INACOM CORP, 10-K, 1999-03-19

INACOM CORP
10-K, 1999-03-19
PATENT OWNERS & LESSORS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

(Mark one)

/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 26, 1998 or

/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

COMMISSION FILE NO. 0-16114
INACOM CORP.
(Exact name of registrant as specified in its charter)

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<S> <C>
DELAWARE 47-0681813
(State or other jurisdiction (I.R.S. Employer Identification
incorporation or organization) No.)

10810 FARNAM, OMAHA, NEBRASKA 68154
(Address of principal executive (Zip Code)
offices)
</TABLE>

Registrant's phone number, including area code: (402) 392-3900

Securities registered pursuant to Section 12(b) of the Act:

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<CAPTION>
NAME OF EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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Common Stock, $.10 Par Value New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on March 12, 1999
as reported on New York Stock Exchange (NYSE), was approximately $493,000,000.

As of March 12, 1999 there were 39,812,105 common shares of the registrant
outstanding. See Item 1 "Recent Developments."

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Proxy Statement for Registrant's 1999 Annual Meeting of
Stockholders are incorporated by reference in Part III of this Form 10-K Report.

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PAGE 1 OF 72
INDEX TO EXHIBITS, PAGE 48
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PART I

ITEM 1. BUSINESS.

RECENT DEVELOPMENTS.

The stockholders of InaCom Corp., a Delaware corporation ("InaCom" or the
"Company"), at a special stockholders' meeting on February 17, 1999, approved
the issuance of InaCom common stock to stockholders of Vanstar Corporation
("Vanstar"), pursuant to an Agreement and Plan of Merger dated October 8, 1998
(the "Merger Agreement"). The Vanstar stockholders also approved the Merger
Agreement. Vanstar became a wholly-owned subsidiary of InaCom on February 17,
1999 following the foregoing stockholder approvals (see "Management's Discussion
and Analysis of Financial Condition and Results of Operations").

The merger makes InaCom one of the world's leading technology services
companies with nearly $7.0 billion in revenues, and more than 12,000 employees
including 7,500 technical professionals.

In connection with the merger, the Company issued 0.64 shares of common
stock for each share of Vanstar common stock outstanding which was approximately
28.0 million shares of the Company's common stock for all shares of the
outstanding common stock of Vanstar. Stock options issued under Vanstar's stock
option plans were assumed by InaCom in the merger and entitled the holders to
purchase an aggregate of approximately 3.8 million shares of InaCom common stock
upon exercise of such options. As of March 12, 1999, the Company had 45,090,533
shares of common stock outstanding or issuable pursuant to the February 1999
merger with Vanstar. However, not all the Vanstar certificates have been
exchanged for InaCom common stock as of March 12, 1999. Consequently, 39,812,105
shares of common stock were outstanding on March 12, 1999.

The consolidated financial statements of the Company appearing under Items
14(a)(1) and (2) contained herein are presented for periods ending prior to the
merger. The merger was accounted for as a pooling of interests and accordingly
supplemental consolidated financial statements that give retroactive effect to
the merger of InaCom and Vanstar have been filed in a Current Report on Form
8-K/A dated February 17, 1999.

The InaCom stockholders at the special stockholders' meeting also approved
(a) an amendment to the certificate of incorporation of InaCom to increase the
number of authorized shares of InaCom common stock to 100,000,000 shares and (b)
an increase of an additional 10,000,000 shares of InaCom common stock authorized
for issuance under the 1997 InaCom Stock Plan.

GENERAL DESCRIPTION OF BUSINESS.

InaCom is a leading single-source provider of information technology
services and products designed to enhance the productivity of information
systems primarily for Fortune 1000 clients. The Company offers a comprehensive
range of services to manage the entire technology life cycle including: (1)
technology planning, (2) technology procurement, (3) technology integration, (4)
technology support, and (5) technology management. InaCom's expertise includes
the integration of voice and data communications. InaCom sells its services and
products through a marketing network of approximately 90 business centers owned
by the Company (on December 26, 1998) throughout the United States that focus on
serving large corporations. The Company also has a network of approximately 875
value-added independent dealers (on December 26, 1998) that typically have a
regional, industry, or specific service focus. The Company has international
locations in Central America, South America, and Mexico and international
affiliations in Europe, Asia, the Caribbean, Middle East, Africa, and Canada to
satisfy the technology management needs of its multinational clients.

InaCom's expertise in procurement, customization, and deployment of personal
computers, peripherals, and software from a wide range of major vendors enables
the Company to customize information

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solutions to meet specific client needs. In addition, InaCom provides its
clients with numerous benefits including in-depth product knowledge and
experience, competitive pricing from its purchasing arrangements, and a wide
array of integration and support services supporting client needs on an on-going
basis.

HISTORY AND STRATEGY

The Company has been providing information technology services and products
since 1982. The Company was established as a division of Valmont Industries,
Inc. ("Valmont") in 1982 and became a wholly owned-subsidiary of Valmont in 1985
under the name ValCom, Inc. The Company completed an initial public offering of
its common stock in 1987 and changed its name to InaCom Corp. in 1991. Pursuant
to the Company's strategy of increasing its direct contact with client, the
Company has increased its client direct revenues from approximately 30% in 1985
to approximately 75% in 1998.

InaCom's strategy is to grow and increase economic value added to enhance
shareholder value. To achieve these goals, InaCom provides comprehensive
solutions to improve the productivity of its clients' information systems. Key
elements of the Company strategy are: (1) to leverage client relationships to
continue expanding higher-margin services revenues, (2) to capitalize on client
trends of outsourcing services, (3) to expand offerings and geographic coverage
through strategic acquisitions, and (4) to capitalize on the convergence of data
and voice communications.

