounts
receivable, inventory levels, and accounts payable in the first three quarters
of 1996 as compared to the first three quarters of 1995 due to the launch of
Microsoft Windows 95 in the third quarter of 1995. Net cash used by investing
activities was $64.5 million and $36.1 million in the first three quarters of
1996 and 1995, respectively. This increase was due to the Company's expansion of
warehouse and other facilities. Net cash used for financing activities increased
to $221.6 million from $17.1 million in the first three quarters of 1996 and
1995, respectively, as a result of higher repayments on borrowings from Ingram
Industries and the $20.0 million distribution to Ingram Industries, both in the
first three quarters of 1996.
Net cash used by operating activities was $251.3 million, $87.1 million,
and $41.7 million in 1995, 1994, and 1993, respectively. The significant
increase in cash used by operating activities in 1995 over 1994 was due to the
increased levels of inventory which accounted for a use of $580.1 million in
1995 as compared to $345.5 million in 1994 and an increase in accounts
receivable which accounted for a use of $320.2 million in 1995 as compared to
$232.3 million in 1994. Cash provided by accounts payable of $543.8 million in
1995 and $411.0 million in 1994 partially offset the use related to inventory
and accounts receivable. The increase in the difference between inventory levels
and accounts payable in 1995 as compared to 1994 was primarily due to the launch
of Microsoft Windows 95.
Net cash used by investing activities of $48.8 million, $42.6 million, and
$40.7 million in 1995, 1994, and 1993, respectively, was due to the Company's
expansion of warehouse and other facilities in each year and the acquisitions of
operations in four European countries in 1994 and the acquisition of operations
in three countries in Europe and in Mexico in 1993.
Net cash provided by financing activities was $298.3 million, $143.3
million, and $101.4 million in 1995, 1994, and 1993, respectively. The increase
in each period was primarily provided by an increase in borrowings from Ingram
Industries.
The Company's sources of capital have primarily been borrowings from Ingram
Industries. As of September 28, 1996, the Company had total debt outstanding of
$625.0 million, including $479.7 million due to Ingram Industries. The Company
has a commitment from NationsBank of Texas N.A. and The Bank of Nova Scotia with
respect to the $1 billion Credit Facility, and the Company expects to enter into
a formal agreement, which will contain standard provisions for agreements of its
type, prior to the closing of this offering. Under the Credit Facility, the
Company can borrow up to $750 million in foreign currencies through negotiated
arrangements with individual lenders in the syndicate. The Company can use up to
$250 million of the Credit Facility for letters of credit. The Company will be
required to comply with certain financial covenants, including minimum net
worth, restrictions on funded debt, current ratio and interest coverage, which
will be tested as of the end of each fiscal quarter. The Credit Facility also
restricts the Company's ability to pay dividends. Borrowings will be subject to
the satisfaction of customary conditions, including the absence of any material
adverse change in the Company's business or financial condition. Concurrently
with the Split-Off, the Company will assume Ingram Industries' accounts
receivable securitization program in partial satisfaction of amounts due to
Ingram Industries. The Company intends to use borrowings under the Credit
Facility to repay (i) the remaining intercompany indebtedness and (ii)
outstanding revolving indebtedness related to amounts drawn by certain of the
Company's subsidiaries, as participants in Ingram Industries' existing unsecured
credit facility, which will terminate concurrently with the closing of this
offering.
The net proceeds from the Combined Offering will be used to repay a portion
of the borrowings under the Credit Facility. After giving effect to the
foregoing transactions, including the application of the net proceeds from the
Combined Offering, borrowings under the Credit Facility would have been
approximately $69.3 million on a pro forma basis at September 28, 1996. See "Use
of Proceeds." After giving effect to the foregoing
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transactions and the application of the net proceeds from the Combined Offering,
the Company would have had available approximately $930.7 million under the
Credit Facility. The aggregate amount of long-term debt outstanding after the
Split-Off, and before application of the proceeds from the Combined Offering,
will be substantially similar to the long-term debt and debt due to Ingram
Industries immediately prior to the Split-Off, except as adjusted for the
accounts receivable securitization program to be assumed by the Company and the
incurrence of an additional $22.6 million of indebtedness in connection with the
acquisition of lease agreements related to certain facilities currently utilized
by the Company. See "Certain Transactions."
Effective February 1993, the Company entered into an agreement with Ingram
Industries whereby the Company sold all of its domestic trade accounts
receivable to Ingram Industries on an ongoing basis. Ingram Industries
transferred certain trade accounts receivable from the Company and other Ingram
Industries affiliates to a trust which sold certificates representing undivided
interests in the total pool of trade receivables without recourse. As of
September 28, 1996, Ingram Industries had sold $160 million of fixed rate
certificates and a variable rate certificate, under which $13.0 million was
outstanding. Ingram Industries' arrangement with the trust extended to December
31, 1997, renewable biannually under an evergreen provision up to a maximum term
of 20 years. In connection with the Split-Off, in partial satisfaction of
amounts due to Ingram Industries, the Ingram Industries accounts receivable
securitization program will be assumed by the Company, which will be the sole
seller of receivables. Under the amended program, certain of the Company's
domestic receivables will no longer be transferred to the trust. The Company
believes the amended program will contain sufficient trade accounts receivable
to support the outstanding fixed rate certificates and an unspecified amount of
the variable rate certificates. Assumption of the securitization program results
in a $160 million reduction of trade accounts receivable and due to Ingram
Industries. See Note 4 of Notes to Consolidated Financial Statements.
The Company and its foreign subsidiaries have uncommitted lines of credit
and short-term overdraft facilities in various currencies which aggregated
$114.1 million as of September 28, 1996. These facilities are used principally
for working capital and bear interest at market rates. See Note 6 of Notes to
Consolidated Financial Statements.
The Company believes that the net proceeds from the Combined Offering,
together with net cash provided by operating activities, supplemented as
necessary with funds available under credit arrangements (including the Credit
Facility), will provide sufficient resources to meet its present and future
working capital requirements and other cash needs for at least the next 12
months, or earlier if the Company were to engage in any corporate transactions
not currently anticipated, in which event the Company anticipates that
additional debt or equity financing would be required.
The Company presently expects to spend approximately $90 million in each of
1996 and 1997 for capital expenditures due to the continued expansion of its
business.
ASSET MANAGEMENT
The Company maintains sufficient quantities of product inventories to
achieve high order fill rates. The Company believes that the risks associated
with slow moving and obsolete inventory are substantially mitigated by
protection and stock return privileges provided by suppliers. In the event of a
supplier price reduction, the Company generally receives a credit for products
in its inventory. In addition, the Company has the right to return a certain
percentage of purchases, subject to certain limitations. Historically, price
protection, stock return privileges, and inventory management procedures have
helped to reduce the risk of decline in the value of inventory. The Company's
risk of decline in the value of inventory could be greater outside the United
States, where agreements with suppliers are more restrictive with regard to
price protection and the Company's ability to return unsold inventory. The
Company establishes reserves for estimated losses due to obsolete inventory in
the normal course of business. Historically, the Company has not experienced
losses due to obsolete inventory materially in excess of established inventory
reserves. Inventory levels may vary from period to period, due in part to the
addition of new suppliers or new lines with current suppliers and large cash
purchases of inventory due to advantageous terms offered by suppliers. See "Risk
Factors -- Risk of Inventory Losses."
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The Company offers various credit terms to qualifying customers as well as
prepay, credit card, and COD terms. The Company closely monitors customers'
creditworthiness through its on-line computer system which contains detailed
information on each customer's payment history and other relevant information.
In addition, the Company participates in a national credit association which
exchanges credit rating information on customers of association members. In most
markets, the Company utilizes various levels of credit insurance to allow sales
expansion and control credit risks. The Company establishes reserves for
estimated credit losses in the normal course of business. Historically, the
Company has not experienced credit losses materially in excess of established
credit loss reserves.
CHANGES IN ACCOUNTING STANDARDS
The Company will adopt Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of " ("FAS 121") in 1996. The Company does not expect the adoption
of FAS 121 to have a material effect on its financial condition or results of
operations.
The Company will adopt Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("FAS 123") in 1996. As permitted by
FAS 123, the Company will continue to measure compensation cost in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Therefore, the adoption of FAS 123 will have no impact on the
Company's financial condition or results of operations.
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BUSINESS
OVERVIEW
Ingram Micro is the leading wholesale distributor of microcomputer products
worldwide. The Company markets microcomputer hardware, networking equipment, and
software products to more than 100,000 reseller customers in approximately 120
countries in three principal market sectors: the VAR sector, consisting of
value-added resellers, systems integrators, network integrators, application
VARs, and original equipment manufacturers; the Commercial sector, consisting of
corporate resellers, direct marketers, independent dealers, and owner-operated
chains; and the Consumer sector, consisting of consumer electronics stores,
computer superstores, mass merchants, office product superstores, software-only
stores, and warehouse clubs. As a wholesale distributor, the Company markets its
products to each of these types of resellers as opposed to marketing directly to
end-user customers.
The Company conducts business with most of the leading resellers of
microcomputer products around the world, including, in the United States,
AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City, Electronic
Data Systems, En Pointe Technologies, Entex Information Services, Micro
Warehouse, Sam's Club, Staples, and Vanstar. The Company's international
reseller customers include Complet Data A/S, Consultores en Diagnostico
Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre Europe, B.V.,
GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk Datasenter, Owell
Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema SPA.
Ingram Micro offers one-stop shopping to its reseller customers by
providing a comprehensive inventory of more than 36,000 products from over 1,100
suppliers, including most of the microcomputer industry's leading hardware
manufacturers, networking equipment suppliers, and software publishers. The
Company's broad product offerings include: desktop and notebook PCs, servers,
and workstations; mass storage devices; CD-ROM drives; monitors; printers;
scanners; modems; networking hubs, routers, and switches; network interface
cards; business application software; entertainment software; and computer
supplies. The Company's suppliers include Apple Computer, Cisco Systems, Compaq
Computer, Creative Labs, Hewlett-Packard, IBM, Intel, Microsoft, NEC, Novell,
Quantum, Seagate, 3Com, Toshiba, and U.S. Robotics.
Ingram Micro distributes microcomputer products through warehouses in eight
strategic locations in the continental United States and 22 international
warehouses located in Canada, Mexico, most countries of the European Union,
Norway, Malaysia and Singapore. The Company believes that it is the market share
leader in the United States, Canada, and Mexico, and the second largest
full-line distributor in Europe, based on publicly available data and
management's knowledge of the industry. In 1995, approximately 31% of the
Company's net sales were derived from operations outside the United States. The
Export Division fulfills orders from U.S. exporters and from foreign customers
in countries where the Company does not operate a distribution subsidiary,
including much of Latin America, the Middle East, Africa, Australia, and parts
of Europe and Asia. The Company participates in the master reseller business in
the United States through Ingram Alliance.
The Company's principal objective is to enhance its position as the
preeminent wholesale distributor of microcomputer products worldwide. The
Company's belief that it is the preeminent wholesale distributor of
microcomputer products is based on publicly available data and management's
knowledge of the industry. The Company is focused on providing a broad range of
products and services, quick and efficient order fulfillment, and consistent
on-time and accurate delivery to its reseller customers around the world. The
Company believes that IMpulse provides a competitive advantage through real-time
worldwide information access and processing capabilities. This on-line
information system, coupled with the Company's exacting operating procedures in
telesales, credit support, customer service, purchasing, technical support, and
warehouse operations, enables the Company to provide its reseller customers with
superior service in an efficient and low cost manner. In addition, to enhance
sales and to support its suppliers and reseller customers, the Company provides
a wide range of value-added services, such as technical training, order
fulfillment, tailored financing programs, systems configuration, and marketing
programs.
The Company has grown rapidly over the past five years, with net sales and
net income increasing to $8.6 billion and $84.3 million, respectively, in 1995
from $2.0 billion and $30.2 million, respectively, in 1991, representing
compound annual growth rates of 43.8% and 29.3%, respectively. For the
thirty-nine weeks ended
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September 28, 1996, the Company's net sales and net income increased 39.6% and
37.8%, respectively, as compared to the net sales and net income levels achieved
in the thirty-nine weeks ended September 30, 1995. The Company's growth during
these periods reflects substantial expansion in its existing domestic and
international operations, resulting from the addition of new customers,
increased sales to the existing customer base, the addition of new product
categories and suppliers, the establishment of Ingram Alliance, and the
successful integration of ten acquisitions worldwide. Because of intense price
competition in the microcomputer products wholesale distribution industry, the
Company's margins have historically been narrow and are expected in the future
to continue to be narrow. In addition, the Company is highly leveraged and has
relied heavily on debt financing for its increasing working capital needs in
connection with the expansion of its business. See "Risk Factors -- Narrow
Margins" and "-- Capital Intensive Nature of Business; High Degree of Leverage."
THE INDUSTRY
The worldwide microcomputer products distribution industry generally
consists of suppliers, which sell directly to wholesalers, resellers, and
end-users; wholesale distributors, which sell to resellers; and resellers, which
sell to other resellers and directly to end-users. A variety of reseller
categories exists, including corporate resellers, VARs, systems integrators,
original equipment manufacturers, direct marketers, independent dealers,
owner-operated chains, franchise chains, and computer retailers. Different types
of resellers are defined and distinguished by the end-user market they serve,
such as large corporate accounts, small and medium-sized businesses, or home
users, and by the level of value they add to the basic products they sell.
Wholesale distributors generally sell only to resellers and purchase a wide
range of products in bulk directly from manufacturers. Different wholesale
distribution models have evolved in particular countries and geographies
depending on the characteristics of the local reseller environment, as well as
other factors specific to a particular country or region. The United States, for
example, is distinguished by the presence of master resellers, or aggregators,
which are functionally similar to wholesale distributors, but which focus on
selling relatively few product lines -- typically high volume, brand name
hardware systems -- to a network of franchised dealers and affiliates.
The growth of the microcomputer products wholesale distribution industry
continues to exceed that of the microcomputer industry as a whole. Faced with
the pressures of declining product prices and the increasing costs of selling
direct to a large and diverse group of resellers, suppliers are increasingly
relying upon wholesale distribution channels for a greater proportion of their
sales. To minimize costs and focus on their core capabilities in manufacturing,
product development, and marketing, many suppliers are also outsourcing an
increasing portion of certain functions such as distribution, service, technical
support, and final assembly to the wholesale distribution channel. Growing
product complexity, shorter product life cycles, and an increasing number of
microcomputer products due to the emergence of open systems architectures and
the recognition of certain industry standards have led resellers to depend on
wholesale distributors for more of their product, marketing, and technical
support needs. In addition, resellers are relying to an increasing extent on
wholesale distributors for inventory management and credit to avoid stocking
large inventories and maintaining credit lines to finance their working capital
needs. The Company believes that new opportunities for growth in the
microcomputer products wholesale distribution industry will emerge as new
product categories, such as computer telephone integration ("CTI") and the
digital video disc format, arise from the ongoing convergence of computing,
communications, and consumer electronics.
International markets, which represent over half of the microcomputer
industry's sales, are characterized by a more fragmented wholesale distribution
channel than in the United States. Increasingly, suppliers and resellers
pursuing global growth are seeking wholesale distributors with international
sales and support capabilities. In addition, the microcomputer products industry
in international markets is less mature and growing more rapidly than in the
United States, and as such, international growth opportunities for microcomputer
wholesaler distributors are significant.
The evolution of open sourcing during the past several years is a
phenomenon specific to the U.S. microcomputer products wholesale distribution
market. Historically, branded computer systems from large suppliers such as
Apple Computer, Compaq Computer, Hewlett-Packard, and IBM were sold in the
United
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States only through authorized master resellers. Under this single sourcing
model, resellers were required to purchase these products exclusively from one
master reseller. Over the past few years, competitive pressures have led some of
the major computer suppliers to authorize second sourcing, in which resellers
may purchase a supplier's product from a source other than their primary master
reseller, subject to certain restrictive terms and conditions (such as higher
prices or the elimination of floor planning subsidies). More recently, certain
computer manufacturers have authorized open sourcing, a model under which
resellers can purchase the supplier's product from any source on equal terms and
conditions. The trend toward open sourcing has blurred the distinction between
wholesale distributors and master resellers, which are increasingly able to
serve the same reseller customers, whereas previously master resellers had a
captive reseller customer base. The Company believes that continued movement
towards second sourcing and open sourcing puts the largest and most efficient
distributors of microcomputer products, which provide the highest value through
superior service and pricing, in the best position to compete for reseller
customers.
The dynamics of the microcomputer products wholesale distribution business
favor the largest distributors which have access to financing and are able to
achieve economies of scale, breadth of geographic coverage, and the strongest
vendor relationships. Consequently, the distributors with these characteristics
are tending to take share from smaller distributors as the industry undergoes a
process of consolidation. The need for wholesale distributors to implement high
volume/low cost operations on a worldwide basis is continuing to grow due to
ongoing price competition, the increasing demand for value-added services, the
trend toward open sourcing, and the increasing globalization of the
microcomputer products industry. In summary, the microcomputer wholesale
distribution industry is growing rapidly while simultaneously consolidating,
creating an industry environment in which market share leadership and cost
efficiency are of paramount importance.
BUSINESS STRATEGY
The Company is the preeminent worldwide wholesale distributor of
microcomputer products and services and believes that it has developed the
capabilities and scale of operations critical for long-term success in the
microcomputer products distribution industry.
The Company's strategy of offering a full line of products and services
provides reseller customers with one-stop shopping. The Company generally is
able to purchase products in large quantities and to avail itself of special
purchase opportunities from a broad range of suppliers. This allows the Company
to take advantage of various discounts from its suppliers, which in turn enables
the Company to provide competitive pricing to its reseller customers. The
Company's international market presence provides suppliers with access to a
broad base of geographically dispersed resellers, serviced by the Company's
extensive network of distribution centers and support offices. The Company's
size has permitted it to attract highly qualified associates and increase
investment in personnel development and training. Also, the Company benefits
from being able to make large investments in information systems, warehousing
systems, and infrastructure. Further, the Company is able to spread the costs of
these investments across its worldwide operations.
The Company is pursuing a number of strategies to further enhance its
leadership position within the microcomputer marketplace. These include:
EXPAND WORLDWIDE MARKET COVERAGE. Ingram Micro is committed to extending
its already extensive worldwide market coverage through internal growth in all
domestic and international markets in which it currently participates. In
addition, the Company intends to pursue acquisitions, joint ventures, and
strategic relationships outside the United States in order to take advantage of
growth opportunities and to leverage its strong systems, infrastructure, and
international management skills.
The Company believes that its skills in warehouse operations, purchasing,
sales, credit management, marketing, and technical support enable it to expand
effectively and quickly into new markets. The Company integrates acquired
operations by incorporating its management philosophies and exacting operating
procedures, implementing its IMpulse information system, applying its functional
expertise, and training personnel on the Ingram Micro business model. Based upon
these capabilities, the Company believes it is in the best position to serve
global resellers, which are increasingly seeking a single source for
microcomputer products and services.
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By providing greater worldwide market coverage, Ingram Micro also increases
the scale of its business, which results in more cost economies. In addition, as
it increases its global reach, the Company diversifies its business across
different markets, reducing its exposure to individual market downturns. The
Company has grown its international operations principally through acquisitions
and currently has operations in 18 countries outside the United States: Canada,
Mexico, most countries of the European Union, Norway, Malaysia, Singapore,
Japan, Argentina, and Ecuador. The Company believes that it is the market share
leader in the United States, Canada, and Mexico, and the second largest
full-line distributor in Europe, based on publicly available data and
management's knowledge of the industry. The Company's objective is to achieve
the number one market share in each of the markets in which it operates.
Ingram Micro will continue to focus on expansion of its operations through
acquisitions, joint ventures, and strategic relationships in order to take
advantage of significant growth opportunities around the world, both in
established and developing markets.
EXPLOIT INFORMATION SYSTEMS LEADERSHIP. Ingram Micro continually invests in
its information systems which are crucial in supporting the Company's growth and
its ability to maintain high service and performance levels. The Company has
developed a scalable, full-featured information system, IMpulse, which the
Company believes is critical to its ability to deliver worldwide, real-time
information to both suppliers and reseller customers. IMpulse is a single,
standardized information system, used across all markets worldwide, that has
been customized to suit local market requirements. The Company believes that it
is the only full-line wholesale distributor of microcomputer products in the
world with such a centralized global system.
IMpulse allows the Company's telesales representatives to deliver real-time
information on product pricing, inventory, availability, and order status to
reseller customers. Telesales representatives utilize the Company's Sales
Adjusted Gross Profit ("SAGP") pricing system to make informed pricing decisions
for each order through access to specific product and order related costs.
Considering the industry's narrow margins, the Company's ability to make
thousands of informed pricing decisions daily represents a competitive
advantage. In addition, the Company has a number of supporting systems,
including its Decision Support System ("DSS"), a multidimensional sales and
profitability analysis application. The Company continuously seeks to make
system modifications to provide greater capability and flexibility to the
Company's individual business units and markets.
The Company intends to continue to develop and expand the use of its
Customer Information Systems ("CIS"), which packages the full range of Ingram
Micro's electronic services into a single solution. CIS is designed to improve
the information flow from supplier to distributor to reseller to end-user in
order to conduct business in a cost-effective manner. It addresses the dynamic
requirements of various customer markets by offering a core group of services
through a number of different electronic media. By using CIS, resellers can
place orders directly, without the assistance of a telesales representative. The
Company plans further expansion in electronic links with reseller customers and
suppliers to provide better access to the Company's extensive database for
pricing, product availability, and technical information.
The Company will continue to invest in the enhancement and expansion of its
systems to create additional applications and functionality.
PROVIDE SUPERIOR EXECUTION FOR RESELLER CUSTOMERS. Ingram Micro continually
refines its systems and processes to provide superior execution and service to
reseller customers. The Company believes that the level of service achieved with
its systems and processes is a competitive advantage and has been a principal
contributor to its success to date.
Providing superior execution involves, among other factors, rapid response
to customer calls, quick access to relevant product information, high order fill
rates, and on-time, accurate shipments. The Company's information systems enable
telesales representatives to provide reseller customers with real-time inventory
and pricing information. Ingram Micro strives to maintain high order fill rates
by keeping extensive supplies of product in its 30 distribution centers
worldwide. In the United States and Canada, the Company has implemented control
systems and processes referred to as Bulletproof Shipping, which include
stock-keeping unit ("SKU") bar coding
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for all products and on-line quality assurance methods. As a result of this
program, substantially all orders in the United States received by 5:00 p.m. are
shipped on the same day, with highly accurate shipping performance.
Ingram Micro will continue to invest in the development of systems and
processes to improve execution. In the United States, the Company is currently
implementing CTI technology, which will provide automatic caller identification,
onscreen call waiting, and abandoned call management capabilities to telesales
and customer service associates. Also in the United States, the recently
installed POWER system will improve response time to reseller customers' product
returns and other customer service requests. To support future customer
requirements, the Company continues to expand and upgrade its distribution
network. For example, a new warehouse is under construction in Millington,
Tennessee. In Canada, a new returns center will be added near Toronto, Ontario.
The Company is implementing formal systems for evaluating and tracking key
performance metrics such as responsiveness to customers, process accuracy, order
processing cycle time, and order fulfillment efficiency. Ingram Micro will use
this customer satisfaction monitoring system to identify potential areas of
improvement as part of the Company's focus on providing superior service.
DELIVER WORLD-CLASS VALUE-ADDED SERVICES TO SUPPLIERS AND RESELLERS. Ingram
Micro is committed to providing a diverse range of value-added wholesaling and
"for fee" services to its supplier and reseller customers. Together, these
services are intended to link reseller customers and suppliers to Ingram Micro
as a one-stop provider of microcomputer products and related services, while
meeting demand by suppliers and resellers to outsource non-core business
activities and thereby lower their operating costs.
The Company's value-added wholesaling services include final assembly and
configuration of products, technical education programs, pre- and post-sale
technical support, order fulfillment, and product demo evaluation.
In addition to these value-added wholesaling services, the Company offers a
variety of "for fee" services for its reseller customers and suppliers. These
services include: contract configuration, contract fulfillment, contract
warehousing, contract telesales, contract credit/accounts receivable management,
contract inventory management, and contract technical support for customers. The
Company is focused on identifying and developing services that directly meet
reseller customer and supplier needs.
MAINTAIN LOW COST LEADERSHIP THROUGH CONTINUOUS IMPROVEMENTS IN SYSTEMS AND
PROCESSES. The microcomputer products industry is characterized by intense
competition and narrow margins, and as a result, achieving economies of scale
and controlling operating expenses are critical to achieving and maintaining
profitable growth.
Over the last five years, the Company has been successful in reducing SG&A
expenses (including expenses allocated from Ingram Industries) as a percentage
of net sales, from 5.8% in 1991 to 4.8% in 1995. The Company has embarked on a
number of programs that are designed to continue to reduce operating expenses as
a percentage of net sales.
Many U.S. developed programs continue to be adapted for implementation in
the Company's international operations. These programs include: (i) the use of
advanced inventory processes and techniques to reduce the number of shipments
from multiple warehouses to fulfill a single order; (ii) the use of proprietary
warehouse productivity programs, such as Bulletproof Shipping and Pick
Assignment; (iii) the enhancement of associates' productivity through the use of
technology such as CTI, and the expanded use of multimedia workstations for
functions such as Telesales and Customer Service; and (iv) the electronic
automation of the ordering and information delivery process through CIS to
decrease the number of non-order telesales calls. See "-- Information Systems."
The Company believes that the continued development of the IMpulse system
and related distribution processes represents an opportunity for the Company to
leverage operating costs across additional areas of the Company's operations.
DEVELOP HUMAN RESOURCES FOR EXCELLENCE AND TO SUPPORT FUTURE GROWTH. Ingram
Micro's growth to date is a result of the talent, dedication, and teamwork of
its associates. Future growth and success will be
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substantially dependent upon the retention and development of existing
associates, as well as the recruitment of superior talent.
The Company has invested in a number of programs and systems designed to
assist in the development and retention of its associates. The Company recently
formed its Leadership Institute to provide training on a global basis in areas
such as personal leadership and basic business fundamentals. In addition, the
Company provides specific functional training for associates through Company
programs such as the Sales, Purchasing, and Marketing Academies. Transferring
functional skills and implementing cross-training programs across all Ingram
Micro locations have proven to be important factors in the Company's growth and
international expansion. In conjunction with these programs, the Company intends
to expand its human resource systems to provide enhanced career planning,
training support, applicant tracking, and benefits administration. Also, the
Company continues to seek top quality associates worldwide through local,
professional, and college recruiting programs.
CUSTOMERS
Ingram Micro sells to more than 100,000 reseller customers in approximately
120 countries worldwide. No single customer accounted for more than 3% of Ingram
Micro's net sales in 1993, 1994, 1995, or the first three quarters of 1996.
The Company conducts business with most of the leading resellers of
microcomputer products around the world, including, in the United States,
AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City, Electronic
Data Systems, En Pointe Technologies, Entex Information Services, Micro
Warehouse, Sam's Club, Staples, and Vanstar. The Company's international
reseller customers include Complet Data A/S, Consultores en Diagnostico
Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre Europe, B.V.,
GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk Datasenter, Owell
Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema SPA. The Company has
certain limited contracts with its reseller customers, although most such
contracts have a short term, or are terminable at will, and have no minimum
purchase requirements. The Company's business is not substantially dependent on
any such contracts.
Ingram Micro is firmly committed to maintaining a strong customer focus in
all of the markets it serves. To best meet this key business objective, the
Company is organized along the lines of the three market sectors it serves: VAR,
Commercial, and Consumer. This organization permits the Company to identify and
address the varying and often unique requirements of each customer group, as
opposed to applying a uniform approach to distinctly different reseller
channels. This organization model is most fully developed in the United States
and Canada, and is described as follows:
- VAR sector. VARs develop computer solutions for their customers by adding
tangible value to a microcomputer product. These computer solutions range
from tailored software development to systems integration that meet
specific customer needs. Systems integrators, network integrators,
application VARs, and original equipment manufacturers ("OEMs") are
classified in this sector. In 1995, this sector contributed over 27% of
Ingram Micro's U.S. net sales (inclusive of Ingram Alliance and the
Export Division).
- Commercial sector. The Commercial sector includes chain/independent
dealers, corporate resellers, and direct marketers that sell a variety of
computer products. This sector continues to be Ingram Micro's largest
channel and contributed over 53% of the Company's 1995 U.S. net sales.
- Consumer sector. The Consumer sector includes computer superstores,
office product superstores, mass merchants, consumer electronics stores,
and warehouse clubs. In 1995, over 17% of the Company's U.S. net sales
came from this sector.
In addition to focusing on the VAR, Commercial, and Consumer market
sectors, the Company also has specialized strategic business units ("SBUs")
designed to provide additional focused marketing and support for specific
product categories or within specific markets. These product-focused SBUs
address the needs of resellers and suppliers for in-depth support of particular
product categories. These SBUs include the Technical
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Products Division, the Macintosh and Apple Computer Division, the Enterprise
Computing Division, and the Mass Storage Division. The Company's market-focused
SBUs, which include the Consumer Markets Division, the Education Division, and
the Government Division, are designed to meet the needs of resellers and VARs
who have chosen to concentrate on a particular customer market.
Customer organization along the VAR, Commercial, and Consumer market
sectors has been implemented to varying degrees throughout the Company's
worldwide operations and may not be as well defined as in the United States and
Canada. Specific market circumstances vary from country to country. In some
markets, a few large resellers dominate; in others, the customer base is more
diversified.
SALES AND MARKETING
Ingram Micro's telesales department is comprised of approximately 1,400
telesales representatives worldwide, of whom more than 800 representatives are
located in the United States. These telesales representatives assist resellers
with product specifications, system configuration, new product/service
introductions, pricing, and availability. The two main United States telesales
centers are located in Santa Ana, California and Buffalo, New York and are
supported by an extensive national field sales organization. Currently, Ingram
Micro has more than 130 field sales representatives worldwide, including more
than 50 in the United States.
In addition to customer organization along the VAR, Commercial, and
Consumer market sectors, the Company utilizes a variety of product-focused
groups specializing in specific product types. Specialists in processors, mass
storage, networks, and other product categories promote sales growth and
facilitate customer contacts for their particular product group. Ingram Micro
also offers a variety of marketing programs tailored to meet specific supplier
and reseller customer needs. Services provided by the Company's in-house
marketing services group include advertising, direct mail campaigns, market
research, retail programs, sales promotions, training, and assistance with trade
shows and other events.
In Canada, Ingram Micro has been organized along customer sector lines to
render more specialized service to each customer sector. Additionally, a
Montreal telesales center was opened in 1995 specifically to cover the
French-speaking market. The Corporate Reseller Division has 13 dedicated field
sales representatives to focus efforts on increasing penetration and protecting
market share. The VAR accounts have received increasing coverage from field
sales representatives, now one for each geographic region, along with dedicated
telesales operations in Vancouver and Montreal. Retail customers served by the
Consumer Markets Division benefit from usage of the electronic ordering systems
and manufacturer/customer symposiums tailored specifically to the Consumer
sector. The Company offers a myriad of marketing programs targeted at the
respective customer markets and are similar to the United States programs that
offer a graduated level of services based on monthly purchase volume.
In Europe, Ingram Micro relies more heavily on telesales to cover its
customer base than in the United States and Canada. In addition, the Company
maintains a relatively small field sales organization to serve larger customers
in each country. Many of the country operations have Technical Products
Divisions that employ dedicated technical sales representatives. The European
operation is expanding the presence of other product-specific divisions such as
the Mass Storage Division and the Macintosh Division. Ingram Micro employs many
of the same marketing tools in Europe as in the United States and Canada,
including product guides, catalogues, and showcases used to promote selected
manufacturers' product lines.
In Mexico, the sales team is comprised of both field sales representatives
and telesales representatives serving Mexico City, Merida, Guadalajara, Puebla,
Monterrey, Leon, and Hermosillo. Complementing this sales group are marketing
associates assigned to key supplier product lines. To best meet the
individualized needs of its increasingly diverse customer group, the Company is
in the process of realigning its sales and marketing workforce along VAR,
Commercial, and Consumer sectors throughout the branch network. This is
anticipated to be a strategic advantage as the trend toward greater customer
focus on particular markets continues to evolve in Mexico.
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Ingram Micro's Asia Pacific sales force is responsible for growing the
Company's sales in Singapore, Malaysia, Indonesia, The Philippines, Thailand,
India, and Hong Kong. Marketing support for this sales effort is based on
product line, but will eventually be aligned along VAR, Commercial, and Consumer
sectors. To provide greater focus on the Japanese market, the Company opened a
sales office in Tokyo during the third quarter of 1995.
The Company's Export Division is supported by a team of sales
representatives located in Miami, Florida and Santa Ana, California. The Miami
office covers the Caribbean, Puerto Rico, Ecuador, Colombia, Venezuela, Peru,
Chile, Argentina, Uruguay, and Brazil, while the Santa Ana Export
representatives sell and market Ingram Micro products and services to Japan, the
Middle East, and Australia. The Belgian Export office, which is part of the
Company's European operations, serves Africa and areas of Europe where Ingram
Micro does not have an in-country sales and distribution operation. In addition,
the Export Division has field sales representatives based in Buenos Aires,
Argentina and Quito, Ecuador.
PRODUCTS AND SUPPLIERS
Ingram Micro believes that it has the largest inventory of products in the
industry, based on a review of publicly available data with respect to its major
competitors. The Company distributes and markets more than 36,000 products from
the industry's premier microcomputer hardware manufacturers, networking
equipment suppliers, and software publishers worldwide. Product assortments vary
by market, and the relative importance of manufacturers to Ingram Micro varies
from country to country. On a worldwide basis, the Company's sales mix is more
heavily weighted toward hardware products and networking equipment than software
products. Net sales of software products have decreased as a percentage of total
net sales in recent years due to a number of factors, including bundling of
software with microcomputers; sales growth in Ingram Alliance, which is a
hardware-only business; declines in software prices; and the emergence of
alternative means of software distribution, such as site licenses and electronic
distribution. The Company believes that this is a trend that applies to the
microcomputer products distribution industry as a whole, and the Company expects
it to continue. See "Risk Factors -- Rapid Technological Change; Alternate Means
of Software Distribution" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
In the United States, Ingram Micro's suppliers include almost all of the
leading microcomputer hardware manufacturers, networking equipment
manufacturers, and software publishers such as Apple Computer, Cisco Systems,
Compaq Computer, Creative Labs, Hewlett-Packard, IBM, Intel, Microsoft, NEC,
Novell, Quantum, 3Com, Seagate, Toshiba, and U.S. Robotics. Internationally,
Ingram Micro has secured distribution agreements with most of the leading
suppliers, and products are added to the Company's mix in response to local
market demands.
New products are continually evaluated and added to the Company's product
mix upon meeting Ingram Micro's business and technical standards. The Company
evaluates on average 160 products monthly. Each Ingram Micro entity has its own
procedure for assessing new products based on local market characteristics, but
all follow general guidelines utilizing certain business and technical criteria
including market size, demand, perceived value, industry positioning, support
required, ease of set-up, packaging quality, and error handling procedures. The
Company proactively pursues products representing the leading edge of
technology.
The Company's suppliers generally warrant the products distributed by the
Company and allow the Company to return defective products, including those that
have been returned to the Company by its customers. The Company does not
independently warrant the products it distributes.
The Company's business, like that of other wholesale distributors, is
subject to the risk that the value of its inventory will be affected adversely
by suppliers' price reductions or by technological changes affecting the
usefulness or desirability of the products comprising the inventory. It is the
policy of most suppliers of microcomputer products to protect distributors, such
as the Company, who purchase directly from such suppliers, from the loss in
value of inventory due to technological change or the supplier's price
reductions. Although the Company has written distribution agreements with many
of its suppliers, these agreements usually provide for nonexclusive distribution
rights and often include territorial restrictions that limit the countries in
which Ingram Micro is permitted to distribute the products. The agreements are
also generally
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short term, subject to periodic renewal, and often contain provisions permitting
termination by either party without cause upon relatively short notice. The
Company does not believe that its business is substantially dependent on the
terms of any such agreements. Under the terms of many distribution agreements,
suppliers will credit the distributor for declines in inventory value resulting
from the supplier's price reductions if the distributor complies with certain
conditions. In addition, under many such agreements, the distributor has the
right to return for credit or exchange for other products a portion of those
inventory items purchased, within a designated period of time. A supplier who
elects to terminate a distribution agreement generally will repurchase from the
distributor the supplier's products carried in the distributor's inventory.
While the industry practices discussed above are sometimes not embodied in
written agreements and do not protect the Company in all cases from declines in
inventory value, management believes that these practices provide a significant
level of protection from such declines. No assurance can be given, however, that
such practices will continue or that they will adequately protect the Company
against declines in inventory value. The Company's risk of inventory loss could
be greater outside the United States, where agreements with suppliers are more
restrictive with regard to price protection and the Company's ability to return
unsold inventory. The Company establishes reserves for estimated losses due to
obsolete inventory in the normal course of business. Historically, the Company
has not experienced losses due to obsolete inventory materially in excess of
established inventory reserves. See "Risk Factors -- Product Supply; Dependence
on Key Suppliers."
VALUE-ADDED SERVICES
The Company believes that there is a trend among wholesale distributors of
microcomputer products to increase available services for suppliers and
customers, and the Company is committed to being in the forefront of this trend.
Ingram Micro offers a myriad of programs and services to its supplier and
reseller customers as an integral part of its wholesaling efforts. The Company
categorizes these services into value-added wholesale distribution and "for fee"
services. Together, these services are intended to link reseller customers and
suppliers to Ingram Micro as a one-stop provider of microcomputer products and
related services, while meeting demand by suppliers and resellers to outsource
non-core business activities and thereby lower their operating costs.
The Company's value-added wholesaling services are an important complement
to its distribution activities and include final assembly and configuration of
products, technical education programs, pre- and post-sale technical support,
order fulfillment, and product demo evaluation.
Ingram Micro offers a selection of "for fee" services which reseller
customers and suppliers may avail themselves of, independent of product purchase
transactions. Many of the value-added wholesaling services are also included in
this set of "for fee" services, which include: contract configuration, contract
fulfillment, contract warehousing, contract telesales, contract inventory
management, and contract technical support for reseller customers and end-users.
Management remains focused on adding more value-added "for fee" services to meet
reseller customer and supplier needs.
Ingram Micro's value-added services for its reseller customers and
suppliers include:
- System Configuration. Final assembly and configuration of microcomputer
products for suppliers and reseller customers.
- Order Fulfillment. Fulfillment of end-user orders on behalf of suppliers
and reseller customers. This may include order-taking, configuration,
shipping, and collection.
- Electronic Services. Various electronic ordering and information delivery
media integrated under the Company's CIS program which enable suppliers
and reseller customers to interface directly with the Company's database.
- Technical Support. Pre- and post-sale technical support for reseller
customers.
- Tailored Marketing Services. A range of offerings including trade show
and symposium development, promotional advertising, end-user briefings,
and joint sales calls performed by Ingram Micro Sales and Marketing staff
for the benefit of reseller customers and suppliers.
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- Financial Services. Includes accounts receivable financing, a purchase
order program, and credit insurance provided or arranged by Ingram
Financial Services Company for reseller customers.
- Inventory Management. A variety of services conducted for reseller
customers that includes contract warehousing, inventory tracking by
serial number, and other services.
- Telesales. Telesales performed by the Company for suppliers and reseller
customers.
- Warehousing. Leasing of warehouse space to suppliers and reseller
customers.
- Technical Education. Various computer-based and self-study training
programs, some leading to certification from suppliers.
- Warranty and Repair. Comprehensive warranty coverage on end-user systems.
This service is sub-contracted by Ingram Micro to third-party repair
businesses for reseller customers.
All of these services are currently available in the Company's U.S.
operations. The degree of implementation of these value-added services in Ingram
Micro's international operations varies depending on particular market
circumstances. Although the Company believes that value-added services are
important as a complement to its core business, such services do not, and are
not in the future expected to, generate a material percentage of the Company's
net sales. In addition, such value-added services do not, and are not in the
future expected to, require a material portion of the Company's resources.
INGRAM ALLIANCE
Ingram Micro entered the master reseller (also known as "aggregation")
business in late 1994 with the launch of Ingram Alliance. Ingram Alliance is
designed to offer resellers access to the industry's leading hardware
manufacturers at competitive prices by utilizing a lower cost business model
that depends upon a higher average order size, lower product returns percentage,
and supplier-paid financing. See "Risk Factors -- Narrow Margins" and "-- Risks
Associated with Ingram Alliance."
The Company believes that it has been able to leverage its leading
traditional wholesale distribution business in the United States to establish
its master reseller business. Over 95% of Ingram Alliance's sales are funded by
floor plan financing companies. The Company typically receives payment from
these financing institutions within three business days from the date of the
sale, allowing Ingram Alliance to operate at much lower relative working capital
levels than the Company's wholesale distribution business. Such floor plan
financing is typically subsidized for Ingram Alliance's reseller customers by
its suppliers.
Since its inception, Ingram Alliance has experienced rapid growth. In 1995,
Ingram Alliance achieved net sales in excess of $700 million, and it currently
has 12 suppliers and more than 800 reseller customers. Ingram Alliance's success
has, to a large degree, been attributable to its ability to leverage Ingram
Micro's distribution infrastructure and capitalize on strong supplier
relationships.
To support additional growth, Ingram Alliance remains committed to further
developing relations with key suppliers. These efforts are largely driven by
joint supplier/distributor sales calls, proposal and bid development programs,
and tailored marketing campaigns carried out by Ingram Alliance supplier program
teams.
Ingram Alliance pursues an integrated sales and marketing strategy to gain
new customers and grow its business. A fully-dedicated telesales team is in
place, which in conjunction with the Company's field sales representatives aims
to cultivate important relationships with reseller customers. Further, Ingram
Alliance provides a wide range of high quality "for fee" value-added services
for its customers including technical training and certification, warranty and
repair, fulfillment, technical support, contract warehousing, and configuration
services. Special promotional activities and creative financing packages are
additional incentives for resellers to do business with Ingram Alliance.
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INFORMATION SYSTEMS
The Company's information system, IMpulse, is central to its ability to
provide superior execution to its customers, and as such, the Company believes
that it represents an important competitive advantage. See "Risk
Factors -- Dependence on Information Systems."
