SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 7, 1998
INTELLIGENT ELECTRONICS, INC.
-----------------------------
(Exact name of issuer as specified in charter)
PENNSYLVANIA 0-15991 23-2208404
(State or Other Jurisdiction Commission (I.R.S. Employer
of Incorporation or file number Identification
Organization) Number)
411 Eagleview Boulevard, Exton, Pennsylvania 19341
(Address of principal executive offices)
(610) 458-5500
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
- ------ ------------
On January 7, 1998, Intelligent Electronics, Inc. (the "Company")
and Ingram Micro Inc. ("Ingram") reached an agreement dated as of
November 21, 1997 whereby the material outstanding issues relating to the
sale of the Company's Reseller Network to Ingram on July 18, 1997 have been
settled.
As a part of the agreement, which became effective as of January 7,
1998, the Company and Ingram have agreed to the following:
- The Amended and Restated Volume Purchase Agreement ("VPA") has
been terminated and the Company and Ingram have entered into a standard
primary source supply agreement to replace the VPA. The supply agreement
has no minimum purchase requirements or other volume purchase commitments
and can be terminated with 30 days written notice by either party.
- The escrow account in the amount of $5 million plus accrued
interest, which was established to secure the Company's obligations under
the VPA, was released to Ingram.
- The escrow account in the amount of $2.5 million plus accrued
interest, which was established pending resolution of certain issues
between the Company and Ingram relating to revenues, was released to the
Company.
- All Closing Balance Sheet issues and purchase price adjustments
have been resolved. With respect to the escrow account in the amount of
$10.0 million, which was established for final settlement of any purchase
price adjustments and indemnity claims, Ingram received approximately $3.6
million plus accrued interest thereon, the Company received approximately
$4.4 million plus accrued interest thereon and $2.0 million will remain in
escrow to cover indemnity claims.
- The $7.5 million letter of credit used to secure the Company's
obligations under the VPA has been terminated and replaced by a $5.0
million letter of credit to cover any indemnity claims. The letter of
credit will expire no later than July 18, 2000.
On January 16, 1998, Ingram filed an indemnity claim relating to a
potential breach of covenants, representations and warranties. The Company
and Ingram are investigating the facts regarding this claim. Currently,
the Company believes there is no basis for indemnification. However, the
$2.0 million discussed above will remain in escrow until this claim is
resolved.
Item 7. Financial Statements and Exhibits
- ------ ---------------------------------
(c) Exhibits
--------
10 Agreement dated as of November 21, 1997 between Intelligent
Electronics, Inc., XLSource, Inc. and Ingram Micro Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELLIGENT ELECTRONICS, INC.
Date: January 23, 1998 By: /s/ Eugene E. Marinelli, Jr.
-----------------------------
Eugene E. Marinelli, Jr.
Vice President and
Chief Financial Officer
Exhibit 10
AGREEMENT
AGREEMENT dated as of November 21, 1997 among Ingram Micro Inc.
("Ingram"), Intelligent Electronics, Inc. ("IE") and XLSource, Inc.
("XLS").
WHEREAS, reference is made to the following agreements:
(i) Supplemental Escrow Agreement (the "Supplemental Escrow")
dated as of July 18, 1997 among Ingram, IE and The First National Bank
of Chicago, as Escrow Agent (the "Escrow Agent");
(ii) Stock Purchase Agreement dated as of April 29, 1997, as
amended as of July 2, 1997 (the "Stock Purchase Agreement") among
Ingram, IE and XLS;
(iii) XLSource Escrow Agreement (the "XLS Escrow") dated as of
July 18, 1997 among Ingram, XLS, IE and the Escrow Agent;
(iv) Escrow Agreement (the "General Escrow") dated as of July
18, 1997 among Ingram, IE and the Escrow Agent;
(v) Amended and Restated Volume Purchase Agreement (the
"VPA") dated as of July 18, 1997 by and between XLS and Ingram.
NOW, THEREFORE, the parties hereto agree as follows:
1. On the Effective Date (defined below), Ingram relinquishes and
waives any claim it has, had or may have for a reduction in the purchase
price of Reseller Network arising from the operation of its business in the
ordinary course from April 29, 1997 to the Closing Date as it relates to
the sale of inventory. On the Effective Date, the parties hereto will
cause the Escrow Agent to release to IE all amounts held in escrow
(including all accrued interest) pursuant to the Supplemental Escrow, which
will then terminate pursuant to Section 6 thereof. Ingram hereby
acknowledges that all of its claims with respect to the Disputed Matters
(as defined in the Supplemental Escrow) have been satisfied in full and
that such matters shall not be considered matters subject to or providing
the basis for indemnification pursuant to Section 13.02 of the Stock
Purchase Agreement.