INTEGRATED LIFE CYCLE SERVICES

As a single-source provider of information technology services and products,
the Company strives to help its clients optimize their information technology
investments and control ongoing costs throughout the entire life cycle of the
clients' technology systems. The Company combines a process improvement approach
along with tools and practices gained by experience and trained personnel to
assist its clients in managing the entire life cycle and costs of distributed
technology. The Company distinguishes itself by being a client advocate,
offering manufacturer-independent recommendations to clients that help clients
gain more value and achieve the desired return on investment from their complex
and critical distributed technology infrastructure. InaCom demonstrates a
leadership position as the largest provider of Intel-based computer systems in
North America, the largest provider of IBM, Compaq and Hewlett-Packard PC
technologies worldwide and the largest provider of Lucent Technologies
communications servers worldwide.

TECHNOLOGY PLANNING. Technology planning services involve assisting clients
in designing and developing standardized technology platforms. The services
include determining standard hardware technology, application software,
operating system software, and networking platforms. The Company assists its
clients with the selection and standardization of manufacturer brands (such as
IBM, Compaq, Hewlett-Packard, Microsoft, Lotus, and others) and assists its
clients in studying the total cost, performance, and capabilities of these
brands and products.

Technology planning services performed by the Company also include the
development of strategies for deployment of distributed technology systems
within its clients' businesses. The Company assists its clients in decisions to
lease or purchase, determining replacement cycles and centralizing acquisition
processes. To assist clients with technology planning, the Company has developed
specific products and programs such as Policy Based Management-TM-, Tactical
Enterprise Network Assessment-TM- and Enterprise Technology Blueprint-TM-.

TECHNOLOGY PROCUREMENT. Technology procurement services generally involve
coordinating the technology purchase process, requisitioning technology
products, processing, tracking, and reporting on the status of orders,
customizing hardware and software configurations, direct deployment to clients'
desktops, and shipment tracking. The demand for cost-effective customized
technology systems has driven a significant change in industry procurement
methods including the trend toward build-to-order and customization programs.
Compaq, IBM, and Hewlett-Packard have chosen InaCom for participation in

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their build-to-order programs. InaCom has invested over $42 million in its
state-of-the-art assembly and delivery systems to provide build-to-order and
customization capabilities. The facilities are strategically located in
Swedesboro, New Jersey, Omaha, Nebraska, and Ontario, California to provide
prompt and cost-effective delivery nationwide.

The Company also focuses its technology procurement services on shortening
the delivery time of technology products, improving compliance to standards in
its clients' organizations, assisting in negotiating hardware and software
agreements on behalf of its clients, and providing other services that minimize
clients' costs. The Company provides certain clients with on-site technical
procurement specialists who assist and manage the technology procurement process
at client locations nationwide. These procurement specialists are technically
oriented and focus on process improvement and operational efficiencies in the
procurement process.

The Company's Inacommerce-TM- and Inacommerce Plus-TM- software provide an
easy to use internet-based procurement management system that allows a business
client to determine real-time product availability and order status along with a
custom configurator to assist the client in designing a technology solution from
its desktop computer. The Company's VISION-TM- 2000 software also allows a
business client to determine daily product availability, custom configure and
order its technology solution. The Company's Direct Express delivery program
reduces the number of steps in the procurement process by shipping products
directly to the location selected by the business client.

TECHNOLOGY INTEGRATION. The Company provides technology integration
services to its clients in an effort to assist clients in obtaining technology
that achieves the clients' business goals. The Company has products and services
available to assist, design and support clients' wide area networks (WANs) and
local area networks (LANs) and to manage software procurement and license
control.

The Company employs high-end technical systems engineers and systems
consultants who perform technology integration services at client locations.
These systems engineers and systems consultants, and the project managers who
coordinate their activities, are contracted to the client for hourly rates or
for fixed-price extended contracts.

TECHNOLOGY SUPPORT. The Company provides its clients ongoing support in
their distributed technology systems primarily in two major areas: "break/fix"
hardware maintenance and installation, moves, additions, and changes ("IMACs").
These functions are similar, but differ in the timing and level of service.

The Company's break/fix hardware maintenance capabilities are supported
directly by the Company's help desk operation, HelpCentral-TM-. Centralized
break/fix hardware maintenance provides coordination, problem solving, tracking,
and control of the clients' hardware maintenance needs.

IMAC distributed support services are managed through various scheduling and
reporting tools that are interrelated with the Company's VISTA-TM-, VISION-TM-,
Inacommerce-TM-, and Inacommerce Plus-TM- information systems. Additionally, the
Company provides distributed support services to its clients by providing
on-site technical personnel that may be involved in various support activities,
including LAN administration, network monitoring, general deskside support, and
some end-user training.

The Company also offers convergence solutions centered around WAN's,
computer and telephone integration, desktop video conferencing, and wireless
data communications. These services include specialized support programs,
maintenance programs and specialized software. The Company provides
communication network services with advanced digital capabilities enabling
voice, data and video communications, utilizing AT&T, Frontier and Westinghouse
networks. The Company's communications services also include long distance,
inbound 800 service, calling cards, and teleconferencing featuring account codes
and enhanced billing and customized call reports which allow business clients to
restrict and track telecommunications activity.

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TECHNOLOGY MANAGEMENT. The Company provides technology management services
that assess the current state and future needs of a client's distributed
technology network to maximize the value of the client's investment in its
networked systems. The technology management services provided through remote
management centers assist clients in the control and reliability of LAN/WAN
environments, provide a study of adequate network speed and responsive user
services, and monitor the infrastructure and system capabilities to satisfy
clients' current and future needs. The Company has developed specific products
and programs to assist its clients in the technology management function,
including Inacom Network Patrol-TM- and Inacom Network Baseline-TM-.

The Company has also developed a comprehensive program called Inacom Asset
Advantage-TM- that contains tools and process improvement techniques to assist
its clients in the inventorying, tracking and controlling of distributed
technology assets. This program helps clients meet financial, risk management,
custodial, warranty, maintenance, service, and refreshment objectives. The
products, including Inacom Asset Roll-Call-TM-, can be integrated with
HelpCentral-TM- and also integrated with the other life cycle products and
programs to help lower the total ownership cost of clients' technology.
Additionally, the Company's Computer Resources International and Boston Computer
Exchange business units provide customized asset registry, asset tracking
services and disposal services to its clients.