Ingram Micro's systems are primarily mainframe-based in order to provide
the high level of scalability and performance required to manage such a large
and complex business operation. IMpulse is a single, standardized, real-time
information system and operating environment, used across all of the Company's
worldwide operations. It has been customized as necessary for use in every
country in which the Company operates and has the capability to handle multiple
languages and currencies. On a daily basis, the Company's systems typically
handle 12 million on-line transactions, 26,000 orders, and 37,000 shipments. The
Company has designed IMpulse as a scalable system that has the capability to
support increased transaction volume. The overall on-line response time for the
Company's network of over 8,000 user stations (terminals, printers, personal
computers, and radio frequency hand held terminals) is less than one-half
second.
Worldwide, Ingram Micro's centralized processing system supports more than
40 operational functions including receiving, order processing, shipping,
inventory management, and accounting. At the core of the IMpulse system is
on-line, real-time distribution software to which considerable enhancements and
modifications have been made to support the Company's growth and its low cost
business model. The Company makes extensive use of advanced telecommunications
technologies with customer service-enhancing features, such as Automatic Call
Distribution to route customer calls to the telesales representatives. The
Telesales Department relies on its Sales Wizard system for on-line, real-time
tracking of all customer calls and for status reports on sales statistics such
as number of customer calls, customer call intentions, and total sales
generated. IMpulse allows the Company's telesales representatives to deliver
real-time information on product pricing, inventory, availability, and order
status to reseller customers. The SAGP pricing system enables telesales
representatives to make informed pricing decisions through access to specific
product and order related costs for each order. Considering the industry's
narrow margins, these pricing decisions are particularly important, and the
Company believes that its ability to make thousands of informed pricing
decisions daily represents a competitive advantage.
In the United States, the Company is in the process of implementing CTI
technology, which will provide the telesales and customer service
representatives with Automatic Number Identification capability and advanced
telecommunications features such as on-screen call waiting and automatic call
return, thereby reducing the time required to process customer orders and
customer service requests.
To complement Ingram Micro's telesales, customer service, and technical
support capabilities, IMpulse supports CIS, which integrates all of the
Company's electronic services into a single solution. CIS offers a number of
different electronic media through which customers can conduct business with the
Company, such as the Customer Automated Purchasing System ("CAPS"), Electronic
Data Interchange ("EDI"), the Bulletin Board Service, and the Ingram Micro Web
site. The Company's latest additions to CIS are its Internet-based Electronic
Catalog and Manufacturer Information Library. The Electronic Catalog provides
reseller customers with real-time access to product pricing and availability,
with the capability to search by product category, name, or manufacturer. The
Manufacturer Information Library is a comprehensive multi-manufacturer database
of timely and accurate product, sales, marketing, and technical information,
which is updated nightly for new information. Ingram Micro believes it is the
first microcomputer wholesale distributor to offer electronic access to
real-time product pricing, availability, and information on the World Wide Web.
All of Ingram Micro's CIS offerings are constantly being reviewed for
enhancement. For instance, a faster local network intranet solution to access
the Manufacturer Information Library is currently being tested, and ordering and
configuration capabilities through the Internet are under consideration.
The Company's warehouse operations use extensive bar-coding technology and
radio frequency technology for receiving and shipping, and real-time links to
UPS and FedEx for freight processing and shipment tracking. The Customer Service
Department uses the POWER System for on-line documentation and faster processing
of customer product returns. To ensure that adequate inventory levels are
maintained, the Company's buyers depend on the Purchasing system to track
inventory on a continual basis. Many other
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features of IMpulse help to expedite the order processing cycle and reduce
operating costs for the Company as well as its reseller customers and suppliers.
To support and augment the Company's mainframe-based systems, the Company
utilizes a number of client-server applications. Examples are the Marketing
On-line Management System, a software application that provides management,
accountability, and financial controls for over 6,000 marketing projects;
APImage, an application that facilitates imaging of invoices and related
documents in the Accounts Payable department, substantially reducing paper
processing and improving document work flow; and DSS, a data warehousing
application that enables multidimensional sales and profitability analysis. In
the United States, over 330 associates across all functions have access to 75
million lines of data through DSS. DSS is used for, among other tasks, pricing
decisions and analysis of profitability by customer market and product category.
DSS is currently being implemented in Canada and the U.K., with plans to add
other international locations thereafter. The Company has also begun to deploy
other PC-based tools for both the United States and international locations,
including workstations in Telesales and Purchasing to assist with product
acquisition and pricing decisions.
The Company employs various security measures and backup systems designed
to protect against unauthorized use or failure of its information systems.
Access to the Company's information systems is controlled through the use of
passwords and additional security measures are taken with respect to especially
sensitive information. The Company has a five year contract with Sungard
Recovery Services for disaster recovery and twice per year performs a complete
systems test, including applications and database integrity. In addition, the
Company has backup power sources for emergency power and also has the capability
to automatically reroute incoming calls, such as from its Santa Ana (West Coast
sales) facility to its Buffalo (East Coast sales) facility. The Company has not
in the past experienced significant failures or downtime of IMpulse or any of
its other information systems, but any such failure or significant downtime
could prevent the Company from taking customer orders, printing product
pick-lists, and/or shipping product and could prevent customers from accessing
price and product availability information from the Company. See "Risk
Factors -- Dependence on Information Systems."
Over 350 experienced information technology professionals support the daily
maintenance and continuous development of the Company's systems.
OPERATIONS
ORDER ENTRY
The order entry process begins with the entry of a customer account number
by a telesales representative. With this input, IMpulse automatically displays
the customer's name, address, credit terms, financing arrangements, and
preferred shipping method. The telesales representative assists the customer
on-line with product lookups, real-time inventory availability, price inquiries,
and status of previous orders. As an order is entered, key information is filled
in by the system, such as product description, price, availability, and adjusted
gross margin. The closest warehouse to the customer with available product is
automatically determined, and the corresponding product quantity is reserved.
The system totals the order and automatically checks the customer's credit
status. The order is released for processing, unless credit limits are exceeded
or the order falls outside acceptable profit levels. In the latter case, the
order is put on hold and immediately elevated for review by credit or sales
management.
Reseller customers can also conduct business electronically through the
Company's CIS offerings such as CAPS, EDI, and IM On Line. By using CIS,
resellers can access the Company's database and place orders directly without
the assistance of a telesales representative. See "-- Information Systems."
SHIPPING
In most of Ingram Micro's operations, the Company's objective is to ship
substantially all orders received by 5:00 p.m. on the same day. In Canada,
France, Belgium, the U.K. and the Netherlands, the cut-off time for same day
shipment is 6:00 p.m. When an order is released, it is immediately available for
processing in the designated warehouse. IMpulse ensures cost efficient order
processing through a system called Pick Assignment which determines pick lists
based on the warehouse location of items ordered. In the distribution
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centers, Ingram Micro relies on a sophisticated bar code reading system and a
flexible automated package handling system for picking, packing, and shipping
products accurately and cost effectively. In addition, IMpulse provides on-line
shipping, manifesting, freight costing, invoicing and package tracking
information.
The Company's warehouse inventories are maintained automatically by IMpulse
which updates stock levels and feeds this information to the purchasing system
for restocking as soon as an order is received. On-line quality assurance done
during receipt of inbound product and prior to the shipment of orders ensures
the integrity of warehouse stock inventory and the accuracy of shipments to
customers. See "Risk Factors -- Dependence on Independent Shipping Companies."
PURCHASING
To monitor product inventory, the purchasing staff, numbering over 260
worldwide, uses the IMpulse system inventory reports, which provide product
inventory levels, six months' sales history, month-to-date, and year-to-date
sales statistics by SKU and by warehouse location. Buyers carefully analyze
current and future inventory positions and profitability potential. Several
factors, such as inventory carrying cost, payment terms, purchase rebates,
volume discounts, and marketing funds are considered in negotiating deals with
suppliers. Buyers enter purchase orders into the IMpulse system, indicating the
SKU number, the quantity to be ordered, and the warehouse locations to which the
order should be shipped. Cost information and supplier terms and conditions are
automatically entered on the purchase order; and can be modified if different
terms have been negotiated. The IMpulse system automatically generates purchase
orders for each inventory warehouse location and transmits these orders directly
to the suppliers via EDI or facsimile. See "Risk Factors -- Risk of Declines in
Inventory Value."
A number of purchasing programs have been developed to exploit
opportunities unique to certain of the Company's operations. In Europe, the
country managers work together as a group to obtain the best available supplier
terms. The European "Inventory Sharing" program, when fully implemented, will
allow sales personnel in one market to order products that are out of stock or
otherwise unavailable in the local country from another European Ingram Micro
business unit. Benefits of this program include lower inventory costs, better
inventory turnover, and improved margins. In Canada, the U.S. Direct Fulfillment
Program allows the fulfillment of individual Canadian orders from the United
States as necessary. See "-- Geographic Tactics -- Canada" and "-- Europe."
GEOGRAPHIC TACTICS
Ingram Micro operates worldwide with a set of common, global strategies.
Recognizing the varying requirements of the Company's different geographic
markets, the Company has developed specific tactics to address local market
conditions. However, the Company's non-U.S. operations are subject to certain
additional risks. See "Risk Factors -- Exposure to Foreign Markets; Currency
Risk."
UNITED STATES
In the United States, the Company has undertaken a number of key
initiatives to enhance its position in the wholesale microcomputer marketplace:
- In an effort to capture an increased share of the VAR sector, the Company
will seek to convey to the market its superior ability to supply basic
wholesaling services to VARs, as well as its breadth of product offerings
to support vertical VAR customer sets. The Premier VAR Plus program has
been developed as the prime marketing vehicle for all VAR programs and
services. This program provides VARs with graduated levels of business
services based on monthly purchase volume. Such services include a
dedicated technical sales force, end-user leads, technology seminars, and
marketing symposiums.
- As a cornerstone of the Company's VAR efforts, the Enterprise Computing
Division continues to expand its penetration in markets for high-end
technical products such as UNIX, Windows NT, document imaging, and
networking equipment. This will be accomplished by developing programs
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which institute a Company-wide commitment to the UNIX VAR market,
providing a sophisticated sales force experienced in complex networking
technology solutions, partnering with key suppliers of high-end technical
products, and leveraging the Company's core competencies in electronic
ordering and configuration.
- In order to increase its share of the Consumer sector, the Company
maintains a team of sales account managers and business development
specialists dedicated to the Consumer account base. The aim of the
Consumer Markets Division is to provide a variety of value-added services
including inventory mix management, store personnel training, marketing
programs, and administration of supplier programs.
CANADA
While the Company's Canadian operation closely mirrors the U.S. operation,
initiatives unique to the Canadian operating environment have been developed and
are described below:
- The U.S. Direct Fulfillment Program has been instituted in Canada to take
advantage of its proximity to the United States. Through this program,
Canadian customers are currently able to receive products directly from
the Chicago distribution center. The expanded use of the U.S. Direct
Fulfillment Program will allow for greater breadth of SKUs and
manufacturers represented in the Canadian marketplace.
- As part of its overall strategy to grow share in the retail market, the
Canadian operation periodically employs Dealer Development
Representatives who provide product education, display set-up, and other
on-site assistance as a special service to retail customers.
EUROPE
One of the Company's key objectives is to become the market share leader in
Europe. The Company entered Europe in 1989 with an acquisition in Belgium. See
"Risk Factors -- Acquisitions." Through a series of small acquisitions, it has
rapidly grown to a pan-European presence with aggregate net sales of $1.8
billion in 1995, covering 11 countries: Austria, Belgium, Denmark, France,
Germany, Italy, the Netherlands, Norway, Sweden, Spain, and the United Kingdom.
The Company believes that it has the second largest market share position in
Europe and that it has a strong base for future growth and increased
profitability. Particular areas of focus in Europe include:
- The Company will seek to enhance gross margin in the European operation
through increased emphasis on high-end and higher margin technical
product sales and the implementation of the SAGP system.
- A program unique to Ingram Micro is Inventory Sharing. This program
allows sales personnel in one European market to order products that are
out of stock or otherwise unavailable in the local country from another
Ingram Micro business unit. The billing is done in the local currency
with all value-added taxes, tax reporting, and similar functions managed
automatically by the IMpulse system. Inventory sharing allows the Company
to expand its sales base without an expansion of inventory investment or
individual country expansion of stock product assortment. Benefits of the
program include lower inventory costs, better inventory turnover, and
improved gross margin. An important initiative is to add more country
operations to the inventory sharing program and to enhance the program
through coordinated purchasing among several countries.
- Continued cost reduction, as a percentage of net sales, and cost control
are important for boosting profitability in the European operation. The
Company aims to further reduce expense ratios of the individual business
units through increased sales volume, the continued development and
refinement of operations and management processes, and the increasing use
of selected U.S. and Canadian business programs.
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MEXICO/ASIA PACIFIC
Mexico. Ingram Dicom, a 70%-owned subsidiary of Ingram Micro, is the
leading wholesale distributor of microcomputer products in Mexico. Ingram Dicom
offers over 6,000 products to more than 5,900 reseller customers in Mexico. In
1995, over 85% of Ingram Dicom's net sales came from 1,100 resellers who
primarily service the country's major banks and businesses. Additionally, Ingram
Dicom also sells to a small but growing VAR client base and to mass merchant
retailers (e.g., Sam's Club, Sanborn's, Price Club).
As the local high technology market becomes more sophisticated, Ingram
Dicom intends to add higher volume, more specialized technical (e.g., UNIX,
networking) products to its inventory. Other important initiatives include
adding a wider selection of technical education courses, extending CAPS
electronic ordering throughout the entire Ingram Dicom operation, and offering a
broader range of financing options for reseller customers. The Company will also
continue to negotiate supplier terms and conditions aimed at limiting the
Company's exposure to foreign currency fluctuations.
Asia Pacific. Ingram Micro's Asia Pacific operations, supported by its
Singapore office and warehouse, focus on serving the Singapore, Malaysia,
Indonesia, Philippines, Thailand, India, and Hong Kong markets. Over 800
customers are currently served from the Singapore base, with approximately 64%
of these customers concentrated in the local Singapore market. The Company
operates a sales office in Tokyo serving the Japanese market. In addition, the
Company has recently acquired a distributor in Malaysia.
In building a solid regional Asia Pacific business, the Company intends to
leverage its systems capability, financial strength, management experience, and
excellent relationships with key suppliers. The initial aim of the Asia Pacific
strategy is to recruit new suppliers and reseller customers while further adding
experienced managers in key functional areas of the business. The Company is
currently exploring the possibility of establishing additional operations
through joint ventures or acquisitions. See "Risk Factors -- Acquisitions."
EXPORT MARKETS
Ingram Micro's Export Division continues to expand in international markets
where the Company does not have a stand-alone, in-country presence. The Miami,
Santa Ana, and Belgium offices serve more than 2,500 resellers in over 100
countries. In addition, the Export Division has field sales representatives
based in Buenos Aires, Argentina and Quito, Ecuador.
Key strategic objectives for the Export Division include increasing sales
and market share in each of the regions it serves primarily by providing a broad
product assortment, further cultivating key supplier relationships, and
expanding reseller service offerings. The Company will continue to position
itself as a global distributor of microcomputer products providing resellers in
all markets access to the Company's vast selection of products via its extensive
network of international and U.S. warehouses.
COMPETITION
The Company operates in a highly competitive environment, both in the
United States and internationally. The microcomputer products distribution
industry is characterized by intense competition, based primarily on price,
product availability, speed and accuracy of delivery, effectiveness of sales and
marketing programs, credit availability, ability to tailor specific solutions to
customer needs, quality and breadth of product lines and service, and
availability of technical and product information. The Company believes it
competes favorably with respect to each of these factors. As price points have
declined, the Company believes that value-added services capabilities (such as
configuration, innovative financing programs, order fulfillment, contract
telesales, and contract warehousing) will become more important competitive
factors.
The Company entered the master reseller business through Ingram Alliance in
late 1994. See "-- Ingram Alliance." The Company competes with other master
resellers, which sell to groups of affiliated franchisees and third-party
dealers. Many of the Company's competitors in the master reseller business are
more experienced and have more established contacts with affiliated resellers,
third-party dealers, or suppliers, which may provide them with a competitive
advantage over the Company.
The Company is constantly seeking to expand its business into areas closely
related to its core microcomputer products distribution business. As the Company
enters new business areas, it may encounter
45
<PAGE> 50
increased competition from current competitors and/or from new competitors, some
of which may be current customers of the Company. For example, the Company
intends to distribute media in the new digital video disc format and may compete
with traditional music and printed media distributors. In addition, certain
services the Company provides may directly compete with those provided by the
Company's reseller customers. There can be no assurance that increased
competition and adverse reaction from customers resulting from the Company's
expansion into new business areas will not have a material adverse effect on the
Company's business, financial condition, or results of operations. See "Risk
Factors -- Intense Competition."
Ingram Micro's primary competitors include large U.S.-based international
distributors such as Merisel, Tech Data, and Arrow Electronics (a worldwide
industrial electronics distributor), as well as national distributors such as
AmeriQuest Technologies (majority owned by Computer 2000), Handleman, Navarre,
and Avnet. Ingram Alliance's principal competitors include such master resellers
as Intelligent Electronics, MicroAge, Datago, InaCom, and recent entrant Tech
Data Elect, a division of Tech Data. Ingram Micro competes internationally with
a variety of national and regional distributors. European competitors include
international distributors such as Computer 2000 (owned by German conglomerate
Viag AG), CHS Electronics, and Softmart/Tech Data, and several local and
regional distributors, including Actebis, Scribona, and Microtech. In Canada,
Ingram Micro competes with Merisel, Globelle, Beamscope, and Tech Data. Ingram
Dicom is the leading distributor in Mexico, competing with such companies as
MPS, CHS Electronics, Intertec, and Dataflux. In the Asia Pacific market, Ingram
Micro faces both regional and local competitors, of whom the largest is Tech
Pacific, a division of First Pacific Holdings, which operates in more than five
Asia Pacific markets.
Ingram Micro also competes with hardware manufacturers and software
publishers that sell directly to reseller customers and end-users.
FACILITIES
Ingram Micro's worldwide executive headquarters, as well as its West Coast
sales and support offices, are located in Santa Ana, California. The Company
also maintains an East Coast operations center in Buffalo, New York. A new
United States distribution center in Millington, Tennessee is expected to be
completed in April 1997, adding 600,000 square feet to the Company's warehouse
capacity. This distribution center will be strategically located near several
major transportation hubs and is expected to benefit from lower regional labor
costs. The U.S. network of distribution centers permits Ingram Micro to keep an
extensive supply of product close to its reseller customers, which enables the
Company to provide substantially all of its U.S. reseller customers with one- or
two-day ground delivery.
The principal properties of the Company consist of the following:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE FLOOR AREA IN SQ. FT.
- ------------------------------ ----------------------------------------- ---------------------
<S> <C> <C>
UNITED STATES
Santa Ana, CA................. Executive offices 398,245
Buffalo, NY................... Offices 188,341
Nashville, TN................. Data Processing Center 11,782
Millington, TN................ Distribution Center (under construction) 600,000
Chicago/Carol Stream, IL...... Distribution Centers 456,139
Fullerton, CA................. Distribution Center 401,394
Harrisburg, PA................ Distribution Center 230,000
Memphis, TN................... Distribution Center 160,000
Fremont, CA................... Distribution Center 141,540
Carrollton, TX................ Distribution Center 121,654
Atlanta, GA................... Distribution Center 83,049
Miami, FL..................... Distribution Center, Offices 52,080
</TABLE>
46
<PAGE> 51
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE FLOOR AREA IN SQ. FT.
- ------------------------------ ----------------------------------------- ---------------------
<S> <C> <C>
Santa Ana, CA................. Returns Center, Offices 219,500
Fremont, CA................... Freight Consolidation Center 58,435
EUROPE
Brussels, Belgium............. Offices 33,600
Horsholm, Denmark............. Offices 39,682
Ballerup, Denmark............. Distribution Center 58,104
Lesquin, France............... Offices 37,088
Paris, France................. Offices 4,250
Roncq, France................. Distribution Center 96,000
Ottobrunn, Germany............ Offices 32,221
Kirchheim, Germany............ Distribution Center 75,904
Milan, Italy.................. Offices 17,114
Milan, Italy.................. Distribution Center 44,669
Rome, Italy................... Offices, Distribution Center 10,225
Utrecht, Netherlands.......... Offices 30,999
Vianen, Netherlands........... Distribution Center 61,149
Oslo, Norway.................. Offices, Distribution Center 53,595
Madrid, Spain................. Offices, Distribution Center 17,689
Barcelona, Spain.............. Offices, Distribution Center 74,508
Kista, Sweden................. Offices 26,371
Sollentuna, Sweden............ Distribution Center 43,126
Milton Keynes, U.K............ Offices, Distribution Center 211,992
CANADA
Toronto, Ontario.............. Offices, Distribution Center 274,376
Vancouver, B.C................ Offices, Distribution Center 87,148
Montreal, Quebec.............. Offices 12,000
MEXICO
Mexico City, D.F.............. Offices, Distribution Center 65,695
Puebla, Puebla................ Offices, Distribution Center 11,679
Leon, Guanajuato.............. Offices, Distribution Center 11,206
Guadalajara, Jalisco.......... Offices, Distribution Center 9,967
Merida, Yucatan............... Offices, Distribution Center 6,437
Monterrey, Nuevo Leon......... Offices, Distribution Center 6,039
Hermosillo, Sonora............ Offices, Distribution Center 5,156
ASIA
Singapore..................... Offices, Distribution Center 20,989
Kuala Lumpur, Malaysia........ Offices, Distribution Center 6,000
Tokyo, Japan.................. Offices 720
</TABLE>
All of the Company's facilities, with the exception of the Brussels office
and the distribution centers in Chicago and Roncq, France, are leased. These
leases have varying terms. The Company does not anticipate any material
difficulty in renewing any of its leases as they expire or securing replacement
facilities, in each case on commercially reasonable terms. The Company has
recently purchased three undeveloped properties in Santa Ana, California
totaling approximately 23.27 acres.
47
<PAGE> 52
TRADEMARKS AND SERVICE MARKS
The Company holds various trademarks and service marks, including, among
others, "Ingram Micro," "IMpulse," the Ingram Micro logo, "Partnership America,"
and "Leading the Way in Worldwide Distribution." Certain of these marks are
registered, or are in the process of being registered, in the United States and
various foreign countries. Even though the Company's marks may not be registered
in every country where the Company conducts business, in many cases the Company
has acquired rights in those marks because of its continued use of them.
Management believes that the value of the Company's marks is increasing with the
development of its business but that the business of the Company as a whole is
not materially dependent on such marks.
EMPLOYEES
As of September 28, 1996, the Company had approximately 8,036 associates
located as follows: United States -- 4,924, Europe -- 1,840, Canada -- 797,
Mexico -- 405, and Asia-Pacific -- 70. Ingram Micro believes that its success
depends on the skill and dedication of its associates. The Company strives to
attract, develop, and retain outstanding personnel. None of the Company's
associates in the United States, Europe, Canada, Malaysia, and Singapore are
represented by unions. In Mexico, Ingram Dicom has collective bargaining
agreements with one of the national unions. The Company considers its employee
relations to be good.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.
48
<PAGE> 53
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to each
person who is an executive officer or director of the Company:
<TABLE>
<CAPTION>
NAME AGE PRESENT AND PRIOR POSITIONS HELD(1) YEARS POSITIONS HELD
- ------------------------ --- ------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Jerre L. Stead(2) 53 Chief Executive Officer and Chairman Aug. 1996 - Present
of the Board
Chief Executive Officer and Chairman Jan. 1995 - Aug. 1995
of the Board, Legent Corporation, a
software development company
Executive Vice President, Chairman May 1993 - Dec. 1994
and Chief Executive Officer, AT&T
Corp. Global Information Solutions
(NCR Corp.), a computer
manufacturer
President and Chief Executive Sept. 1991 - Apr. 1993
Officer, AT&T Corp. Global Business
Communication Systems, a
communications company
Chairman, President and Chief Sept. 1988 - Aug. 1991
Executive Officer, Square D Co., an
electronics manufacturer
Jeffrey R. Rodek(3) 43 Worldwide President; Chief Operating Dec. 1994 - Present
Officer; Director
Senior Vice President, Americas and July 1991 - Sept. 1994
Caribbean, Federal Express, an
overnight courier firm
Senior Vice President, Central Dec. 1989 - July 1991
Support Services, Federal Express
David R. Dukes(3)(4) 52 Vice Chairman Apr. 1996 - Present
Co-Chairman Jan. 1992 - Apr. 1996
Chief Executive Officer, Ingram Jan. 1994 - Present
Alliance
Chief Operating Officer Sept. 1989 - Dec. 1993
Director Sept. 1989 - Present
President Sept. 1989 - Dec. 1991
Sanat K. Dutta 47 Executive Vice President; President, Oct. 1996 - Present
Ingram Micro U.S.
Executive Vice President Aug. 1994 - Oct. 1996
Senior Vice President, Operations May 1988 - Aug. 1994
Michael J. Grainger 44 Executive Vice President; Oct. 1996 - Present
Worldwide Chief Financial Officer
Chief Financial Officer May 1996 - Oct. 1996
Vice President and Controller, Ingram July 1990 - Present
Industries
John Wm. Winkelhaus, II 46 Executive Vice President; President,
Ingram Micro Europe Jan. 1996 - Present
Senior Vice President, Ingram Micro Feb. 1992 - Dec. 1995
Europe
Senior Vice President, Sales Apr. 1989 - Jan. 1992
</TABLE>
49
<PAGE> 54
<TABLE>
<CAPTION>
NAME AGE PRESENT AND PRIOR POSITIONS HELD(1)
- ------------------------ --- ------------------------------------- YEARS POSITIONS HELD
----------------------------
<S> <C> <C> <C> <C> <C>
James E. Anderson, Jr. 49 Senior Vice President, Secretary, and Jan. 1996 - Present
General Counsel
Vice President, Secretary, and Sept. 1991 - Present
General Counsel, Ingram Industries
Partner, Dearborn & Ewing, a law firm Jan. 1986 - Sept. 1991
Douglas R. Antone 43 Senior Vice President; President, June 1994 - Present
Ingram Alliance
Senior Vice President, Worldwide Nov. 1993 - May 1994
Sales and Marketing, Borland
International, a software
development company
Senior Vice President, Worldwide July 1990 - Nov. 1993
Sales, Borland International
Larry L. Elchesen 46 Senior Vice President June 1994 - Present
President, Ingram Micro Canada May 1989 - Present
Philip D. Ellett 42 Senior Vice President; Chief Oct. 1996 - Present
Operating Officer, Ingram Micro
Europe
Senior Vice President; General Jan. 1996 - Oct. 1996
Manager, U.S. Consumer Markets
Division
President, Gates/Arrow, an Aug. 1994 - Dec. 1995
electronics distributor
President and Chief Executive Oct. 1991 - Aug. 1994
Officer, Gates/F.A. Distributing,
Inc.
President and Chief Operating Oct. 1990 - Oct. 1991
Officer, Gates/F.A. Distributing,
Inc.
David M. Finley 56 Senior Vice President, Human July 1996 - Present
Resources
Senior Vice President, Human May 1995 - July 1996
Resources, Budget Rent a Car, a car
rental company
Vice President, Human Resources, The Jan. 1977 - May 1995
Southland Corporation, a
convenience retail company
Robert Furtado 40 Senior Vice President, Operations Aug. 1994 - Present
Vice President, Operations July 1989 - Aug. 1994
Robert Grambo 32 Senior Vice President, Telesales Oct. 1995 - Present
Vice President, Sales Apr. 1994 - Sept. 1995
Vice President, Product Marketing Apr. 1993 - Mar. 1994
President, Bloc Publishing Corp., a Apr. 1992 - Apr. 1993
software publishing firm
Senior Director, Purchasing, Ingram Jan. 1990 - Apr. 1992
Micro
Ronald K. Hardaway 52 Senior Vice President; Chief Jan. 1992 - Present
Financial Officer, Ingram Micro
U.S.
Senior Vice President and Controller June 1990 - Jan. 1992
Gregory J. Hawkins 42 Senior Vice President, Sales Oct. 1995 - Present
Vice President, Sales Jan. 1993 - Oct. 1995
Vice President, Major Accounts Aug. 1992 - Jan. 1993
Director, Major Accounts, Consumer June 1992 - Aug. 1992
Markets
Director, Marketing Jan. 1991 - June 1992
James M. Kelly 60 Senior Vice President, Management Feb. 1991 - Present
Information Systems
</TABLE>
50
<PAGE> 55
<TABLE>
<CAPTION>
NAME AGE PRESENT AND PRIOR POSITIONS HELD(1)
- ------------------------ --- ------------------------------------- YEARS POSITIONS HELD
----------------------------
<S> <C> <C> <C> <C> <C>
David W. Rutledge 43 Senior Vice President, Asia Pacific, Jan. 1996 - Present
Latin America and Export Markets
Senior Vice President, Administration Sept. 1991 - Dec. 1995
Vice President, Secretary, and Jan. 1986 - Sept. 1991
General Counsel, Ingram Industries
Martha R. Ingram(5)(6) 61 Director May 1996 - Present
Chairman of the Board of Directors May 1996 - Aug. 1996
Chairman of the Board of Directors, June 1995 - Present
Ingram Industries
Director, Ingram Industries 1981 - Present
Chief Executive Officer, Ingram Apr. 1996 - Present
Industries
Director of Public Affairs, Ingram 1979 - June 1995
Industries
John R. Ingram(5) 35 Director Dec. 1994 - Present
Acting Chief Executive Officer May 1996 - Aug. 1996
Co-President, Ingram Industries Jan. 1996 - Present
President, Ingram Book Company Jan. 1995 - Oct. 1996
Vice President, Purchasing, Ingram Jan. 1994 - Dec. 1994
Micro Europe
Vice President, Management Services, July 1993 - Dec. 1993
Ingram Micro Europe
Director of Management Services, Jan. 1993 - June 1993
Ingram Micro Europe
Director of Purchasing Apr. 1991 - Dec. 1992
David B. Ingram(5) 33 Director May 1996 - Present
Chairman and President, Ingram Mar. 1996 - Present
Entertainment
President and Chief Operating Aug. 1994 - Mar. 1996
Officer, Ingram Entertainment
Vice President, Major Accounts, Nov. 1993 - Aug. 1994
Ingram Entertainment
Assistant Vice President, Sales, June 1992 - Nov. 1993
Ingram Entertainment
Director, Sales, Ingram Entertainment July 1991 - June 1992
Philip M. Pfeffer 51 Director 1986 - Present
President and Chief Operating May 1996 - Present
Officer, Random House Inc., a
publishing company
Executive Vice President, Ingram Dec. 1981 - Mar. 1996
Industries
Chairman and Chief Executive Officer, Dec. 1981 - Dec. 1995
Ingram Distribution Group Inc.
Chairman, Ingram Micro Holdings Inc. Apr. 1989 - Oct. 1995
</TABLE>
51
<PAGE> 56
<TABLE>
<CAPTION>
NAME AGE PRESENT AND PRIOR POSITIONS HELD(1) YEARS POSITIONS HELD
- ------------------------ --- ------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Don H. Davis, Jr.(3)(7) 56 Director Nominee Oct. 1996 - Present
President and Chief Operating July 1995 - Present
Officer, Rockwell International
Corporation, a diversified
high-technology company
Executive Vice President and Chief Jan. 1994 - July 1995
Operating Officer, Rockwell
International Corporation
Senior Vice President; President, June 1993 - Jan. 1994
Automation Group, Rockwell
International Corporation
President, Allen-Bradley Company, a July 1989 - Jan. 1994
wholly-owned subsidiary of Rockwell
International Corporation
J. Phillip Samper(3)(8) 62 Director Nominee Oct. 1996 - Present
Chairman and Chief Executive Officer, May 1995 - Mar. 1996
Cray Research, Inc., a computer
products company
President and Chief Executive Jan. 1994 - Mar. 1995
Officer, Sun Microsystems Computer
Company, a division of Sun
Microsystems, Inc., a computer
products company
Managing Partner, FRN Group, a Feb. 1991 - Jan. 1994
private investment and consulting
firm
President and Chief Executive May 1990 - Feb. 1991
Officer, Kindercare Learning
Centers, Inc., a child care and
educational company
Joe B. Wyatt(3)(9) 61 Director Nominee Oct. 1996 - Present
Chancellor, Vanderbilt University July 1982 - Present
</TABLE>
- ---------------
(1) The first position and any other positions not given a separate corporate
identification are with the Company.
(2) Jerre L. Stead is a director of Armstrong World Industries, Inc., Autodesk,
Inc., and TJ International, Inc.
(3) Messrs. Davis, Samper, and Wyatt have agreed to serve as directors, with
their service to begin as of the date of this Prospectus. Messrs. Rodek and
Dukes will resign from the Board of Directors at such time.
(4) David R. Dukes is a director of National Education Corporation.
(5) Martha R. Ingram is the mother of David B. Ingram and John R. Ingram. There
are no other family relationships among the above individuals.
(6) Martha R. Ingram is a director of Baxter International Inc., First American
Corporation, and Weyerhaeuser Co.
(7) Don H. Davis, Jr is a director of Sybron International Corporation.
(8) J. Phillip Samper is a director of Armstrong World Industries, Inc., The
Interpublic Group of Companies, Inc., Sylvan Learning Systems, Inc., Network
Storage Corp., and Scitex Corporation, Ltd.
(9) Joe B. Wyatt is a director of Sonat, Inc. and Reynolds Metals Company.
BOARD OF DIRECTORS
The Board of Directors currently consists of Mr. Stead, Mrs. Ingram and
Messrs. John R. Ingram, Rodek, Dukes, David B. Ingram, and Pfeffer. Messrs.
Davis, Samper, and Wyatt have agreed to serve as directors, with their service
to begin as of the date of this Prospectus. Messrs. Rodek and Dukes will resign
from the Board of Directors at such time. So long as the Ingram Family
Stockholders and their permitted transferees (as defined in the Board
Representation Agreement) own in excess of 25,000,000 shares of the outstanding
Common Equity, the Board Representation Agreement will provide for the
designation of (i) not more than three directors designated by the Ingram Family
Stockholders, (ii) one director designated by the Chief Executive Officer of the
Company, and (iii) four or five additional directors ("Independent Directors")
who are not members of the Ingram family or executive officers or employees of
the Company. Directors designated by the Ingram Family Stockholders may include
Martha R. Ingram, any of her legal descendants, or any of their respective
spouses. See "The Split-Off and the Reorganization -- The Split-Off." Mr.
Pfeffer is
52
<PAGE> 57
an Independent Director, and Messrs. Davis, Samper, and Wyatt will be
Independent Directors. One additional Independent Director may be designated
after the closing of this offering.
COMMITTEES. The Board Representation Agreement provides for the formation
of certain committees of the Board of Directors. The Bylaws of the Company
specifically provide for four committees: an Executive Committee, a Nominating
Committee, an Audit Committee, and a Compensation Committee.
The Executive Committee will consist of three directors, one of whom will
be a director designated by the Ingram Family Stockholders, one of whom will be
the director designated by the Chief Executive Officer of the Company, and one
of whom will be an Independent Director. The Executive Committee may approve
management decisions requiring the immediate attention of the Board of Directors
during the period of time between each regularly scheduled meeting of the Board.
The Executive Committee will not have authority to approve any of the following
items, all of which require the approval of the Board: (i) any action that would
require the approval of the holders of a majority of the stock held by certain
of the Ingram Family Stockholders or that would require approval of the holders
of a majority of the Common Equity under applicable law or under the Certificate
of Incorporation or Bylaws of the Company; (ii) any acquisition with a total
aggregate consideration in excess of 2% of the Company's stockholders' equity;
(iii) any action outside the ordinary course of business of the Company; or (iv)
any other action involving a material shift in policy or business strategy for
the Board.
The Nominating Committee will consist of three directors, two of whom will
be directors designated by the Ingram Family Stockholders, and one of whom will
be the director designated by the Chief Executive Officer of the Company. The
function of the Nominating Committee will be to recommend to the full Board of
Directors nominees for election as directors of the Company and to elect members
of committees of the Board of Directors. The Nominating Committee will name the
respective members of an Audit Committee and a Compensation Committee.
The Audit Committee will consist of at least three directors, and a
majority of the members of the Audit Committee will be Independent Directors.
The functions of the Audit Committee will be to recommend annually to the Board
of Directors the appointment of the independent auditors of the Company, discuss
and review in advance the scope and the fees of the annual audit and review the
results thereof with the independent auditors, review and approve non-audit
services of the independent auditors, review compliance with existing major
accounting and financial reporting policies of the Company, review the adequacy
of the financial organization of the Company, and review management's procedures
and policies relating to the adequacy of the Company's internal accounting
controls and compliance with applicable laws relating to accounting practices.
The Compensation Committee will consist of three directors, one of whom
will be a director designated by the Ingram Family Stockholders and two of whom
will be Independent Directors. The functions of the Compensation Committee will
be to review and approve annual salaries, bonuses, and grants of stock options
pursuant to the 1996 Plan for all executive officers and key members of the
Company's management staff and to review and approve the terms and conditions of
all employee benefit plans or changes thereto.
COMPENSATION OF DIRECTORS. Directors who are not Independent Directors will
not receive any additional compensation for serving on the Board of Directors,
but will be reimbursed for expenses incurred in attending meetings of the Board
of Directors and committees thereof. Each Independent Director will be granted,
on the later of (i) the date his or her service as a director begins and (ii)
the date of this Prospectus, options to purchase 45,000 shares of Common Stock.
These options will have an exercise price per share equal to the market price of
the Common Stock on the date of grant and will vest in equal installments on the
first, second, and third anniversaries of the date of grant. Independent
Directors will not receive any other compensation for their service, but will be
reimbursed for expenses incurred in attending meetings of the Board of Directors
and committees thereof.
53
<PAGE> 58
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table provides information
relating to compensation for the year ended December 30, 1995 for the Company's
former Chief Executive Officer and the other four most highly compensated
executive officers of the Company (collectively, the "Named Executive Officers")
for services rendered by each Named Executive Officer during the year ended
December 30, 1995. A portion of this compensation was paid by Ingram Industries
and was included as a factor in the determination of intercompany charges paid
by the Company to Ingram Industries.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
AWARDS
--------------- ALL
ANNUAL COMPENSATION SECURITIES OTHER
-------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION(S) YEAR(1) SALARY($)(2) BONUS($)(3) OPTIONS/SARS(#) ($)(4)
- ----------------------------------- ------- ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Linwood A. (Chip) Lacy, Jr.(5)..... 1995 $558,000 $ 414,057 -- $ 28,617
Former Chief Executive Officer
and Former Chairman of the Board
of Directors
Jeffrey R. Rodek................... 1995 392,820 267,089 240,258(6) 163,649
Worldwide President, Chief
Operating Officer, and Director
David R. Dukes..................... 1995 260,130 205,611 -- 10,607
Vice Chairman of the Company,
Chief Executive Officer of Ingram
Alliance, and Director
Sanat K. Dutta..................... 1995 263,500 213,593 -- 12,365
Executive Vice President and
President, Ingram Micro U.S.
John Wm. Winkelhaus, II............ 1995 250,000 130,441 -- 124,287
Executive Vice President and
President, Ingram Micro Europe
</TABLE>
- ---------------
(1) Under rules promulgated by the Securities and Exchange Commission, since the
Company was not a reporting company during the three immediately preceding
fiscal years, only the information with respect to the most recent completed
fiscal year is reported in the Summary Compensation Table.
(2) Includes amounts deferred under qualified and nonqualified defined
contribution compensation plans and pretax insurance premium amounts.
(3) Reflects amounts paid in 1996 in respect of the fiscal year ended December
30, 1995.
(4) Includes the following amounts: Mr. Lacy (group term life insurance, $3,600;
employer thrift plan contributions, $20,625; relocation, $4,392); Mr. Rodek
(group term life insurance, $1,632; employer thrift plan contributions,
$11,631; relocation, $150,386); Mr. Dukes (group term life insurance,
$1,152; employer thrift plan contributions, $9,455); Mr. Dutta (group term
life insurance, $2,784; employer thrift plan contributions, $9,581); and Mr.
Winkelhaus (group term life insurance, $1,006; employer thrift plan
contributions, $6,211; and expatriate compensatory payments, $117,070).
(5) Mr. Lacy was an employee of Ingram Industries at all times during 1995. All
amounts shown for Mr. Lacy were paid by Ingram Industries, and a portion of
such amounts is reflected in the Company's consolidated statement of income
under charges allocated from Ingram Industries.
(6) Represents options exercisable for 175,000 shares of Ingram Industries
common stock, which will be converted into options exercisable for 240,258
shares of Common Stock in connection with the Split-Off.
54
<PAGE> 59
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR. The following table provides
information relating to stock options granted to the Named Executive Officers
for the year ended December 30, 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL
------------------------------------------------- REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE
UNDERLYING EMPLOYEES OF EXERCISE APPRECIATION FOR
OPTIONS/ THE COMPANY OR BASE OPTION TERM
SARS IN FISCAL PRICE EXPIRATION -------------------
NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($)
- ---------------------------------- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Linwood A. (Chip) Lacy, Jr. ...... -- -- -- -- -- --
Jeffrey R. Rodek(2)............... 240,258 22.95% $ 2.85 1/1/03 $326,532 $782,100
David R. Dukes.................... -- -- -- -- -- --
Sanat K. Dutta.................... -- -- -- -- -- --
John Wm. Winkelhaus, II........... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The Company has, since December 30, 1995, granted certain options to
purchase Class B Common Stock, including options to purchase 150,000,
35,000, 40,000, and 40,000 shares, respectively, to Messrs. Rodek, Dukes,
Dutta, and Winkelhaus. Additionally, options to purchase Common Stock are
expected to be granted to certain officers of the Company, including options
to purchase 200,000, 150,000, 125,000, and 75,000 shares, respectively, to
Messrs. Rodek, Dukes, Dutta, and Winkelhaus, concurrently with this offering
at the initial public offering price set forth on the cover page of this
Prospectus. See "-- 1996 Plan -- Options."
(2) Represents options exercisable for 175,000 shares of Ingram Industries
common stock, which will be converted into options exercisable for 240,258
shares of Common Stock in connection with the Split-Off. Mr. Rodek's options
vest according to the following schedule: 34,324 shares on January 1, 1997,
60,064 shares on January 1, 1998, 60,064 shares on January 1, 1999, 60,064
shares on January 1, 2000, and 25,742 shares on January 1, 2001.