2. On the Effective Date, the parties will cause the Escrow Agent
to release to Ingram the entire amount ($5 million plus accrued interest)
held pursuant to the XLS Escrow. The XLS Escrow will then terminate
pursuant to its terms. The $5 million portion of such payment will be
treated by the parties for all relevant tax purposes as an adjustment to
the Modified Aggregate Deemed Sales Price, as defined in Section 10.03(a)
of the Stock Purchase Agreement. On the Effective Date, and
notwithstanding anything to the contrary contained in the General Escrow,
the parties will cause the Escrow Agent to release to IE from the $10
million initially deposited in the General Escrow an amount equal to
$4,354,947 plus accrued interest on said $4,354,947. It is acknowledged by
all parties that (i) there will remain in the General Escrow $2 million
(plus accrued interest on said $2 million) to secure the obligations
specified in Section 10.07 or Section 13.02 thereof and (ii) such amount
shall be held and disbursed as provided in Sections 4(c) and 4(d) thereof
with the Holdback Period (as defined therein) terminating on January 18,
1998. On the Effective Date, the $7.5 million letter of credit obtained by
IE for the benefit of Ingram will be replaced by a $5 million letter of
credit in substantially the same form as said $7.5 million letter of credit
(except that such replacement letter of credit will not provide for
termination upon termination of the VPA), which will be held by Ingram in
accordance with Section 7.04 of the Stock Purchase Agreement and,
concurrently with the receipt of said replacement $5 million letter of
credit, Ingram shall deliver to IE the original $7.5 million letter of
credit free and clear of any liens or encumbrances of any nature.
3. On the Effective Date, the VPA will terminate without further
obligation or liability on the part of Ingram, IE or XLS with each party
thereto relinquishing and waiving any claim it has, had or may have
thereunder. In particular, all parties acknowledge they have no payments
due them from or continuing obligation of any nature pursuant to the
"Purchase Commitment" or "Service Level" portions of the VPA for the period
beginning July 19, 1997. Pursuant to Section 25 of the VPA, Section 21 of
the VPA is hereby modified to provide that (in addition to the other
termination events specified therein) the VPA will terminate automatically
on the Effective Date.
4. Ingram and XLS will use their best efforts to enter into a
"standard" primary source agreement as promptly as practicable following
the date hereof having terms and conditions to be mutually agreed. It is
acknowledged that (i) XLS will be responsible for its own second sourcing
(purchasing) and third party sourcing (purchasing) and will absorb 100% of
the cost of those functions from July 18, 1997, except to the extent Ingram
has previously made payments to IE in respect of any such services, which
payments shall be retained by IE, and (ii) Ingram will provide to XLS as
part of the primary source agreement vendor level pricing equal to that
provided for in the VPA. The effective date of such primary source
agreement is hereinafter referred to as the "Effective Date".
5. Ingram and IE agree for purposes of Section 2.05 of the Stock
Purchase Agreement, that Final Net Liabilities Assumed exceed Base Net
Liabilities Assumed by an amount of $3,645,053 and agree to cause the
Escrow Agent on the Effective Date to release to Ingram from the balance
deposited in the General Escrow that amount (together with interest accrued
thereon). Ingram hereby acknowledges that all of its claims with respect
to the items set forth on Annex A as such items were reflected on the
Closing Balance Sheet have been satisfied in full and that such matters
shall not be considered matters subject to or providing the basis for
indemnification pursuant to Section 13.02 of the Stock Purchase Agreement.
6. Notwithstanding the provisions of paragraph 5 above, Ingram and
IE agree that Ingram will be indemnified by IE for any liability or loss in
excess of $200,000 incurred by Ingram in connection with any claim made by,
or any payment made to, Logistics Management Associate ("LMA") based on
matters arising from LMA's relationship prior to the Effective Date with
Reseller Network, and in that regard, Section 13.02(b) of the Stock
Purchase Agreement shall be deemed amended to add a new paragraph (iii)
which shall read as follows: (iii) solely to the extent such Damages exceed
$200,000, any claim made by Logistics Management Associates based on
matters arising from Logistic Management Associate's relationship prior to
the Effective Date with Reseller Network. Except as specifically provided
above, this indemnity is in addition to, independent of and does not modify
in any way, any indemnification by IE in accordance with Article 13 of the
Stock Purchase Agreement.
7. Terms used herein but not defined shall have the meanings set
forth in the Stock Purchase Agreement.
8. This Agreement shall be construed in accordance with and
governed by the internal laws of the State of New York. This Agreement may
be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INGRAM MICRO INC.
By: /s/ Michael J. Grainger
-------------------------------------
Michael J. Grainger
Executive VP & CFO, Worldwide
INTELLIGENT ELECTRONICS, INC.
By: /s/ Gene Marinelli
-------------------------------------
Gene Marinelli
Chief Financial Officer
XLSOURCE, INC.
By: /s/ Gene Marinelli
-------------------------------------
Gene Marinelli
Chief Financial Officer
<PAGE>
<PAGE>
ANNEX A
Accounts Receivables (Customer and Vendors) Reserve Items
Inventory and Inventory Reserve Items
Claims of: Microwarehouse
PC Connection
Logistics Management Associates
Norell Temporary Services
CMP
Accounts Payable Debit Items
Accrued Commissions to Resellers
Sales Returns Reserve
But without prejudice to Ingram's indemnification rights under Section 6
of this Agreement.