PRODUCTS AND VENDORS

Products include desktops, laptops, servers, monitors, printers, operating
systems software, phone systems, voice mail, voice processing, data network
equipment, multiple small office-home office offerings, and maintenance. The
Company currently distributes products from such leading vendors as Compaq, IBM,
Hewlett-Packard, Dell, Toshiba, Lexmark, Novell, Microsoft, Oracle, 3Com,
SynOptics, Cisco, Intel, Network General, and Lucent Technologies. Compaq, IBM,
and Hewlett-Packard, collectively, represented approximately 64% and 63% of the
Company's net revenues in fiscal 1998 and 1997, respectively.

The Company has negotiated purchase arrangements, including price, delivery,
training, and support, directly with most major vendors. The Company's
agreements with its vendors are generally on a non-exclusive basis and may be
terminated by the vendors on notice typically ranging from 30 to 90 days.

The agreements with vendors generally contain provisions with respect to
product cost, price protection, returns, and product allocations; the Company is
generally entitled to price protection with all major vendors on eligible
products in the Company's inventory in the event of vendor price reductions.
Certain vendors also sponsor payment programs with several financial service
organizations to facilitate product sales through the business centers. In
addition, the Company's primary vendors provide various incentives for promoting
and marketing their products which typically range from 1% to 5% of sales. The
three major forms of vendor incentives received by the Company are co-operative
funds, market development funds, and vendor rebates. Co-operative funds are
earned based upon the sale of the vendor's products and generally must be
utilized to offset the costs associated with advertising and promotion pursuant
to programs established by the respective vendor. Market development funds are
earned based upon the Company's purchases from the vendor and generally must be
used for market development activities approved by the respective vendor. Vendor
rebates are based upon the Company's attaining purchase volume targets
established with the vendor. Rebates generally can be used at the Company's
discretion.

MARKETING NETWORK

At December 26, 1998, products and services were sold through a marketing
network of approximately 1,000 business centers located throughout the United
States, of which approximately 90 are owned by the Company. The Company has
international locations in Central America, South America, and Mexico and
international affiliations in Europe, Asia, the Caribbean, Middle East, Africa,
and Canada to satisfy the technology management needs of its multinational
clients. As a result of the February 1999

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merger with Vanstar, the Company acquired approximately 100 additional
Company-owned business centers. As the two companies are integrated, duplicate
locations will be consolidated.

The Company's direct sales force in the Company-owned business centers
enables the Company to establish relationships with major corporate clients for
purposes of marketing the Company's integrated life cycle services.

INTERNATIONAL CAPABILITIES AND FINANCIAL INFORMATION ABOUT FOREIGN OPERATIONS
AND EXPORT SALES

The Company has no material export sales. To satisfy the technology
management service needs of its multinational clients, Inacom International, a
subsidiary of the Company, has international locations in Central America, South
America, and Mexico and international affiliations in Europe, Asia, the
Caribbean, Middle East, Africa, and Canada. International Computer Group (ICG)
London, an affiliation of leading independent organizations in various
countries, provides pc-related products and services to international corporate
clients. InaCom's capabilities in international project management and local
resources of the affiliated members allow InaCom to serve the global needs of
its multinational clients' information technology projects. Inacom Latin
America, an InaCom subsidiary, provides international logistics and
customization services in Mexico, the Caribbean, and Central and South America.

As a result of the February 1999 merger with Vanstar, the Company acquired
international locations in Europe and Asia. Vanstar's export sales were not
material for the year ended December 1998. As the two companies are integrated,
duplicate international capabilities will be consolidated.

SEASONAL FACTORS IN BUSINESS

The fourth quarter of the Company's fiscal year generally produces higher
revenues due principally to year-end purchases made by business customers.
However in 1998, the revenues for the fourth quarter were less than revenues
recorded in the second and third quarters. This decrease was primarily due to
the Company increasing its efforts on the client direct side of the business
while de-emphasizing the high volume, lower margin distribution business.

CLIENTS

InaCom believes its client base of large and medium-sized businesses is most
likely to benefit from the cost savings obtainable through the integrated life
cycle services offered by the Company. InaCom is not dependent for a material
part of its business upon a single or a few clients and the loss of any one
client would not have a material adverse effect on the Company's business.

SERVICE MARK AND TRADEMARK

The Company holds United States service mark and trademark registrations for
the marks "Inacom," "ValCom," "Inacomp," and "Vanstar." The Company also has
certain state registrations. The Company claims common law rights to the marks
based on adoption and use. To the Company's knowledge, there are no pending
interference, opposition or cancellation proceedings, or litigation threatened
or claimed, with respect to the marks in any jurisdiction.

GOVERNMENT REGULATION

The Company is subject to various federal, state and local laws and
regulations affecting businesses generally such as laws and regulations
concerning employment, workplace safety, and protection of the environment. The
Company is also subject to federal and state laws regulating franchise
relationships which generally impose registration and/or disclosure requirements
on the Company in the offer and sale of franchises and also regulate related
advertisements. The Company believes it is in substantial compliance with all
such laws and regulations.

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COMPETITION

The Company competes in the technology management services industry with a
large number of service providers, including IBM through its Global Services
division, Andersen Consulting, CompuCom, EDS, ENTEX, GE Capital Technology
Management Service, Wang, and Unisys. Competition in communication products and
services is also intense, and includes entities which are also significant
vendors to the Company, such as Lucent Technologies and AT&T. Certain
competitors and manufacturers are substantially larger than the Company and have
greater financial, technical, service, and marketing resources.