STOCK OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES. The following table provides information relating to stock
options and ISUs exercised by the Named Executive Officers during the year ended
December 30, 1995, as well as the number and value of securities underlying
unexercised stock options held by the Named Executive Officers as of December
30, 1995.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON AT YEAR END AT YEAR END
EXERCISE VALUE ------------------- -----------------
DURING REALIZED EXERCISABLE/ EXERCISABLE/
NAME 1995(1)(2) ($)(3) UNEXERCISABLE(2) UNEXERCISABLE
- ------------------------------ --------- ---------- ------------------- -----------------
<S> <C> <C> <C> <C>
Linwood A. (Chip) Lacy,
Jr. ........................ 1,613,158(4) $2,917,808 46,875/372,315(5) $119,844/$810,153(5)
Jeffrey R. Rodek.............. -- -- 0/274,580 0/214,400
David R. Dukes................ -- 518,063 30,032/243,861 71,921/540,609
Sanat K. Dutta................ -- -- 0/258,105 0/455,656
John Wm. Winkelhaus, II....... -- 278,600 0/244,376 0/450,216
</TABLE>
- ---------------
(1) Excludes Ingram Industries ISUs held by Messrs. Lacy, Dukes, and Winkelhaus
that matured in 1995 and were settled in cash.
(2) Reflects the conversion of shares of Ingram Industries common stock, or
options exercisable for shares of Ingram Industries common stock, into
shares of Class B Common Stock, or options exercisable for shares of Common
Stock, in connection with the Split-Off.
(3) Includes $830,408, $518,063, and $278,600 paid to Messrs. Lacy, Dukes, and
Winkelhaus, respectively, in connection with the settlement of ISUs.
(4) 1,544,513 of such shares were acquired from the E. Bronson Ingram Charitable
8% Remainder Unitrust and were deemed to be acquired from the Company.
(5) Excludes options exercisable for 12,731/101,121 shares of Ingram Industries
common stock with a value of $44,687/$302,084.
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<PAGE> 60
PENSION PLAN
None of the Named Executive Officers other than Mr. Lacy participates in
the tax-qualified Ingram Retirement Plan and the non-qualified Ingram
Supplemental Executive Retirement Plan (the "Retirement Plans") sponsored by
Ingram Industries. At the time he left the Company, Mr. Lacy had earned one year
of credited service under the Retirement Plans.
Mr. Lacy's benefit from the Retirement Plans will be in the form of a
deferred annuity. At age 65, his life only annuities would be $178.70 per month
from the Ingram Retirement Plan and $539.70 per month from the Ingram
Supplemental Executive Retirement Plan. It is anticipated that the Company will
establish a qualified plan similar to the Ingram Industries qualified plan. None
of the Named Executive Officers will participate in the Company's qualified
retirement plan.
EMPLOYMENT AGREEMENTS
In August 1996, the Company entered into an agreement with Mr. Stead
pursuant to which he agreed to serve as Chief Executive Officer and Chairman of
the Board of the Company. The agreement provides for the grant to Mr. Stead of
options at the initial public offering price set forth on the cover page of this
Prospectus exercisable for 3,600,000 shares of Common Stock. Such options will
vest over an extended period, as described below. In lieu of receipt of 200,000
of such options, Mr. Stead may purchase 200,000 shares of Common Stock directly
from the Company at the initial public offering price set forth on the cover
page of this Prospectus. See "-- 1996 Plan -- Options" and "Employee and
Priority Offers -- Employee Directed Offer." Mr. Stead will not receive any
salary, bonus, or other cash compensation during the vesting period of such
options; however, the Company has agreed to compensate Mr. Stead in a mutually
agreeable manner in the event that the initial public offering price set forth
on the cover page of this Prospectus exceeds $14.00. The Company has also agreed
to provide Mr. Stead and his spouse with lifetime healthcare coverage, with a
lifetime cap of $2.0 million, as well as certain other perquisites.
In December 1994, the Company entered into an agreement with Mr. Rodek
pursuant to which he agreed to serve as President and Chief Operating Officer of
the Company and as a member of the Company's Board of Directors. The agreement
provides for a base salary, participation in the Company's Executive Incentive
Bonus Plan, and participation in the Company's health and benefit programs. Mr.
Rodek will receive a severance benefit equal to his annual base salary if the
Company terminates his employment without cause prior to January 1, 1998. Mr.
Rodek currently serves as Worldwide President and Chief Operating Officer.
In April 1988, the Company entered into an agreement with Mr. Dutta
pursuant to which he agreed to serve as Senior Vice President, Operations. The
agreement provides for a base salary, participation in the Company's Executive
Incentive Bonus Plan, and participation in the Company's health and benefit
programs. Mr. Dutta will receive a severance benefit of nine months' base salary
if he is terminated without cause or 12 months' base salary if he is
involuntarily terminated or has a substantial change in title or reduction of
salary within 12 months of a change in control (as defined in the agreement).
Mr. Dutta currently serves as Executive Vice President and President, Ingram
Micro U.S.
In June 1991, the Company entered into an agreement with Mr. Winkelhaus
pursuant to which he agreed to serve as Senior Vice President, Ingram Micro
Europe. The agreement provides for a base salary, a housing cost and goods and
services differential, participation in the Company's Executive Incentive Bonus
Plan, and participation in the Company's health and benefit programs. Mr.
Winkelhaus currently serves as Executive Vice President and President, Ingram
Micro Europe.
Mr. Lacy resigned as Chairman and Chief Executive Officer of the Company
effective May 31, 1996. Pursuant to an agreement (the "Severance Agreement"),
Mr. Lacy resigned from all positions with the Company, and resigned from all
positions with Ingram Industries and its other subsidiaries, except that Mr.
Lacy will remain a director of Ingram Industries until December 31, 1997, unless
earlier removed in accordance with the bylaws of Ingram Industries. In addition,
Mr. Lacy has agreed to serve as a director of the Company, if so requested by
Ingram Industries, until December 31, 1997.
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<PAGE> 61
Pursuant to the Severance Agreement, Mr. Lacy has agreed to cooperate with
the Company and Ingram Industries in connection with the consummation of the
Split-Off and this offering. Mr. Lacy has also agreed not to use or disclose
confidential information relating to the Company. Furthermore, Mr. Lacy has
agreed that until November 30, 1998, he will not compete with the Company or
solicit for hire any person who was or becomes an employee of the Company
between December 1, 1995 and June 1, 1998. Mr. Lacy has also agreed to similar
restrictions with respect to the businesses of Ingram Industries and its other
subsidiaries.
The Company has agreed to pay Mr. Lacy one year's salary at the level in
effect as of the date of his resignation, and has paid Mr. Lacy $272,000, his
earned bonus for the first five months of 1996. In addition, the Severance
Agreement provides for the continuation of certain health and life insurance
benefits for a period of 12 months from the date thereof. Mr. Lacy will also
receive certain payments from Ingram Industries.
The shares of Ingram Industries common stock owned by Mr. Lacy will be
converted into shares of Class B Common Stock in connection with the Split-Off.
These shares have been placed in an escrow account, although Mr. Lacy will be
permitted to sell such shares, subject to applicable tax and securities laws,
provided that the after-tax proceeds of such sales remain in the escrow account.
If at any time prior to December 1, 1998, Mr. Lacy breaches the terms and
conditions of the Severance Agreement, the Company shall have the right to be
reimbursed for its damages from this escrow account. Furthermore, Ingram
Industries and the Company may suspend any payments or obligations otherwise
owed to Mr. Lacy. If not earlier released due to the death of Mr. Lacy or a
Change of Control (as defined therein), fifty percent of the escrow account will
be released on June 1, 1998 and the remainder on December 1, 1998.
KEY EMPLOYEE STOCK PURCHASE PLAN
As of April 30, 1996, the Board of Directors of the Company adopted, and
Ingram Industries, as the sole stockholder of the Company, approved, the Key
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Company has
reserved 4,000,000 shares of Class B Common Stock to cover awards under the
Stock Purchase Plan.
Employee Offering. In the second quarter of 1996, the Company offered (the
"Employee Offering") 2,775,000 shares of its Class B Common Stock, of which
2,510,400 shares were purchased, in reliance upon Regulation D and Regulation S
under the Securities Act of 1933, as amended (the "Securities Act"), for
$17,572,800, to certain of its officers. Such shares are subject to vesting,
certain restrictions on transfer, and repurchase by the Company upon termination
of the holder's employment. As of the date of this Prospectus, 50,000 of such
shares have been repurchased by the Company. In order to allow bank loan
financing of the shares purchased in the Employee Offering, the Company entered
into repurchase agreements with the bank, pursuant to which it agreed to
repurchase (i) unvested shares at the lower of fair market value and $7.00 and
(ii) vested shares at fair market value, in the event of an employee's default
on his or her loan.
Restricted Stock Grants. The Company also made grants pursuant to the
Stock Purchase Plan of an aggregate of 107,000 restricted shares of Class B
Common Stock to certain officers and employees of the Company, which shares will
vest 25% on April 1, 1998 and each year thereafter through 2001. Prior to
vesting, such shares are subject to forfeiture to the Company, with no
consideration paid to the holder thereof, upon termination of the holder's
employment. As of the date of this Prospectus, 5,000 of such shares have been
forfeited to the Company.
1996 PLAN
As of April 30, 1996, the Board of Directors of the Company adopted, and
Ingram Industries, as the sole stockholder of the Company, approved, the 1996
Equity Incentive Plan (the "1996 Plan"). The Company has amended the 1996 Plan,
effective as of the date of this Prospectus, primarily to increase the number of
shares available for grant from 10,000,000 shares to 12,000,000 shares, as well
as to change the allowable vesting schedule for options granted under the 1996
Plan and to permit options to be granted to purchase shares of Common Stock in
addition to Class B Common Stock. Options granted prior to the date of this
Prospectus will continue to be governed by the 1996 Plan as in effect prior to
the amendment of the 1996 Plan.
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<PAGE> 62
The purpose of the 1996 Plan is to attract and retain key personnel and to
enhance their interest in the Company's continued success.
The 1996 Plan is administered by the Board of Directors of the Company or a
committee appointed thereby (the "Committee"). The Committee has broad
discretion, subject to contractual restrictions affecting the Company, as to the
specific terms and conditions of each award and any rules applicable thereto,
including but not limited to the effect thereon of the death, retirement, or
other termination of employment of the participant.
The 1996 Plan permits the granting of (i) stock options that qualify as
"Incentive Stock Options" under the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), (ii) options other than Incentive Stock Options
("Nonqualified Stock Options"), (iii) SARs granted either alone or in tandem
with other awards under the 1996 Plan, (iv) restricted stock and restricted
stock units, (v) performance awards, and (vi) other stock-based awards. The
Company has reserved 12,000,000 shares of Common Equity (which may be either
Common Stock or Class B Common Stock) to cover awards under the 1996 Plan.
The Board of Directors may amend, alter, or terminate the 1996 Plan at any
time, provided that stockholder approval generally must be obtained for any
change that would require stockholder approval under Rule 16b-3 under the
Exchange Act or any other regulatory or tax requirement that the Board deems
desirable to comply with or obtain relief under and subject to the requirement
that no rights under an outstanding award may be impaired by such action without
the consent of the holder thereof. The Committee may amend or modify the terms
of any outstanding award but only with the consent of the participant if such
amendment would impair his rights. In the event of certain corporate
transactions or events affecting the shares or the structure of the Company, the
Committee may make certain adjustments as set forth in the 1996 Plan.
The 1996 Plan is not subject to any provision of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and is not qualified under
Section 401(a) of the Code.
Options. On June 25, 1996, the Company granted options to purchase an
aggregate of approximately 4,800,000 shares of Class B Common Stock under the
1996 Plan to all full-time employees of the Company who had at such time been
continuously employed by the Company since January 1, 1996, as well as to
certain employees of the Company, at the director level and above, who began
employment with the Company at a later date. The exercise price of these options
is $7.00 per share. These options, which are Incentive Stock Options to the
extent permitted under the terms of the 1996 Plan and the Code, will vest as
follows: (i) for officers of the Company, in four equal annual installments
commencing on April 1, 1998, and (ii) for non-officers, in five equal annual
installments commencing on April 1, 1997, in each case subject to continued
employment with the Company.
Concurrently with the closing of this offering, it is expected that the
Board of Directors will grant options under the 1996 Plan to purchase
approximately 5,200,000 shares of Common Stock to certain executive officers,
employees, and Independent Directors of the Company. The exercise price of these
options will be equal to the initial public offering price set forth on the
cover page of this Prospectus. Of such options, options to purchase 3,400,000
shares will be granted to Mr. Stead pursuant to the employment agreement
described above. See "-- Employment Agreements." Of the total options being
granted to Mr. Stead, options to purchase 200,000 shares will vest immediately,
and options to purchase an additional 1,600,000 shares will vest in four equal
installments beginning April 1, 1998. The remaining options to purchase an
additional 1,600,000 shares granted to Mr. Stead, as well as the options to
purchase approximately 1,000,000 shares to be granted to other executive
officers and employees of the Company, will vest over a fixed term, subject to
continued employment with the Company; however, such options will vest earlier
if the Company achieves certain performance criteria. The Company also intends
to grant to the Independent Directors, concurrently with this offering, options
to purchase an aggregate of 180,000 shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus. See "-- Board of
Directors -- Compensation of Directors." The Company has also granted options to
purchase an aggregate of approximately 635,000 shares of Common Stock to certain
officers of the Company, in connection with the hiring or promotion of such
officers. All of such options have or will have an exercise price equal to the
initial public offering price set forth on the cover page of this Prospectus and
otherwise have terms similar to those of the options granted in June 1996.
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<PAGE> 63
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company intends to make available to its employees the opportunity to
purchase shares of Common Stock under its 1996 Employee Stock Purchase Plan (the
"ESPP"). The ESPP was adopted by the Board of Directors and stockholders in
October 1996. The ESPP is intended to qualify under Section 423 of the Code and
permits eligible employees of the Company to purchase Common Stock through
payroll deductions, provided that no employee may accrue the right to purchase
more than $25,000 worth of stock under all employee stock purchase plans of the
Company in any calendar year. Up to 1,000,000 shares of Common Stock will be
initially available for sale under the ESPP. The amount of additional shares of
Common Stock that will be made available for sale under the ESPP, if any, has
not been determined. The initial offering period will commence on or about the
date of this Prospectus and will end on the last market trading day on or before
December 31, 1998, and the right to purchase shares of Common Stock will accrue
in an amount not to exceed $13,000 per employee during the offering period. The
price of Common Stock offered under the initial offer under the ESPP will be
100% of the lower of the fair market value of the Common Stock on the first or
last day of the offering period. The price of Common Stock offered under
subsequent ESPP offerings, the duration of which will be determined by the
Committee, will be from 85% to 100% of the lower of the fair market value of the
Common Stock on the first or last day of each offering period, as determined by
the Committee. Employees may end their participation in the ESPP at any time
during an offering period, and they will be paid their payroll deductions
accumulated to date. Participation ends automatically on termination of
employment with the Company.
Rights granted under the ESPP are not transferable by a participant other
than by will, the laws of descent and distribution, or as otherwise provided
under the ESPP.
The Board may amend or terminate the ESPP at any time. The ESPP will
terminate in all events on the last business day in October 2006.
EXECUTIVE INCENTIVE BONUS PLAN
All officers of the Company are eligible to participate in the Company's
Executive Incentive Bonus Plan (the "Bonus Plan"). Pursuant to the Bonus Plan,
officers receive bonus payments based on the Company's meeting or exceeding
budgeted results, as well as individual achievement of previously agreed upon
goals.
ROLLOVER PLAN; INCENTIVE STOCK UNITS
In connection with the Split-Off, Ingram Industries options held by the
Company's employees and certain other Ingram Industries options and SARs will be
converted to Ingram Micro options ("Rollover Stock Options") to purchase shares
of Common Stock. In addition, holders of approximately 300,000 Ingram Industries
ISUs will have the option to exchange a portion of their ISUs for Rollover Stock
Options. See "The Split-Off and the Reorganization -- The Split-Off." Upon
conversion, assuming all eligible ISUs are exchanged, approximately 11,000,000
Rollover Stock Options will be outstanding, with exercise prices ranging from
$0.66 to $3.32 per share. See "The Split-Off and the Reorganization -- The
Split-Off." The majority of these options will be fully vested by the year 2000
and expire no later than ten years from the date of grant. These vested options
generally become exercisable, if otherwise vested, upon the earlier of (i) nine
months after the Split-Off or (ii) a public offering of the shares, in each case
subject to the optionee's continued employment with any of the Company, Ingram
Industries, or Ingram Entertainment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company does not currently maintain a
separate compensation committee. Historically, base compensation of officers of
the Company, and Mr. Lacy's compensation under the Bonus Plan, has been
determined by the Executive Compensation Committee of the Ingram Industries
board of directors, which in 1995 consisted of E. Bronson Ingram, until his
resignation from the Board in May, and Messrs. Lacy and Pfeffer. Mr. Lacy did
not participate in the determination of his compensation. Compensation under the
Bonus Plan for all officers of the Company other than Mr. Lacy was determined by
the entire Board of Directors of the Company.
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<PAGE> 64
EMPLOYEE AND PRIORITY OFFERS
EMPLOYEE DIRECTED OFFER
Up to 535,000 shares of Common Stock offered in this offering (the
"Employee Shares") have been reserved for certain employees of the Company (the
"Employee Directed Offer"). Each such employee may apply to purchase a number of
shares of Common Stock within a specified range at the initial public offering
price set forth on the cover page of this Prospectus and on the same terms and
conditions as the shares being offered to the general public. To the extent any
shares are not sold in the Priority Offer (as defined below), such shares may be
included in the Employee Directed Offer. In addition, Mr. Stead may purchase
200,000 shares of Common Stock directly from the Company in the Company
Offering, with no underwriting discounts or commissions payable thereon. Mr.
Stead intends to borrow the funds necessary to purchase such shares, and the
Company may enter into a repurchase agreement with respect thereto. The
repurchase agreement would provide that, in the event of a default, the Company
would repurchase such shares at fair market value if they are not eligible for
sale in the public market. Any purchasers who are affiliates of the Company will
represent that any purchases are being made for investment purposes only.
Any shares of Common Stock to be sold in Canada pursuant to the Employee
Directed Offer will be sold by the Company directly to its employees in Canada
at the initial public offering price set forth on the cover page of this
Prospectus. The Company will pay the Underwriters an advisory fee which will be
equal to the underwriting discounts and commissions which would have been
payable to the Underwriters had such shares been sold by the Underwriters
instead of directly by the Company.
In the event that the demand for Employee Shares exceeds the number of
shares of Common Stock available under the Employee Directed Offer, the maximum
number of Employee Shares available to each individual will be reduced to the
extent necessary so that the total subscriptions equal the number of available
Employee Shares. Any application for a number of shares that is less than the
employee's new maximum individual application size will be unaffected thereby.
PRIORITY OFFER
Up to 1,765,000 of the shares of Common Stock offered in this offering (the
"Priority Shares") have been reserved pursuant to a priority allocation offer
(the "Priority Offer"). The Priority Offer is being made to certain customers
and vendors of the Company, to certain other individuals, including certain
employees of Ingram Industries and Ingram Entertainment, and to Ingram
Industries. Ingram Industries may purchase approximately 300,000 shares of
Common Stock in connection with its obligations under certain deferred
compensation plans which relate to the performance of the Common Stock. Each
other such person may apply to purchase a number of shares of Common Stock
within a range based on certain individual factors relating to such person at
the initial public offering price set forth on the cover page of this Prospectus
and on the same terms and conditions as the shares being offered to the general
public. Any purchasers who are affiliates of the Company will represent that any
purchases are being made for investment purposes only.
In the event that the demand for Priority Shares exceeds the number of
shares of Common Stock available under the Priority Offer, the maximum number of
Priority Shares available to each purchaser other than Ingram Industries will be
reduced to the extent necessary so that the total subscriptions equal the number
of available Priority Shares. Any application for a number of shares that is
less than the applicant's new maximum individual application size will be
unaffected thereby.
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CERTAIN TRANSACTIONS
Historically, Ingram Industries has provided certain administrative
services to the Company. The Company is allocated a portion of the costs of
these administrative services. This allocation totaled $1.6 million, $2.4
million, $3.5 million, and $3.3 million in 1993, 1994, 1995, and the first three
quarters of 1996, respectively. In connection with the Split-Off, the Company
will enter into the Transitional Service Agreements with Ingram Industries
relating to the continued provision of certain administrative services. The
Company believes that the terms of the Transitional Service Agreements will be
on a basis as favorable as those that would be obtained from third parties on an
arm's length basis. The Transitional Service Agreements generally terminate on
December 31, 1996, although payroll services under the Transitional Service
Agreements will be provided through December 31, 1997. After such termination,
the Company will be required to provide such services internally or find a
third-party provider of such services.
Additionally, Ingram Industries has provided a large portion of the debt
financing required by the Company in connection with its expansion. As of
December 31, 1994, December 30, 1995, and September 28, 1996, $449.4 million,
$673.8 million, and $479.7 million, respectively, was outstanding to Ingram
Industries. Interest on such debt has been charged based on Ingram Industries'
domestic weighted average cost of funds. See Note 6 of Notes to Consolidated
Financial Statements. In connection with the Split-Off, the Company will assume
Ingram Industries' accounts receivable securitization program in partial
satisfaction of amounts due to Ingram Industries. The Company intends to use
borrowings under the Credit Facility to repay the remaining intercompany
indebtedness to Ingram Industries, which was incurred for general corporate
purposes, primarily working capital needs in connection with the expansion of
the Company's business. The Company will also use borrowings under the Credit
Facility to repay outstanding revolving indebtedness related to amounts drawn by
certain of the Company's subsidiaries, as participants in Ingram Industries'
existing $380 million credit facility, which will terminate concurrently with
the closing of this offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company leases certain office space near Buffalo, New York from a
partnership owned by certain members of the Ingram family. The lease agreement
expires January 31, 2013 and requires annual rental payments of approximately
$1.6 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." The Company
currently subleases its facilities in Santa Ana, California and Harrisburg,
Pennsylvania from Ingram Industries pursuant to a sublease which expires March
1, 2007. The sublease agreement requires annual rental payments of approximately
$2.1 million. In connection with the Reorganization, the Company intends to
acquire ownership of these facilities for an aggregate amount of approximately
$22.6 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." The Company's
lease for its distribution center in Millington, Tennessee is guaranteed by
Ingram Industries. This guarantee provides for the release of Ingram Industries'
guarantee upon satisfaction by the Company of certain financial requirements
specified in the guarantee including consummation of an initial public offering
of at least $300 million. Certain of the Company's other leases are guaranteed
by Ingram Industries. The Company anticipates that such guarantees will be
released in connection with the Split-Off.
The Company extended a loan during 1995 to one of its senior executive
officers. This loan has been repaid in full. The largest aggregate amount
outstanding at any time during 1995 was $450,000. This loan bore interest at the
intercompany rate of interest paid by the Company to Ingram Industries.
In connection with the Split-Off, it is expected that agreements relating
to board representation and registration rights with respect to Common Stock
held by the Ingram Family Stockholders (including shares of Common Stock issued
upon conversion of Class B Common Stock) will be entered into by the Company and
the Ingram Family Stockholders. See "The Split-Off and the Reorganization."
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THE SPLIT-OFF AND THE REORGANIZATION
Immediately prior to the closing of this offering, Ingram Industries will
consummate the Split-Off. The consummation of the Split-Off is a non-waiveable
condition to the closing of this offering. The Company, Ingram Industries, and
Ingram Entertainment have also entered into certain agreements to effect the
Reorganization. The following is a summary of certain of the material terms of
the Split-Off.
THE SPLIT-OFF
Immediately prior to the closing of this offering, Ingram Industries will
consummate an exchange under an Exchange Agreement (the "Exchange Agreement"),
pursuant to which certain existing stockholders of Ingram Industries may
exchange a specified number of their shares of Ingram Industries common stock
for shares of Class B Common Stock of the Company of equivalent value to the
shares of Ingram Industries so exchanged. The exchange of shares of Ingram
Industries common stock for shares of Class B Common Stock of the Company,
together with those elements of the Reorganization contemplated to occur prior
to the closing of this offering, are referred to herein as the "Split-Off." See
"Principal Stockholders." If all eligible stockholders were to exchange all of
their shares of Ingram Industries common stock eligible to be exchanged, they
would receive 107,251,362 shares of Class B Common Stock. The exchange values
were determined by the board of directors of Ingram Industries, which relied in
part on an opinion of a financial advisor to the effect that the Split-Off was
fair to all involved parties. In the Exchange Agreement, the Company covenants
that, during the two-year period following the Split-Off, it will not (i)
liquidate, merge, or consolidate with any other person, or sell, exchange,
distribute, or dispose of any material asset other than in the ordinary course
of business, (ii) with certain limited exceptions, redeem or reacquire any of
its capital stock transferred in the Split-Off, (iii) cease to conduct the
principal active trade or business conducted by it during the five years
immediately preceding the Split-Off, or (iv) otherwise take any actions
inconsistent with the facts and representations set forth in the private letter
ruling from the U.S. Internal Revenue Service (the "IRS") regarding certain
federal income tax consequences of the Reorganization and the Split-Off, in each
case unless it first obtains an opinion from recognized tax counsel or a ruling
from the IRS that such action will not affect the qualification of the
transactions contemplated by the Exchange Agreement for tax-free treatment. All
such covenants were necessary to obtain the private letter ruling from the IRS.
After the Exchange, Ingram Entertainment will continue to be a wholly-owned
subsidiary of Ingram Industries. Although there can be no assurance, it is
contemplated that, pursuant to the Exchange Agreement, on or after June 20,
1997, certain remaining stockholders of Ingram Industries will exchange their
remaining shares of Ingram Industries common stock for shares of Ingram
Entertainment common stock.
Certain outstanding Ingram Industries options and SARs will be converted
to, and certain Ingram Industries ISUs may be exchanged for, Rollover Stock
Options. The exchange values for these options, SARs, and ISUs are primarily
based on the exchange value for the underlying common stock. The option, SAR,
and ISU exchange values were determined by the board of directors of Ingram
Industries in accordance with the respective plans under which they were issued.
If all eligible ISUs are exchanged, the total number of Rollover Stock Options
outstanding would be exercisable for approximately 11,000,000 shares of Common
Stock. See "Management -- Rollover Plan; Incentive Stock Units."
The Company and the Ingram Family Stockholders are expected to enter into
the Board Representation Agreement. So long as the Ingram Family Stockholders
and their permitted transferees (as defined in the Board Representation
Agreement) own in excess of 25,000,000 shares of the outstanding Common Equity,
the Board Representation Agreement will provide for the designation of (i) not
more than three directors designated by the Ingram Family Stockholders, (ii) one
director designated by the Chief Executive Officer of the Company, and (iii)
four or five additional Independent Directors (collectively, the "Designated
Nominees").
The Ingram Family Stockholders will be required to vote their shares of
Common Equity for the election of the Designated Nominees. In addition, certain
types of corporate transactions, including transactions involving the potential
sale or merger of the Company; the issuance of additional equity, warrants, or
options; acquisitions involving aggregate consideration in excess of 10% of the
Company's stockholders' equity; any
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guarantee of indebtedness of an entity other than a subsidiary of the Company
exceeding 5% of the Company's stockholders' equity; and the incurrence of
indebtedness in a transaction which could reasonably be expected to reduce the
Company's investment rating (i) lower than one grade below the rating in effect
immediately following this offering or (ii) below investment grade, may not be
entered into without the written approval of at least a majority of the voting
power deemed to be held (for purposes of the Board Representation Agreement) by
certain of the Ingram Family Stockholders, acting in their sole discretion.
The Board Representation Agreement will terminate on the date on which the
Ingram Family Stockholders and their permitted transferees collectively cease to
beneficially own at least 25,000,000 shares of the Common Equity of the Company
(as such number may be equitably adjusted to reflect stock splits, stock
dividends, recapitalization, and other transactions in the capital stock of the
Company). All decisions for the Ingram Family Stockholders that are trusts or
foundations will be made by the trustees thereof, who in some cases are members
of the Ingram family.
The Ingram Family Stockholders and the other stockholders of Ingram
Industries who will receive shares of Class B Common Stock in the Split-Off will
enter into a registration rights agreement (the "Registration Rights Agreement")
which grants the E. Bronson Ingram QTIP Marital Trust (the "QTIP Trust") demand
registration rights following the closing of this offering. Such demand
registration rights may be exercised with respect to all or any portion (subject
to certain minimum thresholds) of the shares of Class B Common Stock owned by
the QTIP Trust, one or more of the other Ingram Family Stockholders and certain
of their permitted transferees on up to three occasions during the 84-month
period following the closing of this offering; provided that the Company shall
not be obligated to effect (i) any registration requested by the QTIP Trust
unless the QTIP Trust has furnished the Company with an opinion of counsel to
the effect that such registration and any subsequent sale will not affect the
tax-free nature of the Split-Off or (ii) more than one demand registration
during any 12-month period.
The Registration Rights Agreement also grants one demand registration right
(subject to certain minimum thresholds) to members of the Ingram family (which
may only be exercised during the 84-month period following the closing of this
offering) and one demand registration right to certain minority stockholders of
the Company if a change of control of the Company occurs following the closing
of this offering but prior to the second anniversary of the Split-Off Date. The
minority stockholders will not be entitled to this registration right if they
were offered the opportunity to participate in the change of control
transaction.
The Registration Rights Agreement restricts the exercise by any party
thereto of a demand registration right, and provides that the Company will not
grant any registration rights to any other person that are more favorable than
those granted pursuant to the Registration Rights Agreement or that provide for
the exercise of demand registration rights sooner than three months following a
public offering in which such person was entitled to include its shares, unless
the number of shares requested to be included in such public offering exceeded
125% of the number of shares actually included.
In addition, the Registration Rights Agreement provides that the parties
thereto shall be entitled to unlimited "piggyback" registration rights in
connection with any proposed registration of equity securities by the Company
(with certain specified exceptions) during the 84-month period following the
completion of this offering. Employees who received shares in the Employee
Offering, and persons who have exercised Rollover Stock Options, are bound by
the provisions of the Registration Rights Agreement as if such employees were
parties thereto, and are entitled to the "piggyback" registration rights
provided therein, with respect to the portion of their shares of Class B Common
Stock that is no longer subject to restrictions.
The Registration Rights Agreement contains provisions regarding reduction
of the size of an offering that has been determined by the underwriters to have
exceeded its maximum potential size and contains certain customary provisions,
including those relating to holdback arrangements, registration procedures,
indemnification, contribution and payment of fees and expenses.
Pursuant to an agreement (the "Thrift Plan Liquidity Agreement") with the
Ingram Thrift Plan (the "Thrift Plan"), which will receive 10,007,000 shares of
Class B Common Stock in the Split-Off, during the
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<PAGE> 68
90-day period following each of (i) the closing of this offering and (ii) the
first anniversary of the closing of this offering, the Company may elect to file
a registration statement under the Securities Act covering such number of shares
as are required to be sold by the Thrift Plan in order to comply with the
requirements of ERISA or are necessary to fund distributions to Thrift Plan
participants ("Registrable Securities"). If a registration statement covering
the Registrable Securities has not become effective during either such 90-day
period, the Thrift Plan may elect to sell any of such Registrable Securities to
the Company during the 90-day period thereafter at the then-current fair market
value of the Common Stock; provided that the Company's obligation in any fiscal
year to purchase shares not required to fund distributions by the Thrift Plan
will be limited to the lesser of $10,000,000 or 3% of the Company's
stockholders' equity as of the beginning of such fiscal year. In addition, the
Thrift Plan may elect to sell to the Company one time each calendar month, such
number of shares as are necessary to fund distributions to Thrift Plan
participants, except during such periods when the Company has notified the
Thrift Plan of the filing of a registration statement covering Registrable
Securities or when such a registration statement is effective. The Company will
not be obligated to make any repurchase pursuant to the Thrift Plan Liquidity
Agreement if it determines that to do so would adversely affect the tax-free
nature of the Split-Off or if such repurchase would be prohibited by a credit
facility of the Company. Of the 10,007,000 shares of Class B Common Stock to be
received by the Thrift Plan, 9,207,000 shares will be subject to a lock-up
agreement in connection with this offering. See "Shares Eligible for Future
Sale" and "Underwriters."
THE REORGANIZATION
The Company is currently a subsidiary of Ingram Industries, a company
controlled by the Ingram Family Stockholders. Ingram Industries is engaged in
various businesses in addition to that of the Company, including inland marine
transportation; the production and transport of specification commercial sand;
insurance; and the distribution of books, prerecorded video cassettes, laser
discs, video games, and spoken-word audio cassettes. The businesses of the
Company, Ingram Industries, and Ingram Entertainment (each, an "Ingram Company")
and their respective subsidiaries will be reorganized as described below. In
conjunction with the Split-Off, the Company will assume Ingram Industries'
accounts receivable securitization program in partial satisfaction of amounts
due to Ingram Industries. The Company will repay the remaining intercompany
indebtedness with borrowings under the Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Pursuant to a reorganization agreement (the "Reorganization Agreement"),
each Ingram Company has agreed to retain or assume, at the time of the
Reorganization, certain liabilities and obligations, including the following:
(i) liabilities and obligations incurred by such Ingram Company (other than
certain general corporate level liabilities of Ingram Industries) with respect
to periods ending on or prior to the closing of the Split-Off, other than
liabilities or obligations arising as a result of any intentional act which is
tortious or as a result of any illegal act (each, a "Designated Action")
committed by (x) a corporate officer of Ingram Industries (except for actions
that are believed by such person to be in furtherance of his duties as an
officer or employee of the Company, Ingram Entertainment, or their respective
subsidiaries, or the other subsidiaries or business operating units of Ingram
Industries), (y) any other employee of Ingram Industries whose responsibilities
are not primarily associated with the Company, Ingram Entertainment, or their
respective subsidiaries, or the other subsidiaries or business operating units
of Ingram Industries or (z) an employee (other than general corporate level
employees of Ingram Industries) of any other Ingram Company; (ii) liabilities
and obligations (other than general corporate level liabilities of Ingram
Industries) incurred by any other Ingram Company with respect to periods ending
on or prior to the closing of the Split-Off as a result of any Designated Action
committed by an employee of any such Ingram Company or certain subsidiaries or
business operating units of such Ingram Company; (iii) in the case of Ingram
Industries, certain general corporate level liabilities and obligations up to an
aggregate of $100,000 incurred by Ingram Industries with respect to certain
periods ending on or prior to the closing of the Split-Off and recorded under
Ingram Industries' internal accounting system as "home office" liabilities, to
the extent that such liabilities and obligations are extraordinary in nature and
arise out of the ordinary course of business and were not accrued on Ingram
Industries' year end 1995 balance sheet; (iv) specified liabilities and
obligations related to certain asset dispositions and the settlement of certain
claims; and (v) liabilities and obligations incurred by such
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<PAGE> 69
Ingram Company with respect to periods beginning after the closing of the
Split-Off. In addition, certain contingent assets or liabilities, as well as
fees and costs incurred in connection with the Split-Off, will be shared 23.01%
by Ingram Industries, 72.84% by the Company, and 4.15% by Ingram Entertainment.
These contingent liabilities include (i) liabilities and obligations arising as
a result of any Designated Action committed by a corporate officer of Ingram
Industries (except for actions that are believed by such person to be in
furtherance of his duties as an officer or employee of the Company, Ingram
Entertainment, or their respective subsidiaries or other designated affiliates,
or the other subsidiaries or designated affiliates of Ingram Industries), or any
other employee of Ingram Industries whose responsibilities are not primarily
associated with the Company, Ingram Entertainment, or their respective
subsidiaries, or the other subsidiaries or business operating units of Ingram
Industries; (ii) certain general corporate level liabilities and obligations, if
the aggregate of such liabilities and obligations incurred by Ingram Industries
exceeds $100,000, incurred by Ingram Industries with respect to periods ending
on or prior to the closing of the Split-Off and recorded under Ingram
Industries' internal accounting system as "home office" liabilities, to the
extent that such liabilities and obligations are extraordinary and non-recurring
in nature and arise out of the ordinary course of business and were not accrued
on Ingram Industries' 1995 balance sheet; (iii) certain liabilities and
obligations incurred by Ingram Industries in respect of specified individuals
pursuant to certain deferred compensation plans of Ingram Industries; and (iv)
assets, liabilities, and obligations arising in connection with certain
specified asset dispositions. The Company will not be responsible for any
liabilities except to the extent that the Company's share of such liabilities,
fees or costs and certain other amounts (net of any contingent assets) exceeds,
in the aggregate, $20,778,000. The Company currently believes that any such
liabilities, fees or costs will be materially offset by amounts expected to be
due from Ingram Industries. However, there can be no assurance that further
payments, which could be material, will not be required in the future.
Pursuant to the Reorganization Agreement, each Ingram Company will agree to
conduct its business, from the date of the Reorganization Agreement until the
closing of the Split-Off in the ordinary course of business consistent with past
practice. The Reorganization Agreement provides that at or prior to the closing
of the Split-Off, the Company will enter into bank repurchase agreements with
respect to securities of the Company received in connection with the Exchange
Agreement in exchange for shares of Ingram Industries common stock currently
held as collateral for certain loans made to stockholders of Ingram Industries.
If securities of Ingram Industries are exchanged for securities of Ingram
Entertainment, as contemplated in "-- The Split-Off " above, Ingram
Entertainment has agreed to enter into similar agreements with respect to such
securities.
Pursuant to the Reorganization Agreement, each Ingram Company has agreed to
indemnify each other Ingram Company from any and all damage, loss, liability,
and expense incurred as a result of any breach by such party of any covenant or
agreement pursuant to the Reorganization Agreement or the failure by such party
to perform its obligations with respect to any liability retained or assumed by
such party pursuant to the Reorganization Agreement.
The Ingram Companies will also enter into an employee benefits transfer and
assumption agreement (the "Employee Benefits Agreement"). The Employee Benefits
Agreement provides for the allocation of employee benefit assets and liabilities
generally on a pro rata basis in respect of each Ingram Company's current and
former employees. Each Ingram Company will indemnify the other parties with
respect to such party's benefit-related assumed or retained assets and
liabilities.
In connection with the Reorganization, the Ingram Companies will enter into
a tax sharing and tax services agreement (the "Tax Sharing Agreement"). Under
the Tax Sharing Agreement, the Company agrees that it will be liable for (i) its
allocable share of the consolidated federal income tax liability and any
consolidated state income tax liability for the year that includes the Split-Off
and (ii) generally, 72.84% of any adjustment in excess of reserves already
established by Ingram Industries for federal or state income tax liabilities of
Ingram Industries, Ingram Entertainment, or the Company (x) relating to tax
periods ending on or prior to the Split-Off or (y) resulting from a failure
(other than due to a breach of certain representations or covenants) of either
the Split-Off or the subsequent exchange of securities of Ingram Industries for
securities of Ingram Entertainment to qualify for tax-free treatment. However,
no liability with respect to the subsequent exchange involving Ingram
Entertainment will be allocated to the Company if such exchange is not completed
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in accordance with the provisions of the Exchange Agreement or if the facts and
circumstances of such exchange are materially different from those on which the
private letter ruling received by Ingram Industries (see "The Split-Off and the
Reorganization -- Conditions to the Split-Off") is based, unless a supplemental
private letter ruling reasonably satisfactory to the Company addressing such
differences is obtained prior to such exchange. Subject to certain consultation
rights and certain limited rights on the part of the Company to consent to a
settlement, Ingram Industries will have the right to control any audit or
proceeding relating to the Company for periods ending prior to the Split-Off.
The Company will share in any refunds received in respect of the carryback of
any future tax losses or credits it may suffer or receive. In addition, Ingram
Industries and Ingram Entertainment have each agreed that, upon the exercise by
one of its employees of an option granted in connection with the Split-Off, it
will pay the Company an amount equal to the tax benefit, if any, received from
any compensation deduction in respect of such exercise. Furthermore, if the
Split-Off or the contemplated exchange of Ingram Entertainment common stock
fails to qualify for tax-free treatment as a result of a breach by one of the
Ingram Companies of specified representations or covenants contained in the
Exchange Agreement, any resulting deficiency will be borne by such breaching
Ingram Company.
In addition, until 1999, the Company will provide data processing services
to Ingram Industries and Ingram Entertainment for a fee to be determined. The
Ingram Companies have also entered into the Transitional Service Agreements
relating to the continued provision of certain administrative services
(including cash management, insurance, employee benefits, and payroll
administration). The Transitional Service Agreements are expected to be on terms
as favorable as those that would be obtained from third parties on an arm's
length basis.
CONDITIONS TO THE SPLIT-OFF
The Split-Off is subject to the satisfaction or waiver of certain
conditions including, without limitation, (i) receipt of a private letter ruling
from the IRS satisfactory to Ingram Industries and certain of the Ingram Family
Stockholders as to the tax-free nature of the Split-Off and a determination by
the board of directors of Ingram Industries and each of the Ingram Family
Stockholders that nothing has come to their attention that causes them to
conclude that significant questions exist as to the validity of the ruling as
applied to the Reorganization or the Split-Off; (ii) the absence of any law,
judgment, injunction, order or decree which prohibits consummation of the
Split-Off; (iii) the effectiveness of certain ancillary agreements; (iv) receipt
of required regulatory approvals and third-party consents; (v) consummation of
the scheduled refinancing and assumption of debt; and (vi) settlement of
intercompany receivables and payables. On October 16, 1996, Ingram Industries
received from the IRS a private letter ruling as to the tax-free nature of the
Split-Off. The Exchange Agreement may be terminated by the board of directors of
Ingram Industries or the holders of a majority of the outstanding shares of
Ingram Industries common stock at any time prior to the closing of the
Split-Off.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of September 28,
1996, as adjusted for (i) the Split-Off and (ii) the issuance of the Common
Stock in the Combined Offering as if such transactions had occurred on September
28, 1996, with respect to the beneficial ownership of each class of the Common
Equity by (a) each person known by the Company to own beneficially more than
five percent of the outstanding shares of either class of the Common Equity; (b)
each director; (c) each of the Named Executive Officers; and (d) all executive
officers and directors of the Company as a group. See "Management," "Certain
Transactions," and "The Split-Off and the Reorganization."
<TABLE>
<CAPTION>
COMMON
CLASS B COMMON STOCK COMMON STOCK(1) EQUITY
------------------------------ ------------------------------ ------------
SHARES SHARES PERCENTAGE
BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE OF TOTAL
NAME OWNED OF CLASS OWNED OF CLASS VOTING POWER
- ---------------------------------------------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
E. Bronson Ingram QTIP Marital Trust(2)(3).... 69,099,259 62.9% -- -- 61.8%
Ingram Thrift Plan(2)......................... 10,007,000 9.1 -- -- 8.9
David B. Ingram(2)(3)......................... 72,377,210(4)(5) 65.9 16,080(6)(7) * 64.7
Robin Ingram Patton(2)(3)..................... 71,646,916(4)(5) 65.2 --(7) -- 64.1
Orrin H. Ingram(2)(3)......................... 73,157,670(4)(5) 66.6 68,644(6)(7) * 65.4
Roy E. Claverie(2)............................ 10,859,083(4)(8) 9.9 150,000(6)(7) * 9.7
SunTrust Bank, Atlanta(9)..................... 12,115,391 11.0 -- -- 10.8
Jerre L. Stead................................ -- -- 400,000(10) 2.0% *
Jeffrey R. Rodek.............................. 285,000 * -- -- *
David R. Dukes................................ 65,000 * 73,277(6) * *
Sanat K. Dutta................................ 85,000 * 37,410(6) * *
John Wm. Winkelhaus, II....................... 85,000 * 42,559(6) * *
Martha R. Ingram(3)........................... 83,740,788(4)(5) 76.3 --(7) -- 74.9
John R. Ingram(3)............................. 71,875,978(4)(5) 65.5 38,633(6)(7) * 64.3
Philip M. Pfeffer............................. 1,972,476(5) 1.8 27,020(6) * 1.8
J. Phillip Samper............................. -- -- -- -- --
Joe B. Wyatt.................................. -- -- 193,065(6) * *
Don H. Davis, Jr.............................. -- -- -- -- --
All executive officers and directors as
a group (24 persons)(3)(11)................. 91,067,943(4)(5) 82.9 1,166,807(6)(7) 5.5 81.5
Linwood A. (Chip) Lacy, Jr.................... 1,390,062 1.3 110,500(6) * 1.3
</TABLE>
- ---------------
* Less than one percent.
(1) Excludes each stockholder's beneficial ownership of Class B Common Stock,
which may be converted into Class A Common Stock at any time, at the option
of the holder. See "Description of Capital Stock."
(2) The address for the indicated parties is: c/o Ingram Industries Inc., One
Belle Meade Place, 4400 Harding Road, Nashville, Tennessee 37205.
(3) David B. Ingram, Robin Ingram Patton, Orrin H. Ingram, John R. Ingram, and
Martha R. Ingram are trustees of the QTIP Trust, and accordingly could each
be deemed to be the beneficial owner of the shares held by the QTIP Trust.
(4) Includes 71,286,290; 71,266,588; 71,286,290; 10,387,004; 71,286,290;
81,702,786; and 83,870,115 shares, for David B. Ingram, Robin Ingram
Patton, Orrin H. Ingram, Roy E. Claverie, John R. Ingram, Martha R. Ingram,
and all executive officers and directors as a group, respectively, which
shares are held by various trusts or foundations of which these individuals
are trustees. Such individuals could each be deemed to be the beneficial
owner of the shares held by such trusts of which he or she is a trustee.
(5) Excludes for David B. Ingram 5,132,080 shares held by one or more trusts of
which he and/or his children are beneficiaries; for Robin Ingram Patton
2,932,917 shares held by one or more trusts of which she is a beneficiary;
for Orrin H. Ingram 1,441,856 shares held by one or more trusts of which he
and/or his children are beneficiaries; for John R. Ingram 2,732,815 shares
held by one or more trusts of which he and/or his children are
beneficiaries; for Mr. Lacy 223,097 shares held by a trust of which his
children are beneficiaries; for Mr. Pfeffer 234,348 shares held by his
children or one or more trusts of which his children are beneficiaries; and
for Mr. Claverie 244,912 shares held by his children or one or more trusts
of which he and/or his children are beneficiaries. Each such individual
disclaims beneficial ownership as to such shares.
(6) Represents Rollover Stock Options exercisable within 60 days of the date of
the table for shares of Common Stock.
(7) Excludes approximately 250,000 shares of Common Stock that may be purchased
by Ingram Industries in this offering. As principal stockholders of Ingram
Industries, the indicated stockholders may be deemed to be beneficial
owners of the shares held by Ingram Industries.
(8) Includes 10,007,000 shares held by the Ingram Thrift Plan. Mr. Claverie may
be deemed to be the beneficial owner of such shares, because he is a
trustee of the Ingram Thrift Plan.
(9) The address for SunTrust Bank, Atlanta ("SunTrust") is 25 Park Place, NE,
Atlanta, Georgia 30303. All shares are held by SunTrust, as trustee for
certain individuals. SunTrust and certain of its affiliates may be deemed
beneficial owners of such shares; however, SunTrust and such affiliates
disclaim any beneficial interest in such shares.
(10) Includes options to purchase 200,000 shares of Common Stock, which
represent the immediately exercisable portion of the options to be granted
to Mr. Stead effective upon the closing of this offering. See
"Management -- 1996 Plan -- Options."
(11) Excludes shares beneficially owned by Mr. Lacy, the Company's former Chief
Executive Officer and former Chairman of the Board of Directors.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 265,000,000 shares
of Class A Common Stock, par value $0.01 per share, of which 20,200,000 shares
will be issued and outstanding upon the closing of the Combined Offering
(assuming no exercise of the U.S. Underwriters' over-allotment option), and
135,000,000 shares of Class B Common Stock, par value $0.01 per share, of which
109,813,762 shares will be issued and outstanding upon the closing of the
Combined Offering. In addition, the Company's Certificate of Incorporation (the
"Certificate of Incorporation") authorizes the issuance by the Company of up to
1,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred
Stock"), on terms determined by the Company's Board of Directors. The following
description is a summary of the capital stock of the Company and is subject to
and qualified in its entirety by reference to the provisions of the Certificate
of Incorporation and the Amended and Restated Bylaws (the "Bylaws") of the
Company, which are included as exhibits to the Registration Statement of which
this Prospectus forms a part.
COMMON EQUITY
The shares of Common Stock and Class B Common Stock are identical in all
respects, except for voting rights and certain conversion rights, as described
below.
VOTING RIGHTS. Each share of Common Stock entitles the holder to one vote
on each matter submitted to a vote of the Company's stockholders, including the
election of directors, and each share of Class B Common Stock entitles the
holder to ten votes on each such matter. Except as required by applicable law,
holders of the Common Stock and Class B Common Stock vote together as a single
class on all matters submitted to a vote of the stockholders of the Company.
There is no cumulative voting. See "Risk Factors -- Control by Ingram Family
Stockholders."
Subject to New York Stock Exchange requirements, for so long as there are
any shares of Class B Common Stock outstanding, any action that may be taken at
a meeting of the stockholders may be taken by written consent in lieu of a
meeting if the Company receives consents signed by stockholders having the
minimum number of votes that would be necessary to approve the action at a
meeting at which all shares entitled to vote on the matter were present and
voted. This could permit certain holders of Class B Common Stock to take action
regarding certain matters without providing other stockholders the opportunity
to voice dissenting views or raise other matters. The right to take such action
by written consent of stockholders will expire at such time as all outstanding
shares of Class B Common Stock cease to be outstanding.
DIVIDENDS, DISTRIBUTIONS, AND STOCK SPLITS. Holders of Common Stock and
Class B Common Stock are entitled to receive dividends at the same rate if, as,
and when such dividends are declared by the Board of Directors out of assets
legally available therefor after payment of dividends required to be paid on
shares of Preferred Stock, if any.
In the case of dividends or distributions payable in Common Stock or Class
B Common Stock, only shares of Common Stock will be distributed with respect to
the Common Stock and only shares of Class B Common Stock will be distributed
with respect to the Class B Common Stock. In the case of dividends or other
distributions consisting of other voting shares of the Company, the Company will
declare and pay such dividends in two separate classes of such voting
securities, identical in all respects, except that the voting rights of each
such security paid to the holders of the Common Stock shall be one-tenth of the
voting rights of each such security paid to the holders of Class B Common Stock,
and such security paid to the holders of Class B Common Stock shall convert into
the security paid to the holders of the Common Stock upon the same terms and
conditions applicable to the Class B Common Stock. In the case of dividends or
other distributions consisting of securities convertible into, or exchangeable
for, voting securities of the Company, the Company will provide that such
convertible or exchangeable securities and the underlying securities be
identical in all respects, except that the voting rights of each security
underlying the convertible or exchangeable security paid to the holders of the
Common Stock shall be one-tenth of the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of Class B Common
Stock, and such underlying securities paid to the holders of Class B Common
Stock shall convert into the security paid to the holders of the Common Stock
upon the same terms and conditions applicable to the Class B Common Stock.
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<PAGE> 73
Neither the Common Stock nor the Class B Common Stock may be subdivided or
combined in any manner unless the other class is subdivided or combined in the
same proportion.
CONVERSION. The Common Stock has no conversion rights.
The Class B Common Stock is convertible into Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of Common Stock for each share of Class B Common Stock
converted. Each share of Class B Common Stock will also automatically convert
into one share of Common Stock upon the earliest to occur of (i) the fifth
anniversary of the closing of the Split-Off; (ii) the sale or transfer of such
share of Class B Common Stock (a) by a holder that is a party to the Board
Representation Agreement to any person that is not an affiliate, spouse or
descendant of such holder, their estates or trusts for their benefit or any
other party to the Exchange Agreement or (b) by any other holder, to a holder
that is not the spouse or descendant of such holder or their estates or trusts
for the benefit thereof; and (iii) the date on which the number of shares of
Class B Common Stock then outstanding is less than 25% of the aggregate number
of shares of Common Equity then outstanding.
LIQUIDATION. In the event of any dissolution, liquidation, or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment of
the debts and other liabilities of the Company and making provision for the
holders of Preferred Stock, if any, the remaining assets of the Company will be
distributed ratably among the holders of the Common Stock and the Class B Common
Stock, treated as a single class.
MERGERS AND OTHER BUSINESS COMBINATIONS. Upon a merger, combination, or
other similar transaction of the Company in which shares of Common Equity are
exchanged for or changed into other stock or securities, cash and/or any other
property, holders of each class of Common Equity will be entitled to receive an
equal per share amount of stock, securities, cash, and/or any other property, as
the case may be, into which or for which each share of any other class of Common
Equity is exchanged or changed; provided that in any transaction in which shares
of capital stock are distributed, such shares so exchanged for or changed into
may differ as to voting rights and certain conversion rights to the extent and
only to the extent that the voting rights and certain conversion rights of
Common Stock and Class B Common Stock differ at that time.
OTHER PROVISIONS. The holders of the Common Stock and Class B Common Stock
are not entitled to preemptive rights. There are no redemption provisions or
sinking fund provisions applicable to the Common Stock or the Class B Common
Stock.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by the DGCL, or the rules of any quotation system or national securities
exchange on which stock of the Company may be quoted or listed, to provide for
the issuance of shares of Preferred Stock in one or more series; to establish
from time to time the number of shares to be included in each such series; to
fix the rights, powers, preferences, and privileges of the shares of each series
and any qualifications and restrictions thereon; and, to the extent permitted by
the DGCL, to increase or decrease the number of shares of such series, without
any further vote or action by the stockholders. Depending upon the terms of the
Preferred Stock established by the Board of Directors, any or all series of
Preferred Stock could have preference over the Common Stock with respect to
dividends and other distributions and upon liquidation of the Company or could
have voting or conversion rights that could adversely affect the holders of the
outstanding Common Stock. The Company has no present plans to issue any shares
of Preferred Stock.
LIMITATION OF LIABILITY; INDEMNIFICATION
As permitted by the DGCL, the Certificate of Incorporation provides that
directors of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director to
the fullest extent permitted by the DGCL (which currently provides that such
liability may be so limited, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the DGCL, relating to
prohibited dividends or distributions or
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<PAGE> 74
the repurchase or redemption of stock, or (iv) for any transaction from which
the director derives an improper personal benefit).
Each person who is or was a party to any action by reason of the fact that
such person is or was a director or officer of the Company shall be indemnified
and held harmless by the Company to the fullest extent permitted by the DGCL.
This right to indemnification also includes the right to have paid by the
Company the expenses incurred in connection with any such proceeding in advance
of its final disposition, to the fullest extent permitted by the DGCL. In
addition, the Company may, by action of the Board of Directors, provide
indemnification to such other employees and agents of the Company to such extent
as the Board of Directors determines to be appropriate under the DGCL.
As a result of this provision, the Company and its stockholders may be
unable to obtain monetary damages from a director for breach of his duty of
care. Although stockholders may continue to seek injunctive or other equitable
relief for an alleged breach of fiduciary duty by a director, stockholders may
not have any effective remedy against the challenged conduct if equitable
remedies are unavailable. The Company also reserves the right to purchase and
maintain directors' and officers' liability insurance.
OTHER CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The Bylaws provide that a majority of the total number of directors shall
constitute a quorum for the transaction of business. The Board of Directors may
act by unanimous written consent. The Board Representation Agreement contains
additional provisions relating to corporate governance. See "The Split-Off and
the Reorganization -- The Split-Off."
Annual meetings of stockholders shall be held to elect the Board of
Directors and transact such other business as may be properly brought before the
meeting. Special meetings of stockholders may be called by the chairman and
shall be called by the secretary on the written request of stockholders having
10% of the voting power of the Company. The stockholders may act by written
consent in lieu of a meeting of stockholders until such time as all shares of
Class B Common Stock cease to be outstanding.
The Certificate of Incorporation may be amended with the approval of the
Board of Directors (by the vote required as described above), and for so long as
any shares of Class B Common Stock remain outstanding, in addition to any vote
required by law, any such amendment also requires the approval of the holders of
a majority of the Company's outstanding voting power and a majority of the
members of the Board of Directors. However, any amendment to the provisions of
the Certificate of Incorporation relating to the Common Equity also requires the
consent of a majority of the outstanding voting power held by the Ingram Family
Stockholders. The Bylaws may be amended with the approval of three-quarters of
the entire Board of Directors or by the holders of 75% of the Company's voting
power present and entitled to vote at any annual or special meeting of
stockholders at which a quorum is present.
The number of directors which shall constitute the whole Board of Directors
shall be fixed by resolution of the Board of Directors. The number of directors
shall in no event be less than seven nor more than nine; provided, however, that
when the Board of Directors is expanded to eight directors, it may not be
subsequently reduced in size. The size of the initial Board is fixed at eight
members, but may be increased to nine in accordance with the Board
Representation Agreement. The vote of a majority of the entire Board is required
for all actions of the Board. The directors shall be elected at the annual
meeting of the stockholders, except for filling vacancies. Directors may be
removed with the approval of the holders of a majority of the Company's voting
power present and entitled to vote at a meeting of stockholders. Vacancies and
newly created directorships on the Board of Directors resulting from any
increase in the number of directors may be filled by a majority of the directors
then in office, although less than a quorum, a sole remaining director, or the
holders of a majority of the voting power present and entitled to vote at a
meeting of stockholders. So long as the Ingram Family Stockholders and their
permitted transferees own at least 25,000,000 shares of the Common Equity, the
Bylaws will provide for the appointment of the Designated Nominees.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote generally, shall
constitute a quorum for stockholder action at any meeting.
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SECTION 203 OF THE DGCL
After this offering, the Company will be subject to Section 203 of the DGCL
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in a business combination (as defined therein) with an "interested
stockholder" (defined generally as any person who beneficially owns 15% or more
of the outstanding voting stock of the Company or any person affiliated with
such person) for a period of three years following the date that such
stockholder became an interested stockholder, unless (i) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation at the time the transaction
commenced (excluding for purposes of determining the number of shares
outstanding those shares owned (a) by directors who are also officers of the
corporation and (b) by employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer); or (iii) on or
subsequent to such date the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is First Chicago
Trust Company of New York.
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<PAGE> 76
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of the Combined Offering, the Company will have
outstanding an aggregate of 20,200,000 shares of Common Stock (23,200,000 shares
if the U.S. Underwriters' over-allotment option is exercised in full), and
109,813,762 shares of Class B Common Stock. Of the total outstanding shares of
Common Equity, only the shares of Common Stock sold in the Combined Offering
will be freely tradable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act (which sales would be subject to
certain volume limitations and other restrictions described below).
The remaining shares of Common Equity held by existing stockholders upon
completion of this offering will be "restricted securities" as that term is
defined in Rule 144 under the Securities Act. In general, under Rule 144 as
currently in effect, a person (or persons whose shares are aggregated),
including an affiliate, who has beneficially owned shares for at least two years
(including, if the shares are transferred, the holding period of any prior owner
except an affiliate) is entitled to sell in "broker's transactions" or to market
makers, within any three-month period commencing 90 days after the date of this
Prospectus, a number of shares that does not exceed the greater of (i) 1% of the
then outstanding shares of such class of the Common Equity (approximately
1,098,138 shares immediately after this offering) or (ii) generally, the average
weekly trading volume in such class of the Common Stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale, and subject
to certain other limitations and restrictions. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the three
months preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least three years, would be entitled to sell such shares under
Rule 144(k) without regard to the volume and other requirements described above.
Shares of Common Equity that would otherwise be deemed "restricted securities"
could be sold at any time through an effective registration statement relating
to such shares of Common Equity.
Of the 109,813,762 shares of Class B Common Stock outstanding as of the
closing of the Combined Offering, 2,562,400 shares were acquired in July 1996
pursuant to the Employee Offering and the concurrent grant of restricted stock
awards, and 107,251,362 shares will have been acquired pursuant to the
Split-Off. Under current law, absent registration or an exemption from
registration other than Rule 144, (a) no shares of Class B Common Stock will be
eligible for sale as of the date of this Prospectus; (b) 107,251,362 shares of
Class B Common Stock will be eligible for sale two years from the effective date
of the Split-Off, and (c) the 2,562,400 shares of Class B Common Stock sold in
the Employee Offering in July 1996 (or granted concurrently therewith), and not
repurchased or forfeited, will be eligible for sale upon the later of (i) July
1998 and (ii) for those shares pledged to secure purchase money loans for such
shares, two years after the release of such pledge. In addition, the 2,562,400
shares of Class B Common Stock issued in July 1996 are subject to contractual
vesting restrictions, which restrictions begin to lapse in April 1998.
Pursuant to the Registration Rights Agreement, the QTIP Trust, which after
the Split-Off will hold 69,099,259 shares of Class B Common Stock, has certain
demand registration rights with respect to all or any portion (subject to
certain minimum thresholds) of the shares of Class B Common Stock owned by the
QTIP Trust, one or more of the other Ingram Family Stockholders and certain of
their permitted transferees on up to three occasions during the 84-month period
following the closing of this offering; provided that the Company shall not be
obligated to effect (i) any registration requested by the QTIP Trust unless the
QTIP Trust has furnished the Company with an opinion of counsel to the effect
that such registration and any subsequent sale will not affect the tax-free
nature of the Split-Off or (ii) more than one demand registration during any
12-month period. The Registration Rights Agreement also grants one demand
registration right (subject to certain minimum thresholds) to members of the
Ingram family holding, at the time of the Split-Off, approximately 18,210,000
shares of Class B Common Stock (which may only be exercised within the 84-month
period following the closing of this offering). All holders of such demand
registration rights are subject to the lock-up agreements described below, and
therefore are restricted from selling any shares during the 180-day period
following the date of this Prospectus. In addition, the Registration Rights
Agreement grants one demand registration right to certain minority stockholders
of the Company, if a change of control of the Company occurs following the
closing of this offering but prior to the second anniversary of the Split-Off
Date. The minority stockholders will not be entitled to this registration right
if they were offered the opportunity to participate in the change of control
transaction.
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<PAGE> 77
In addition, the Registration Rights Agreement provides that the recipients
of Class B Common Stock received in the Split-Off will be entitled to unlimited
"piggyback" registration rights in connection with any proposed registration of
equity securities by the Company (with certain specified exceptions) during the
84-month period following the closing of this offering. Employees who received
shares in the Employee Offering, holders of restricted stock granted at the time
of the Employee Offering, and persons who have exercised Rollover Stock Options,
are bound by the provisions of the Registration Rights Agreement as if such
employees were parties thereto, and are entitled to the "piggyback" registration
rights provided therein, with respect to the portion of their shares of Common
Equity that is no longer subject to restrictions.
Pursuant to the Thrift Plan Liquidity Agreement, the Thrift Plan has
certain rights to require the Company to purchase such shares of Class B Common
Stock as are required to be sold by the Thrift Plan in order to comply with the
requirements of ERISA or are necessary to fund distributions to Thrift Plan
participants, if the Company does not arrange for the registration of such
shares. Of the 10,007,000 shares of Class B Common Stock held by the Thrift
Plan, 9,207,000 shares will be subject to the lock-up agreements described
below.
Immediately following the closing of the Combined Offering, there will be
outstanding options exercisable for approximately 21,000,000 shares of Common
Equity. Of such options, approximately 2,600,000 Rollover Stock Options and
200,000 options granted to Mr. Stead will be exercisable immediately after the
closing of the Combined Offering for shares of Common Stock, although shares
issuable upon exercise of approximately 1,000,000 of such options will be
subject to the lock-up agreements described below. In addition, approximately
1,350,000 Rollover Stock Options will become exercisable on or prior to May 1,
1997, although the shares issuable upon exercise of approximately 600,000 of
such Rollover Stock Options will be subject to the lock-up agreements described
below. In addition, on April 1, 1997, options granted to non-officers of the
Company pursuant to the 1996 Plan will become exercisable for approximately
700,000 shares of Class B Common Stock, none of which will be subject to the
lock-up agreements described below. The Company has filed a registration
statement on Form S-1 under the Securities Act covering shares issuable upon
exercise of Rollover Stock Options exercisable on or prior to January 1, 1997.
The Company also intends to file a registration statement on Form S-8 covering
all Rollover Stock Options held by employees of the Company, as well as a
registration statement on Form S-8 covering all options granted under the 1996
Plan. Shares registered under such registration statements will, subject to Rule
144 volume limitations applicable to affiliates, be available for sale in the
open market, unless such shares are subject to vesting restrictions with the
Company or the lock-up agreements described below. See "Management -- 1996 Plan"
and "-- Rollover Plan; Incentive Stock Units."
The Company and its directors and executive officers, and certain
stockholders of the Company, have agreed, subject to certain exceptions, not to
offer, sell, contract to sell or otherwise dispose of any Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated. Morgan Stanley & Co. Incorporated
has informed the Company that it has no present intention to consent to any such
transactions. Of the 107,251,362 shares of Class B Common Stock to be received
in the Split-Off, all but 3,855,892 shares are subject to such lock-up
agreements. Each holder of shares received in the Split-Off, in order to obtain
the private letter ruling from the IRS, has represented in the Exchange
Agreement that there is no plan or intention by such holder to sell, exchange,
transfer by gift or otherwise dispose of any of such holder's Class B Common
Stock subsequent to the Split-Off. As described above, all such shares are
subject to restrictions on resale under Rule 144, including a two-year holding
period. However, 800,000 of such 3,855,892 shares are held by the Thrift Plan,
which has the registration rights described above, and therefore such shares may
be registered and be eligible for immediate resale under certain limited
circumstances. In addition, certain minority stockholders may have demand
registration rights under the Registration Rights Agreement upon a change of
control, as described above.
Prior to this offering, there has not been any public market for either
class of the Common Equity. No prediction can be made as to the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Sales of substantial additional
amounts of Common Equity in the public market, or the perception that such sales
could occur, could adversely affect the prevailing market price of the Common
Stock.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
"Non-U.S. Holder." A "Non-U.S. Holder" is a person or entity that, for U.S.
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership, or a non-resident fiduciary of a foreign
estate or trust.
This discussion is based on the Code, and administrative interpretations as
of the date hereof, all of which are subject to change, including changes with
retroactive effect. This discussion does not address all aspects of U.S. federal
income and estate taxation that may be relevant to Non-U.S. Holders in light of
their particular circumstances and does not address any tax consequences arising
under the laws of any state, local or foreign jurisdiction.
Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, would affect the United States
taxation of dividends paid to a Non-U.S. Holder on Common Stock. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. The
discussion below is not intended to be a complete discussion of the provisions
of the Proposed Regulations, and prospective investors are urged to consult
their tax advisors with respect to the effect the Proposed Regulations would
have if adopted.
Prospective holders should consult their tax advisors with respect to the
particular tax consequences to them of owning and disposing of Common Stock,
including the consequences under U.S. federal law as well as under the laws of
any state, local or foreign jurisdiction.
DIVIDENDS
Subject to the discussion below, dividends paid to a Non-U.S. Holder of
Common Stock generally will be subject to withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. For purposes
of determining whether tax is to be withheld at a 30% rate or at a reduced rate
as specified by an income tax treaty, the Company ordinarily will presume that
dividends paid to an address in a foreign country are paid to a resident of such
country absent knowledge that such presumption is not warranted.
Under the Proposed Regulations, to obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder would generally be required to provide a Form
W-8 certifying such Non-U.S. Holder's entitlement to benefits under a treaty.
The Proposed Regulations would also provide special rules to determine whether,
for purposes of determining the applicability of a tax treaty, dividends paid to
a Non-U.S. Holder that is an entity should be treated as paid to the entity or
those holding an interest in that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States if the Non-U.S. Holder files a valid Form 4224
(or, if and when the Proposed Regulations become effective, a Form W-8) stating
that the dividends are so connected. Instead, the effectively connected
dividends will be subject to regular U.S. income tax in the same manner as if
the Non-U.S. Holder were a U.S. resident. A non-U.S. corporation receiving
effectively connected dividends may also be subject to an additional "branch
profits tax" which is imposed, under certain circumstances, at a rate of 30% (or
such lower rate as may be specified by an applicable treaty) of the non-U.S.
corporation's effectively connected earnings and profits, subject to certain
adjustments.
Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
A similar report is sent to the holder. Pursuant to tax treaties or certain
other agreements, the IRS may make its reports available to tax authorities in
the recipient's country of residence.
Dividends paid to a Non-U.S. Holder at an address within the United States
may be subject to backup withholding imposed at a rate of 31% if the Non-U.S.
Holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and certain other information. The
Proposed Regulations would, if adopted, alter the foregoing rules in certain
respects, including by providing certain
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presumptions under which a Non-U.S. Holder would be subject to backup
withholding in the absence of the certification from the holder as to non-U.S.
status, regardless of whether dividends are paid to a U.S. or non-U.S. address.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the United States, (ii) in the case of certain Non-U.S. Holders who
are non-resident alien individuals and hold the Common Stock as a capital asset,
such individual is present in the United States for 183 or more days in the
taxable year of the disposition, (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) the Company is or has been a "U.S. real property holding
corporation" within the meaning of Section 897(c)(2) of the Code at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period. The Company is not, and does not anticipate becoming, a
U.S. real property holding corporation.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of Common Stock paid to or through a U.S. office of a broker unless
the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds if the payment
is made outside the United States through a non-U.S. office of a non-U.S.
broker. However, U.S. information reporting requirements (but not backup
withholding) will apply to a payment of disposition proceeds outside the United
States if (A) the payment is made through an office outside the United States of
a broker that is either (i) a U.S. person, (ii) a foreign person which derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the United States or (iii) a "controlled foreign corporation" for
U.S. federal income tax purposes and (B) the broker fails to maintain
documentary evidence that the holder is a Non-U.S. Holder and that certain
conditions are met, or that the holder otherwise is entitled to an exemption.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-U.S. Holder would be subject to backup
withholding in the absence of certification from the holder as to non-U.S.
status.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in the Common Stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.
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UNDERWRITERS
Under the terms and subject to the conditions in an Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below, for whom Morgan Stanley & Co. Incorporated, The Robinson-Humphrey
Company, Inc., Alex. Brown & Sons Incorporated, Hambrecht & Quist LLC, and J.C.
Bradford & Co. are serving as U.S. Representatives, and the International
Underwriters named below, for whom Morgan Stanley & Co. International Limited,
The Robinson-Humphrey Company, Inc., Alex. Brown & Sons Incorporated, and
Hambrecht & Quist LLC are serving as International Representatives, have
severally agreed to purchase, and the Company has agreed to sell to them
severally, the respective number of shares of Common Stock set forth opposite
the name of each Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
----------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..............................
The Robinson-Humphrey Company, Inc.............................
Alex. Brown & Sons Incorporated................................
Hambrecht & Quist LLC..........................................
J.C. Bradford & Co.............................................
----------
Subtotal.................................................... 16,000,000
----------
International Underwriters:
Morgan Stanley & Co. International Limited.....................
The Robinson-Humphrey Company, Inc.............................
Alex. Brown & Sons Incorporated................................
Hambrecht & Quist LLC..........................................
----------
Subtotal.................................................... 4,000,000
----------
Total.................................................. 20,000,000
=========
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The U.S. Representatives and the
International Representatives are collectively referred to as the
"Representatives." The Underwriting Agreement provides that the obligations of
the several Underwriters to pay for and accept delivery of the shares of Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (a) it is not purchasing any U.S. Shares (as defined below) for the
account of anyone other than a United States or Canadian Person (as defined
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below) and (b) it has not offered or sold, and will not offer or sell, directly
or indirectly, any U.S. Shares or distribute any prospectus outside the United
States and Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions set forth below, (a) it is not purchasing any International Shares
(as defined below) for the account of any United States or Canadian Person and
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any International Shares or distribute any prospectus relating to
the International Shares within the United States or Canada or to any United
States or Canadian Person. With respect to any of The Robinson-Humphrey Company,
Inc., Alex. Brown & Sons Incorporated, and Hambrecht & Quist LLC, the foregoing
representations or agreements (i) made by it in its capacity as a U.S.
Underwriter shall apply only to shares of Common Stock purchased by it in its
capacity as a U.S. Underwriter, (ii) made by it in its capacity as an
International Underwriter shall apply only to shares of Common Stock purchased
by it in its capacity as an International Underwriter, and (iii) shall not
restrict its ability to distribute any prospectus relating to the shares of
Common Stock to any person. The foregoing limitations do not apply to
stabilization transactions or to certain transactions specified in the Agreement
Between U.S. and International Underwriters. As used herein, "United States or
Canadian Person" means any national or resident of the United States or Canada,
or any corporation, pension, profit-sharing or other trust or other entity
organized under the laws of the United States or Canada or of any political
subdivision thereof (other than a branch located outside the United States and
Canada of any United States or Canadian Person) and includes any United States
or Canadian branch of a person who is otherwise not a United States or Canadian
Person. All shares of Common Stock to be purchased by the U.S. Underwriters and
the International Underwriters are referred to herein as the "U.S. Shares" and
the "International Shares," respectively.
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares so sold shall be the Price to Public set forth on the cover page hereof,
in United States dollars, less an amount not greater than the per share amount
of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares of Common Stock, such dealer represents and agrees
that it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such shares of Common Stock in Canada or to, or for the
benefit of, any resident of Canada in contravention of the securities laws of
Canada or any province or territory thereof and that any offer of shares of
Common Stock in Canada will be made only pursuant to an exemption from the
requirement to file a prospectus in the province or territory of Canada in which
such offer is made, and that such dealer will deliver to any other dealer to
whom it sells any of such shares of Common Stock a notice to the foregoing
effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and during the period of six months after the date hereof will not offer
or sell any shares of Common Stock to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing,
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of
Public Offers of Securities Regulations 1995 (the "Regulations"); (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the shares of Common Stock offered hereby in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on to any person in the United Kingdom any document received
by it in connection with the offer of the shares of Common Stock, other than any
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document which consists of, or is part of, listing particulars, supplementary
listing particulars, or any other document required or permitted to be published
by listing rules under Article IV of the Financial Services Act 1986, if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995, or is a person to whom
such document may otherwise lawfully be issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any of the shares of Common Stock acquired
in connection with this offering, except for offers or sales to Japanese
International Underwriters or dealers and except pursuant to any exemption from
the registration requirements of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the shares of Common Stock a notice stating in substance that
such dealer may not offer or sell any of such shares, directly or indirectly, in
Japan or to or for the account of any resident thereof except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
of Japan, and that such dealer must send to any other dealer to whom it sells
any of such shares of Common Stock a notice to the foregoing effect.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the price to public set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of $ per share under the price to public. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of
$ per share to other Underwriters or to certain dealers. After the
initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.
Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to 3,000,000 additional shares of Common Stock at the price to
public set forth on the cover page of this Prospectus, less underwriting
discounts and commissions. The U.S. Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, incurred in the sale of the
shares of Common Stock offered hereby. To the extent that such option is
exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares to be purchased and offered by such U.S.
Underwriter in the above table bears to the total number of initial shares to be
purchased by the U.S. Underwriters.
The Common Stock has been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange under the symbol "IM." The
Underwriters intend to sell shares of the Common Stock to a minimum of 2,000
beneficial owners in lots of 100 or more so as to meet the distribution
requirements of such listing.
At the Company's request, the Underwriters have reserved for sale, at the
price to public set forth on the cover page hereof, up to 2,300,000 shares
offered hereby (including approximately shares that will be sold directly
by the Company to certain of its Company's Canadian employees, pursuant to which
the Underwriters will receive an advisory fee as part of such placement by the
Company) for directors, officers, employees, business associates, related
persons of the Company and its subsidiaries, and Ingram Industries. The number
of shares of Common Stock available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares which are not so purchased will be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby. See
"Employee and Priority Offers."
The Company and its directors and executive officers, and certain
stockholders of the Company, have agreed that they will not (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right, or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other
78
<PAGE> 83
securities, in cash or otherwise, for a period of 180 days after the date of
this Prospectus, without the prior written consent of Morgan Stanley & Co.
Incorporated, other than (i) the sale to the Underwriters of any shares of
Common Stock pursuant to the Underwriting Agreement, (ii) the grant of options
or issuance of stock upon the exercise of outstanding stock options pursuant to
the Company's stock option plans or (iii) an exception for the Thrift Plan
allowing for the sale of up to 800,000 shares. See "Shares Eligible for Future
Sale." Morgan Stanley & Co. Incorporated has informed the Company that it has no
present intention to provide a waiver from the 180-day lock-up period for the
Company and its directors, executive officers and stockholders who have agreed
to such lock-ups.
The Representatives have informed the Company that the Underwriters do not
intend sales to discretionary accounts to exceed five percent of the total
number of shares of Common Stock offered by them.
The Company and the Underwriters have agreed in the Underwriting Agreement
to indemnify each other against certain liabilities, including liabilities under
the Securities Act.
From time to time each of Morgan Stanley & Co. Incorporated, The
Robinson-Humphrey Company, Inc., and J.C. Bradford & Co. has provided, and
continues to provide, investment banking services to Ingram Industries and the
Company.
PRICING OF OFFERING
Prior to this offering, there has been no public market for the shares of
Common Stock of the Company. Consequently, the initial public offering price
will be determined by negotiations between the Company and the Representatives.
Among the factors considered in determining the initial public offering price
will be the Company's record of operations, the Company's current financial
condition and future prospects, the experience of its management, the economics
of the industry in general, the general condition of the equity securities
market, and the market prices of similar securities of companies considered
comparable to the Company. There can be no assurance that a regular trading
market for the shares of Common Stock will develop after this offering or, if
developed, that a public trading market can be sustained. There can be no
assurance that the prices at which the Common Stock will sell in the public
market after this offering will not be lower than the price at which it is
issued by the Underwriters in this offering.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Davis Polk & Wardwell, New York, New York and
for the Underwriters by Wilson Sonsini Goodrich & Rosati, Palo Alto, California.
EXPERTS
The consolidated financial statements as of December 31, 1994 and December
30, 1995 and for each of the three fiscal years in the period ended December 30,
1995 included in this Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
79
<PAGE> 84
ADDITIONAL INFORMATION
Prior to this offering, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended, with respect to the shares of Common Stock being offered hereby. This
Prospectus, which is part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted as permitted by the Rules
and Regulations of the Commission. Statements contained in this Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete, and in each instance in which a copy of such contract or
other document has been filed as an exhibit to the Registration Statement,
reference is made to such copy and each such statement is qualified in all
respects by such reference.
As a result of this offering, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. A copy of the
Registration Statement, the exhibits and schedules forming a part thereof and
the reports and other information filed by the Company in accordance with the
Exchange Act may be inspected without charge at the offices of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain regional offices
of the Commission located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material may also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees prescribed by the Commission.
Such material may also be accessed electronically by means of the Commission's
home page on the Internet at http://www.sec.gov.
80
<PAGE> 85
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheet as of December 31, 1994, December 30, 1995 and September
28, 1996 (unaudited)................................................................ F-3
Consolidated Statement of Income for the years ended January 1, 1994, December 31,
1994 and December 30, 1995 and the thirty-nine weeks ended September 30, 1995 and
September 28,
1996 (unaudited).................................................................... F-4
Consolidated Statement of Stockholder's Equity for the years ended January 1, 1994,
December 31, 1994 and December 30, 1995 and the thirty-nine weeks ended September
28, 1996 (unaudited)................................................................ F-5
Consolidated Statement of Cash Flows for the years ended January 1, 1994, December 31,
1994 and December 30, 1995 and the thirty-nine weeks ended September 30, 1995 and
September 28, 1996 (unaudited)...................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 86
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of Ingram Micro Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of Ingram Micro
Inc. (a wholly-owned subsidiary of Ingram Industries Inc.) and its subsidiaries
at December 31, 1994 and December 30, 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
30, 1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Nashville, Tennessee
February 29, 1996, except
Note 12 as to which the date is September 9, 1996
and Note 2 as to which the date is October 29, 1996
F-2
<PAGE> 87
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL PERIOD END
------------------------- SEPTEMBER 28,
1994 1995 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 58,369 $ 56,916 $ 43,196
Trade accounts receivable (less allowances of
$25,668 in 1994, $30,791 in 1995 and $38,069 in
1996).......................................... 745,910 1,071,275 1,127,937
Inventories...................................... 995,880 1,582,922 1,382,122
Other current assets............................. 68,717 88,503 115,243
---------- ---------- ----------
Total current assets........................ 1,868,876 2,799,616 2,668,498
Property and equipment, net......................... 58,285 89,126 127,984
Goodwill, net....................................... 33,481 29,871 27,785
Other............................................... 13,647 22,285 19,445
---------- ---------- ----------
Total assets................................ $1,974,289 $2,940,898 $ 2,843,712
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................. $1,100,598 $1,652,073 $ 1,670,358
Accrued expenses................................. 94,505 121,572 153,598
Current maturities of long-term debt............. 10,724 6,332 16,458
---------- ---------- ----------
Total current liabilities................... 1,205,827 1,779,977 1,840,414
Long-term debt................................... 92,204 170,424 128,855
Due to Ingram Industries......................... 449,355 673,792 479,703
Other............................................ 3,434 5,697 8,572
---------- ---------- ----------
Total liabilities........................... 1,750,820 2,629,890 2,457,544
Minority interest................................... 2,125 213 2,956
Commitments and contingencies (Note 8)
Redeemable Class B Common Stock..................... -- -- 17,223
Stockholder's equity:
Preferred Stock, $0.01 par value, 1,000,000
shares authorized; no shares issued and
outstanding.................................... -- -- --
Class A Common Stock, $0.01 par value,
265,000,000 shares authorized; no shares issued
and outstanding................................ -- -- --
Class B Common Stock, $0.01 par value,
135,000,000 shares authorized; 109,813,762
shares issued and outstanding (including
2,460,400 redeemable shares)................... 1,073 1,073 1,074
Additional paid in capital....................... 22,427 22,427 23,140
Retained earnings................................ 197,815 282,122 339,689
Cumulative translation adjustment................ 29 5,173 2,680
Unearned compensation............................ -- -- (594)
---------- ---------- ----------
Total stockholder's equity.................. 221,344 310,795 365,989
---------- ---------- ----------
Total liabilities and stockholder's
equity.................................... $1,974,289 $2,940,898 $ 2,843,712
========== ========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-3
<PAGE> 88
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR ---------------------------------
---------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
---------- ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales................. $4,044,169 $5,830,199 $8,616,867 $6,070,722 $8,474,710
Cost of sales............. 3,714,527 5,391,224 8,011,181 5,648,210 7,900,223
---------- ---------- ---------- -------------- --------------
Gross profit.............. 329,642 438,975 605,686 422,512 574,487
Expenses:
Selling, general and
administrative....... 225,047 296,330 415,344 296,079 386,492
Charges allocated from
Ingram Industries.... 1,567 2,355 3,461 2,561 3,259
Non-cash compensation
charge............... 8,859
---------- ---------- ---------- -------------- --------------
226,614 298,685 418,805 298,640 398,610
---------- ---------- ---------- -------------- --------------
Income from operations.... 103,028 140,290 186,881 123,872 175,877
Other (income) expense:
Interest income......... (407) (937) (3,479) (3,049) (1,188)
Interest expense........ 5,003 8,744 13,451 8,918 10,608
Interest expense charged
by Ingram
Industries........... 16,089 24,189 32,606 22,977 30,912
Net foreign currency
exchange loss........ 111 6,873 7,751 6,572 447
Other................... (623) 716 1,936 405 1,689
---------- ---------- ---------- -------------- --------------
20,173 39,585 52,265 35,823 42,468
---------- ---------- ---------- -------------- --------------
Income before income taxes
and minority interest... 82,855 100,705 134,616 88,049 133,409
Provision for income
taxes................... 31,660 39,604 53,143 34,755 55,459
---------- ---------- ---------- -------------- --------------
Income before minority
interest................ 51,195 61,101 81,473 53,294 77,950
Minority interest......... 840 (2,243) (2,834) (2,986) 383
---------- ---------- ---------- -------------- --------------
Net income................ $ 50,355 $ 63,344 $ 84,307 $ 56,280 $ 77,567
========= ========= ========= ========== ==========
Earnings per share........ $ 0.41 $ 0.52 $ 0.69 $ 0.46 $ 0.64
========= ========= ========= ========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-4
<PAGE> 89
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL CUMULATIVE
------------------- -------------------- PAID IN RETAINED TRANSLATION UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT COMPENSATION TOTAL
---------- ------ ----------- ------ ---------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 2, 1993...... 107,251,362 $1,073 $ 22,427 $84,116 $ 1,802 $109,418
Translation
adjustment......... (4,314) (4,314)
Net income........... 50,355 50,355
---------- ------ ----------- ------ ------- -------- ------ --------
JANUARY 1, 1994...... 107,251,362 1,073 22,427 134,471 (2,512) 155,459
Translation
adjustment......... 2,541 2,541
Net income........... 63,344 63,344
---------- ------ ----------- ------ ------- -------- ------ --------
DECEMBER 31, 1994.... 107,251,362 1,073 22,427 197,815 29 221,344
Translation
adjustment......... 5,144 5,144
Net income........... 84,307 84,307
---------- ------ ----------- ------ ------- -------- ------ --------
DECEMBER 30, 1995.... 107,251,362 1,073 22,427 282,122 5,173 310,795
Distribution to
Ingram Industries
(unaudited)........ (20,000 ) (20,000)
Grant of restricted
Class B Common
Stock
(unaudited)........ 102,000 1 713 (714)
Amortization of
unearned
compensation
(unaudited)........ 120 120
Translation
adjustment
(unaudited)........ (2,493) (2,493)
Net income
(unaudited)........ 77,567 77,567
---------- ------ ----------- ------ ------- -------- ------ --------
SEPTEMBER 28, 1996
(UNAUDITED)........ 107,353,362 $1,074 $ 23,140 $339,689 $ 2,680 $ (594) $365,989
========== ====== =========== ====== ======= ======== ====== ========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-5
<PAGE> 90
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR -------------------------------
------------------------------ SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------- -------- -------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:
Net income........................... $ 50,355 $ 63,344 $ 84,307 $ 56,280 $ 77,567
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization..... 12,918 18,675 25,394 17,829 25,253
Deferred income taxes............. (5,719) (4,668) (8,632) (8,475) (3,144)
Minority interest................. 840 (2,243) (2,834) (2,986) 383
Non-cash compensation charge...... 8,859
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Trade accounts receivable......... (161,097) (232,268) (320,177) (151,854) (63,799)
Inventories....................... (143,738) (345,511) (580,116) (481,072) 194,288
Other current assets.............. (2,881) (12,846) (15,877) (20,929) (16,280)
Accounts payable.................. 184,787 411,012 543,822 612,038 25,890
Accrued expenses.................. 22,830 17,452 22,828 11,651 24,235
-------- -------- -------- -------------- --------------
Cash provided (used) by operating
activities...................... (41,705) (87,053) (251,285) 32,482 273,252
CASH PROVIDED (USED) BY INVESTING
ACTIVITIES:
Purchase of property and equipment... (21,311) (31,286) (52,985) (37,219) (62,503)
Acquisitions, net of cash acquired... (21,447) (15,088)
Other................................ 2,062 3,765 4,188 1,124 (2,034)
-------- -------- -------- -------------- --------------
Cash used by investing
activities...................... (40,696) (42,609) (48,797) (36,095) (64,537)
CASH PROVIDED (USED) BY FINANCING
ACTIVITIES:
Proceeds from sale of Class B Common
Stock............................. 17,223
Increase (decrease) in borrowings
from Ingram Industries............ 83,635 103,580 224,437 (36,196) (194,090)
Proceeds (repayment) of debt......... 1,410 (4,930) (838) 97 2,481
Net borrowings under revolving credit
facility.......................... 16,388 44,636 74,666 19,039 (29,612)
Distribution to Ingram Industries.... (20,000)
Minority interest investment......... 2,400
-------- -------- -------- -------------- --------------
Cash provided (used) by financing
activities...................... 101,433 143,286 298,265 (17,060) (221,598)
Effect of exchange rate changes on
cash................................. 84 354 364 399 (837)
-------- -------- -------- -------------- --------------
Increase (decrease) in cash............ 19,116 13,978 (1,453) (20,274) (13,720)
Cash, beginning of year................ 25,275 44,391 58,369 58,369 56,916
-------- -------- -------- -------------- --------------
Cash, end of period or year............ $ 44,391 $ 58,369 $ 56,916 $ 38,095 $ 43,196
======== ======== ======== ========== ==========
Supplementary disclosure of cash flow
information:
CASH PAYMENTS DURING THE PERIOD:
Interest............................. $ 20,738 $ 32,528 $ 45,164 $ 31,066 $ 41,814
Income taxes......................... 34,906 47,152 54,506 38,843 60,090
Cash payments include payments made to Ingram Industries for interest and U.S. income taxes
</TABLE>
See accompanying notes to these consolidated financial statements.