All aspects of the integrated life cycle services industry are highly
competitive. This industry continues to experience a significant amount of
consolidation. In the future InaCom may face fewer but larger and
better-financed competitors as a consequence of such consolidation. The
Company's marketing network competes for potential clients, including national
accounts, with numerous resellers and distributors. Several computer
manufacturers have expanded their channels of distribution, pricing, and product
positioning and compete with the Company's marketing network for potential
clients. Other competitors operate mail order or discount stores offering clones
of major vendor products. The Company also competes with other computer
technology providers in the recruitment and retention of franchisees and
independently owned resellers.

EMPLOYEES

At December 26, 1998, the number of employees was approximately 5,600. As a
result of the February 1999 merger with Vanstar, the Company added approximately
6,500 employees. None of the employees is covered by a collective bargaining
agreement. The Company considers its relations with employees to be good.

BACKLOG

The backlog of orders for products distributed by the Company was $32.6
million at the close of the 1998 fiscal year compared to $47.5 million at the
close of the 1997 fiscal year and $59.3 million at the close of the 1996 fiscal
year. Such orders are not necessarily firm since large customers may place
orders with several technology providers and accept products from the technology
provider who delivers first.

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CERTAIN BUSINESS FACTORS

THIS REPORT, INCLUDING DOCUMENTS INCORPORATED BY REFERENCE HEREIN, CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO INACOM THAT ARE
BASED ON THE BELIEFS OF INACOM MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO INACOM MANAGEMENT. SUCH STATEMENTS REFLECT
THE CURRENT VIEW OF INACOM WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO
CERTAIN RISKS, UNCERTAINTIES, AND ASSUMPTIONS, INCLUDING THE RISK FACTORS
DESCRIBED IN THIS REPORT. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS
MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS BELIEVED, ESTIMATED OR
EXPECTED.

WE MUST RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL PERSONNEL IN ORDER
TO BE COMPETITIVE.

InaCom depends heavily on its senior management team. Further, InaCom faces
intense competition in attracting and retaining qualified technical personnel,
including systems engineers and communications specialists. InaCom's strategy
for growth in the sale of computer services and communication services depends
on its ability to attract and retain qualified technical personnel, including
systems engineers and communications specialists. The failure to recruit and
retain senior management and technical personnel could have a material adverse
effect on InaCom's business.

SIGNIFICANT CONSOLIDATION AND MANUFACTURERS SELLING DIRECT TO CONSUMERS MAY
CAUSE COMPETITION TO INCREASE IN INTENSITY.

The technology management services industry is highly competitive and
continues to experience a significant amount of consolidation. In the future,
InaCom may face fewer but larger and better financed competitors as a
consequence of such consolidation. In addition, several computer manufacturers
have expanded their channels of delivery, pricing and product positioning and
compete with InaCom's marketing network for potential clients. To the extent
that the technology services industry continues to consolidate or computer
manufacturers continue to compete directly for InaCom customers, InaCom's
business could be adversely affected.

IF WE FAIL TO MANAGE OUR GROWTH, OUR PROFITABILITY MAY BE ADVERSELY
AFFECTED.

InaCom's goal is to increase the scale of its operations through internal
growth and through the acquisition of other businesses. Consequently, InaCom may
experience periods of rapid growth with significantly increased staffing
requirements. InaCom's ability to maintain and manage its growth effectively
will require it to expand its management information systems capabilities and to
improve its operational and financial systems and controls. Moreover, InaCom
will need to attract, train, motivate, retain, and manage its senior managers,
technical professionals, and other employees. Any failure to expand its
management information systems capabilities and its operational and financial
systems and controls or to recruit appropriate additional personnel in an
efficient manner at a pace consistent with any business growth InaCom may
experience would have a material adverse effect on InaCom's business, financial
condition and results of operations.

OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE CANNOT COUNTERACT FUTURE
DECLINES IN GROSS MARGINS.

Gross margins on product sales declined over the past several years because
of product price reductions and intense competition. Gross margins for services
may also decline as competition intensifies. InaCom has responded by reducing
operating expenses as a percentage of revenue and by focusing on sales of higher
margin services. A material decrease in the gross margin for services or a
failure by InaCom to successfully maintain reduction of operating expenses as a
percentage of gross margins could have a material adverse effect on InaCom's
business.

IF KEY VENDORS DECREASE INCENTIVE FUNDS, OUR PROFITABILITY WILL BE ADVERSELY
AFFECTED.

InaCom's key vendors provide various incentives for promoting and marketing
their product offerings. A material decrease in the level of vendor incentive
funding or credits would have a material adverse effect

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on InaCom's business. Beginning in May 1998, funds or credits received by InaCom
became primarily based on the sales of the vendor's products through the
independent dealer and InaCom-owned channels rather than based upon purchases of
the products from the vendors. The three major forms of vendor incentives
received by InaCom are co-operative funds, market development funds, and vendor
rebates. The funds or credits are earned through performance of specific
marketing programs or upon completion of objectives outlined by the vendors.
These funds or credits from InaCom's primary vendors typically range from 1% to
5% of sales of the vendors' products by InaCom.

IF OUR VENDORS DO NOT CONTINUE CURRENT PRICE PROTECTION POLICIES OR THERE
ARE OTHER UNFORESEEN EVENTS, WE MAY HAVE TO DEVALUE OUR INVENTORY.

The personal computer industry is characterized by rapid product improvement
and technological change resulting in relatively short product life cycles and
rapid product obsolescence. These factors can place inventory at considerable
valuation risk. InaCom's information technology suppliers generally provide
price protection intended to reduce the risk of inventory devaluation. However,
beginning in May 1998, the major suppliers announced plans to reduce the number
of days for which they will provide price protection to periods ranging from two
to four weeks rather than the unlimited protection previously available and to
allow product returns on average of 2% to 3% of product sales per quarter,
rather than the 5% of sales per quarter previously available. If the suppliers
do not continue current price protection policies or if there are unforeseen
product developments, InaCom's business could be materially adversely affected.