F-6
<PAGE> 91
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
Ingram Micro Inc. (the "Company" or "Ingram Micro"), formerly Ingram Micro
Holdings Inc. (refer to Note 12), is primarily engaged in wholesale distribution
and marketing of microcomputer hardware and software products. The Company
conducts the majority of its operations in North America and Europe. The Company
is a wholly-owned subsidiary of Ingram Industries Inc. ("Ingram Industries"). In
September 1995, Ingram Industries announced its intention to reorganize into
three separate companies in a tax-free reorganization. As part of the
reorganization (the "Reorganization"), Ingram Industries will split-off the
Company. The plan of reorganization is subject to, among other things, receipt
of a satisfactory tax ruling from the Internal Revenue Service. The plan
contemplates that certain of the Ingram Industries stockholders will exchange
(the "Exchange") all or some of their shares of Ingram Industries for the
outstanding shares of the Company held by Ingram Industries. The Exchange and
those elements of the Reorganization contemplated to occur prior to the closing
of the Company's initial public offering are referred to herein as the
"Split-Off."
The accompanying consolidated financial statements have been prepared as if
the Company had operated as an independent stand alone entity for all periods
presented except the Company generally has not had significant borrowings in
North America other than amounts due Ingram Industries. Refer to Notes 6 and 10
regarding related party transactions.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies which conform to generally
accepted accounting principles applied on a consistent basis between years, are
described below:
Basis of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Fiscal Year
The fiscal year of the Company is a 52 or 53 week period ending on the
Saturday nearest to December 31. All references herein to "1993," "1994" and
"1995" represent the 52 week fiscal years ended January 1, 1994, December 31,
1994 and December 30, 1995, respectively.
Accounting Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, disclosure of contingent liabilities at financial
statement date and reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash
Outstanding checks of $119,627 in 1994 and $72,868 in 1995 are included in
accounts payable.
F-7
<PAGE> 92
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue Recognition
Revenue is recognized at the time of product shipment. The Company, under
specified conditions, permits its customers to return or exchange products. The
provision for estimated sales returns is recorded concurrently with the
recognition of revenue.
Vendor Programs
Funds received from vendors for price protection, product rebates,
marketing or training programs are recorded net of direct costs as adjustments
to product costs, reduction of selling, general and administrative expenses or
revenue according to the nature of the program.
The Company does not provide warranty coverage of its product sales.
However, to maintain customer relations, the Company facilitates domestic vendor
warranty policies by accepting for exchange, with the Company's prior approval,
most defective products within 90 days of invoicing. Defective products received
by the Company are subsequently returned to the vendor for credit or
replacement.
The Company generated approximately 17% of its sales in fiscal 1993, 18% in
1994 and 23% in 1995 from products purchased from two vendors.
Inventories
Inventories are stated at the lower of average cost or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful life:
<TABLE>
<S> <C>
Leasehold improvements....................................... 3-12 years
Distribution equipment....................................... 5-7 years
Computer equipment........................................... 2-5 years
</TABLE>
Maintenance, repairs and minor renewals are charged to expense as incurred.
Additions, major renewals and betterments to property and equipment are
capitalized. Realization of carrying value is assessed periodically.
Goodwill
Goodwill is amortized on a straight-line basis over periods ranging from
five to twenty years. Accumulated amortization was $9,846 at December 31, 1994
and $13,576 at December 30, 1995. The Company evaluates the recoverability of
goodwill and reviews the amortization periods on an annual basis. Recoverability
is measured on the basis of anticipated undiscounted cash flows from operations.
At December 31, 1994 and December 30, 1995, no impairment was indicated.
Income Taxes
The temporary differences between the financial reporting basis and the
income tax basis of the Company's assets and liabilities are provided in
accordance with Statement of Financial Accounting Standards No. 109.
F-8
<PAGE> 93
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Foreign Currency Translation
Financial statements of foreign subsidiaries are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and a weighted average exchange rate for each period for results of
foreign operations. Translation adjustments are recorded as a separate component
of stockholder's equity when the local currency is the functional currency.
Translation adjustments are recorded in income when the U.S. dollar is the
functional currency. The U.S. dollar is the functional currency for the
Company's subsidiaries in Mexico and Singapore.
Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable and
other accrued expenses approximate fair value because of the short maturity of
these items.
The carrying amounts of intercompany payables and debt issued pursuant to
bank credit agreements approximate fair value because interest rates on these
instruments approximate current market interest rates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable
and derivative financial instruments. Credit risk with respect to trade accounts
receivable is limited due to the large number of customers and their dispersion
across geographic areas. The Company sells its products primarily in the United
States, Europe, Canada and Mexico. The Company performs ongoing credit
evaluations of its customers' financial condition, utilizes flooring
arrangements with third party financing companies, obtains credit insurance in
certain locations and requires collateral in certain circumstances. The Company
maintains an allowance for potential credit losses.
Derivative Financial Instruments
The Company operates internationally with distribution facilities in
various locations around the world. The Company uses derivative financial
instruments to reduce its exposure to fluctuations in interest rates and foreign
exchange rates by creating offsetting positions through the use of derivative
financial instruments. The market risk related to the foreign exchange
agreements is offset by changes in the valuation of the underlying items being
hedged. The majority of the Company's derivative financial instruments have
terms of 90 days or less. The Company currently does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives.
Derivative financial instruments are accounted for on an accrual basis.
Income and expense are recorded in the same category as that arising from the
related asset or liability being hedged. Gains and losses resulting from
effective hedges of existing assets, liabilities or firm commitments are
deferred and recognized when the offsetting gain and losses are recognized on
the related hedged items. Written foreign currency options are used to mitigate
currency risk in conjunction with purchased options. Gains or losses on written
foreign currency options are adjusted to market value at the end of each
accounting period and have not been material to date.
The notional amount of forward exchange contracts and options is the amount
of foreign currency bought or sold at maturity. The notional amount of currency
interest rate swaps is the underlying principal and currency amounts used in
determining the interest payments exchanged over the life of the swap. Notional
amounts are indicative of the extent of the Company's involvement in the various
types and uses of derivative financial instruments and are not a measure of the
Company's exposure to credit or market risks through its
F-9
<PAGE> 94
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
use of derivatives. The estimated fair value of derivative financial instruments
represents the amount required to enter into like off-setting contracts with
similar remaining maturities based on quoted market prices.
Credit exposure is limited to the amounts, if any, by which the
counterparties' obligations under the contracts exceed the obligations of the
Company to the counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of counterparties
from a limited group of high quality institutions and other contract provisions.
Derivative financial instruments comprise the following:
<TABLE>
<CAPTION>
1994 1995
----------------------- -----------------------
NOTIONAL ESTIMATED NOTIONAL ESTIMATED
AMOUNTS FAIR VALUE AMOUNTS FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Foreign exchange forward contracts....... $ 44,586 $ (384) $109,218 $ (1,971)
Purchased foreign currency options....... 55,979 699 75,928 485
Written foreign currency options ........ 77,298 (25) 121,183 (615)
Currency interest rate swaps............. 9,823 (543) 25,655 (1,056)
</TABLE>
Employee Benefits
The Company participates in Ingram Industries' defined contribution plan
covering substantially all U.S. employees. The plan permits eligible employees
to make contributions up to certain limits and receive employer matching at
stipulated percentages. The Company's contributions charged to expense were $716
in fiscal 1993, $764 in 1994 and $1,399 in 1995.
As a result of the Split-Off described in Note 1, the Company will
establish its own employee benefit plans.
Earnings Per Share
Historical earnings per share data reflects the Company's capital structure
as a result of the formation of the Delaware corporation in preparation for the
Split-Off described in Notes 1 and 12. Earnings per share is determined based on
the number of shares the Company is expected to have after the Split-Off
(107,251,362) in addition to all dilutive common stock and common stock
equivalent shares issued within 12 months of the public offering. Pursuant to
the Securities and Exchange Commission Staff Accounting Bulletins and Staff
policy, such shares are treated as if they were outstanding for all periods
presented using the treasury stock method (14,155,229). The number of common
shares used to compute the earnings per share amounts for each of the three
fiscal years in the period ended December 30, 1995 and the thirty-nine weeks
ended September 30, 1995 and September 28, 1996 was 121,406,591, 121,406,591,
and 121,687,287, respectively.
Supplementary Earnings Per Share
Supplementary per share data (unaudited) is presented to give effect to the
repayment of certain indebtedness assumed by the Company in satisfaction of
amounts due to Ingram Industries. Net income is adjusted by $16,078 and $11,203
for 1995 and the thirty-nine weeks ended September 28, 1996, respectively, to
reflect the reduction in interest expense (net of tax) related to the
indebtedness assumed by the Company.
The weighted average shares outstanding used to calculate supplementary pro
forma earnings per share are based on weighted average shares outstanding at
December 30, 1995 and September 28, 1996, respectively, as adjusted for
20,200,000 shares of Class A Common Stock being sold in the Company's initial
public offering to repay certain indebtedness of the Company.
F-10
<PAGE> 95
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Unaudited supplementary pro forma earnings per share for the fiscal periods
ended December 30, 1995 and September 28, 1996 is $0.70 and $0.62, respectively.
Interim Financial Information
The accompanying interim financial statements have been prepared without
audit, and certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes that
the disclosures herein are adequate to make information presented not
misleading. These statements should be read in conjunction with the Company's
financial statements for the year ended December 30, 1995. The results of
operations for the thirty-nine week period is not necessarily indicative of
results for the full year.
In the opinion of management, the accompanying interim financial statements
contain all adjustments of a normal and recurring nature necessary for a fair
presentation of the Company's financial position as of September 28, 1996, its
results of operations for the thirty-nine weeks ended September 30, 1995 and
September 28, 1996, and its cash flows for the thirty-nine weeks ended September
30, 1995 and September 28, 1996.
NOTE 3 -- ACQUISITIONS
The Company acquired 70% of the stock of Distribuidora de Computo, S.A. de
C.V. ("Dicom"), in January 1993, for $9,327 cash and amounts payable to the
sellers of $2,475. Dicom is located in Mexico and is engaged in wholesale
distribution. The assets acquired were $32,383 and liabilities assumed were
$21,468.
The Company also acquired four separate wholesale distributors in Germany,
the United Kingdom, Belgium and the Netherlands in 1993. The combined
consideration for the assets or common stock purchased was $12,120 cash and
$2,364 of notes payable to sellers. The acquired companies had assets of $10,810
and liabilities of $80.
In April and August 1994, the Company acquired two separate wholesale
distributors (Keylan S.A. and Datateam Sverige AB) with operations in Spain,
Sweden, Denmark and Norway. The combined consideration paid was $15,088 cash and
$5,279 of notes payable to the sellers. The acquired companies had assets of
$48,748 and liabilities of $35,034.
The acquisitions described above have been accounted for using the purchase
method of accounting. The purchase price has been allocated to the assets
purchased and liabilities assumed based on fair values at the date of
acquisition. The excess of the purchase price over fair value of net assets
acquired in 1993 was $7,916 and in 1994 was $6,653 and was recorded as goodwill.
The operating results of these acquired businesses have been included in
the consolidated statement of income from the date of acquisition. Pro forma
results of operations have not been presented because the effects of these
acquisitions were not significant.
NOTE 4 -- ACCOUNTS RECEIVABLE
Effective February 1993, the Company entered into an arrangement with
Ingram Industries whereby the Company sells all of its domestic trade accounts
receivable to Ingram Industries on an ongoing basis ($665,325 at December 30,
1995). Ingram Industries transfers certain trade accounts receivable from the
Company and other Ingram Industries affiliates to a trust which sells
certificates representing undivided interests in the total pool of trade
receivables without recourse. Ingram Industries' arrangement with the trust
extends to December 31, 1997 and renews biannually under an evergreen provision
up to a maximum term of
F-11
<PAGE> 96
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
twenty years. At December 31, 1994 and December 30, 1995, the accounts
receivable and due to Ingram Industries amounts in the Company's consolidated
balance sheet have not been reduced to reflect the sale of such receivables. As
a result of the Split-Off described in Note 1, it is anticipated that Ingram
Industries' accounts receivable securitization agreement will be assumed by the
Company.
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
FISCAL PERIOD END
--------------------- SEPTEMBER 28,
1994 1995 1996
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................. $ 2,274 $ 2,359 $ 11,431
Leasehold improvements........................... 17,448 26,381 47,588
Distribution equipment........................... 39,814 62,462 76,173
Computer equipment............................... 40,579 59,161 76,922
------- ------- -------
100,115 150,363 212,114
Accumulated depreciation......................... (41,830) (61,237) (84,130)
------- ------- -------
$ 58,285 $ 89,126 $127,984
======= ======= =======
</TABLE>
Depreciation expense was $10,927 in fiscal 1993, $15,756 in 1994 and
$21,785 in 1995.
NOTE 6 -- LONG-TERM DEBT AND DUE TO INGRAM INDUSTRIES
Ingram Industries manages most treasury activities, including the
arrangement of short-term and long-term financing on a centralized, consolidated
basis. Using a centralized cash management system, the Company's domestic cash
receipts are remitted to Ingram Industries and domestic cash disbursements are
funded by Ingram Industries on a daily basis. The Company's historical financial
statements reflect funding provided by Ingram Industries to the Company, and net
cash used by the Company, as amounts due to Ingram Industries. At December 31,
1994 and December 30, 1995, amounts due to Ingram Industries are classified as
long-term due to the terms of the underlying debt at Ingram Industries.
Ingram Industries charges the Company interest expense on the outstanding
intercompany balance based on Ingram Industries' domestic weighted average cost
of funds. The average rate was 6.93% in fiscal 1993, 6.99% in 1994 and 7.38% in
1995.
The Company and other Ingram Industries affiliates participate in Ingram
Industries' unsecured revolving credit agreement with a syndicate of banks.
Under this agreement, Ingram Industries and its affiliates may borrow in various
currencies up to $380,000 at various money market and bid rates. The weighted
average borrowing rate was 6.84% at December 31, 1994 and 7.00% at December 30,
1995. The agreement extends to December 31, 1999, and is renewable for an
additional two year period during the year prior to expiration. The agreement is
guaranteed by certain subsidiaries of the Company and other Ingram Industries
affiliates. At December 30, 1995, outstanding aggregate borrowings were
$229,716, of which $167,176 is specifically related to amounts drawn by the
Company's subsidiaries.
The Company's subsidiaries outside the United States have lines of credit
and short-term overdraft facilities aggregating $93,527 various banks worldwide.
Most of these arrangements are reviewed periodically for renewal. At December
30, 1995, the Company had $5,782 outstanding under these facilities.
F-12
<PAGE> 97
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
In addition to the guarantee described above, the Company has guaranteed
certain other borrowings of Ingram Industries totaling $328,572. Included within
this amount are (i) amounts outstanding on an unsecured temporary revolving
credit facility that provides for borrowings up to $200,000 at specified
variable rates and expires on the earlier of December 31, 1996 or five days
after the successful completion of an initial public offering and (ii) $192,900
of fixed maturity, privately placed debt with maturities from November 1, 1996
to November 1, 2002. As a result of the Split-Off described in Notes 1 and 12,
it is anticipated that certain of the debt facilities guaranteed will be assumed
by the Company in satisfaction of the amounts payable to Ingram Industries.
Under the most restrictive provisions of the loan agreements, Ingram
Industries is required to maintain certain levels of stockholders' equity, a
certain current ratio and a certain debt to capital ratio and is subject to
certain dividend restrictions. During 1994 and 1995, Ingram Industries was in
compliance with the provisions of these agreements.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FISCAL PERIOD END
--------------------- SEPTEMBER 28,
1994 1995 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility........................ $ 61,913 $141,521 $ 100,195
Overdraft facilities............................. 10,724 5,782 13,184
Other............................................ 30,291 29,453 31,934
-------- -------- --------
102,928 176,756 145,313
Less current maturities of long-term debt........ (10,724) (6,332) (16,458)
-------- -------- --------
$ 92,204 $170,424 $ 128,855
======== ======== ========
</TABLE>
Annual maturities of long-term debt as of December 30, 1995 are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 6,332
1997.............................................................. 10,187
1998.............................................................. 388
1999.............................................................. 157,743
2000 and thereafter............................................... 2,106
--------
$176,756
========
</TABLE>
NOTE 7 -- INCOME TAXES
The components of income before taxes and minority interest consist of the
following:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
United States....................................... $85,044 $ 99,701 $124,277
Foreign............................................. (2,189) 1,004 10,339
------- -------- --------
Total..................................... $82,855 $100,705 $134,616
======= ======== ========
</TABLE>
F-13
<PAGE> 98
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $30,268 $35,989 $44,615
State............................................... 4,721 4,060 9,544
Foreign............................................. 2,390 4,223 7,616
------- ------- -------
37,379 44,272 61,775
Deferred:
Federal............................................. (1,929) (2,472) (4,082)
State............................................... (198) 136 (949)
Foreign............................................. (3,592) (2,332) (3,601)
------- ------- -------
(5,719) (4,668) (8,632)
------- ------- -------
Total income tax provision............................ $31,660 $39,604 $53,143
======= ======= =======
</TABLE>
Deferred income taxes reflect the tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
FISCAL PERIOD END
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Tax in excess of book basis of foreign operations... $ 9,837 $13,816 $19,511
Accruals not currently deductible................... 7,840 9,275 12,734
Inventories......................................... 2,724 3,538 5,876
Other............................................... 293 263 492
------- ------- -------
Total....................................... $20,694 $26,892 $38,613
======= ======= =======
Deferred tax liabilities:
Depreciation........................................ $ 1,324 $ 958 $ 1,564
======= ======= =======
</TABLE>
Current deferred tax assets of $15,130 and $19,307 are included in other
current assets at December 31, 1994 and December 30, 1995, respectively.
Non-current deferred tax assets of $11,762 and $19,306 are included in other
assets at December 31, 1994 and December 30, 1995, respectively.
Reconciliation of the statutory U.S. federal income tax rate to the
Company's effective rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate............................................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit.......... 3.3 2.8 3.9
Other.......................................................... (.1) 1.5 .6
---- ---- ----
- - -
Effective tax rate............................................. 38.2% 39.3% 39.5%
===== ===== =====
</TABLE>
F-14
<PAGE> 99
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company is included in the consolidated federal income tax return filed
by Ingram Industries. Taxes related to the Company are determined on a separate
entity basis and taxes payable are remitted to Ingram Industries every two
months. Taxes payable to Ingram Industries of $4,089 at December 31, 1994 and
$14,303 at December 30, 1995 are included in accrued expenses in the
consolidated balance sheet.
At December 30, 1995, the Company had foreign net operating tax loss
carryforwards of $49,264 of which approximately one third have no expiration
date.
The Company does not provide for U.S. federal income taxes on undistributed
earnings of foreign subsidiaries as such earnings are intended to be permanently
reinvested in those operations.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
There are various claims, lawsuits and pending actions against the Company
incident to the Company's operations. It is the opinion of management that the
ultimate resolution of these matters will not have a material effect on the
Company's financial position or results of operations.
The Company has arrangements with certain finance companies which provide
accounts receivable and inventory financing facilities for its customers. The
Company assesses the financial stability of the finance companies and payment
terms are within 3 to 30 days of product shipment. In conjunction with certain
of these arrangements, the Company has inventory repurchase agreements with the
finance companies that would require it to repurchase certain inventory which
might be repossessed from the customers by the finance companies. Such
repurchases have been insignificant to date.
The Company leases the majority of its facilities and certain equipment
under noncancelable operating leases. Renewal and purchase options at fair
values exist for a substantial portion of the leases. Rental expense for the
years ended January 1, 1994, December 31, 1994 and December 30, 1995 was
$11,939, $16,574 and $28,367, respectively. Future minimum rental commitments on
operating leases that have remaining noncancelable lease terms in excess of one
year as of December 30, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................................... $21,507
1997............................................................... 18,614
1998............................................................... 16,693
1999............................................................... 14,912
2000............................................................... 9,912
Later years........................................................ 54,104
</TABLE>
F-15
<PAGE> 100
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9 -- SEGMENT INFORMATION
The Company operates predominantly in a single industry segment as a
wholesale distributor of microcomputer hardware and software. Geographic areas
in which the Company operates include the United States (United States and the
majority of the Company's exports), Europe (Belgium, Denmark, France, Germany,
Italy, the Netherlands, Norway, Spain, Sweden and the United Kingdom) and Other
(Canada, Mexico and Singapore). Transfers between geographic areas primarily
represent intercompany sales and are accounted for based on established sales
prices between the related companies. Net sales, income (loss) from operations
and identifiable assets by geographic area are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES:
United States:
Sales to unaffiliated customers............... $3,118,316 $4,122,338 $5,969,749
Transfers between geographic areas............ 60,358 76,696 86,961
Europe........................................... 485,126 1,078,250 1,849,129
Other............................................ 440,727 629,611 797,989
Eliminations..................................... (60,358) (76,696) (86,961)
---------- ---------- ----------
Total.................................... $4,044,169 $5,830,199 $8,616,867
========== ========== ==========
INCOME (LOSS) FROM OPERATIONS:
United States.................................... $ 98,669 $ 123,796 $ 156,749
Europe........................................... (3,246) 8,079 19,576
Other............................................ 7,605 8,415 10,556
---------- ---------- ----------
Total.................................... $ 103,028 $ 140,290 $ 186,881
========== ========== ==========
IDENTIFIABLE ASSETS:
United States.................................... $ 945,699 $1,381,798 $1,996,642
Europe........................................... 190,892 393,346 669,309
Other............................................ 159,772 199,145 274,947
---------- ---------- ----------
Total.................................... $1,296,363 $1,974,289 $2,940,898
========== ========== ==========
</TABLE>
No single customer accounts for 10% or more of the Company's net sales.
NOTE 10 -- TRANSACTIONS WITH RELATED PARTIES
Ingram Industries provides certain corporate, general and administrative
services to the Company in addition to treasury activities described in Note 6
(including, but not limited to, legal, tax, employee benefits and electronic
data processing services). Charges for these services are based upon utilization
and at amounts which management believes are less than the amounts which the
Company would incur as a stand-alone entity. Such amounts are reflected as
charges allocated from Ingram Industries on the consolidated statement of
income.
Ingram Industries also provides guarantees to certain of the Company's
vendors and for certain of the Company's leases; no charges from Ingram
Industries have been reflected in the Company's financial statements for such
guarantees.
F-16
<PAGE> 101
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company leases warehouse and office space from certain stockholders of
Ingram Industries. Total rental payments were $729 in fiscal 1993, $784 in 1994
and $1,645 in 1995.
Other transactions with Ingram Industries affiliates includes sales of
$1,664 in fiscal 1993, $3,056 in 1994 and $5,281 in 1995.
NOTE 11 -- STOCK OPTIONS AND INCENTIVE PLANS
Certain of the Company's employees participate in Ingram Industries'
qualified and non-qualified stock option and SAR plans. Ingram Industries' plans
provide for the grant of options and SARs at fair value. In conjunction with the
Split-Off, Ingram Industries options held by the Company's employees and certain
other Ingram Industries options and SARs will be converted to Ingram Micro
options ("Rollover Stock Options") to purchase Class A Common Stock. Upon
conversion, approximately 11,000,000 Rollover Stock Options will be outstanding.
The Rollover Stock Options have exercise prices ranging from $0.66 to $3.32 per
share, the majority will be fully vested by the year 2000 and no such options
expire later than 10 years from the date of grant. The Company recorded a
non-cash compensation charge of approximately $8,859 or $5,404 net of tax, in
the first three quarters of 1996 related to the vested portion of certain
Rollover Stock Options. This charge was based on the difference between the
estimated fair value of such options in the first quarter of 1996 and the
exercise price of such options.
The Company will adopt Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("FAS 123") in 1996. As permitted by
FAS 123, the Company will continue to measure compensation cost in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Therefore, the adoption of FAS 123 will have no impact on the
Company's financial condition or results of operations.
The Company has two Incentive Stock Unit ("ISU") plans available to grant
up to 1,575,000 ISUs to certain key employees. Subject to continued employment,
these stock appreciation awards vest over five years and actual cash payout is
based on the increase in book value from date of award grant. Outstanding ISUs
at January 1, 1994, December 31, 1994 and December 30, 1995 were 748,200,
221,000 and 25,100, respectively. The amounts charged to expense related to
these incentive stock unit plans totaled $3,354 in fiscal 1993, $2,163 in 1994
and $695 in 1995. There were no grants made under the ISU plans in 1995.
The Company will establish its separate stock option and incentive plans in
conjunction with the Split-Off. Refer to Note 12.
NOTE 12 -- SUBSEQUENT EVENTS
Formation of Ingram Micro Inc.
On April 29, 1996, a Delaware corporation, Ingram Micro Inc., was formed to
hold all of the outstanding stock of Ingram Micro Holdings Inc. ("Holdings"). It
is the Company's plan to merge with and into such Delaware corporation prior to
the effective date of a registration statement on Form S-1 filed with the
Securities and Exchange Commission. The proposed merger will not impact the
Company's financial statements, as the Company's historical financial statements
reflect the capital structure described herein.
Ingram Micro Inc., a Delaware corporation, has two classes of common stock,
consisting of 265,000,000 shares of $0.01 par value Class A Common Stock and
135,000,000 shares of $0.01 par value Class B Common Stock, and 1,000,000 shares
of $0.01 par value Preferred Stock. Class A stockholders are entitled to one
vote on each matter to be voted on by the stockholders whereas the Class B
stockholders are entitled to ten votes on each matter to be voted on by the
stockholders. The two classes of stock have similar
F-17
<PAGE> 102
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
rights in all other respects. Each share of Class B Common Stock may at any time
be converted to a share of Class A Common Stock; however, conversion will occur
automatically on the earliest to occur of (i) the fifth anniversary of the
consummation of the Split-Off pursuant to the Exchange Agreement; (ii) the sale
of such share of Class B Common Stock to any person not provided for under the
provisions of the Board Representation Agreement; or (iii) the date on which the
number of shares of Class B Common Stock then outstanding represents less than
25% of the aggregate number of shares of Class A Common Stock and Class B Common
Stock then outstanding. The capital structure resulting from the formation of
the Delaware corporation was finalized on September 9, 1996 and the Company has
107,251,362 shares of Class B Common Stock outstanding.
Key Employee Stock Purchase Plan
As of April 30, 1996, the Company adopted the Key Employee Stock Purchase
Plan (the "Plan") which provides for the issuance of up to 4,000,000 shares of
Class B Common Stock to certain employees. In June 1996, the Company offered
2,775,000 shares of its Class B Common Stock to certain employees pursuant to
the Plan, and subsequently sold 2,510,400 shares with proceeds of approximately
$17,573. The shares sold thereby are subject to vesting and certain restrictions
on transfer, may be redeemable prior to vesting and are subject to repurchase by
the Company upon termination of employment. The Company has repurchased 50,000
of such shares. In addition, the Company granted, pursuant to this Plan, 107,000
restricted shares of Class B Common Stock to certain officers and employees of
the Company. These shares are subject to vesting. Prior to vesting, these
restricted grant shares are subject to forfeiture to the Company without
consideration, upon termination of employment. 5,000 of such shares have been
forfeited to the Company.
1996 Equity Incentive Plan
As of April 30, 1996, the Company adopted the 1996 Equity Incentive Plan
and Ingram Industries approved the grant of options under this plan. In June
1996, the Company issued options at $7.00 per share to purchase an aggregate of
approximately 4,800,000 shares of Class B Common Stock under its Equity
Incentive Plan to all eligible employees of the Company. These options vest and
generally become exercisable over five years from the issue date and expire
eight years after the issue date.
Split-Off, Reorganization and Exchange
The Company plans to engage in a Split-Off, consisting of a Reorganization
and an Exchange, from Ingram Industries and Ingram Entertainment. Pursuant to
the Reorganization Agreement it is contemplated that the Company will retain all
of the assets and liabilities associated with the Company's business and will
indemnify Ingram Industries and Ingram Entertainment for all liabilities related
to the Company's business and operations or otherwise assigned to the Company.
In addition, the Reorganization Agreement provides for the sharing by the
Company of approximately 73% of certain contingent assets and liabilities not
allocated to one of the parties. The Company will assume a portion of Ingram
Industries' debt in return for the extinguishment of intercompany indebtedness.
The debt to be assumed by the Company includes an accounts receivable
securitization program which will be transferred to the Company subsequent to
the Split-Off. The Company will also enter into a $1 billion Credit Facility.
In connection with the Reorganization Agreement, the Company is expected to
enter into an employee benefits transfer and assumption agreement with Ingram
Industries and Ingram Entertainment which will provide for the allocation of
employee benefit assets and liabilities on a pro rata basis to each of the
parties of the Split-Off. It is also contemplated that the Company will enter
into a Tax Sharing Agreement. This Agreement will hold the Company liable for
its allocable share of the consolidated federal and state income
F-18
<PAGE> 103
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
tax liability for the year that includes the Split-Off and approximately 73% of
any adjustment in excess of reserves already established by Ingram Industries
for past federal or state tax liabilities of the Company, Ingram Industries or
Ingram Entertainment. In addition, the Company will share in any refunds
received. The Company will also enter into Transitional Service Agreements
related to certain administration services including data processing.
In conjunction with the Reorganization, the Company will consummate an
exchange pursuant to which certain existing stockholders of Ingram Industries
may exchange all or a portion of their shares of Ingram Industries common stock
for shares of Class B Common Stock of the Company of equivalent value. If all
stockholders were to exchange all eligible shares, they would receive
107,251,362 shares of Class B Common Stock. Pursuant to a Transfer Restrictions
Agreement, the shares of Class B Common Stock received by employees of the
Company, Ingram Industries or Ingram Entertainment in the Exchange are expected
to be subject to repurchase by the Company upon termination of employment. The
repurchase feature lapses upon consummation of an initial public offering.
Although there can be no assurance, it is also contemplated that, on or after
June 20, 1997, certain remaining stockholders of Ingram Industries will exchange
their remaining shares of Ingram Industries common stock for shares of Ingram
Entertainment common stock.
F-19
<PAGE> 104
LOGO
<PAGE> 105
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (Subject to Completion)
Issued October 30, 1996
20,000,000 Shares
LOGO
CLASS A COMMON STOCK
---------------------------
OF THE 20,000,000 SHARES OF CLASS A COMMON STOCK (THE "COMMON STOCK") OFFERED
HEREBY, 4,000,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES
AND CANADA BY THE INTERNATIONAL UNDERWRITERS, AND 16,000,000 SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS.
SEE "UNDERWRITERS." UP TO 2,300,000 OF THE SHARES OF COMMON STOCK OFFERED
HEREBY ARE BEING RESERVED FOR SALE TO CERTAIN INDIVIDUALS AND INGRAM
INDUSTRIES INC. SEE "EMPLOYEE AND PRIORITY OFFERS." ALL SUCH SHARES ARE
BEING OFFERED ON THE SAME TERMS AND CONDITIONS AS THE SHARES BEING
OFFERED TO THE PUBLIC GENERALLY, AND ANY PURCHASERS OF SUCH SHARES WHO
ARE AFFILIATES OF THE COMPANY WILL REPRESENT THAT ANY PURCHASES ARE
BEING MADE FOR INVESTMENT PURPOSES ONLY. ALL OF THE SHARES OF
COMMON STOCK OFFERED HEREBY ARE BEING ISSUED AND SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET
FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED
THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $17 AND
$19 PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING
PRICE. THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK,
THE COMMON STOCK OFFERED HEREBY AND THE CLASS B COMMON STOCK
(THE "CLASS B COMMON STOCK," AND COLLECTIVELY WITH THE COMMON
STOCK, THE "COMMON EQUITY"). THE RIGHTS OF HOLDERS OF COMMON
STOCK AND CLASS B COMMON STOCK ARE IDENTICAL EXCEPT FOR
VOTING AND CONVERSION RIGHTS AND RESTRICTIONS ON
TRANSFERABILITY. HOLDERS OF THE COMMON STOCK ARE
ENTITLED TO ONE VOTE PER SHARE, AND HOLDERS OF THE
CLASS B COMMON STOCK ARE ENTITLED TO TEN VOTES PER
SHARE ON MOST MATTERS SUBJECT TO STOCKHOLDER VOTE.
UPON THE CLOSING OF THIS OFFERING, THE INGRAM FAMILY
STOCKHOLDERS (AS DEFINED HEREIN) WILL HAVE
APPROXIMATELY 80.8% OF THE COMBINED VOTING POWER
OF THE COMMON EQUITY (80.5% IF THE U.S.
UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT
OPTION IN FULL). THE COMMON STOCK HAS BEEN
APPROVED FOR LISTING, SUBJECT TO OFFICIAL
NOTICE OF ISSUANCE, ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "IM."
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
RISKS ASSOCIATED WITH THIS OFFERING.
---------------------------
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.
---------------------------
PRICE $ A SHARE
---------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total(3)............................... $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $1,400,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
3,000,000 additional Shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions, and proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriters."
---------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, counsel for the Underwriters. It is
expected that delivery of the Shares will be made on or about ,
1996 at the office of Morgan Stanley & Co. Incorporated, New York, New York,
against payment therefor in immediately available funds.
---------------------------
MORGAN STANLEY & CO.
International
THE ROBINSON-HUMPHREY COMPANY, INC.
ALEX. BROWN & SONS
INTERNATIONAL
HAMBRECHT & QUIST
, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE> 106
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[ALTERNATE PAGE FOR COMPANY PROSPECTUS]
PROSPECTUS (Subject to Completion)
Issued October 30, 1996
200,000 Shares
LOGO
CLASS A COMMON STOCK
---------------------------
OFFERING TO THE COMPANY'S
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
---------------------------
THE SHARES ARE BEING OFFERED DIRECTLY BY THE COMPANY. COMMON STOCK SOLD PURSUANT
TO THIS OFFERING WILL BE ISSUED BY THE COMPANY AND WILL NOT BE UNDERWRITTEN OR
SUBJECT TO THE ARRANGEMENTS DESCRIBED HEREIN UNDER "UNDERWRITERS."
ACCORDINGLY, THE INFORMATION IN THE PUBLIC PROSPECTUS ON THE COVER PAGE
AND IN THE CAPTION "UNDERWRITERS" IS NOT APPLICABLE. ALL PROCEEDS FROM
THIS OFFERING WILL BE PAYABLE TO THE COMPANY AND WILL BE USED FOR
GENERAL CORPORATE PURPOSES. THIS OFFERING IS CONDITIONED UPON THE
COMPLETION OF THE COMPANY'S INITIAL PUBLIC OFFERING AND IS
EXPECTED TO BE CONSUMMATED CONCURRENTLY WITH SUCH INITIAL
PUBLIC OFFERING.
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
RISKS ASSOCIATED WITH THIS OFFERING.
---------------------------
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.
---------------------------
PRICE $ A SHARE
---------------------------
, 1996
<PAGE> 107
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
An itemized statement of the estimated amount of the expenses, other than
underwriting discounts and commissions, incurred and to be incurred in
connection with the issuance and distribution of the securities registered
pursuant to this Registration Statement is as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 112,139
NYSE listing fee................................................. 151,100
NASD filing fee.................................................. 30,500
Printing and engraving expenses.................................. 250,000
Accounting fees and expenses..................................... 130,000
Legal fees and expenses.......................................... 600,000
Transfer Agent fees and expenses................................. 20,000
Blue Sky fees and expenses and legal fees........................ 70,000
Miscellaneous.................................................... 36,261
--------
Total.................................................. $1,400,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of the Company may and, in
certain cases, must be indemnified by the Company against, in the case of a non-
derivative action, judgments, fines, amounts paid in settlement and reasonable
expenses (including attorneys' fees) incurred by him as a result of such action,
and in the case of a derivative action, against expenses (including attorneys'
fees), if in either type of action he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. This indemnification does not apply, in a derivative action, to matters
as to which it is adjudged that the director, officer, employee or agent is
liable to the Company, unless upon court order it is determined that, despite
such adjudication of liability, but in view of all the circumstances of the
case, he is fairly and reasonably entitled to indemnity for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was unlawful.
Section 102 of the DGCL allows the Company to eliminate or limit the
personal liability of a director to the Company or to any of its stockholders
for monetary damage for a breach of fiduciary duty as a director, except in the
case where the director (i) breaches such person's duty of loyalty to the
Company or its stockholders, (ii) fails to act in good faith, engages in
intentional misconduct or knowingly violates a law, (iii) authorizes the payment
of a dividend or approves a stock purchase or redemption in violation of Section
174 of the DGCL or (iv) obtains an improper personal benefit. Article Tenth of
the Company's Certificate of Incorporation includes a provision which eliminates
directors' personal liability to the fullest extent permitted under the Delaware
General Corporation Law.
Article Tenth of the Company's Certificate of Incorporation provides that
the Company shall indemnify any person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened to be made
a party to, or is involved in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of the
Company or is or was serving at the request of the Company as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted by Delaware Law. Each such
indemnified party shall have the right to be paid by the Company for any
expenses incurred in
II-1
<PAGE> 108
connection with any such proceeding in advance of its final disposition to the
fullest extent authorized by Delaware Law. Article Tenth of the Company's
Certificate of Incorporation also provides that the Company may, by action of
its Board of Directors, provide indemnification to such of the employees and
agents of the Company to such extent and to such effect as the Board of
Directors shall determine to be appropriate and authorized by Delaware Law.
Reference is made to the underwriting agreement filed as an Exhibit hereto,
pursuant to which the Underwriters will agree to indemnify officers and
directors of the Company against certain liabilities under the Securities Act.
As permitted by Delaware Law and the Company's Certificate of
Incorporation, the Company maintains insurance covering its directors and
officers against certain liabilities incurred by them in their capacities as
such, including among other things, certain liabilities under the Securities Act
of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the second quarter of 1996, the Company offered 2,775,000 shares of its
Class B Common Stock to certain of its employees, of which 2,510,400 shares were
purchased for $17.6 million. The shares were issued without registration under
the Securities Act in reliance upon the exemptions from registration afforded by
Section 4(2) of the Securities Act, and Regulation D and Regulation S
promulgated under the Securities Act. All such shares were issued pursuant to
the Company's Key Employee Stock Purchase Plan and are subject to certain
restrictions.
Reference is made to "Management -- Rollover Plan; Incentive Stock Units"
and "The Split-Off and the Reorganization -- The Split-Off " regarding shares,
and options exercisable for shares, of the Company's Common Equity, to be issued
in connection with the Split-Off, the purchasers thereof and the consideration
therefor. Such issuances will occur without registration under the Securities
Act in reliance upon the exemptions from registration afforded by Section 4(2)
of the Securities Act and Regulation D promulgated under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) LIST OF EXHIBITS.
<TABLE>
<C> <C> <S>
1.01 -- Form of Underwriting Agreement
3.01 -- Form of Certificate of Incorporation of the Registrant
3.02 -- Form of Bylaws of the Registrant+
3.03 -- Form of Amended and Restated Bylaws of the Registrant+
4.01 -- Specimen Certificate for the Class A Common Stock, par value $0.01 per share,
of the Registrant+
5.01 -- Opinion of Davis Polk & Wardwell+
10.01 -- Ingram Micro Inc. Executive Incentive Bonus Plan+
10.02 -- Ingram Micro Inc. Management Incentive Bonus Plan+
10.03 -- Ingram Micro Inc. General Employee Incentive Bonus Plan+
10.04 -- Agreement dated as of December 21, 1994 between the Company and Jeffrey R.
Rodek+
10.05 -- Agreement dated as of April 25, 1988 between the Company and Sanat K. Dutta+
10.06 -- Agreement dated as of June 21, 1991 between the Company and
John Wm. Winkelhaus, II+
10.07 -- Ingram Micro Inc. Rollover Stock Option Plan+
10.08 -- Ingram Micro Inc. Key Employee Stock Purchase Plan+
10.09 -- Ingram Micro Inc. 1996 Equity Incentive Plan+
10.10 -- Ingram Micro Inc. Amended and Restated 1996 Equity Incentive Plan+
</TABLE>
II-2
<PAGE> 109
<TABLE>
<C> <C> <S>
10.11 -- Severance Agreement dated as of June 1, 1996 among the Company, Ingram
Industries, Linwood A. Lacy, Jr., and NationsBank, N.A., as trustee of the
Linwood A. Lacy, Jr. 1996 Irrevocable Trust dated February 1996+
10.12 -- Form of Credit Agreement dated as of October , 1996 among the Company and
Ingram European Coordination Center N.V., Ingram Micro Singapore Pte Ltd., and
Ingram Micro Inc., as Borrowers and Guarantors, certain financial
institutions, as the Lenders, NationsBank of Texas, N.A., as Administrative
Agent for the Lenders and The Bank of Nova Scotia as Documentation Agent for
the Lenders+
10.13 -- Form of Amended and Restated Reorganization Agreement dated as of October 17,
1996 among the Company, Ingram Industries, and Ingram Entertainment+
10.14 -- Form of Registration Rights Agreement to be dated as of the closing date of
the Split-Off among the Company and the persons listed on the signature pages
thereof+
10.15 -- Form of Board Representation Agreement to be dated as of the closing date of
the Split-Off among the Company and the persons listed on the signature pages
thereof+
10.16 -- Form of Thrift Plan Liquidity Agreement to be dated as of the closing date of
the Split-Off among the Company and the Ingram Thrift Plan+
10.17 -- Form of Tax Sharing and Tax Services Agreement to be dated as of the closing
date of the Split-Off among the Company, Ingram Industries, and Ingram
Entertainment+
10.18 -- Form of Master Services Agreement, to be dated as of the closing date of the
Split-Off between the Company and Ingram Industries+
10.19 -- Form of Employee Benefits Transfer and Assumption Agreement to be dated as of
the closing date of the Split-Off among the Company, Ingram Industries, and
Ingram Entertainment+
10.20 -- Form of Data Center Services Agreement to be dated as of the closing date of
the Split-Off among the Company, Ingram Book Company, and Ingram
Entertainment+
10.21 -- Form of Amended and Restated Exchange Agreement dated as of October 17, 1996
among the Company, Ingram Industries, Ingram Entertainment and the other
parties thereto+
10.22 -- Agreement dated as of August 26, 1996 between the Company and Jerre L. Stead+
10.23 -- Definitions for Ingram Funding Master Trust Agreements+
10.24 -- Asset Purchase and Sale Agreement dated as of February 10, 1993 between Ingram
Industries and Ingram Funding+
10.25 -- Pooling and Servicing Agreement dated as of February 10, 1993 among Ingram
Funding, Ingram Industries and Chemical Bank+
10.26 -- Amendment No. 1 to the Pooling and Servicing Agreement dated as of February
12, 1993, the Asset Purchase and Sale Agreement dated as of February 12, 1993,
and the Liquidity Agreement dated as of February 12, 1993+
10.27 -- Certificate Purchase Agreement dated as of July 23, 1993+
10.28 -- Schedule of Certificate Purchase Agreements+
10.29 -- Series 1993-1 Supplement to Ingram Funding Master Trust Pooling and Servicing
Agreement dated as of July 23, 1993+
10.30 -- Schedule of Supplements to Ingram Funding Master Trust Pooling and Servicing
Agreement dated as of July 23, 1993+
10.31 -- Letter of Credit Reimbursement Agreement dated as of February 10, 1993+
10.32 -- Liquidity Agreement dated as of February 10, 1993+
10.33 -- Amendment No. 2 to the Pooling and Servicing Agreement dated as of February
12, 1993, the Asset Purchase and Sale Agreement dated as of February 12, 1993,
and the Liquidity Agreement dated as of February 12, 1993
</TABLE>
II-3
<PAGE> 110
<TABLE>
<C> <C> <S>
10.34 -- Agreement dated as of October 10, 1996 between the Company and Michael J.
Grainger+
10.35 -- Form of Repurchase Agreement
21.01 -- Subsidiaries of the Registrant+
23.01 -- Consent of Price Waterhouse LLP
23.02 -- Consent of Davis Polk & Wardwell (included in their opinion filed as Exhibit
5.01)+
24.01 -- Powers of Attorney of certain officers and directors of the Registrant+
24.02 -- Power of Attorney of Jerre L. Stead+
27.01 -- Financial Data Schedule (EDGAR version only)+
99.01 -- Consent of J. Phillip Samper+
99.02 -- Consent of Joe B. Wyatt+
99.03 -- Consent of Don H. Davis, Jr.
</TABLE>
- ---------------
+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
See Schedule II on page S-1. All other schedules for which provision is
made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable
or the information is contained in the Consolidated Financial Statements and
related notes and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) It will provide to the underwriters at the closing specified in
the underwriting agreements certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Ingram Micro
Inc. has duly caused this Amendment No. 4 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Santa Ana, State of California, on this 30th day of October, 1996.
INGRAM MICRO INC.
By: /s/ MICHAEL J. GRAINGER
------------------------------------
Name: Michael J. Grainger
Title: Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------ ------------------
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
* Chief Executive Officer (Principal October 30, 1996
- ------------------------------------------ Executive Officer); Chairman of the
Jerre L. Stead Board of Directors
/s/ MICHAEL J. GRAINGER Executive Vice President; October 30, 1996
- ------------------------------------------ Chief Financial Officer
Michael J. Grainger (Principal Financial Officer and
Principal Accounting Officer)
* President and Chief Operating October 30, 1996
- ------------------------------------------ Officer; Director
Jeffrey R. Rodek
* Vice Chairman; Director October 30, 1996
- ------------------------------------------
David R. Dukes
* Director October 30, 1996
- ------------------------------------------
Martha R. Ingram
* Director October 30, 1996
- ------------------------------------------
John R. Ingram
* Director October 30, 1996
- ------------------------------------------
David B. Ingram
* Director October 30, 1996
- ------------------------------------------
Philip M. Pfeffer
* Pursuant to Power of Attorney previously
filed with the Commission.
/s/ MICHAEL J. GRAINGER Attorney-in-Fact October 30, 1996
- ------------------------------------------
Michael J. Grainger
</TABLE>
II-5
<PAGE> 112
INGRAM MICRO INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF YEAR EXPENSES OTHER(*) DEDUCTIONS YEAR
- ----------------------------------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable and sales returns:
1995............................. $ 25,668 $ 24,168 $ 673 $(19,718) $ 30,791
1994............................. 18,594 20,931 (4) (13,853) 25,668
1993............................. 12,928 17,492 2,343 (14,169) 18,594
Inventory obsolescence:
1995............................. $ 10,706 $ 13,199 $ 207 $(11,867) $ 12,245
1994............................. 9,431 9,410 257 (8,392) 10,706
1993............................. 6,076 6,587 121 (3,353) 9,431
</TABLE>
- ---------------
* Other includes recoveries, acquisitions and the effect of fluctuations in
foreign currency.
S-1
<PAGE> 113
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
<C> <C> <S> <C>
1.01 -- Form of Underwriting Agreement....................................
3.01 -- Form of Certificate of Incorporation of the Registrant............
3.02 -- Form of Bylaws of the Registrant+.................................
3.03 -- Form of Amended and Restated Bylaws of the Registrant+............
4.01 -- Specimen Certificate for the Class A Common Stock, par value $0.01
per share, of the Registrant+.....................................
5.01 -- Opinion of Davis Polk & Wardwell+.................................
10.01 -- Ingram Micro Inc. Executive Incentive Bonus Plan+.................
10.02 -- Ingram Micro Inc. Management Incentive Bonus Plan+................
10.03 -- Ingram Micro Inc. General Employee Incentive Bonus Plan+..........
10.04 -- Agreement dated as of December 21, 1994 between the Company and
Jeffrey R. Rodek+.................................................
10.05 -- Agreement dated as of April 25, 1988 between the Company and Sanat
K. Dutta+.........................................................
10.06 -- Agreement dated as of June 21, 1991 between the Company and
John Wm. Winkelhaus, II+..........................................
10.07 -- Ingram Micro Inc. Rollover Stock Option Plan+.....................
10.08 -- Ingram Micro Inc. Key Employee Stock Purchase Plan+...............
10.09 -- Ingram Micro Inc. 1996 Equity Incentive Plan+.....................
10.10 -- Ingram Micro Inc. Amended and Restated 1996 Equity Incentive
Plan+.............................................................
10.11 -- Severance Agreement dated as of June 1, 1996 among the Company,
Ingram Industries, Linwood A. Lacy, Jr., and NationsBank, N.A., as
trustee of the Linwood A. Lacy, Jr. 1996 Irrevocable Trust dated
February 1996+....................................................
10.12 -- Form of Credit Agreement dated as of October , 1996 among the
Company and Ingram European Coordination Center N.V., Ingram Micro
Singapore Pte Ltd., and Ingram Micro Inc., as Borrowers and
Guarantors, certain financial institutions, as the Lenders,
NationsBank of Texas, N.A., as Administrative Agent for the
Lenders and The Bank of Nova Scotia as Documentation Agent for the
Lenders+..........................................................
10.13 -- Form of Amended and Restated Reorganization Agreement dated as of
October 17, 1996 among the Company, Ingram Industries, and Ingram
Entertainment+....................................................
10.14 -- Form of Registration Rights Agreement to be dated as of the
closing date of the Split-Off among the Company and the persons
listed on the signature pages thereof+............................
10.15 -- Form of Board Representation Agreement to be dated as of the
closing date of the Split-Off among the Company and the persons
listed on the signature pages thereof+............................
10.16 -- Form of Thrift Plan Liquidity Agreement to be dated as of the
closing date of the Split-Off among the Company and the Ingram
Thrift Plan+......................................................
10.17 -- Form of Tax Sharing and Tax Services Agreement to be dated as of
the closing date of the Split-Off among the Company, Ingram
Industries, and Ingram Entertainment+.............................
10.18 -- Form of Master Services Agreement, to be dated as of the closing
date of the Split-Off between the Company and Ingram
Industries+.......................................................
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
<C> <C> <S> <C>
10.19 -- Form of Employee Benefits Transfer and Assumption Agreement to be
dated as of the closing date of the Split-Off among the Company,
Ingram Industries, and Ingram Entertainment+......................
10.20 -- Form of Data Center Services Agreement to be dated as of the
closing date of the Split-Off among the Company, Ingram Book
Company, and Ingram Entertainment+................................
10.21 -- Form of Amended and Restated Exchange Agreement dated as of
October 17, 1996 among the Company, Ingram Industries, Ingram
Entertainment and the other parties thereto+......................
10.22 -- Agreement dated as of August 26, 1996 between the Company and
Jerre L. Stead+...................................................
10.23 -- Definitions for Ingram Funding Master Trust Agreements+...........
10.24 -- Asset Purchase and Sale Agreement dated as of February 10, 1993
between Ingram Industries and Ingram Funding+.....................
10.25 -- Pooling and Servicing Agreement dated as of February 10, 1993
among Ingram Funding, Ingram Industries and Chemical Bank+........
10.26 -- Amendment No. 1 to the Pooling and Servicing Agreement dated as of
February 12, 1993, the Asset Purchase and Sale Agreement dated as
of February 12, 1993, and the Liquidity Agreement dated as of
February 12, 1993+................................................
10.27 -- Certificate Purchase Agreement dated as of July 23, 1993+.........
10.28 -- Schedule of Certificate Purchase Agreements+......................
10.29 -- Series 1993-1 Supplement to Ingram Funding Master Trust Pooling
and Servicing Agreement dated as of July 23, 1993+................
10.30 -- Schedule of Supplements to Ingram Funding Master Trust Pooling and
Servicing Agreement dated as of July 23, 1993+....................
10.31 -- Letter of Credit Reimbursement Agreement dated as of February 10,
1993+.............................................................
10.32 -- Liquidity Agreement dated as of February 10, 1993+................
10.33 -- Amendment No. 2 to the Pooling and Servicing Agreement dated as of
February 12, 1993, the Asset Purchase and Sale Agreement dated as
of February 12, 1993, and the Liquidity Agreement dated as of
February 12, 1993.................................................
10.34 -- Agreement dated as of October 10, 1996 between the Company and
Michael J. Grainger+..............................................
10.35 -- Form of Repurchase Agreement......................................
21.01 -- Subsidiaries of the Registrant+...................................
23.01 -- Consent of Price Waterhouse LLP...................................
23.02 -- Consent of Davis Polk & Wardwell (included in their opinion filed
as Exhibit 5.01)+.................................................
24.01 -- Powers of Attorney of certain officers and directors of the
Registrant+.......................................................
24.02 -- Power of Attorney of Jerre L. Stead+..............................
27.01 -- Financial Data Schedule (EDGAR version only)+.....................
99.01 -- Consent of J. Phillip Samper+.....................................
99.02 -- Consent of Joe B. Wyatt+..........................................
99.03 -- Consent of Don H. Davis, Jr.......................................
</TABLE>
- ---------------
+ Previously filed.
<PAGE> 1
EXHIBIT 1.01
----------
WSGR DRAFT
10/29/96
----------
20,000,000 Shares
INGRAM MICRO INC.
Class A Common Stock, par value $0.01 per share
UNDERWRITING AGREEMENT
____________, 1996
<PAGE> 2
_____________, 1996
Morgan Stanley & Co. Incorporated
The Robinson-Humphrey Company, Inc.
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
J.C. Bradford & Co.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
The Robinson-Humphrey Company, Inc.
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England, United Kingdom
Dear Sirs and Mesdames:
Ingram Micro Inc., a Delaware corporation (the "Company") and a subsidiary
of Ingram Industries Inc., a Tennessee corporation ("Ingram Industries"),
proposes to issue and sell to the several Underwriters named in Schedules I and
II hereto (the "Underwriters") 20,000,000 shares (the "Firm Shares") of its
Class A Common Stock, par value $0.01 per share ("Class A Common Stock"). Ingram
Industries is executing this Agreement for the sole purpose of giving the
representations and warranties included in Section 2 hereof.
It is understood that, subject to the conditions hereinafter stated,
16,000,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 4,000,000 Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated, The
Robinson-Humphrey Company, Inc., Alex. Brown & Sons Incorporated, Hambrecht &
Quist LLC and J.C. Bradford & Co. shall act as representatives (the "U.S.
Representatives") of the several U.S. Underwriters, and Morgan Stanley & Co.
International Limited, The Robinson-Humphrey Company, Inc., Alex. Brown & Sons
Incorporated and Hambrecht & Quist LLC shall act as representatives (the
"International Representatives") of the several International Underwriters.
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 3,000,000 shares of its Class A Common
Stock (the "Additional Shares") if and to the extent that the U.S.
<PAGE> 3
Representatives shall have determined to exercise, on behalf of the U.S.
Underwriters, the right to purchase such shares of Class A Common Stock granted
to the U.S. Underwriters in Section 3 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares." The shares of
Class A Common Stock and Class B Common Stock, par value $0.01 per share ("Class
B Common Stock"), of the Company to be outstanding after giving effect to the
sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside front
cover page. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement;" the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "Prospectus." If the
Company has filed an abbreviated registration statement to register additional
shares of Class A Common Stock pursuant to Rule 462(b) under the Securities Act
(the "Rule 462 Registration Statement"), then any reference herein to the
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
Immediately prior to the closing of the sale of the Firm Shares to the
Underwriters, the Company, Ingram Industries, the Ingram Stockholders (as
defined in the Registration Statement), and certain subsidiaries of the
foregoing entities will enter into a series of transactions described in the
Prospectus under the caption "The Split-Off and the Reorganization," whereby the
Company will cease to be a subsidiary of Ingram Industries. As part of these
transactions, Ingram Industries will consummate an exchange (the "Exchange"),
pursuant to which existing stockholders of Ingram Industries will exchange all
or a portion of their shares of Ingram Industries common stock for shares of the
Company's Class B Common Stock. The Company, Ingram Industries and the Ingram
Family Stockholders have entered into certain agreements pursuant to which the
operations of the three companies will be reorganized (the "Reorganization"). In
the Reorganization, the Company, Ingram Industries and Ingram Entertainment (as
defined in the Registration Statement) ("Ingram Entertainment") will allocate
certain liabilities and obligations among themselves. The Exchange, together
with those elements of the Reorganization contemplated to occur prior to the
closing of the sale of the Firm Shares, are referred to herein as the
"Split-Off." Immediately after the Exchange, none of the Common Stock will be
held by Ingram Industries; however, as described in the Prospectus, Ingram
Industries will purchase approximately 300,000 shares of Class A Common Stock as
part of the public offering contemplated hereby. The term "Split-Off Agreements"
means the Reorganization Agreement, the Master Services Agreement, the Tax
Sharing and Tax Services Agreement, the Employee Benefits Transfer and
Assumption Agreement, the Exchange Agreement (each such agreement, as defined in
the Registration Statement) and any other agreements required to be delivered on
or before the closing of the Split-Off pursuant to any of the foregoing.
The use herein of the words "knowledge" or "know" with respect to a person,
unless otherwise stated, refers only to that information within the actual
knowledge of the person.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Underwriters that:
-2-
<PAGE> 4
(a) The Registration Statement has become effective under the
Securities Act; no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for such purpose
are pending before or, to the Company's knowledge, threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (b) do not apply
to statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the Company
in writing by such Underwriter expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified
to transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(d) The Company does not have any significant subsidiaries (as
such term is defined in paragraph (w) of Rule 1-02 of Regulation S-X
promulgated by the Commission).
(e) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case that is material to the
business of the Company and its subsidiaries, taken as a whole, in each
case free and clear of any security interest, lien, encumbrance, claim,
defect or adverse interest of any nature except such as are described in
the Prospectus or such as do not materially affect the value of such
property and do not interfere in any material respect with the use made and
proposed to be made of such property by the Company and its subsidiaries,
taken as a whole; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere in any material respect with the use made and proposed to be made
of such property and buildings by the Company and its subsidiaries, taken
as a whole, in each case except as described in or contemplated by the
Prospectus.
(f) The authorized capital stock of the Company conforms, in
all material respects, as to legal matters to the description thereof
contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly issued,
fully paid and non-assessable; except as set forth in the Prospectus,
neither the Company nor any subsidiary has outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations; and all outstanding
shares of capital stock and options and other rights to acquire capital
stock were not issued in violation of any preemptive rights, rights of
first refusal or other similar rights.
-3-
<PAGE> 5
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive rights, rights of first refusal or other
similar rights.
(i) This Agreement has been duly authorized, executed and
delivered by the Company.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company, or any agreement or other
instrument binding upon the Company that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company,
except for any such contravention that would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, and would not
conflict with or materially impair the performance by the Company of its
obligations under this Agreement, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under this
Agreement, except (i) such as may be required by the securities or Blue Sky
laws of the various states and other jurisdictions in connection with the
offer and sale of the Shares by the Underwriters and (ii) such consents,
approvals, authorizations, orders or qualifications which if not obtained
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, and would not materially impair the
performance by the Company of its obligations under this Agreement.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
financial condition, earnings, business or operations of the Company and
its subsidiaries, taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement).
(l) Except as described in or contemplated by the Prospectus,
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) the Company and its
subsidiaries have not incurred any material liability or obligation, direct
or contingent, nor entered into any material transaction, in each case not
in the ordinary course of business; (ii) other than repurchases of shares
pursuant to the Company's Key Employee Stock Purchase Plan, the Company has
not purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock other than ordinary and customary dividends; and (iii) there has not
been any material change in the capital stock, short-term debt or long-term
debt of the Company and its consolidated subsidiaries.
(m) There are no legal, regulatory or governmental proceedings
pending or, to the knowledge of any of the Company's officers, threatened
to which the Company or any of its subsidiaries is a party or to which any
of the properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts
or other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.
(n) The Company has all necessary consents, authorizations,
approvals, orders, certificates and permits of and from, and has made all
declarations and filings with, all foreign, federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and other tribunals, to own, lease, license and use its properties and
assets and to conduct its business in the manner described in the
-4-
<PAGE> 6
Prospectus, except to the extent that the failure to obtain or file would
not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(o) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act, complied
when so filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(p) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(q) There is no legal or beneficial owner of any securities of
the Company who has any rights, not effectively satisfied or waived, to
require registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement.
(r) The Company and its subsidiaries, taken as a whole, are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for,
except for any such insurance coverage which was not necessary for the
Company and its subsidiaries, taken as a whole, to have prudent and
customary coverage, or which was adequately replaced; and neither the
Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the financial condition, earnings, business or operations
of the Company and its subsidiaries, taken as a whole, except as described
in or contemplated by the Prospectus.
(s) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (collectively, "Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure
to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(t) The costs and liabilities, if any, associated with the
effect of Environmental Laws on the business, operations and properties of
the Company (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(u) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights, licenses,
inventions, trade secrets, copyrights, trademarks, service marks, trade
names, technology and know-how necessary to conduct its business in the
manner described in the Prospectus and, except as disclosed in the
Prospectus, neither the Company nor any of its subsidiaries has
-5-
<PAGE> 7
received any notice of infringement or conflict with (and neither the
Company nor any of its subsidiaries knows of any infringement or conflict
with) asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, copyrights, trademarks, service marks, trade
names, technology or know-how which could result in a material adverse
effect upon the Company and its subsidiaries, taken as a whole; and, except
as disclosed in the Prospectus, the discoveries, inventions, products or
processes of the Company and its subsidiaries referred to in the Prospectus
do not, to the knowledge of any of the Company's officers, infringe or
conflict with any right or patent of any third party, or any discovery,
invention, product or process which is the subject of a patent application
filed by any third party, known to any of the Company's officers which
could have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(v) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate foreign, federal,
state or local regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, and neither the Company nor any such subsidiary has received any
notice of proceedings related to the revocation or modification of any such
certificate, authorization or permit with respect to which there is a
reasonable likelihood of an unfavorable decision, ruling or finding that
would, singly or in the aggregate, result in a material adverse change in
the financial condition, earnings, business or operations of the Company
and its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
(w) The Company and its subsidiaries, taken as a whole,
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(x) Except as described in or contemplated by the Prospectus,
no material labor dispute with the employees of the Company or any of its
subsidiaries exists, or, to the knowledge of the Company, is imminent, and,
without any investigation, the Company's executive officers have no
knowledge of any existing, threatened or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors
that is reasonably likely to result in a material adverse change in the
financial condition or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole.
(y) Price Waterhouse LLP are, and during the periods covered
by their report included in the Registration Statement were, independent
certified public accountants with respect to the Company and its
subsidiaries within the meaning of the Securities Act.
(z) The financial statements, together with the related
schedules and notes thereto, included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), fairly present the
consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries on the basis stated
in the Registration Statement at the respective dates or for the respective
periods to which they apply; such statements and the related schedules and
notes thereto have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
and are in accordance with the books and records of the Company and its
subsidiaries; the other financial and statistical information and data set
forth in the Registration Statement and the Prospectus (and any amendment
or supplement thereto) is, in all material respects, accurately presented
and prepared on
-6-
<PAGE> 8
a basis consistent with such financial statements and the books and records
of the Company; and no other financial statements are required by the
Securities Act to be included in the Registration Statement or the
Prospectus.
(aa) The New York Stock Exchange ("NYSE") has approved the
Class A Common Stock for listing, subject only to official notice of
issuance.
(bb) The Company has complied with all provisions of Section
517.075, Florida Statutes, relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.
(cc) The Split-Off Agreements to which the Company is a party
have been duly authorized, executed and delivered by the Company and each
such agreement constitutes a valid and binding agreement of the Company.
(dd) Except as described in the Prospectus, all applicable
consents, authorizations, approvals, orders, certificates and permits of
and from, and all applicable declarations and filings with, all foreign,
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals having
jurisdiction over the Company required in connection with the Split-Off
have been obtained or filed, except to the extent that the failure to
obtain or file would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole; and
the execution and delivery by the Company of, and the performance by the
Company of its obligations under, the Split-Off Agreements does not
contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company or any agreement or other instrument
binding upon the Company that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company,
except for any such contravention that would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, and would not
conflict with or materially impair the performance by the Company of its
obligations under the Split-Off Agreements.
(ee) The Split-Off shall have been consummated, in all
material respects, in accordance with the terms of the Split-Off Agreements
prior to the closing of the sale of the Firm Shares to the Underwriters.
2. Representations and Warranties of Ingram Industries.
Ingram Industries represents and warrants to and agrees with each of the
Underwriters that:
(a) Ingram Industries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Tennessee.
(b) This Agreement has been duly authorized, executed and
delivered by Ingram Industries.
(c) The execution and delivery by Ingram Industries of, and
the performance by Ingram Industries of its obligations under, this
Agreement will not contravene any provision of applicable law or the
certificate of incorporation or bylaws of Ingram Industries or Ingram
Entertainment or any agreement or other instrument binding upon Ingram
Industries or Ingram Entertainment that is material to Ingram Industries
and its subsidiaries (including, without limitation, Ingram Entertainment),
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over Ingram Industries or Ingram
Entertainment, except for any such contravention that would not have a
material adverse effect on Ingram Industries and its subsidiaries
(including, without limitation, Ingram Entertainment), taken as a whole,
and would not conflict with or materially impair the performance by Ingram
Industries of its obligations under
-7-
<PAGE> 9
this Agreement, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by Ingram Industries of any of its obligations under this
Agreement, except (i) such as may be required by the securities or Blue Sky
laws of the various states and jurisdictions in connection with the offer
and sale of the Shares by the Underwriters and (ii) such consents,
approvals, authorizations, orders or qualifications which if not obtained
would not have a material adverse effect on Ingram Industries and its
subsidiaries (including, without limitation, Ingram Entertainment), taken
as a whole, and would not materially impair the performance by Ingram
Industries of its obligations under this Agreement.
(d) The Split-Off Agreements to which Ingram Industries is a
party have been duly authorized, executed and delivered by Ingram
Industries and each such agreement constitutes a valid and binding
agreement of Ingram Industries.
(e) Except as described in the Prospectus, all applicable
consents, authorizations, approvals, orders, certificates and permits of
and from, and all applicable declarations and filings with, all foreign,
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals having
jurisdiction over Ingram Industries or Ingram Entertainment required in
connection with the Split-Off have been obtained or filed, except to the
extent that the failure to obtain or file would not, singly or in the
aggregate, have a material adverse effect on Ingram Industries and its
subsidiaries (including, without limitation, Ingram Entertainment), taken
as a whole, and would not prevent the consummation of the Split-Off; and
the execution and delivery by Ingram Industries of, and the performance by
Ingram Industries of its obligations under, the Split-Off Agreements does
not contravene any provision of applicable law or the certificate of
incorporation or bylaws of Ingram Industries or Ingram Entertainment or any
agreement or other instrument binding upon Ingram Industries or Ingram
Entertainment that is material to Ingram Industries and its subsidiaries
(including, without limitation, Ingram Entertainment), taken as a whole, or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over Ingram Industries or Ingram Entertainment, except
for any such contravention that would not have a material adverse effect on
Ingram Industries and its subsidiaries (including, without limitation,
Ingram Entertainment), taken as a whole, and would not conflict with or
materially impair the performance by Ingram Industries of its obligations
under the Split-Off Agreements.
(f) The Split-Off shall have been consummated, in all material
respects, in accordance with the terms of the Split-Off Agreements prior to
the closing of the sale of the Firm Shares to the Underwriters.
(g) Ingram Industries is familiar with the statements relating
to Ingram Industries under the captions "Certain Transactions" and "The
Split-Off and the Reorganization" in the Prospectus and the statements
relating to Ingram Industries in other parts of the Registration Statement,
and such statements do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
3. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees
to sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company at $________ a share (the "Purchase Price") the respective number of
Firm Shares set forth in Schedule I and II hereto opposite the name of such
Underwriter. Notwithstanding the foregoing, it is understood that if any
employees of the Company or any of its subsidiaries are purchasing Shares in
Canada in the Employee Directed Offer (as defined in the Registration
Statement), such Shares (the "Canadian Employee Shares") will be sold directly
by the Company to such employees at a price per share (the "Canadian Employee
Purchase Price") equal to the Public
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<PAGE> 10
Offering Price (as defined below). In consideration for acting as agents of the
Company, the Underwriters will receive an advisory fee equal to the difference
between the Public Offering Price and the Purchase Price multiplied by the
aggregate number of Canadian Employee Shares sold in the Employee Directed
Offer.
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to issue and sell to the U. S. Underwriters the Additional Shares, and the U.S.
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to 3,000,000 Additional Shares at the Purchase Price. If the U.S.
Representatives, on behalf of the U.S. Underwriters, elect to exercise such
option, the U.S. Representatives shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the U.S. Underwriters and the
date on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 5 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares. The Additional Shares to be purchased by the U.S. Underwriters
hereunder and the U.S. Firm Shares are hereinafter collectively referred to as
the "U.S. Shares."
The Company hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the sale of any Shares to the Underwriters to be
sold hereunder, (B) the issuance by the Company of any shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
described in the Prospectus, (C) the grant of the Rollover Stock Options (as
defined in the Registration Statement), (D) the grant of options to purchase
Common Stock under the Company's 1996 Equity Incentive Plan and (E) the issuance
by the Company of any shares of Common Stock pursuant to the Company's 1996
Employee Stock Purchase Plan.
4. TERMS OF PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company is
further advised by you that the Shares are to be offered to the public initially
at $_____________ a share (the "Public Offering Price") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
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Each U.S. Underwriter hereby makes to and with the Company the
representations and agreements of such U.S. Underwriter contained in the fifth
and sixth paragraphs of Article III of the Agreement Between U.S. and
International Underwriters of even date herewith. Each International Underwriter
hereby makes to and with the Company the representations and agreements of such
International Underwriter contained in the seventh, eighth, ninth and tenth
paragraphs of Article III of such Agreement Between U.S. and International
Underwriters.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be
made to the Company in federal or other funds immediately available in New York
City against delivery of such Firm Shares for the respective accounts of the
several Underwriters at __________ at 10:00 A.M., New York City time, on
___________, 1996, or at such other time on the same or such other date, not
later than _________, 1996, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company
in federal or other funds immediately available in New York City against
delivery of such Additional Shares for the respective accounts of the several
U.S. Underwriters at __________ at 10:00 A.M., New York City time, on the date
specified in the notice described in Section 3 or at such other time on the same
or such other date, in any event not later than _______, 1996, as shall be
designated in writing by the U.S. Representatives. The time and date of such
payment are hereinafter referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Company to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than __________ (New York City time) on
the date hereof.
The several obligations of the Underwriters hereunder are
subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act, and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial
or otherwise, or in the earnings, business or operations, of the
Company and its subsidiaries, taken as a whole, from that set forth in
the Prospectus that, in your
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<PAGE> 12
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the chief executive
officer or president and the chief financial officer of the Company, to the
effect set forth in clause (a) (i) above, and to the effect that the
representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied hereunder on or before the Closing
Date.
The officers signing and delivering such certificate may
rely upon their knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the chief executive
officer or a co-president of Ingram Industries, to the effect that the
representations and warranties of Ingram Industries contained in this
Agreement are true and correct as of the Closing Date and that Ingram
Industries has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officers signing and delivering such certificate may
rely upon their knowledge as to proceedings threatened.
(d) The Underwriters shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, outside counsel for the Company, dated
the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of Delaware and has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus;
(ii) the authorized capital stock of the Company
conforms, in all material respects, as to legal matters to the
description thereof contained in the Prospectus;
(iii) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive rights, or, to the knowledge of such
counsel, rights of first refusal or other similar rights;
(iv) this Agreement has been duly authorized, executed
and delivered by the Company;
(v) the statements (A) in the Prospectus under the
captions "Risk Factors -- Relationship with Ingram Industries,
Ingram Entertainment, and the Ingram Stockholders," "Risk
Factors -- Control by Ingram Stockholders," "Risk Factors --
Shares Eligible for Future Sale," "Dividend Policy,"
"Management," "Certain Transactions," "The Split-Off and the
Reorganization," "Description of Capital Stock," "Shares
Eligible for Future Sale" and "Underwriters" and (B) in the
Registration Statement in Items 14 and 15, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to
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<PAGE> 13
therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(vi) after due inquiry, such counsel does not know of
any legal, regulatory or governmental proceeding pending or
threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations,
contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not
described or filed as required;
(vii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be
an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(viii) to the knowledge of such counsel, there is no legal
or beneficial owner of any securities of the Company who has
any rights, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement;
(ix) to such counsel's knowledge: (A) the Registration
Statement has become effective under the Securities Act, no
stop order proceedings with respect thereto have been
instituted or are pending or threatened under the Securities
Act and nothing has come to such counsel's attention to lead
it to believe that such proceedings are contemplated; and (B)
any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) under the Securities Act has
been made in the manner and within the time period required by
such Rule 424(b);
(x) the Shares to be sold under this Agreement to the
Underwriters have been duly authorized for listing on the
NYSE, subject to official notice of issuance;
(xi) the Split-Off Agreements to which the
Company is a party have been duly authorized, executed and
delivered by the Company;
(xii) except as described in the Prospectus, all
applicable consents, authorizations, approvals, orders,
certificates and permits of and from, and all applicable
declarations and filings with, all federal and New York state
authorities required in connection with the Split-Off have
been obtained or filed, except to the extent that the failure
to obtain or file would not, singly or in the aggregate, have
a material adverse effect on the Company and its subsidiaries,
taken as a whole; and the execution and delivery by the
Company of, and the performance by the Company of its
obligations under, the Split-Off Agreements does not
contravene any provision of applicable federal or New York
state law or the General Corporation Law of the State of
Delaware or the certificate of incorporation or bylaws of the
Company or, to such counsel's knowledge, any agreement or
other instrument binding upon the Company that is material to
the Company and its subsidiaries, taken as a whole, or, to
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company, except for any such contravention that would not
have a material adverse effect on the Company
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<PAGE> 14
and its subsidiaries, taken as a whole, and would not conflict
with or materially impair the performance by the Company of
its obligations under the Split-Off Agreements;
(xiii) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (B) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data included therein as
to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
In rendering such opinion, such counsel may state that their
opinion is limited to the federal laws of the United States, the laws
of the State of New York and the General Corporation Law of the State
of Delaware.
(e) The underwriters shall have received on the Closing Date
an opinion of James E. Anderson, Jr., Esq., Senior Vice President,
Secretary and General Counsel of the Company, dated the Closing Date,
to the effect that:
(i) the Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable; except as set
forth in the Prospectus, to the knowledge of such counsel,
neither the Company nor any subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights,
convertible securities or obligations; and all outstanding
shares of capital stock and options and other rights to
acquire capital stock were not issued in violation of any
preemptive rights, or, to the knowledge of such counsel,
rights of first refusal or other similar rights;
(iii) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene any provision of applicable law
or the certificate of incorporation or bylaws of the Company
or, to such counsel's knowledge, any agreement or other
instrument binding upon the Company that is material to the
Company and its subsidiaries, taken as a whole, or, to such
counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company,
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<PAGE> 15
except for any such contravention that would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole, and would not conflict with or materially
impair the performance by the Company of its obligations under
this Agreement, and no consent, approval, authorization or
order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its
obligations under this Agreement, except (i) such as may be
required by the securities or Blue Sky laws of the various
states and jurisdictions in connection with the offer and sale
of the Shares by the Underwriters and (ii) such consents,
approvals, authorizations, orders or qualifications which if
not obtained would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole, and would not
materially impair the performance by the Company of its
obligations under this Agreement;
(iv) after due inquiry, such counsel does not know of
any legal, regulatory or governmental proceeding pending or
threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations,
contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not
described or filed as required;
(v) to the knowledge of such counsel, there is no legal
or beneficial owner of any securities of the Company who has
any rights, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement;
(vi) except as described in the Prospectus, all
applicable consents, authorizations, approvals, orders,
certificates and permits of and from, and all applicable
declarations and filings with, all federal and Tennessee state
authorities required in connection with the Split-Off have
been obtained or filed, except to the extent that the failure
to obtain or file would not, singly or in the aggregate, have
a material adverse effect on the Company and its subsidiaries,
taken as a whole; and the execution and delivery by the
Company of, and the performance by the Company of its
obligations under, the Split-Off Agreements does not
contravene any provision of applicable federal law or
Tennessee state law or the certificate of incorporation or
bylaws of the Company or, to such counsel's knowledge, any
agreement or other instrument binding upon the Company that is
material to the Company and its subsidiaries, taken as a
whole, or, to such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company, except for any such
contravention that would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole, and would
not conflict with or materially impair the performance by the
Company of its obligations under the Split-Off Agreements;
(vii) the Exchange has been consummated, in all material
respects, in accordance with the terms of the Split-Off
Agreements;
(viii) such counsel (A) has no reason to believe that
(except for financial statements and schedules and other
financial and statistical data as to which such counsel need
not express any belief) the Registration Statement and the
prospectus included therein at the time the Registration
Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements
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<PAGE> 16
therein not misleading and (B) has no reason to believe that
(except for financial statements and schedules and other
financial and statistical data included therein as to which
such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
In rendering such opinion, such counsel may state that his opinion is
limited to the federal laws of the United States and the laws of the State of
Tennessee.
(f) The Underwriters shall have received on the Closing Date
an opinion of James E. Anderson, Jr., Esq., Vice President, Secretary
and General Counsel for Ingram Industries, dated the Closing Date, to
the effect that:
(i) Ingram Industries has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Tennessee;
(ii) this Agreement has been duly authorized, executed
and delivered by Ingram Industries;
(iii) the execution and delivery by Ingram Industries of,
and the performance by Ingram Industries of its obligations
under, this Agreement will not contravene any provision of
applicable law or the certificate of incorporation or bylaws
of Ingram Industries or Ingram Entertainment or, to such
counsel's knowledge, any agreement or other instrument binding
upon Ingram Industries or Ingram Entertainment that is
material to Ingram Industries and its subsidiaries (including,
without limitation, Ingram Entertainment), taken as a whole,
or, to such counsel's knowledge, any judgment, order or decree
of any governmental body, agency or court having jurisdiction
over Ingram Industries or Ingram Entertainment, except for any
such contravention that would not have a material adverse
effect on Ingram Industries and its subsidiaries (including,
without limitation, Ingram Entertainment), taken as a whole,
and would not conflict with or materially impair the
performance by Ingram Industries of its obligations under this
Agreement, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by Ingram Industries of any of
its obligations under this Agreement, except (i) such as may
be required by the securities or Blue Sky laws of the various
states and jurisdictions in connection with the offer and sale
of the Shares by the Underwriters and (ii) such consents,
approvals, authorizations, orders or qualifications which if
not obtained would not have a material adverse effect on
Ingram Industries and its subsidiaries (including, without
limitation, Ingram Entertainment), taken as a whole, and are
would not materially impair the performance by Ingram
Industries of its obligations under this Agreement;
(iv) the Split-Off Agreements to which Ingram Industries
is a party have been duly authorized, executed and delivered
by Ingram Industries; and
(v) except as described in the Prospectus, all
applicable consents, authorizations, approvals, orders,
certificates and permits of and from, and all applicable
declarations and filings with, all federal and Tennessee state
authorities required in connection with the Split-Off have
been obtained or filed, except to the extent that the failure
to obtain or file would not, singly or in the aggregate, have
a material adverse effect on Ingram Industries and its
subsidiaries (including,
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<PAGE> 17
without limitation, Ingram Entertainment), taken as a whole
and would not prevent the consummation of the Exchange; and
the execution and delivery by Ingram Industries of, and the
performance by Ingram Industries of its obligations under, the
Split-Off Agreements does not contravene any provision of
applicable federal law or Tennessee state law or the
certificate of incorporation or bylaws of Ingram Industries or
Ingram Entertainment or, to such counsel's knowledge, any
agreement or other instrument binding upon Ingram Industries
or Ingram Entertainment that is material to Ingram Industries
and its subsidiaries (including, without limitation, Ingram
Entertainment), taken as a whole, or, to such counsel's
knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over Ingram
Industries or Ingram Entertainment, except for any such
contravention that would not have a material adverse effect on
Ingram Industries and its subsidiaries (including, without
limitation, Ingram Entertainment), taken as a whole, and would
not conflict with or materially impair the performance by
Ingram Industries of its obligations under the Split-Off
Agreements.
(g) The Underwriters shall have received on the Closing Date
an opinion of Wilson Sonsini Goodrich & Rosati, counsel for the
Underwriters, dated the Closing Date, covering the matters referred to
in subparagraphs (iii), (iv), (v) (but only as to the statements in the
Prospectus under "Description of Capital Stock" and "Underwriters") and
(xiii) of paragraph (d) above.
With respect to (A) subparagraph (xiii) of paragraph (d)
above, Davis Polk & Wardwell and Wilson Sonsini Goodrich & Rosati, and
with respect to (B) subparagraph (viii) of paragraph (e) above, James
E. Anderson, Jr., Esq., may state that their opinion and belief are
based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and
review and discussion of the contents thereof, but are without
independent check or verification, except as specified.