IF THE SUPPLY AGREEMENTS WITH OUR KEY VENDORS WERE MATERIALLY REVISED, NOT
RENEWED OR TERMINATED, IT WOULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

InaCom's business depends on its relationship with key vendors. An
unanticipated interruption in one or more of the relationships could have a
material adverse effect on InaCom. In 1998 InaCom derived approximately 64% of
its total revenue from Compaq, IBM and Hewlett-Packard products. InaCom's
agreements with these vendors are on a non-exclusive basis and may be terminated
by the vendors on notice typically ranging from 30 to 90 days. InaCom's business
relationships with the key vendors are good but a material adverse effect on
InaCom's business would occur if a supply agreement with a key vendor were
materially revised, were not renewed or were terminated, key computer vendors
materially decreased marketing development funds paid to InaCom, or the supply
of products was insufficient or interrupted.

WE MAINTAIN A SIGNIFICANT AMOUNT OF RATE-SENSITIVE WORKING CAPITAL TO
FINANCE OUR OPERATIONS.

InaCom borrows a significant amount of working capital to purchase inventory
and to finance accounts receivable. InaCom borrows working capital through a
revolving credit facility and an asset securitization program. InaCom has also
raised capital through the public sale of debentures. InaCom's working capital
financing is subject to interest rate increases because much of the borrowing
bears a floating interest rate. In addition, such financing is subject to
additional uncertainty because there is no assurance that future borrowing will
be available in amounts and on terms acceptable to InaCom.

IF WE ARE UNABLE TO PROPERLY MANAGE "BUILD-TO-ORDER" PROGRAMS, OUR BUSINESS
MAY BE ADVERSELY AFFECTED.

InaCom is participating in "build-to-order" programs of Compaq, IBM, and
Hewlett-Packard. Under each of these programs, InaCom performs the final
assembly of computer products after a customer order is received. InaCom
believes the build-to-order program reduces InaCom's inventory requirements and
improves margins. The potential disadvantages of the build-to-order program
include a decrease in the number of days of price protection available from
manufacturers, and the costs and additional administrative burdens of meeting
manufacturers' strict qualification standards for final assembly of computer
products. The failure of InaCom to meet the manufacturers' qualification
standards, or the inability of InaCom to manage its inventory to meet customer
demands and within the manufacturers' price protection limits, could have a
material adverse effect on InaCom's business.

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FUTURE INACOM ACQUISITIONS MAY RESULT IN INCREASED DEBT AND DILUTION TO
INACOM STOCKHOLDERS.

InaCom acquires businesses and enters into strategic alliance relationships
with resellers in selected geographic markets and service areas. Acquisitions
involve a number of special risks, including integrating acquired businesses
into InaCom's operation, the potential loss of key employees of acquired
businesses, accurate valuation of acquired businesses, incurrence of additional
debt to finance acquisitions and the financial impact of goodwill amortization.
Although InaCom has no definite plans to acquire any particular business, it may
issue InaCom common stock to consummate certain such acquisitions in the future
which may cause dilution to current stockholders.

FAILURE OF OUR PROCUREMENT AND DELIVERY SYSTEMS COULD RESULT IN OUR FAILURE
TO TAKE ORDERS, SHIP PRODUCTS AND REACT TO MARKET CONDITIONS.

InaCom depends on a variety of information systems to provide it with a
competitive advantage. A failure of InaCom's proprietary procurement and
delivery systems or any of its other information systems could prevent InaCom
from taking orders and/or shipping product and prevent clients from accessing
product availability information from InaCom. Such failure could also prevent
InaCom from determining appropriate product processing or the adequacy of
inventory levels, and prevent InaCom from reacting to rapidly changing market
conditions.

ITEM 2. PROPERTIES.

The Company leases its principal executive and administrative offices in
Omaha, Nebraska, including approximately 95,000 square feet under a lease
expiring in July 2012, approximately 115,000 square feet under a lease expiring
in March 2007, and approximately an additional 24,000 square feet under leases
expiring from June 2002 through September 2003.

The Company leases distribution and customization facilities in Omaha,
Nebraska, including approximately 128,000 square feet under a lease expiring in
May 2003, a distribution and customization facility in Swedesboro, New Jersey,
with approximately 203,000 square feet under a lease expiring in April 2007, and
a distribution and customization facility in Ontario, California, with
approximately 179,000 square feet under a lease expiring in July 2006. These
facilities serve as the distribution and customization points for the Company.

The land and buildings for all other business centers owned by the Company
and warehouse facilities are also leased. Most of these leases are operating
leases, under which the Company pays maintenance, insurance, repairs, and
utility costs. Average terms of these leases are one to five years with options
to renew or terminate.

As a result of the February 1999 merger with Vanstar, the Company acquired
additional properties. Vanstar leases (1) 92,335 square feet of office space in
Alpharetta, Georgia under two separate leases expiring in November 1999 and
December 2001, (2) three buildings in Roswell, Georgia totaling 86,880 square
feet for one of its corporate divisions under a lease expiring in May 2001 and
(3) 89,086 square feet of office space in Pleasanton, California under a lease
expiring in May 2006. Vanstar's main distribution center is located in
Indianapolis, Indiana, consisting of 415,680 square feet under a lease expiring
in April 2007. Vanstar also leases a distribution center in Livermore,
California with 192,000 square feet which lease expires in September 1999 and a
51,520 square feet repair facility in Wharton, New Jersey which lease expires in
September 2004. Vanstar's new Solution Center, consisting of 85,852 square feet,
is located in Tempe, Arizona, and has a lease term extending until December
2007.

ITEM 3. PENDING LEGAL PROCEEDINGS.