The opinions of Davis Polk & Wardwell and James E. Anderson,
Jr., Esq. described in paragraphs (d), (e) and (f), respectively, above
shall be rendered to you at the request of the Company or Ingram
Industries, as the case may be, and shall so state therein.
(h) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Price Waterhouse LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided, however, that the letter delivered on the Closing Date shall
use a "cut-off date" not earlier than the date hereof.
(i) The "lock-up" agreements, each substantially in the form
attached hereto as Exhibit A, between you and certain stockholders,
officers and directors of the Company relating to sales and certain
other dispositions of shares of Common Stock or certain other
securities, delivered to you on or before the date hereof, shall be in
full force and effect on the Closing Date.
(j) The Company shall have complied with the provisions of
paragraph (a) of Section 7 hereof with respect to the furnishing of
Prospectuses on the business day following the date of this Agreement.
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<PAGE> 18
(k) All documents, opinions or certificates required to be
delivered on or prior to the Closing Date pursuant to the Split-Off
Agreements shall have been delivered, and all transactions contemplated
to be consummated on or prior to the Closing Date pursuant to the
Split-Off Agreements as described under the caption "The Split-Off and
the Reorganization" in the Prospectus shall have been consummated.
All the agreements, opinions, certificates and letters
mentioned above or elsewhere in this Agreement shall be deemed in compliance
with the provisions hereof only if Morgan Stanley & Co. Incorporated as a
representative of the several Underwriters, shall be reasonably satisfied that
they comply in form and scope.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents and legal opinions
as you may reasonably request with respect to the good standing of the Company,
the due authorization and issuance of the Additional Shares and other matters
related to the issuance of the Additional Shares.
7. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To furnish to you, without charge, six (6) signed copies
of the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 10:00 A.M. New York City time on the
business day following the date of this Agreement and during the period
mentioned in paragraph (c) below, as many copies of the Prospectus and
any supplements and amendments thereto or to the Registration Statement
as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
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<PAGE> 19
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement
covering the twelve-month period ending January 3, 1998 that satisfies
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any Blue Sky memorandum in connection with the offer and sale of the
Shares under securities laws of various states and other jurisdictions
and all expenses in connection with the qualification of the Shares for
offer and sale under state or foreign securities laws as provided in
paragraph (d) of Section 7 hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification
of the offering of the Shares by the National Association of Securities
Dealers, Inc. (the "NASD"), (v) all fees and expenses in connection
with the preparation and filing of the registration statement on Form
8-A relating to the Class A Common Stock and all costs and expenses
incident to listing the Shares on the NYSE, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and
expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering of
the Shares, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with
the prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants,
and, if the Company shall agree in advance, for a portion of the cost
associated with the chartering of aircraft in connection with the road
show based on the number of (A) officers and representatives of the
Company and (B) consultants utilizing such aircraft compared to the
total number of passengers using such aircraft and (ix) all other costs
and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this
Section 7. It is understood, however, that except as provided in this
paragraph (f) of Section 7, Section 8 and the last paragraph of Section
10 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes
payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
(g) During a period of three years from the effective date of
the Registration Statement, the Company will furnish to you copies of
(i) all reports to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company
with the Commission or any national securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
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<PAGE> 20
(i) Prior to the Closing Date or any Additional Closing Date,
as the case may be, the Company will not, directly or indirectly, issue
any press release or other communication, other than any press release
or other communication made in the ordinary course of business, and not
material to the business of the Company and its subsidiaries, taken as
a whole, and will not hold any press conference with respect to the
Company, or its financial condition, results of operations, business,
properties, assets, or prospects or this offering, without your prior
written consent, which shall not be unreasonably withheld.
Notwithstanding the foregoing, the Company may take any such action
without your prior written consent, if advised by counsel that such
action is required in order to comply with applicable law, provided
that you are given notice of such action at the earliest practicable
date and that you and your counsel are provided an opportunity, to the
extent practicable, to consult with the Company with respect to such
action.
8. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy
of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required
by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such
failure is the result of noncompliance by the Company with paragraph
(a) of Section 7.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Underwriter, but only
with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to paragraph (a) or (b) of this
Section 8, such person (the "Indemnified Party") shall promptly notify
the person against whom such indemnity may be sought (the "Indemnifying
Party") in writing and the Indemnifying Party, upon
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<PAGE> 21
request of the Indemnified Party, shall retain counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Party unless (i) the Indemnifying Party and the Indemnified Party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the Indemnifying Party shall not, in
respect of the legal expenses of any Indemnified Party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties and
that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley &
Co. Incorporated, in the case of parties indemnified pursuant to
paragraph (a) of this Section 8, and by the Company, in the case of
parties indemnified pursuant to paragraph (b) of this Section 8. The
Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified
Party shall have requested an Indemnifying Party to reimburse the
Indemnified Party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the Indemnifying
Party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement
is entered into more than 30 days after receipt by such Indemnifying
Party of the aforesaid request and (ii) such Indemnifying Party shall
not have reimbursed the Indemnified Party in accordance with such
request prior to the date of such settlement. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Party is or could have been a party
and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject
matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 8 is unavailable to an Indemnified
Party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party under
such paragraph, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii)
if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters
on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Shares shall be deemed to be in
the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses) received by the Company and
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of
the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to,
among other
-20-
<PAGE> 22
things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the respective number of Shares
they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) of this Section 8. The amount paid or
payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 8,
no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by
it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section
8 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any Indemnified Party at law or in
equity.
(f) The indemnity and contribution provisions contained in
this Section 8 and the representations, warranties and other statements
of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, or the Company,
its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Shares.
9. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
NYSE, the American Stock Exchange, the NASD, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
federal or New York State authorities, or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses (a)(i) through (iv), such
event singly or together with any other such event, makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
-21-
<PAGE> 23
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided,
however, that in no event shall the number of Shares that any Underwriter has
agreed to purchase pursuant to this Agreement be increased pursuant to this
Section 10 by an amount in excess of one-ninth of such number of Shares without
the written consent of such Underwriter. If, on the Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any U.S. Underwriter or U.S. Underwriters shall fail or
refuse to purchase Additional Shares and the aggregate number of Additional
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased, the non-defaulting U.S.
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting U.S. Underwriters would have been
obligated to purchase in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
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<PAGE> 24
13. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
INGRAM MICRO INC.
By: ________________________________
INGRAM INDUSTRIES INC.
By: ________________________________
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<PAGE> 25
Accepted, _________, 1996
Morgan Stanley & Co. Incorporated
The Robinson-Humphrey Company, Inc.
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
J.C. Bradford & Co.
Acting severally on behalf of themselves and the
several U.S. Underwriters named in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: _____________________________________________
Morgan Stanley & Co. International Limited
The Robinson-Humphrey Company, Inc.
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
Acting severally on behalf of themselves and the
several International Underwriters named in Schedule
II hereto.
By Morgan Stanley & Co. International Limited
By: _____________________________________________
-24-
<PAGE> 26
SCHEDULE I
U.S. UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ------------------------------------------------------ ---------------------
<S> <C>
Morgan Stanley & Co. Incorporated.....................
The Robinson-Humphrey Company, Inc. ..................
Alex. Brown & Sons Incorporated ......................
Hambrecht & Quist LLC ................................
J.C. Bradford & Co....................................
---------------------
Total...................... 16,000,000
</TABLE>
<PAGE> 27
SCHEDULE II
INTERNATIONAL UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ------------------------------------------------------ ---------------------
<S> <C>
Morgan Stanley & Co. International Limited............
The Robinson-Humphrey Company, Inc. ..................
Alex. Brown & Sons Incorporated ......................
Hambrecht & Quist LLC ................................
---------------------
Total...................... 4,000,000
</TABLE>
<PAGE> 28
EXHIBIT A
LOCK-UP AGREEMENT
_____________, 1996
Morgan Stanley & Co. Incorporated
The Robinson-Humphrey Company, Inc.
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
J.C. Bradford & Co.
as Representatives of the Several Underwriters
Re: Initial Public Offering of Ingram Micro Inc.
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"Representatives") of the several underwriters (the "Underwriters"), propose to
enter into an underwriting agreement with Ingram Micro Inc. (the "Company")
providing for the initial public offering (the "Public Offering") by the
Underwriters of shares of Class A Common Stock, par value $.01 per share, of the
Company (together with the Company's Class B Common Stock, par value $.01 per
share, the "Common Stock") pursuant to a Registration Statement (the
"Registration Statement") to be filed by the Company with the Securities and
Exchange Commission (the "Commission").
To induce the Underwriters that may participate in the Public Offering,
subject to the terms of the Underwriting Agreement, to continue their efforts in
connection with the Public Offering, the undersigned hereby agrees that, without
the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending one hundred eighty (180) days after the date of the final prospectus (the
"Prospectus") relating to the Public Offering: (1) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for shares of
Common Stock (collectively, the "Shares") (whether such Shares are now owned by
the undersigned or are hereafter acquired) or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Shares, whether or not any such transaction
described in clause (1) or (2) above is to be settled by delivery of such
Shares, in cash or otherwise. In addition, the undersigned agrees that, without
the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending one hundred eighty (180) days after the date of the Prospectus, make any
demand for or exercise any right with respect to, the registration of any
Shares.
Notwithstanding the foregoing, if the undersigned is an individual, he
or she may transfer any or all of the Shares either during his or her lifetime
or on death by gift, will or intestacy to his or her immediate family or to a
trust, partnership or other entity, the beneficiaries, partners or equity
holders of which are exclusively the undersigned and/or a member or members of
his or her immediate family; provided, however, that in any such case, it shall
be a condition to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding the Shares subject to the
provisions of this Agreement, and there shall be no further transfer
<PAGE> 29
of such Shares except in accordance with this Agreement. For purposes of this
and the following paragraph, "immediate family" shall mean lineal descendant,
spouse, adopted child, father, mother, brother or sister of the transferor and
the spouses, adopted children and lineal descendants of any of the foregoing.
In addition, notwithstanding the foregoing, if the undersigned is a
partnership, the partnership may transfer any Shares to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner, and any partner
who is an individual may transfer any such Shares by gift, will or intestate
succession to his or her immediately family; if the undersigned is a trust, the
trust may transfer any Shares to any beneficiary of such trust or to the estate
of any such beneficiary, and any beneficiary who is an individual may transfer
any such Shares by gift, will or intestate succession to a member or members of
his or her immediate family; and if the undersigned is a corporation, the
corporation may transfer any Shares to any shareholder of such corporation, and
any shareholder who is an individual may transfer any such Shares by gift, will
or intestate succession to his or her immediate family; provided, however, that
in any such case, it shall be a condition to the transfer that the transferee
execute an agreement stating that the transferee is receiving and holding the
Shares subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with this Agreement.
In addition, notwithstanding the foregoing, any Shares that were
purchased pursuant to the Company's Key Employee Stock Purchase Plan may be sold
or otherwise transferred to the Company in accordance with the terms thereof.
The undersigned hereby acknowledges that this agreement is valid and
binding notwithstanding any prior agreements relating to this matter and further
agrees and consents to the entry of stop-transfer instructions with the
Company's transfer agent against the transfer of shares of Common Stock held by
the undersigned except in compliance with the terms and conditions of this
agreement. The undersigned also understands that the Company and the
Underwriters will proceed with the Public Offering in reliance on this Lock-Up
Agreement. Whether or not the Public Offering occurs as planned depends on a
number of factors, including market conditions. A final decision as to the
Public Offering will be made by the Underwriters and the Company. This Lock-Up
Agreement shall terminate if the pricing of the Public Offering shall not have
occurred prior to or on January 1, 1997.
Very truly yours,
___________________________________
Name of Stockholder
___________________________________
Signature of Authorized Signatory
______________________________________________
Print Name and Title, if applicable
______________________________________________
Additional Signature(s), if stock jointly held
<PAGE> 1
Exhibit 3.01
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
INGRAM MICRO INC. (A CALIFORNIA CORPORATION)
INTO
INGRAM MICRO INC. (A DELAWARE CORPORATION)
PURSUANT TO SECTION 253 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
INGRAM MICRO INC. ("Micro Delaware"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that:
FIRST: INGRAM MICRO INC. ("Micro California") is a corporation
organized and existing under the California General Corporation Law.
SECOND: Micro Delaware owns of record 100% of the outstanding shares of
Class A common stock (the "Common Stock"), par value $0.25 per share, of Micro
California, the Common Stock being the only class of stock of Micro California
outstanding.
THIRD: At a meeting of the Board of Directors of Micro Delaware held
on August 20, 1996, the Board of Directors of Micro Delaware adopted the
following resolutions providing for the merger of Micro California into Micro
Delaware, which resolutions have not been amended or rescinded and are in full
force and effect:
RESOLVED, That, pursuant to Section 253 of the General
Corporation Law of the State of Delaware, Ingram Micro Inc. ("Micro
California") shall be merged (the "Merger") into Ingram Micro Inc. ("Micro
Delaware"), whereupon the separate existence of Micro California
<PAGE> 2
shall cease, and Micro Delaware shall be the surviving corporation (the
"Surviving Corporation") and shall assume all of the obligations of
Micro California.
RESOLVED, That the Merger shall be effective at the time a
Certificate of Ownership and Merger for the Merger is filed with the
Secretary of State of the State of Delaware (the "Effective Time").
RESOLVED, That the Certificate of Incorporation of Micro
Delaware as in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance
with applicable law.
RESOLVED, That the bylaws of Micro Delaware as in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
RESOLVED, That the Chairman of the Board and Chief Executive
Officer and the President and Chief Operating Officer of Micro Delaware
be, and each of them hereby is, authorized and directed to (i) make and
execute a Certificate of Ownership and Merger ("Certificate of Ownership
and Merger"), which shall set forth a copy of these resolutions and the
date of adoption thereof, and to cause the same to be filed with the
Secretary of State of Delaware, (ii) execute and file with the Secretary
of State of California all required documents, including without
limitation an executed counterpart of the Certificate of Ownership and
Merger and (iii) take all actions and to execute and file all other
documents whether within or without the State of Delaware or California
as such officers may deem appropriate to effectuate the foregoing
resolutions and to carry out the purposes thereof, the taking of any
such action and any execution and delivery of any such document
conclusively to evidence the due authorization thereof by Micro
Delaware.
IN WITNESS WHEREOF, INGRAM MICRO INC. has caused this Certificate of
Ownership and Merger to be executed in its corporate name by its Chief Executive
Officer and attested to by its Secretary, this 23rd day of October, 1996.
By: /s/ JERRE L. STEAD
-----------------------------
Name: Jerre L. Stead
Title: Chairman of the Board and
Chief Executive Officer
<PAGE> 3
ATTEST:
/s/ JAMES E. ANDERSON, JR.
- ------------------------------
Name: James E. Anderson, Jr.
Title: Secretary
3
<PAGE> 4
CERTIFICATE OF OWNERSHIP AND MERGER
merging
INGRAM MICRO HOLDINGS INC.
into
INGRAM MICRO INC.
Pursuant to Section 253 of the General Corporation
Law of the State of Delaware
INGRAM MICRO INC. ("Micro Delaware"), a corporation organized and
existing under the General Corporation law of the State of Delaware, does
hereby certify that:
FIRST: INGRAM MICRO HOLDINGS INC. ("Holdings") is a corporation
organized and existing under the California General Corporation Law.
SECOND: Micro Delaware owns of record 100% of the outstanding shares
of common stock (the "Common Stock"), par value $0.20 per share, of Holdings,
the Common Stock being the only class of stock of Holdings outstanding.
THIRD: At a meeting of the Board of Directors of Micro Delaware held
on August 20, 1996, the Board of Directors of Micro Delaware adopted the
following resolutions providing for the merger of Holdings into Micro Delaware,
which resolutions have not been amended or rescinded and are in full force and
effect:
RESOLVED, That, pursuant to Section 253
of the General Corporation Law of the State of
Delaware, Ingram Micro Holdings Inc. ("Holdings")
shall be merged (the "Merger") into Ingram Micro
Inc. ("Micro Delaware"), whereupon the separate
existence of Holdings shall cease, and Micro
Delaware shall be the surviving corporation (the
"Surviving
<PAGE> 5
Corporation") and shall assume all of the
obligations of Holdings.
RESOLVED, That the Merger shall be
effective at the time a Certificate of
Ownership and Merger for the Merger is filed
with the Secretary of State of the State of
Delaware (the "Effective Time").
RESOLVED, That the Certificate of
Incorporation of Micro Delaware as in effect
at the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation
until amended in accordance with applicable
law.
RESOLVED, That the bylaws of Micro
Delaware as in effect at the Effective Time
shall be the bylaws of the Surviving
Corporation until amended in accordance with
applicable law.
RESOLVED, That the Chairman of the Board
and Chief Executive officer and the President
and Chief Operating Officer of Micro Delaware
be, and each of them hereby is, authorized and
directed to (i) make and execute a Certificate
of Ownership and Merger ("Certificate of
Ownership and Merger"), which shall set forth
a copy of these resolutions and the date of
adoption thereof, and to cause the same to be
filed with the Secretary of State of Delaware,
(ii) execute and file with the Secretary of
State of California all required documents,
including without limitation an executed
counterpart of the Certificate of Ownership
and Merger and (iii) take all actions and to
execute and file all other documents whether
within or without the State of Delaware or
California as such officers may deem
appropriate to effectuate the foregoing
resolutions and to carry out the purposes
thereof, the taking of any such action and any
execution and delivery of any such document
conclusively to evidence the due authorization
thereof by Micro Delaware.
IN WITNESS WHEREOF, INGRAM MICRO INC. has caused this
Certificate of Ownership and Merger to be executed in its
2
<PAGE> 6
corporate name by its Chief Executive Officer and attested to by its Secretary,
this 23rd day of October, 1996.
By: /s/ JERRE L. STEAD
-----------------------------
Name: Jerre L. Stead
Title: Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ JAMES E. ANDERSON, JR.
- ----------------------------------
Name: James E. Anderson, Jr.
Title: Secretary
3
<PAGE> 7
CERTIFICATE OF INCORPORATION
OF
INGRAM MICRO INC.
* * * * *
FIRST: The name of the Corporation is Ingram Micro Inc.
SECOND: The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware. The name of its registered agent at such address
is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended ("DELAWARE LAW").
FOURTH: (a) SHARES AUTHORIZED. The total number of shares of stock
which the Corporation shall have authority to issue is (i) a total of
400,000,000 shares of Common Stock, par value $0.01 per share (the "COMMON
STOCK"), in two classes consisting of 265,000,000 shares of Class A Common Stock
(the "CLASS A COMMON STOCK") and 135,000,000 shares of Class B Common Stock (the
"CLASS B COMMON STOCK") and (ii) 1,000,000 shares of Preferred Stock, par value
$0.01 per share (the "PREFERRED STOCK"). The number of authorized shares of any
class or classes of capital stock of the Corporation may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the voting power of the stock
of the Corporation entitled to vote generally in the election of directors,
irrespective of the provisions of Section 242(b)(2) of the Delaware Law or any
corresponding provision hereinafter enacted.
(b) COMMON STOCK. All shares of Class A Common Stock and Class B
Common Stock will be identical and will entitle the holders thereof to the same
rights and privileges, except as otherwise provided herein.
<PAGE> 8
(1) VOTING RIGHTS. The holders of the Class A Common Stock shall be
entitled to one vote on each matter to be voted on by the stockholders of
the Corporation for each share of such stock held. The holders of the
Class B Common Stock shall be entitled to 10 votes on each matter to be
voted on by the stockholders of the Corporation for each share of such
stock held. Except as otherwise required by applicable law, the holders of
shares of Class A Common Stock and the holders of shares of Class B Common
Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(2) DIVIDENDS AND DISTRIBUTIONS. Subject to the preferences
applicable to Preferred Stock outstanding at any time, the holders of
shares of Class A Common Stock and the holders of shares of Class B Common
Stock shall be entitled to receive, from time to time, when and as
declared by the Board of Directors, out of assets or funds of the
Corporation legally available therefor, dividends and other distributions
in cash, property or securities of the Corporation; provided that, subject
to the provisions of this subparagraph, the Corporation shall pay
dividends or other distributions to the holders of each class of Common
Stock that are equal on a per share basis. In the case of dividends or
other distributions payable in Class A Common Stock or Class B Common
Stock, including distributions pursuant to stock splits or divisions of
Class A Common Stock or Class B Common Stock, only shares of Class A
Common Stock shall be distributed with respect to Class A Common Stock and
only shares of Class B Common Stock shall be distributed with respect to
Class B Common Stock. In the case of dividends or other distributions
consisting of other voting securities of the Corporation, the Corporation
shall declare and pay such dividends in two separate classes of such
voting securities, identical in all respects, except that the voting
rights of each such security paid to the holders of Class A Common Stock
shall be one-tenth of the voting rights of each such security paid to the
holders of Class B Common Stock, and such security paid to the holders of
Class B Common Stock shall convert into the security paid to the holders
of Class A Common Stock upon the same terms and conditions applicable to
the Class B Common Stock. In the case of dividends or other distributions
consisting of non-voting securities convertible into, or exchangeable
for, voting securities of the Corporation, the Corporation shall provide
that such convertible or exchangeable securities and the underlying
securities
2
<PAGE> 9
be identical in all respects (including, without limitation, the
conversion or exchange rate), except that the voting rights of each
security underlying the convertible or exchangeable security paid to the
holders of Class A Common Stock shall be one-tenth of the voting rights of
each security underlying the convertible or exchangeable security paid to
the holders of the Class B Common Stock, and such underlying securities
paid to the holders of Class B Common Stock shall convert into the
underlying securities paid to the holders of Class A Common Stock upon the
same terms and conditions applicable to the Class B Common Stock.
(3) STOCK SPLITS. The Corporation shall not in any manner subdivide
or combine (by stock split, stock dividend, reclassification,
recapitalization or otherwise) the outstanding shares of one class of
Common Stock unless the outstanding shares of all classes of Common Stock
shall be proportionately subdivided or combined.
(4) CONVERSION OF CLASS B COMMON STOCK. (A) OPTIONAL. Subject to the
provisions of this subparagraph (4),the holder of each share of Class B
Common Stock shall have the right, at any time, at such holder's option,
to convert each outstanding share of Class B Common Stock into one fully
paid and nonassessable share of Class A Common Stock. Such right of
conversion shall be exercised by the holder thereof by giving written
notice to the Corporation that the holder elects to convert a stated
number of shares of Class B Common Stock into Class A Common Stock and by
surrender of a certificate or certificates for the shares to be converted
as provided in subparagraph (4)(C) below.
(B) AUTOMATIC. Each outstanding share of Class B Common Stock will
be automatically converted into one fully paid and nonassessable share of
Class A Common Stock without any action (including without limitation the
surrender of certificates therefor) on the part of the holder thereof upon
the earliest to occur of:
(I) the fifth anniversary of the consummation of the split-off
pursuant to the Exchange Agreement (the "EXCHANGE AGREEMENT") to be
entered into among Ingram Industries Inc., Ingram Entertainment
Inc., the Corporation and the persons listed on the signature pages
thereof;
3
<PAGE> 10
(II) the sale or transfer of such share of Class B Common Stock
(A) by a holder that is a party to the Board Representation
Agreement (as defined in the Exchange Agreement) to any person that
is not (i) an affiliate of such holder, (ii) the spouse or a
descendant (including adopted persons and their descendants) of such
holder, their estates or trusts or other entities for the benefit of
such holder or its affiliates, spouse or descendants (including
adopted persons and their descendants) or (iii) any other party to
the Exchange Agreement or (B) by any other holder, to a holder that
is not the spouse or a descendant (including adopted persons and
their descendants) of such holder, their estates or trusts for the
benefit thereof; and
(III) the date on which the number of shares of Class B Common
Stock then outstanding represents less than 25% of the aggregate
number of shares of Class A Common Stock and Class B Common Stock
then outstanding, as determined by the Board of Directors of the
Corporation.
As soon as practicable following the occurrence of an event referred to in
clause (I) or (III) above, written notice of such automatic conversion
shall be given by the Corporation to all holders of Class B Common Stock.
Upon receipt of such written notice, or immediately prior to the
consummation of any sale or transfer referred to in clause (II) above,
each holder of Class B Common Stock shall, pursuant to subparagraph (4)(C)
below, surrender the certificate or certificates representing the shares
of Class B Common Stock that have been or will be converted.
(C) Each certificate for shares of Class B Common Stock to be
surrendered to the Corporation in connection with a conversion shall be
surrendered at the principal office of the Corporation (or such other
office or agency of the Corporation as the Corporation may designate by
notice in writing to the holder or holders of the Class B Common Stock) at
any time during its usual business hours, together with a statement of the
name or names (with address) in which the certificate or certificates for
shares of Class A Common Stock shall be issued. Unless the shares issuable
on conversion are to be issued in the same name as the name in which such
shares of Class B Common Stock are registered, each share surrendered for
conversion shall be accompanied by instruments of
4
<PAGE> 11
transfer, in form satisfactory to the Corporation, duly executed by the
holder or the holder's duly authorized attorney and by transfer tax stamps
or funds therefor, if required pursuant to subparagraph (4)(G) below.
(D) Promptly following the receipt by the Corporation of the
certificate for the share or shares of Class B Common Stock surrendered
for conversion, together with the other documents referred to in
subparagraph (4)(C) above, and the payment in cash of any amount required
pursuant to subparagraph (4)(G) below, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in
such name or names as such holder may direct, a certificate or
certificates for the number of shares of Class A Common Stock issuable
upon conversion of such share or shares of Class B Common Stock. Such
conversion shall be deemed to have been effected immediately prior to the
close of business on (x) the date on which the certificate or certificates
for such share or shares, together with the other documents referred to in
subparagraph (4)(C) above, shall have been surrendered and the payment of
the amount required pursuant to subparagraph (4)(G) below shall have been
made, in the case of a conversion pursuant to subparagraph (4)(A) above or
(y) upon consummation of the sale or the happening of an event in the case
of a conversion pursuant to subparagraph (4)(B) above, and at such time
the rights of the holder of such share or shares of Class B Common Stock
shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Class A Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.
(E) If the number of shares of Class B Common Stock represented by
the certificate or certificates surrendered for conversion exceeds the
number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder thereof, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Class B Common Stock represented by the certificate or certificates
surrendered which are not to be converted.
(F) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, such number of its authorized
but unissued shares of Class A Common Stock as shall be required for
5
<PAGE> 12
the purpose of effecting conversions of the Class B Common Stock.
(G) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Class A Common Stock on conversion of the Class B
Common Stock pursuant hereto; provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Class A Common Stock in a
name other than that of the holder of the Class B Common Stock to be
converted and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(H)(I) In the event that the Corporation shall enter into any
consolidation, merger, combination or other transaction in which
shares of any class of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property,
then, and in such event, the shares of each class of Common Stock
shall be exchanged for or changed into an amount per share equal to
the amount of stock, securities, cash and/or any other property, as
the case may be, into which or for which each share of the other
class of Common Stock is exchanged or changed; provided that if
shares of Class A Common Stock and Class B Common Stock are
exchanged for or changed into shares of capital stock, such shares
so exchanged for or changed into may differ to the extent and only
to the extent that the Class A Common Stock and Class B Common Stock
differ as provided herein.
(II) In the event of a reclassification, change of outstanding
shares (other than a change in par value or as a result of any
subdivision or combination) or other similar transaction as a result
of which the shares of Class A Common Stock are converted into
another security, then a holder of Class B Common Stock shall be
entitled to receive upon conversion the amount of such security that
such holder would have received if such conversion had occurred
immediately prior to the record date of such reclassification or
other similar transaction.
6
<PAGE> 13
(III) If a share of Class B Common Stock shall be converted
subsequent to the record date for the payment of a dividend or other
distribution on shares of Class B Common Stock but prior to such
payment, then the registered holder of such share at the close of
business on such record date shall be entitled to receive the
dividend or other distribution payable on such share on such date
notwithstanding the conversion thereof.
(5) LIQUIDATION RIGHTS. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, after payment or provision for the payment of the debts and
other liabilities of the Corporation and after making provision for the
holders of each series of Preferred Stock, if any, the remaining assets
and funds of the Corporation, if any, shall be divided among and paid
ratably to the holders of the Class A Common Stock and the Class B Common
Stock treated as a single class.
(6) ISSUANCE. Shares of Class B Common Stock which have been issued
and reacquired in any manner, including shares purchased, redeemed,
converted or exchanged, shall (upon compliance with any applicable
provisions of the laws of the State of Delaware) be canceled and shall not
be available for reissue or redesignation.
(c) PREFERRED STOCK. The Board of Directors is hereby empowered to
authorize by resolution or resolutions from time to time the issuance of one or
more classes or series of Preferred Stock and to fix the voting powers, full or
limited, or no voting powers and the designations, preferences and relative,
participating, optional or other special rights, if any, and the qualifications
or restrictions thereof, if any, with respect to each such class or series of
Preferred Stock and the number of shares constituting each such class or series,
and to increase or decrease the number of shares of any such class or series to
the extent permitted by Delaware Law.
7
<PAGE> 14
FIFTH: The name and mailing address of the incorporator are:
NAME MAILING ADDRESS
---- ---------------
Carole Schiffman 450 Lexington Avenue
New York, New York 10017
The power of the incorporator as such shall terminate upon the filing of this
Certificate of Incorporation.
SIXTH: The names and mailing addresses of the persons who are to
serve as directors until the first annual meeting of stockholders or until their
successors are elected and qualified are:
NAME MAILING ADDRESS
---- ---------------
Linwood A. Lacy, Jr. c/o Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
Philip M. Pfeffer c/o Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
Jeffrey R. Rodek c/o Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
David R. Dukes c/o Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
John R. Ingram c/o Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
David B. Ingram c/o Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
SEVENTH: The Board of Directors shall have the power to adopt, amend
or repeal the bylaws of the Corporation.
EIGHTH: (a) Election of directors need not be by written ballot
unless the bylaws of the Corporation so provide.
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<PAGE> 15
(b) There shall be no cumulative voting in the election of
directors.
NINTH: For so long as any shares of Class B Common Stock are
outstanding, any action required or permitted to be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, by written consent setting forth the action to be taken signed by the
holders of outstanding capital stock entitled to vote thereon having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a stockholders' meeting at which all shares entitled to vote
thereon were present and voted. Commencing at such time as there are no shares
of Class B Common Stock outstanding, any action required or permitted to be
taken at any annual or special meeting of stockholders may be taken only upon
the vote of stockholders at an annual or special meeting duly noticed and called
in accordance with Delaware Law and may not be taken by written consent of
stockholders without a meeting.
TENTH: (a) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by Delaware Law.
(b)(i) Each person (and the heirs, executors or administrators of
such person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by Delaware Law. The right to indemnification conferred in this ARTICLE TENTH
shall also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware Law. The right to indemnification
conferred in this ARTICLE TENTH shall be a contract right.
(ii) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the employees and agents of the Corporation
to such extent and to such effect as the Board of Directors shall determine to
be appropriate and authorized by Delaware Law.
9
<PAGE> 16
(c) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or loss
incurred by such person in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under Delaware Law.
(d) The rights and authority conferred in this ARTICLE TENTH shall
not be exclusive of any other right which any person may otherwise have or
hereafter acquire.
(e) Neither the amendment nor repeal of this ARTICLE TENTH, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws of
the Corporation, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this ARTICLE TENTH
in respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.
ELEVENTH: The Corporation reserves the right to amend this
Certificate of Incorporation in any manner permitted by Delaware Law and, except
as otherwise provided in ARTICLE TENTH, all rights and powers conferred herein
on stockholders, directors and officers, if any, are subject to this reserved
power. For so long as any shares of Class B Common Stock are outstanding, in
addition to any vote otherwise required by law, any such amendment shall require
approval of both (a) a majority of the members of the Board of Directors and (b)
the holders of a majority of the voting power of all the shares of capital stock
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class.
10
<PAGE> 17
IN WITNESS WHEREOF, I have hereunto signed my name this 29th day of
April, 1996.
/s/ Carole Schiffman
_______________________________
Carole Schiffman
11
<PAGE> 1
EXHIBIT 10.33
AMENDMENT NO. 2
This AMENDMENT NO. 2 amends each of
(i) the Pooling and Servicing Agreement dated as of February 10,
1993 as amended by Amendment No. 1, dated January 31, 1994
(the "Pooling and Servicing Agreement"), including Annex X
thereto, and as supplemented by the Variable Funding
Supplement dated as of February 12, 1993, the Series 1993-1
Supplement dated as of July 23, 1993 (the "Series 1993-1
Supplement"), the Series 1993-2 Supplement dated as of July
23, 1993 (the "Series 1993-2 Supplement"), the Series 1994-1
Supplement dated as of March 24, 1994 (the "Series 1994-1
Supplement"), the Series 1994-2 Supplement dated as of March
24, 1994 (the "Series 1994-2 Supplement") and the Series
1994-3 Supplement dated as of March 24, 1994 (the "1994-3
Supplement") each among Ingram Funding Inc. ("Funding"),
Ingram Industries Inc. ("Ingram") and The Chase Manhattan Bank
(formerly known as Chemical Bank), as Trustee (the "Trustee"),
(ii) the Asset Purchase and Sale Agreement dated as of February 10,
1993 (the "Purchase Agreement") as amended by Amendment No. 1,
dated January 31, 1994 between Funding and Ingram,
(iii) the Asset Purchase and Sale Agreement dated as of February 10,
1993 (the "Micro Purchase Agreement") as amended by Amendment
No. 1, dated January 31, 1994 between Ingram Micro Inc.
("Micro") and Ingram,
(iv) the Asset Purchase and Sale Agreement dated as of February 10,
1993 (the "Commtron Purchase Agreement") as amended by
Amendment No. 1, dated January 31, 1994 between Ingram
Entertainment Inc., ("Entertainment") (as successor to
Commtron) and Ingram,
(v) the Subservicing Agreement dated as of February 12, 1993 (the
"Micro Subservicing Agreement") between Ingram and Micro,
(vi) the Subservicing Agreement dated as of February 12, 1993 (the
"Commtron Subservicing Agreement") between Ingram and Commtron,
(vii) the Letter of Credit Reimbursement Agreement dated as of
February 10, 1993, as amended on October 15, 1994, (the "LOC
Agreement") among Distribution Funding Corporation (the "CP
Issuer"), Funding, Chemical Bank ("Chemical"), and the LOC
Issuers named therein, and
<PAGE> 2
(viii) the Liquidity Agreement dated as of February 10, 1993, as
amended on October 15, 1994, (the "Liquidity Agreement") as
amended by Amendment No. 1, dated January 31, 1994 among the
CP Issuer, Funding, Ingram, Chemical, NationsBank of North
Carolina, N.A. ("NationsBank"), The Bank of Nova Scotia
("BNS" and, together with Chemical and NationsBank, the
"Banks"), Chemical, as agent for the Banks, with BNS,
NationsBank and the Industrial Bank of Japan, Limited, Atlanta
Agency, as Lead Managers,
and is entered into as of September 13, 1996 (the "Amendment Effective Date")
by and among each of the above-named parties to the several agreements listed
above.
WHEREAS, the parties to each of the Agreements desire to enter
into certain amendments thereto and to consent to all such amendments to all
such Agreements,
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
I. Defined Terms. Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in, or for
purposes of, the Agreement(s) in which such term is used.
II. Amendments to Pooling and Servicing Agreement. The
Pooling and Servicing Agreement shall be amended as follows:
A. Assumption and Release of Duties
From and after the date of consummation and
settlement of the stock transfers contemplated in the Exchange Agreement
described in the registration statement (SEC Registration No. 333-08453)filed
with the Securities and Exchange Commission (the "SEC") with respect to the
common stock of Ingram Micro Inc., a Delaware corporation ("New Micro") (such
date the "Reorganization Date"), Micro will assume all of the duties and
obligations of Ingram under the Pooling and Servicing Agreement and as of such
date Ingram shall be released from all of its duties and obligations under or
in connection with such Agreement except as expressly provided herein.
B. Conveyance of Receivables
It is recognized and agreed that in light of
the various changes being accomplished under this Amendment, from and after the
Amendment Effective Date, Entertainment, as successor to Commtron, and Micro
will be removed as Designated Subsidiaries and it is further agreed that
accounts receivable created by the Ingram Book Company division of Ingram shall
no longer be
-2-
<PAGE> 3
Receivables for purposes of Section 2.01 of the Pooling and Servicing
Agreement. Micro shall assume all of the duties and obligations of Ingram
under the Purchase Agreement; provided, however, that Micro shall have no
obligation to sell accounts receivable generated by its "CMD" (as defined in
Exhibit B hereto) operations. Therefore, for the avoidance of doubt, Ingram,
Micro and Entertainment hereby agree as follows:
Each of Ingram, Micro and Entertainment represents and warrants that
all of the conditions necessary for the removal of Micro and
Entertainment as Designated Subsidiaries in accordance with Section
2.2 of the Purchase Agreement have been fulfilled; and
As of the Amendment Effective Date, any and all Receivables purchased
by Funding and conveyed to the Trust pursuant to Section 2.01 of the
Pooling and Servicing Agreement by Funding shall be limited to
Receivables created by and purchased from Micro (exclusive of
Receivables created by CMD).
C. Continuing Obligations of Ingram
It is agreed that Ingram shall not be
released from any of its duties and obligations with respect to any Receivables
transferred under the Pooling and Servicing Agreement prior to the Amendment
Effective Date, including the requirements with respect to the preparation and
submission of reports on such Receivables. Further, the obligations of Ingram
under Sections 8.04, 8.06 and 8.08 of the Pooling and Servicing Agreement shall
remain in effect with respect to liabilities that may arise with respect to the
activities Ingram has conducted as Servicer and with respect to the application
of such provisions to Receivables transferred prior to the Amendment Effective
Date.
Ingram shall continue to maintain the books
and accounts required under Section 3.03(t), and shall continue to be
responsible for the performance of its obligations under Sections 3.03 (1),(q)
and (o), of the Pooling and Servicing Agreement, but only until the
Reorganization Date. On and after the Reorganization Date, such duties shall be
the responsibility solely of Micro.
It is further understood and agreed that on
and after the Reorganization Date, Ingram shall have the right to repurchase
all Receivables with any unpaid balance held under the Pooling and Servicing
Agreement which were created by either Ingram or Entertainment at a price equal
to the Purchase Price thereof, increased by an amount appropriate to recover
the amount determined under the Seller's Discount provisions with respect to
such Receivables, less any amounts actually collected by the Trust with respect
to such Receivables. Ingram agrees to use its best efforts to repurchase such
Receivables on the Reorganization Date or as
-3-
<PAGE> 4
soon thereafter as practicable; provided, however, that no such repurchase
shall be made if as of the result of any such repurchase of a Receivable an
Event of Termination with respect to any Series would occur.
D. Amendments with Respect to Allocations and
Payments.
Section 4.03(b)(i)(B) is revised to be as
follows:
(B) Allocate and pay to the holder of the
Transferor Certificate an amount equal to the product of (1) the Invested
Percentage for such Series and (2) the Principal Collections for such Business
Day; provided that no such allocation or payment shall be made if on such
Business Day there shall be in existence a Suspension Event or an Event of
Termination.
The last paragraph of Section 9.01 is revised
to be as follows:
then, (a) in the case of any event described in subparagraph (i) (other than
clause (B) thereof), (ii) and (vi) after any applicable grace period set forth
in such subparagraphs, either the Trustee or the Holders of Investor
Certificates of the related Series evidencing Undivided Interests aggregating
more than 65% of the related Invested Amount of such Series by notice then
given in writing to the Transferor and the Servicer (and to the Trustee if
given by the Certificateholders) may declare that an Event of Termination has
occurred (A) with respect to all Series of Certificates (in the case of notice
given by the Trustee) or (B) such Series (in the case of notice given by
Investor Certificateholders) as of the date of such notice, or
(b) in the case of any event described in clause (B) of subparagraph
(i) or in subparagraphs (iii), (iv), (v), (vii), or (ix) an Event of
Termination with respect to all Series shall occur without any notice or other
action on the part of the Trustee or any Certificateholder immediately upon the
occurrence of such event, or
(c) in the case notice is provided to the Trustee that any event
described in subparagraph (viii) has occurred, the Trustee by notice then given
in writing to the Transferor and the Servicer will declare that an Event of
Termination has occurred with respect to all Series of Certificates as of the
date of such notice; provided, however, that in the event that within ten days
of such notice by the Trustee, the Holders of Investor Certificates of a Series
evidencing Undivided Interests aggregating at least 65% of the related Invested
Amount of such Series shall provide written notice to the Trustee, the
Transferor and the Servicer that they
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<PAGE> 5
waive such Event of Termination, then no Event of Termination shall result with
respect to such Series.
E. Amendments with Respect to Allocations and
Distributions After Amortization Period Commencement Date.
It is agreed that the modifications addressed
with respect to the allocation and payment provisions of Section 4.04 with
respect to each of the Supplements other than the Variable Funding Supplement
shall become effective on the Amendment Effective Date; provided, however, that
the effectiveness of such modifications to Section 4.04 shall be suspended and
the provisions of Section 4.04 as in effect prior to the Amendment Effective
Date shall be reinstated beginning on the later of June 30, 1997 and such date
as Micro's independent accountants shall have confirmed in writing that the
accounting treatment of the sale of the Receivables under generally accepted
accounting principles ("GAAP") shall not be changed by such suspension and
reinstatement (any such adverse change, an "Adverse Balance Sheet Event").
Micro agrees to use its best efforts to obtain from its independent accountants
on or before the 10th Business Day immediately preceding June 30, 1997 either
(i) such confirmation or (ii) a written statement that such confirmation cannot
be made, identifying the pronouncements or other applicable accounting
standards that formed the basis of such conclusion and shall promptly furnish a
copy of any such document it receives to the Trustee and to each
Certificateholder.
Such suspension shall continue in effect
until and unless such provisions are further amended; provided however, if, on
or prior to July 1, 1998, (x) there shall be in effect a published
interpretation or similar determination by the SEC that has the effect of an
Adverse Balance Sheet Event (which would for this purpose include any written
communication with respect to FASB 125 from the SEC to Micro with respect to a
potential SEC enforcement action should Micro not restate its balance sheets)
and (y) Micro shall receive written advice from its independent accountants
that, based upon its review of the SEC publication or determination described
in (x) above, if the suspension of the modifications to Section 4.04 provided
in this Amendment No. 2 were revoked and such modifications were in effect,
there would be no on-going Adverse Balance Sheet Event, then the suspension of
such modification shall be revoked upon notice by Micro to the Trustee and the
Certificateholders of such circumstances, such notice to be accompanied by a
copy of such written advice from Micro's independent accountants identifying
the pronouncements, including such SEC publication or determination, or other
applicable accounting statements that formed the basis of such conclusion.
Notwithstanding the above sentence, if the publication or determination
referred to in (x) above is based upon either (a) modifications to FAS 125 that
occur subsequent to June 30, 1997 or (b) other accounting pronouncements that
are adopted subsequent to
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<PAGE> 6
June 30, 1997, then no such revocation of the suspension of the modification
shall occur.
Prior to this amendment, subparagraphs (h),
(k), (l), (m) and (n) of such Section have contained an exception as to
allocation and payment after the Amortization Period Commencement Date that
operates to characterize certain amounts as Principal and direct the payment of
such amounts to the Class A Certificates until such Certificates have received
full payment of principal. The substance of this portion of Amendment No. 2 is
to revise such provisions so that these amounts will not be paid as Principal
on the Class A Certificates, but will be retained in a new account, the "Class
B Certificate Collection Account", which will be maintained until the
respective Class A Certificates have received full payment of principal. On
each Settlement Date until such time, amounts on deposit in the Class B
Certificate Collection Account will be applied to (1) the Class A Default
Deficiency Amount and (2) the reimbursement of Class A Charge-Offs under
subparagraphs (i) and (j), respectively, of Section 4.04, to the extent that
such Deficiencies or Charge-Offs exist. After the Class A Certificates have
been fully paid, all amounts on deposit in the Class B Certificate Collection
Account shall be released and applied to the other purposes described in
Section 4.04.
The revisions to Section 4.04 for each of
such Supplements are contained in Exhibit A attached hereto.
F. Annex X
Subparagraph (iv) of the definition of
"Eligible Receivable" shall be amended to be as follows:
(iv) which does not constitute an obligation of
the United States, or any state or any city or other
political subdivision thereof, or any agency,
instrumentality or subdivision of any of the
foregoing;
A new definition shall be inserted as
follows:
"Suspension Event" shall mean that at the close of business on the date of
determination either of the following conditions shall exist:
a. the Adjusted Eligible Principal Receivables
shall be less than the Minimum Adjusted
Eligible Principal Receivables; or
b. The Transferor Eligible Amount shall be less
than the Transferor Minimum Amount.
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<PAGE> 7
G. Miscellaneous
On and after the Amendment Effective Date,
the Servicing Fee shall be payable to Micro. Ingram and Micro may allocate the
Servicing Fee for periods prior to the Reorganization Date as they shall agree.
III. Amendments to the Purchase Agreement. The Purchase
Agreement shall be amended as follows:
A. Assumption and Release of Duties
From and after the Amendment Effective Date
Micro will assume all of the duties and obligations of Ingram under the
Purchase Agreement with respect to Receivables delivered from and after the
Amendment Effective Date. Ingram shall continue to perform its duties and
obligations with respect to Receivables delivered prior to the Amendment
Effective Date until the Ingram Release Date which shall be the later to occur
of (i) the date on which the Trustee provides notification to Ingram and
Entertainment that it no longer holds any interest in Receivables created by
Entertainment or Ingram (the "Entertainment Notification Date") and (ii) the
Reorganization Date. After the Ingram Release Date, Ingram shall be released
from all of its duties and obligations under or in connection with the Purchase
Agreement except as expressly provided herein.
B. Conveyance of Receivables
It is agreed that from and after the
Amendment Effective Date, Micro will become the Seller under the Purchase
Agreement and that Micro will not own or have any right to convey Receivables
created by either Ingram or Entertainment. Therefore, from and after the
Amendment Effective Date, the Purchase Agreement will relate to Receivables
created by Micro only. As earlier indicated, Micro shall not have an
obligation to sell CMD Receivables under the Purchase Agreement.
C. Continuing Obligations of Ingram
It is agreed that Ingram shall not be
released from any of its duties and obligations with respect to any Receivables
sold pursuant to the Purchase Agreement prior to the Amendment Effective Date.
Further, the obligation of Ingram under Section 9.13 of the Purchase Agreement
shall remain in effect after the Ingram Release Date. All other duties and
obligations of Ingram under the Purchase Agreement shall terminate on the
Ingram Release Date.
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<PAGE> 8
D. Security Interests
Micro shall take all actions necessary to
create in favor of the Buyer the security interest contemplated by Section
2.1(f) of the Purchase Agreement in all Receivables transferred on and after
the Amendment Effective Date. The Buyer and the Trustee shall cooperate with
Ingram to release any security interest held by them in receivables created by
Ingram to the extent such receivables were created after the Amendment
Effective Date.
E. Term and Termination
Section 8.1 of the Purchase Agreement is
revised so that the existing clause (v) shall become clause (vi) and a new
clause (v) shall be inserted to be as follows:
(v) an officer of the Seller receives notice or
becomes aware that notice of a lien has been filed by
the Pension Benefit Guaranty Corporation against the
Seller, the Transferor or the Trust under Section 412
of the Code or Section 302(f) of ERISA for a failure
to make a required installment or other payment to a
plan to which Section 412(n) of the Code or Section
302(f) of ERISA applies;
F. Miscellaneous
To the extent that any explicit provision of
the Purchase Agreement shall be inconsistent with the intent of the shifting of
duties and obligations addressed in this Section III, such provision shall be
interpreted to apply in a manner consistent with the intention of the shift of
such duties and obligations from Ingram to Micro.
IV. Amendments to the Micro Purchase Agreement. The
Micro Purchase Agreement shall be amended as follows:
From and after the Amendment Effective Date, Micro shall have
no obligation to sell and Ingram shall have no obligation to buy any
receivables under the Micro Purchase Agreement. During the period commencing
on the Amendment Effective Date and ending on the date the Trustee provides
notification to Ingram and Micro that it no longer holds any interest in
Receivables created by Micro prior to the Amendment Effective Date (the "Micro
Notification Date"), both Micro and Ingram shall continue to perform all of
their duties and obligations with respect to Receivables sold prior to the
Amendment Effective Date. After the Micro Notification Date, neither Micro nor
Ingram shall have any continuing duties under the Micro Purchase Agreement and
such agreement shall terminate for all purposes.
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<PAGE> 9
V. Amendments to the Commtron Purchase Agreement. The
Commtron Purchase Agreement shall be amended as follows:
From and after the Amendment Effective Date, Entertainment
shall have no obligation to sell and neither Ingram nor Micro shall have any
obligation to buy any receivables under the Commtron Purchase Agreement.
During the period commencing on the Amendment Effective Date and ending on the
Entertainment Notification Date, both Entertainment and Ingram shall continue
to perform all of their duties and obligations with respect to Receivables sold
prior to the Amendment Effective Date. After the Entertainment Notification
Date, neither Entertainment nor Ingram shall have any continuing duties under
the Entertainment Purchase Agreement and such agreement shall terminate for all
purposes.
VI. Amendments to the Micro Subservicing Agreement. The
Micro Subservicing Agreement shall be amended as follows:
Micro shall continue to perform all of its duties and
obligations under the Micro Subservicing Agreement until the Micro Notification
Date at which time the Micro Subservicing Agreement shall terminate and Micro
shall have no continuing duties or obligations thereunder.
VII. Amendments to the Commtron Subservicing Agreement.
The Commtron Subservicing Agreement shall be amended as follows:
Entertainment shall continue to perform all of its duties and
obligations under the Commtron Subservicing Agreement until the Entertainment
Notification Date at which time the Commtron Subservicing Agreement shall
terminate and Entertainment shall have no continuing duties or obligations
thereunder.
VIII. Amendments to the LOC Agreement. The LOC Agreement
shall be amended as follows:
A. Assumption and Release of Duties
From and after the Reorganization Date, Micro
shall become the Servicer under the Pooling and Servicing Agreement and shall
assume all of the duties and obligations of Ingram in its capacity as Servicer
under the LOC Agreement, except that Ingram shall have the continuing
responsibilities provided for under Section 5.03(b) of the LOC Agreement.
Micro hereby makes the representations and
warranties contained in: (i) Section 3.03, as of the Effective Date, and (ii)
Section 3.04 as of the Reorganization Date, in each case, substituting Micro
for Ingram in each of such provisions. Micro assumes all of the duties and
obligations of Ingram under the LOC Agreement in addition to those in its
capacity as Servicer as
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<PAGE> 10
of the Reorganization Date and as of such date Ingram shall be released from
all of such duties and obligations.
B. Extension of Term
By execution of this Amendment No. 2, each of
the LOC Issuers agrees that the LOC Commitment and its respective Percentage of
the LOC Commitment is hereby extended until December 31, 1999.
IX. Amendments to the Liquidity Agreement. The Liquidity
Agreement shall be amended as follows:
A. Assumption and Release of Duties
From and after the Reorganization Date, Micro
shall become the Servicer under the Pooling and Servicing Agreement and shall
assume all of the duties of Ingram in its capacity as Servicer in connection
with the Liquidity Agreement and Ingram shall be released from all such duties
and obligations except as otherwise provided in this Amendment No. 2.
Further, in connection with the changes
effected by this Amendment No. 2, Micro will assume the duties of Ingram under
the Purchase Agreement and Micro will acquire all of the outstanding capital
stock of Funding. It is therefore agreed that from and after the
Reorganization Date, Micro shall assume all of the duties and obligations of
Ingram in connection with the Liquidity Agreement that do not relate to Ingram
in its role of servicer and that as of such date Ingram shall be released from
all of such duties and obligations.
B. Covenants of Micro
Micro hereby makes the covenants contained in
Sections 7.02(a), (b), (c), (d), (e) and (f) of the Liquidity Agreement,
substituting Micro for Ingram in each of such provisions. The Financial
Covenants contained in Section 7.02(g) shall be amended and become effective
from and after the date on which Micro acquires Funding from Ingram (the
"Acquisition Date") to be as follows:
Section 7.02(g) Financial Covenants. Micro will not permit:
(i) its consolidated current ratio at the end of
any Fiscal Period to be less than 1.0:1.0;
(ii) the ratio of (i) Consolidated EBITDA for any
period of four consecutive Fiscal Periods to
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<PAGE> 11
(ii) Consolidated Interest Charges for such
period to be less than 3.5 to 1.0;
(iii) the ratio of (i) the average daily balances
of Consolidated Funded Debt during any Fiscal
Period to (ii) Consolidated EBITDA for the
period of four Fiscal Periods ending on the
last day of such Fiscal Period to exceed 3.5
to 1.0;
(iv) the Consolidated Tangible Net Worth as at the
end of any Fiscal Period to be less than the
sum of (i) the greater of (A) $500,000,000
and (B) an amount equal to 90% of
Consolidated Tangible Net Worth as at the end
of the Fiscal Year ending nearest to December
31, 1996, plus (ii) as of the end of each
Fiscal Year commencing with the Fiscal Year
ending closest to December 31, 1997, 67% of
Consolidated Net Income (without taking into
account any losses incurred in any Fiscal
Year) since the beginning of the Fiscal Year
which began closest to December 31, 1996; and
(v) except for dividends paid, or redemptions
made, in any Fiscal Year that do not exceed
fifty percent (50%) of Consolidated Net
Income for the immediately preceding Fiscal
Year, Micro will not declare or pay any
dividends (in cash, property or obligations)
or any other payments or distributions on
account of, or set apart money for a sinking
or analogous fund for, or purchase, redeem,
retire or otherwise acquire for value any of
its shares of capital stock now or hereafter
outstanding or any warrants, options or other
rights to acquire the same; return any
capital to its stockholders as such; or make
any distribution of assets to its
stockholders as such; provided, however, that
Micro may redeem, purchase or acquire any of
its capital stock (i) issued to employees
pursuant to any Plan or other contract or
arrangement relating to employment upon the
termination of employment or other events or
(ii) in a transaction contemplated by the
Transition Agreements.
Capitalized terms contained in this Section
7.02(g) and not otherwise defined herein shall have the respective meanings
ascribed to such terms in that certain Credit Agreement in the amount of
$1,000,000,000 among Micro, Ingram European Coordination Center N.V., Ingram
Micro Singapore PTE LTD., Ingram
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<PAGE> 12
Micro Inc. (Canada) and certain financial institutions as named therein or any
successor agreement thereto (the "Credit Agreement").
C. Miscellaneous
Micro shall be substituted for Ingram in
Section 8.01(f) and the release of Ingram from responsibilities as provided in
this Amendment No. 2 shall not constitute an Event of Default under such
provision.
D. Extension of Term
By execution of this Amendment No. 2, each of
the Liquidity Agent and the Lead Managers agrees that the Liquidity Commitment
and its Percentage of the Liquidity Commitment is hereby extended until
December 31, 1999.
X. Notices. The notice provisions of each of the
documents being amended are hereby revised such that all notices previously
directed to Ingram, the Transferor, or Servicer shall be directed to Ingram
Micro, Inc., 1600 E. St. Andrew Place, Santa Ana, California 92705, Attn:
Treasurer, with a copy to Ingram Micro Inc., 1600 E. St. Andrew Place, Santa
Ana, California 92705, Attn: General Counsel.
XI. Collateral Matters. The parties to this Amendment
No. 2 understand that in connection with the changes effected by this Amendment
No. 2, on or about the Reorganization Date Micro will acquire all of the
outstanding capital stock of Funding, and that Micro will acquire each of the
Subordinated Note, dated February 10, 1993 issued by Funding and the Revolving
Note dated as of February 10, 1993 issued by Funding and the right to all
payments made under each of such notes. For purposes of Section 7.01(h)(iv) of
the Liquidity Agreement and to the extent otherwise required by any of the
documents being amended by this Amendment No. 2 or by any other document or
agreement, by execution of this Amendment No. 2 each of the undersigned consent
to such transfers.
It is further understood and agreed that
prior to the Reorganization Date, Micro's parent, Ingram Micro Holdings Inc.,
and Micro will each be merged into New Micro and, as a result thereof, New
Micro shall succeed to all of the rights and obligations of Micro under each of
the Agreements amended by this Amendment No. 2.
XII. Consent to Amendments. Each party hereto hereby
consents to each amendment to each Agreement provided for in this Amendment No.
2.
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<PAGE> 13
XIII. Ratification of Agreements. As amended by this
Amendment No. 2, each Agreement is in all respects ratified and confirmed. To
the extent of any conflict or inconsistency between the Agreements and this
Amendment No. 2, it is agreed that the provisions of this Amendment No. 2 shall
control.
XIV. Counterparts. This Amendment No. 2 may be executed
in any number of counterparts, which may include facsimile counterparts, each
of which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
XV. Governing Law. THIS AMENDMENT NO. 2 SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
XVI. Confirmation of Ratings. This Amendment No. 2 shall
not become effective unless and until the Trustee shall have received written
confirmation from each Rating Agency that the effectiveness hereof will not
result in either the reduction or withdrawal of the ratings currently assigned
by such Rating Agency to both the Commercial Paper and the Class A Certificates
of each of the Series 1993-1, Series 1993-2, Series 1994-1, Series 1994-2 and
Series 1994-3.
XVII. The Trustee. The Trustee shall not be responsible
in any manner whatsoever for or in respect of the validity or sufficiency of
this Amendment No. 2 or for or in respect of the recitals contained herein, all
of which recitals are made solely by Funding, Ingram and Micro.
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<PAGE> 14
IN WITNESS WHEREOF, each of the parties to the Agreements has
caused this Amendment No. 2 to be executed by its duly authorized officer as of
the date set forth above and, as applicable, consents to each of the changes
effected thereby.
INGRAM FUNDING INC.
By:
-------------------------------
Name: Robert W. Mitchell
Title: Asst. Treasurer
INGRAM INDUSTRIES INC.
By:
-------------------------------
Name: Robert W. Mitchell
Title: V.P. and Treasurer
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<PAGE> 15
THE CHASE MANHATTAN BANK, as Trustee
By:
--------------------------------
Name:
Title:
INGRAM MICRO INC.
By:
--------------------------------
Name: Robert W. Mitchell
Title: Asst. Treasurer
INGRAM ENTERTAINMENT INC.,
as successor to COMMTRON CORP.
By:
--------------------------------
Title: Vice Chairman and
Treasurer
DISTRIBUTION FUNDING CORPORATION
By:
--------------------------------
Name:
Title: Vice President
THE CHASE MANHATTAN BANK, as the Liquidity
Agent and as a Bank
By:
--------------------------------
Name:
Title: Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.
By:
--------------------------------
Name:
Title: Senior Vice President
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<PAGE> 16
THE BANK OF NOVA SCOTIA
By:
--------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
Atlanta Agency
By:
--------------------------------
Name:
Title:
The undersigned Certificateholders acknowledge and consent to
all of the foregoing amendments by execution below:
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By:
--------------------------------
Name:
Title:
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
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<PAGE> 17
PACIFIC CORINTHIAN LIFE INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
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<PAGE> 18
Exhibit A
Each of the Series 1993-1 Supplement, the Series 1993-2
Supplement, the Series 1994-1 Supplement, the Series 1994-2 Supplement and the
Series 1994-3 Supplement are hereby amended as follows (blanks in a Series
designation will be completed with the applicable Series designation for each
Supplement)
New subparagraphs 4.04(q), (r), (s) and (t) shall be added as
follows:
Section 4.04(q)
The Series Class B Certificate Collection Account. The
Trustee, for the benefit of the Certificateholders holding the Series _____
Certificates (the "Series _______ Certificateholders"), shall establish or
shall cause to be established and maintained with an Eligible Institution
(which may be the Trustee) in the name of the Trustee, on behalf of the Trust,
a segregated trust account (the "Series _____ Class B Certificate Collection
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series __________ Certificateholders.
The Series _____ Class B Certificate Collection Account shall be under the sole
dominion and control of the Trustee for the benefit of the Series ______
Certificateholders. If, at any time, the institution holding the Series _____
Class B Certificate Collection Account ceases to be an Eligible Institution,
the Trustee shall within 30 days of a Responsible Officer learning of such
event establish a new Series _____ Class B Certificate Collection Account
meeting the conditions specified above with an Eligible Institution, transfer
any cash and/or any investments to such new Series _____ Class B Certificate
Collection Account and from the date such new Series _____ Class B Certificate
Collection Account is established, it shall be the "Series _____ Class B
Certificate Collection Account". Neither the Transferor nor the Servicer, nor
any person or entity claiming by, through or under the Transferor or Servicer,
shall have any right, title or interest in, or any right to withdraw any amount
from, the Series _____ Class B Certificate Collection Account except to the
extent provided in the Agreement as modified by this Supplement.
(r) Administration of the Series Class B Certificate
Collection Account. Funds on deposit in the Series _____ Class B Certificate
Collection Account shall at the direction of the Servicer be invested by the
Trustee in Permitted Investments that will mature so that such funds will be
available prior to the Payment Date following such investment. Any funds on
deposit in the Series _____ Class B Certificate Collection Account to be so
invested shall be invested solely in Permitted Investments. Any request by the
Servicer to invest funds on deposit in the Series _____ Class B Certificate
Collection Account shall be in writing and shall be deemed a certification by
the Servicer to the Trustee that the requested investment is a Permitted
Investment which
<PAGE> 19
matures at or prior to the time required hereby. The Trustee shall maintain
possession of the negotiable instruments or securities, if any, evidencing the
Permitted Investments described in clause (a) of the definition thereof from
the time of purchase thereof until maturity. All interest and earnings (net of
losses and investment expenses) on funds on deposit in the Series _____ Class B
Certificate Collection Account ______ shall be paid by the Trustee to the
Transferor on each Payment Date.
(s) Identification of Series Class B Certificate
Collection Account. Schedule A, which is hereby incorporated into and made a
part of this Supplement, identifies the Series ___ Class B Certificate
Collection Account by setting forth the account number of such account, the
account designation of such account and the name and location of the
institution with which such account has been established.
(t) Application of Funds in the Series Class B
Certificate Collection Account. On each Payment Date funds available in the
Series _____ Class B Certificate Collection Account shall be applied for the
purposes provided in this Section 4.04; provided, however, if on any Payment
Date there shall be no Receivables held in the Trust, then any amounts held in
the Series ____ Class B Certificate Collection Account shall be applied (i)
first, to the payment of any amounts due on the Series ____ Class A
Certificates, and (ii) second, to the payment of any amounts due on the Series
____ Class B Certificates.
____________________
Section 4.04(h) of each Supplement shall be amended as
follows:
The last sentence of such subparagraph shall be deleted and
replaced with the following:
Notwithstanding the preceding sentence, from and after the
Amortization Period Commencement Date, all excess Series
_______Imputed Yield Collections shall first be allocated to
the payment of the unpaid Make-Whole Amount, if any, owing to
the Class A Certificateholders pursuant to Section 19 of the
Series ________ Supplement and, if sufficient funds have been
allocated to fully satisfy such unpaid Make-Whole Amount,
remaining excess Series ______ Imputed Yield Collections shall
be characterized as restricted funds ("Restricted Funds") in
respect of the Series _____ Certificates and deposited into
the Series _____ Class B Certificate Collection Account.
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<PAGE> 20
____________________
Section 4.04(i) of each Supplement shall be amended to be as
follows:
(i) Class A Certificate Defaults. On each Settlement
Date, after giving effect to the payments required pursuant to Sections
4.04(a), (b) and (c) (including any payments from Undistributed Class B
Interest and Subordinated Series _____ Principal Collections with respect
thereto), the Trustee, acting in accordance with instructions from the
Servicer, shall pay, (i) from available Series ______ Imputed Yield Collections
and, (ii) from and after the Amortization Period Commencement Date, from any
amounts on deposit in the Series _____ Class B Certificate Collection Account,
an amount equal to the excess, if any, of (i) the product of (x) the Defaulted
Amount for the preceding Settlement Period as determined on the preceding
Determination Date and (y) the average Class A Invested Percentage during such
preceding Settlement Period over (ii) the aggregate Class A Default Amounts for
each Business Day in the preceding Settlement Period (in each case, without
regard to the aggregate amount of Class A Charge-Offs outstanding from previous
days) the "Class A Default Deficiency Amount"), (i) to the Holder of the
Transferor Certificate, during the Non-Amortization Period, but only to the
extent of available Series ________ Imputed Yield Collections (and, if
required, from Undistributed Class B Interest and Subordinated Series ________
Principal Collections) and (ii) to the Principal Funding Account, during the
Amortization Period to the extent of available Series _______ Imputed Yield
Collections (and, if required, from Undistributed Class B Interest, and
Subordinated Series _______ Principal Collections and amounts available in the
Series _____ Class B Certificate Collection Account). If available Series
_______ Imputed Yield Collections are less than the Class A Default Deficiency
Amount, the Trustee, acting in accordance with instructions from the Servicer,
shall determine the aggregate amount paid to the Holder of the Transferor
Certificate during the preceding Settlement Period pursuant to Section 4.04(h)
and shall deem such payments to have been made in satisfaction of such Class A
Default Deficiency Amount, up to the amount thereof. Any amounts
recharacterized as payments of the Class A Default Deficiency Amount and any
amounts from the Series _____ Class B Certificate Collection Account applied
under this Section 4.04(i) shall be treated, for all purposes hereunder, as
payments in respect of Principal Receivables.
____________________
Section 4.04(j) of each Supplement shall be amended to be as
follows:
(j) Settlement Date Adjustment and Reimbursement of Class
A Charge-Offs. On each Settlement Date, the Trustee, acting
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<PAGE> 21
in accordance with instructions from the Servicer, shall reduce the aggregate
amount of Class A Charge-Offs, if any, and correspondingly increase the Class A
Invested Amount, to the extent of the excess, if any, of (i) the aggregate
Class A Default Amounts for each Business Day in the preceding Settlement
Period over (ii) the product of (x) the Defaulted Amount for the preceding
Settlement Period as determined on the preceding Determination Date and (y) the
average Class A Invested Percentage during such preceding Settlement Period.
On each Settlement Date, after giving effect to such reduction and to the
payments required pursuant to Sections 4.04(a), (b), (c) and (i) (including any
payments from Undistributed Class B Interest, Subordinated Series ________
Principal Collections with respect thereto and funds from the Series _____
Class B Certificate Collection Account), the Trustee, acting in accordance with
instructions from the Servicer, shall pay, (i) from available Series _________
Imputed Yield Collections and, (ii) from and after the Amortization Period
Commencement Date from any amounts on deposit in the Series _____ Class B
Certificate Collection Account, an amount equal to the sum of (x) the aggregate
amount of Class A Charge-Offs, if any, which have not theretofore been
reimbursed pursuant to Section 4.04(d) and this Section 4.04(j) and (y) the
excess of the amount determined in accordance with Section 4.04(i) over the
amount paid or characterized as having been paid with respect thereto pursuant
to the first and second sentences of Section 4.04(i) ("Unreimbursed Class A
Charge-Offs"), (i) to the Holder of the Transferor Certificate, during the
Non-Amortization Period, but only to the extent of available Series __________
Imputed Yield Collections (and, if required, from Undistributed Class B
Interest and Subordinated Series __________ Principal Collections), and (ii) to
the Principal Funding Account, during the Amortization Period to the extent of
Series ________ Imputed Yield Collections (and, if required, from Undistributed
Class B Interest, Subordinated Series _________ Principal Collections and funds
from the Series _____ Class B Certificate Collection Account), and the Class A
Invested Amount shall be increased by the amount so paid or deposited. Any
such amounts paid under this Section 4.04(j) shall be treated, for all purposes
hereunder, as payments in respect of Principal Receivables.
____________________
Section 4.04(k) of each Supplement shall be amended to be as
follows:
(k) Class B Certificate Defaults. On each Settlement
Date, after giving effect to the payments required pursuant to Sections
4.04(a), (b), (c), (i), (j), (e) and (f), the Trustee, acting in accordance
with instructions from the Servicer, shall pay, solely from available Series
______ Imputed Yield Collections, but if there shall then no longer be any
Class A Certificates outstanding and unpaid, then also from any amounts on
deposit in the Series _____ Class B Certificate Collection Account, an amount
-4-
<PAGE> 22
equal to the excess, if any, of (i) the product of (x) the Defaulted Amount for
the preceding Settlement Period as determined on the preceding Determination
Date and (y) the average Class B Invested Percentage during such preceding
Settlement Period over (ii) the aggregate Class B Default Amounts for each
Business Day in the preceding Settlement Period (in each case, without regard
to the aggregate amount of Class B Charge-Offs outstanding from previous days)
(the "Class B Default Deficiency Amount"), (i) to the Holder of the Transferor
Certificate, during the Non-Amortization Period, but only to the extent of
available Series ________ Imputed Yield Collections, and (ii) to the Principal
Funding Account, during the Amortization Period to the extent of available
Series ________ Imputed Yield Collections, but if there shall no longer be any
Class A Certificates outstanding and unpaid, then also from any amounts on
deposit in the Series _____ Class B Certificate Collection Account. If
available Series ________ Imputed Yield Collections are less than the Class B
Default Deficiency Amount, the Trustee, acting in accordance with instructions
from the Servicer, shall determine the aggregate amount paid to the Holder of
the Transferor Certificate during the preceding Settlement Period pursuant to
Section 4.04(h) and shall deem such payments to have been made in satisfaction
of such Class B Default Deficiency Amount, up to the amount thereof. Any
amounts recharacterized as payments of the Class B Default Deficiency Amount
shall be treated, for all purposes hereunder, as payments in respect of
Principal Receivables. Notwithstanding anything to the contrary in this
Section 4.04(k), from and after the Amortization Period Commencement Date,
until the Class A Invested Amount and all accrued interest thereon has been
paid to, or deposited for the benefit of, the Class A Certificateholders, no
allocation of available Series _________ Imputed Yield Collections to the Class
B Default Deficiency Amount shall be made under this Section 4.04(k).
____________________
Section 4.04(l) of each Supplement shall be amended to be as
follows:
(l) Settlement Date Adjustment and Reimbursement of Class
B Charge-Offs. On each Settlement Date, the Trustee, acting in accordance with
instructions from the Servicer, shall reduce the aggregate amount of Class B
Charge-Offs, if any, and correspondingly increase the Class B Invested Amount,
to the extent of the excess, if any, of (i) the aggregate Class B Default
Amounts for each Business Day in the preceding Settlement Period over (ii) the
product of (x) the Defaulted Amount for the preceding Settlement Period as
determined on the preceding Determination Date and (y) the average Class B
Invested Percentage during such preceding Settlement Period. On each
Settlement Date, after giving effect to such reduction and to the payments
required pursuant to Sections 4.04(a), (b), (c), (i), (j), (e), (f) and (k),
the
-5-
<PAGE> 23
Trustee, acting in accordance with instructions from the Servicer, shall pay,
solely from available Series _______ Imputed Yield Collections but if there
shall no longer be any Class A Certificates outstanding and unpaid, then also
from any amounts on deposit in the Series _____ Class B Certificate Collection
Account, an amount equal to the sum of (x) the aggregate amount of Class B
Charge-Offs, if any, which have not theretofore been reimbursed pursuant to
Section 4.04(g) and this Section 4.04(l) and (y) the excess, if any, of the
amount determined pursuant to the first sentence of Section 4.04(k) over the
amount paid or characterized as having been paid with respect thereto pursuant
to the first and second sentences of Section 4.04(k) ("Unreimbursed Class B
Charge-Offs"), (i) to the Holder of the Transferor Certificate, during the Non-
Amortization Period, but only to the extent of available Series _______ Imputed
Yield Collections, and (ii) to the Principal Funding Account, during the
Amortization Period to the extent of Series _________ Imputed Yield
Collections, but if there shall no longer be any Class A Certificates
outstanding and unpaid, then also from any amounts on deposit in the Series
_____ Class B Certificate Collection Account, and the Class B Invested Amount
shall be increased by the amount so paid or deposited. Any amounts paid under
this Section 4.04(l) shall be treated, for all purposes hereunder, as payments
in respect of Principal Receivables. Notwithstanding anything to the contrary
in this Section 4.04(l), from and after the Amortization Period Commencement
Date, until the Class A Invested Amount and all accrued interest thereon has
been paid to, or deposited for the benefit of, the Class A Certificateholders,
no allocation of available Series ________ Imputed Yield Collections to
Unreimbursed Class B Charge-Offs shall be made under this Section 4.04(l).
____________________
Section 4.04(m) of each Supplement shall be amended to be as
follows:
(m) Settlement Date Payments and Deposits of Excess
Series Imputed Yield Collections. On each Settlement Date, after giving
effect to the payments required pursuant to Sections 4.04(a), (b), (c), (i),
(j), (e), (f), (k) and (l), the Trustee, acting in accordance with instructions
from the Servicer, shall pay or deposit, as applicable, all remaining Series
_______ Imputed Yield Collections, and, if there shall no longer remain any
Class A Certificates outstanding and unpaid, then also all amounts remaining in
the Series _____ Class B Certificate Collection Account, (i) if the Transferor
Eligible Amount as of the end of the preceding Business Day is greater than or
equal to the Transferor Minimum Amount, to the Holder of the Transferor
Certificate and (ii) if the Transferor Eligible Amount as of the end of the
preceding Business Day is less than the Transferor Minimum Amount, first, to
the Transferor Account to the extent required to cause the Transferor Eligible
Amount to be not less than the Transferor
-6-
<PAGE> 24
Minimum Amount, and second, any remaining Series _________ Imputed Yield
Collection, to the Holder of the Transferor Certificate. Notwithstanding the
preceding sentence, from and after the Amortization Period Commencement Date
until there shall no longer be any Class A Certificates remaining outstanding
and unpaid, all excess Series _______ Imputed Yield Collections shall be
deposited into the Series _____ Class B Certificate Collection Account.
____________________
Section 4.04(n) of each Supplement shall be amended to be as
follows:
(n) Undistributed Series Imputed Yield
Collections. If, as of the end of any day on which Series _______ Imputed
Yield Collections are to be distributed pursuant to Sections 4.04(c), (d), (f),
(g), (h), (i), (j), (k), (l) or (m), such payments would cause the Transferor
Eligible Amount, after taking into account payments to the Transferor pursuant
to Section 4.03 and Sections 4.04(c), (d), (f), (g), (h), (i), (j), (k), (l)
and (m) and the increase in the Transferor Eligible Amount resulting from the
transfer of any new Receivables to the Trust as of such day, to be less than
the Transferor Minimum Amount (any such Series ______ Imputed Yield Collections
to the extent applied to reduce the Transferor Eligible Amount to the
Transferor Minimum Amount being referred to as "Distributed Series
Imputed Yield Collections"), then the Trustee, acting in accordance with
instructions from the Servicer, shall pay or deposit, as applicable, any Series
_________ Imputed Yield Collections allocated to the Holder of the Transferor
Certificate in excess of Distributed Series ________ Imputed Yield Collections
("Undistributed Series Imputed Yield Collections"), first, to the
Transferor Account to the extent required to cause the Transferor Eligible
Amount to be not less than the Transferor Minimum Amount, and second, any
remaining Series ________ Imputed Yield Collections to the Holder of the
Transferor Certificate. Notwithstanding the preceding sentence, from and after
the Amortization Period Commencement Date until there shall no longer be any
Class A Certificates remaining outstanding and unpaid, all Undistributed Series
_______ Imputed Yield Collections shall be deposited into the Series _____
Class B Certificate Collection Account.
-7-
<PAGE> 25
EXHIBIT B
"CMD" shall refer to the operations categorized as the
Consumer Markets Division from time to time on the internal records of Micro,
which operations generally include the marketing of products to certain
retailers engaged in mass marketing. It is understood and agreed that the
activities so categorized and the specific obligors included therein may change
from time to time in the good faith determination of Micro.
<PAGE> 1
EXHIBIT 10.35
REPURCHASE AGREEMENT
--------------------
This Repurchase Agreement, effective as of [ ] _____, 1996, is by and
among INGRAM MICRO INC., a Delaware corporation ("Ingram"), ___________________
("Stockholder") and NATIONSBANK OF TENNESSEE, N.A. ("Bank");
W I T N E S S E T H:
WHEREAS, Stockholder owns certain shares of the Class __ common stock
of Ingram ("the "Common Stock") as set forth on Exhibit A attached hereto
(collectively, the "Shares") which he acquired through one or more stock
purchase agreements (collectively, the "Stock Purchase Agreements") with Ingram;
WHEREAS, Stockholder desires to pledge the Shares to Bank as collateral
for repayment of a promissory note (the "Note") which evidences a loan from
Bank to Stockholder;
WHEREAS, the parties hereto desire to enter into this Agreement in
order to set forth the terms and conditions under which Ingram will consent to
Stockholder's pledge of the Shares and be required to purchase the Shares or
the Note;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Ingram hereby consents to Stockholder's pledge of the Shares to
Bank solely as security for payment of the Note, and any and all extensions,
renewals, modifications and increases thereof, pursuant to a Stock Pledge
Agreement of even date herewith which shall be in form acceptable to Ingram and
which may not be modified or amended without the consent of Ingram. Stockholder
and Bank each agree that the Shares may be sold pursuant to such pledge only in
conformity with the provisions of this Agreement.
2. In the event that Bank elects to exercise its right to
foreclose upon and dispose of the Shares in order to satisfy Stockholder's
obligations to Bank under the Note, or any extension, renewal or modification
thereof, Stockholder or Bank shall promptly notify Ingram thereof.
3.(a) Upon receipt of a notice delivered pursuant to Section 2,
provided that Stockholder would have the right under the Stock Purchase
Agreements to require Ingram to repurchase the Shares, but subject to the
exceptions hereinafter set forth, Bank shall be required to sell to Ingram, and
Ingram shall be required to purchase from Bank, the Shares at the price
calculated in accordance with the formula set forth in the Stock Purchase
Agreements.
(b) At Ingram's option, upon receipt of a notice pursuant to
Section 2 hereof, Ingram may elect, in lieu of purchasing the Shares, to
purchase the Note and the rights of Bank in the documents referred to in the
Note (the "Loan Documents") by payment to Bank of the outstanding principal
and all accrued interest and late charges on the Note through the date of
purchase.
(c) In the event that (i) the purchase price for the Shares would
be less than the outstanding principal and all accrued interest and late
charges on the Note, (ii) Stockholder would not have the right under the Stock
Purchase Agreement to require Ingram to repurchase the Shares and Ingram does
not otherwise elect to do so, of (iii) Stockholder is not a resident of the
United States of America, then, provided Bank has not
<PAGE> 2
released its pledge on any of the Shares initially pledged as collateral for
repayment of the Note except in conformance with the provisions of that certain
Addendum to Promissory Note and to Pledge Agreement between Stockholder and
Bank of even date herewith, Bank may elect, at its option, to require Ingram to
purchase the Note and the rights of Bank in the Loan Documents at a purchase
price equal to the outstanding principal and all accrued interest and late
charges on the Note through the date of purchase, provided that the outstanding
principal included therein shall not exceed $7.00 per Share.
(d) Any purchase pursuant to paragraphs (a), (b) or (c) above shall
take place on a date (the "Closing Date") specified in writing by Ingram to
Stockholder and Bank, which shall be not less than 10 nor more than 20 days
from the date Ingram receives the notice pursuant to Section 2 hereof. The
purchase price for the Shares or the Note and Loan Documents shall be payable
by cashier's check, wire transfer or other readily available funds on the
Closing Date. Concurrently with such payment, Bank shall deliver the
certificates representing the Shares, duly endorsed for transfer, or, as the
case may be, the Note and the Loan Documents, assigned without recourse, to
Ingram.
(e) Notwithstanding any other provision in this Agreement, except in
accordance with the provisions of Section 3(c)(iii) hereof, Ingram shall not be
required to purchase either the Shares or the Note and the Loan Documents at
any time that either (i) the Shares are included in an effective registration
statement filed with the United States Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
(ii) the Shares are eligible for sale pursuant to Rule 144 under the Securities
Act or any successor rule which would permit sales of the Shares in the public
market without registration.
(f) Stockholder stipulates and agrees that any disposition of the
Shares by Bank in accordance with this Agreement will be a "commercially
reasonable" disposition within the meaning of T.C.A. Section 47-9-504.
4. In the event that Stockholder satisfies the obligations to Bank
which are secured by the Shares or Bank otherwise elects to rescind its
election to foreclose upon and dispose of the Shares at any time prior to the
closing of a purchase by Ingram pursuant to Section 3 hereof, Ingram shall not
be either obligated or permitted to complete such purchase unless otherwise
permitted by the Stock Purchase Agreements; provided, however, that, upon a
subsequent election by Bank to exercise its rights to foreclose upon and
dispose of the Shares in order to satisfy Stockholder's obligations to Bank
under the Note, or any extension, renewal or modification thereof, the rights
and obligations of the parties hereto again shall be subject to the provisions
of Sections 2 and 3 hereof.
5. The parties hereto acknowledge that, in the event Ingram
purchases the Shares pursuant to Section 3(a) hereof, Ingram shall be liable to
pay only the purchase price for the Shares as set forth in such paragraph and
Bank shall look solely to Stockholder for the satisfaction of debt to the
extent that such debt exceeds the purchase price for the Shares. To the extent
that the purchase price exceeds such debt, the difference shall be payable
solely to Stockholder. In the event that Ingram defaults in its obligations
under Section 3 of this Agreement, then Bank shall have all rights and remedies
otherwise available to it, legal or equitable, to enforce this Agreement
against Ingram, including one or more actions for specific performance or
damages or both, the right to foreclose on the Shares, purchase the Shares
itself or sell the Shares to a third party in mitigation of its damages.
2
<PAGE> 3
6. Nothing in this Agreement shall prevent Ingram from exercising
its rights under the Stock Purchase Agreements to purchase the Shares at the
times and for the prices set forth therein. In the event of any such exercise by
Ingram at a time when Bank holds a pledge on the Shares as security for payment
of the Note, Ingram shall deliver the purchase price for the Shares to Bank
which shall apply the amount received first to payment of outstanding principal
and accrued interest and late charges on the Note and deliver the balance, if
any, to Stockholder. Concurrently with its receipt of such payment, Bank shall
deliver the certificates representing the Shares, duly endorsed for transfer,
to Ingram. Notwithstanding the foregoing, if the purchase price for the Shares
would be less than the outstanding principal and all accrued interest and late
charges on the Note, Bank may, by notice delivered to Ingram within 10 days of
its receipt of Ingram's election, require Ingram, in lieu of purchasing the
Shares, to purchase the Note and the rights of Bank in the Loan Documents at a
purchase price calculated in accordance with the provisions of Section 3(c) of
this Agreement. In any such event, the purchase shall be completed in
accordance with the provisions of Section 3(d) hereof and Ingram shall be able
thereafter to complete the purchase of the Shares if it so elects.
7. In order to assist the parties with the administration of this
Agreement, Ingram's Treasurer shall deliver to Bank, within 45 days of the end
of each calendar quarter, a statement certifying the Fair Market value per
share of Common Stock as determined in accordance with the provisions of the
Stock Purchase Agreements.
8. All notices required or otherwise given hereunder shall be made
in writing and personally delivered or sent by certified mail, return receipt
requested, addressed as follows:
If to Ingram:
Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
Attention: President
with a copy to:
Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, CA 92705
Attention: General Counsel
If to Stockholder:
----------------------------
----------------------------
----------------------------
If to Bank:
NationsBank of Tennessee, N.A.
One NationsBank Plaza
Nashville, TN 37239
Attention: Ronnie L. Boling, Vice President
9. This Agreement may not be altered, amended or terminated except
in writing and executed by all parties hereto.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
INGRAM MICRO INC.
By:
--------------------------------
Title:
-----------------------------
STOCKHOLDER:
------------------------------------
NATIONSBANK OF TENNESSEE, N.A.
By:
--------------------------------
Title:
-----------------------------
4
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 (333-08453) of our report dated February 29,
1996, except as to Note 12 which is dated as of September 9, 1996 and Note 2
which is dated as of October 29, 1996, relating to the financial statements of
Ingram Micro Inc., which appears in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedules for the three
years ended December 30, 1995 listed under Item 16(b) of this Registration
Statement when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in such report also
included these schedules. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
Price Waterhouse LLP
Nashville, Tennessee
October 29, 1996
<PAGE> 1
EXHIBIT 99.03
CONSENT
The undersigned, Don H. Davis, Jr., hereby consents, pursuant to Rule 438 under
the Securities Act of 1933, as amended, to being named in the Registration
Statement on Form S-1 (File No. 333-08453) (the "Registration Statement") of
Ingram Micro Inc. (the "Registrant") as a person about to become a director of
the Registrant, and to the filing of this Consent as an exhibit to the
Registration Statement.
--------------------------------------
Don H. Davis, Jr.
October 28, 1996