On July 3, 1997, a trust claiming to have purchased shares of Vanstar common
stock filed suit in Superior Court of the State of California. The suit is
entitled O'Neal Trust v. Vanstar Corporation, et al., Case No. CV767266. On
January 21, 1998, the same plaintiff along with others claiming to have
purchased

10
<PAGE>
shares of Vanstar common stock, filed suit in the United States District Court
for the Northern District of California, making allegations virtually identical
to those in the earlier suit. The recent suit is captioned O'Neal Trust, et al.
v. Vanstar Corporation, et al., Case No. C-98-0216 MJJ. Both suits named as
defendant Vanstar and certain former directors and officers of Vanstar. The
complaints in both suits generally allege, among other things, that the
defendants made false or misleading statements or concealed information
regarding Vanstar and that the plaintiffs, as holders of the Vanstar common
stock, suffered damage as a result. The plaintiffs in both suits seek class
action status, purporting to represent a class of purchasers of Vanstar common
stock between March 11, 1996 and March 14, 1997, and seek damages in an
unspecified amount, together with other relief. The complaint in the first suit
purports to state a cause of action under California law; the complaint in the
recent suit purports to state two causes of action under the Securities Exchange
Act of 1934. On July 23, 1998, the California Superior Court dismissed the state
court complaint as to certain defendants. The Company believes that the
plaintiffs' allegations in both suits are without merit and intends to defend
the suits vigorously.

The Company is involved in a limited number of legal actions arising in the
ordinary course of business, the result of none of which is expected to have a
material adverse effect on the consolidated financial statements of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to a stockholder vote during the fourth
quarter of 1998.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company as of March 12, 1999 are listed below
in order of their length of service to the Company, together with their ages and
all Company positions and offices held by them.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ---------------------------------------------------------------------------
<S> <C> <C>
Bill L. Fairfield 52 Director, President and Chief Executive Officer
David C. Guenthner 49 Executive Vice President and Chief Financial Officer
Michael A. Steffan 47 President, Distribution and Operations, and Secretary
Cris Freiwald 44 President, International Division
Robert A. Schultz 56 Group Executive, Information Systems Group
George DeSola 52 Group Executive, Technology Service Group
Larry Fazzini 51 Senior Vice President of Corporate Resources
Jeffrey A. Hartigan 56 Vice President and Chief Information Officer
Leon Kerkman 39 Senior Vice President and Assistant General Manager of Distribution and
Operations
Len Smith 47 Chief Technology Officer
Richard Oshlo 51 Vice President and Treasurer
Dennis Strittmatter 52 Vice President of Life Cycle Services
</TABLE>

Except as set forth below, all of the officers have been associated with the
Company in their present position or capacities for more than the past five
years.

Bill L. Fairfield has been President and a director of InaCom since March
1985. He was named Chief Executive Officer in September 1987. Mr. Fairfield
serves as a director of Buckle, Inc., Sitel Corp. and International Computer
Group (ICG) Paris.

David C. Guenthner was named Executive Vice President and Chief Financial
Officer in November 1991. Prior to November 1991, Mr. Guenthner was Senior Vice
President of Finance and Chief Financial Officer for InaCom.

11
<PAGE>
Michael A. Steffan was named President of Distribution and Operations in
December 1995. Mr. Steffan was responsible for the Reseller Division from
December 1994 to December 1995 in addition to his position as President of
Distribution and Operations, a position he had held since May 1993. Prior to May
1993, Mr. Steffan was Vice President of Corporate Development. Mr. Steffan has
served as Secretary for InaCom since March 1985.

Cris Freiwald was named President of the International Division in November
1994. Mr. Freiwald was Vice President of Corporate Development from May 1993 to
November 1994. Prior to May 1993, Mr. Freiwald was Director of Business
Development.

Robert A. Schultz was named Group Executive of the Information Systems Group
in December 1996. Prior to December 1996, Mr. Schultz was the President and
General Manager of Direct Operations, a position he had held since April 1994,
and the President and General Manager of Client Services Division, a position he
had held from January 1993 to December 1996.

George DeSola was named Group Executive of the Technology Services Group in
December 1996 in addition to his position as President of InaCom Communications,
a position he held from March 1994 to June 1998. Mr. DeSola was responsible for
Corporate Marketing from December 1994 to December 1996. Prior to March 1994,
Mr. DeSola was the Vice President of Marketing and Customer Service for MCI
Communications Corp., a telecommunications company.

Larry Fazzini was named Senior Vice President of Corporate Resources in
August 1997. Prior to August 1997, Mr. Fazzini was Vice President of Corporate
Resources, a position he had held since he joined InaCom in February 1993.

Jeffrey A. Hartigan was named Vice President and Chief Information Officer
in May 1995 when he joined InaCom. Prior to May 1995, Mr. Hartigan was Vice
President of Information Services at Northern Telecommunications Inc. (NORTEL),
a telecommunications company.

Leon Kerkman was promoted to Senior Vice President and Assistant General
Manager of Distribution and Operations in February 1999. Prior to February 1999,
Mr. Kerkman was Vice President and Assistant General Manager of Distribution and
Operations, a position he had held since March 1998. Prior to March 1998, Mr.
Kerkman was Vice President and Corporate Controller, a position he had held
since June 1993.

Len Smith was named Chief Technology Officer in 1996 when he joined InaCom.
Prior to joining InaCom, Mr. Smith was President and Chief Executive Officer of
Iceberg Software, L.L.C. from 1995 to 1996. Mr. Smith was Vice President of
Product Development and Data Products at EON Corporation from 1991 to 1995.

Richard Oshlo was named Vice President in February 1999 in addition to his
position as Treasurer, a position he held since March 1998. Prior to March 1998,
Mr. Oshlo was Assistant Treasurer, a position he had held since joining InaCom
in 1997. Previously he was Senior Vice President of Investment Banking at GWR
Investments, Inc. from 1993 to 1996.

Dennis Strittmatter was promoted to Vice President of Life Cycle Services in
March 1998. He was previously Vice President of Distribution Management from
1996 to 1998, and Vice President and Assistant General Manager from 1993 to
1996.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

RECENT SALES OF UNREGISTERED SECURITIES

None

Information required for Item 5 is included with the information under Item
8 below.

12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

This selected financial data is presented for periods ending prior to the
February 1999 merger with Vanstar. The merger was accounted for as a pooling of
interests and accordingly supplemental consolidated financial statements that
give retroactive effect to the merger of InaCom and Vanstar have been filed in a
Current Report on Form 8-K/A dated February 17, 1999.

<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income statement data:
Revenue.................................. $ 4,258,425 $ 3,896,302 $ 3,102,055 $ 2,200,344 $ 1,800,539
Earnings (loss) before income taxes...... 72,297 49,871 31,719 19,833 (3,749)
Net earnings (loss)...................... 42,584 29,456 18,733 11,707 (2,256)
Earnings (loss) per share
Basic.................................. 2.66 2.48 1.80 1.17 (0.22)
Diluted................................ $ 2.26 $ 2.17 $ 1.66 $ 1.16 $ (0.22)
Balance sheet data:
Working capital.......................... $ 280,951 $ 257,986 $ 100,303 $ 90,940 $ 78,759
Total assets............................. 1,103,539 960,539 847,600 624,238 519,875
Long-term debt, less current maturities
of long-term debt...................... 201,500 141,500 55,250 23,667 30,333
Stockholders' equity..................... $ 425,137 $ 325,216 $ 176,830 $ 148,775 $ 135,590
Other information:
Common stock closing market prices
High................................... $ 36.75 $ 40.13 $ 39.25 $ 15.25 $ 21.00
Low.................................... $ 15.13 $ 20.00 $ 13.25 $ 7.00 $ 6.87
Weighted-average shares outstanding
Basic.................................. 16,000 11,900 10,400 10,000 10,000
Diluted................................ 20,700 14,600 11,900 10,100 10,000
</TABLE>

13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

This Management's Discussion and Analysis of Financial Condition and Results
of Operations and the consolidated financial statements of the Company appearing
under Items 14(a)(1) and (2) contained herein are presented for periods ending
prior to the February 1999 merger with Vanstar. The merger was accounted for as
a pooling of interests and accordingly supplemental consolidated financial
statements that give retroactive effect to the merger of InaCom and Vanstar have
been filed in a Current Report on Form 8-K/A dated February 17, 1999.

RESULTS OF OPERATIONS

The following tables set forth, for the indicated periods, revenues, gross
margins, and net earnings and the mix of revenues, gross margin, and net
earnings for each of the Company's operating segments.
<TABLE>
<CAPTION>
SUMMARY OF OPERATING RESULTS

<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER
-------------------------------------------------------------------

<CAPTION>
1998 1997 1996(1) 1998 1997 1996(1)
--------- --------- --------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Products..................... $3,879,334 $3,626,532 $2,944,681 91.1% 93.1% 94.9%
Services..................... 379,091 269,770 157,374 8.9% 6.9% 5.1%
--------- --------- --------- ----- ----- -----
Total.................... $4,258,425 $3,896,302 $3,102,055 100.0% 100.0% 100.0%
--------- --------- --------- ----- ----- -----
--------- --------- --------- ----- ----- -----
Gross Margin:
Products..................... $ 231,681 $ 207,166 $ 173,031 60.6% 63.0% 71.9%
Services..................... 150,354 121,826 67,745 39.4% 37.0% 28.1%
--------- --------- --------- ----- ----- -----
Total.................... $ 382,035 $ 328,992 $ 240,776 100.0% 100.0% 100.0%
--------- --------- --------- ----- ----- -----
--------- --------- --------- ----- ----- -----
Net Earnings:
Products..................... $ 20,872 $ 11,953 $ 9,916 49.0% 40.6% 52.9%
Services..................... 21,712 17,503 8,817 51.0% 59.4% 47.1%
--------- --------- --------- ----- ----- -----
Total.................... $ 42,584 $ 29,456 $ 18,733 100.0% 100.0% 100.0%
--------- --------- --------- ----- ----- -----
--------- --------- --------- ----- ----- -----
</TABLE>

- ------------------------

(1) Net earnings include the impact of non-recurring charges of $1.0 million in
the fourth quarter of 1996.

14
<PAGE>
The following table sets forth, for the indicated periods, the gross margin
percentage of the two operating segments and the consolidated gross margin
percentage of the Company.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Gross Margin:
Products............................................................ 6.0% 5.7% 5.9%
Services............................................................ 39.7% 45.2% 43.1%
Consolidated Gross Margin......................................... 9.0% 8.4% 7.8%
</TABLE>

1998 COMPARED TO 1997

REVENUES

Revenues for 1998 increased $362.1 million or 9.3% to $4.3 billion when
comparing the fiscal year ended December 26, 1998 with the fiscal year ended
December 27, 1997. Revenue growth resulted from an increase in all revenue
components. Product revenues increased $252.8 million or 7.0% over 1997 and
revenues from services increased $109.3 million or 40.5% over 1997.

Product revenues increased primarily as a result of an increase in products
shipped directly to end-user clients, overall industry growth, and the
acquisitions completed by the client direct side of the business (Company-owned
business centers). This increase was partially offset by a decrease in product
revenues through the independent dealer channel. Acquisitions added
approximately $153.7 million to product revenues in 1998. Excluding the effects
of the acquisitions, product revenues through the client direct side of the
business increased $191.7 million or 10.7% compared to 1997, while product
revenues through the independent dealer market decreased $92.6 million or 5.0%
compared to 1997. A number of factors contributed to the decline in revenues in
the independent dealer market. The Company increased it efforts on the client
direct side of the business while de-emphasizing the high volume, lower-margin
distribution business. Pricing pressures and changes in vendor funding also made
the independent dealer market less profitable in 1998. Product availability
issues along with dealers reducing their inventory levels in response to changes
in the terms and conditions offered by the manufacturers also contributed to the
decline in independent dealer revenues.

Revenues from services increased as a result of increased sales efforts for
such services offerings, the inclusion of these services with increasing product
sales, and the recent acquisitions completed by the Company. Acquisitions added
approximately $27.8 million to services revenues in 1998. Excluding the effects
of the acquisitions, total services revenues increased $81.5 million or 30.2%
compared to 1997. Of this total increase of $81.5 million, $75.5 million is
attributable to an increase in services sales through the client direct side of
the business.

GROSS MARGINS

The increase in the Company's consolidated gross margin percentage in 1998
was primarily due to a change in the revenue mix to include more of the
higher-margin services sales along with an improvement in the products gross
margin percentage. The gross margin percentage on products increased in 1998
compared to 1997 as a result of the change in the mix to include more of the
higher-margin client direct business as compared to the lower-margin independent
dealer business.

The gross margin percentage on services decreased in 1998 compared to 1997.
This decrease was attributable to lower utilization rates realized by services
specialists hired in 1998. The lower utilization rates of the newly hired
services specialists were primarily a result of the learning process before such
specialists become a fully utilized and billable resource. This decrease was
only partially offset by a change in the mix of services revenues to include
more of the higher-margin technology support and technology integration services
and less lower-margin technology procurement services in 1998 compared to 1997.

15
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative (SG&A) expenses increased $25.9 million
or 10.3% in 1998. SG&A as a percent of revenues increased to 6.5% in 1998 versus
6.4% in 1997 primarily due to the SG&A added by the business combinations not
included in 1997. Excluding these business combinations, SG&A as a percentage of
revenues would have been 6.3%. Acquisitions that have been completed by the
Company and were not included in 1997 accounted for approximately $18.7 million
of the SG&A in 1998.

FINANCING EXPENSE

Financing expense for 1998 increased by $4.8 million to $33.8 million.
Financing expense increased primarily as a result of higher average daily
borrowings, the temporary use of more expensive financing during the transition
to the Company's new financing agreements in the second quarter of 1998, and a
financing charge recognized in the third quarter of 1998. The pre-tax financing
charge of $1.3 million, recognized under Statement of Financial Accounting
Standard (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," related to the sale of assets under
an accounts receivable securitization completed in July 1998. The increase in
average daily borrowings was partially offset by a decrease in the average daily
borrowing rate (excluding the impact of the temporary financing and the
financing charge). The average daily borrowings in 1998 were $59.8 million more
than the average daily borrowings in 1997, while the average daily borrowing
rate in 1998 decreased approximately 44 basis points (excluding the impact of
the temporary financing and the financing charge) versus 1997. The increase in
average daily borrowings during 1998 resulted from financing an increase in
accounts receivable which resulted from an increase in revenues and vendor
receivables during this period and from financing higher inventories in the
first half of the year. The decrease in the average daily borrowing rate in 1998
(excluding the impact of the temporary financing and the financing charge)
resulted primarily from the issuance of $86.25 million of 4.5% convertible
subordinated debentures in November 1997 (see "Liquidity and Capital
Resources"), the Company's new financing agreements, and the favorable borrowing
rates in the financial markets.

NET EARNINGS

Including the impact of the financing charge under SFAS No. 125 (see
"Financing Expense"), net earnings for 1998 increased 44.6% to $42.6 million
compared to net earnings of $29.5 million for 1997. Earnings per share for 1998
increased to $2.26 per diluted share from the $2.17 per diluted share reported
in 1997. Excluding the financing charge under SFAS No. 125 of $1.3 million, or
$0.7 million after-tax, net earnings were $43.3 million, or $2.30 per diluted
share, for 1998. These increases resulted from the factors discussed above.

1997 COMPARED TO 1996

REVENUES

Revenues for 1997 increased $794.2 million or 25.6% to $3.9 billion when
comparing the fiscal year ended December 27, 1997 with the fiscal year ended
December 28, 1996. Revenue growth resulted from an increase in all revenue
components. Product revenues increased $681.8 million or 23.2% over 1996 and
revenues from services increased $112.4 million or 71.4% over 1996.

Product revenues increased primarily as a result of an increase in products
shipped directly to end-user clients, overall industry growth, and the
acquisitions completed by the client direct side of the business. Acquisitions
added approximately $87.4 million to product revenues in 1997. Excluding the
effects of the acquisitions, product revenues through the client direct side of
the business increased $355.2 million or 26.4% compared to 1996 and product
revenues through the independent dealer channel increased $239.2 million or
14.9% compared to 1996.

16
<PAGE>
Revenues from services increased as a result of increased sales efforts for
such services offerings, the inclusion of these services with increasing product
sales, and the recent acquisitions completed by the Company. Acquisitions added
approximately $32.4 million to services revenues in 1997. Excluding the effects
of the acquisitions, total services revenues increased $80.0 million or 50.8%
compared to 1996. Of this total increase of $80.0 million, $76.0 million is
attributable to an increase in sales through the client direct side of the
business.

GROSS MARGINS

The increase in the Company's gross margin percentage for 1997 was primarily
due to the increase in the mix of higher-margin services versus lower-margin
products. The decrease in the gross margin percentage for products in 1997 was
primarily due to a decrease in the gross margin percentage on product sales
through the independent dealer channel. This decrease was partially offset by an
increase in the gross margin percentage on product sales through the client
direct side of the business. The increase in gross margin percentage for
services resulted primarily from a change in the mix of services to include more
higher-margin technology integration services partially offset by a decrease in
technology support services and an increase in lower-margin technology
procurement services.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative (SG&A) expenses increased $61.4 million
or 32.6% in 1997. SG&A as a percent of revenues increased to 6.4% in 1997 versus
6.1% in 1996 primarily due to the SG&A added by the business combinations not
included in 1996. Excluding these business combinations, SG&A as a percentage of
revenues would have been 6.0%. Acquisitions that have been completed by the
Company and were not included in 1996 accounted for approximately $23.9 million
of the SG&A in 1997. Excluding the effects of the acquisitions, the increase in
SG&A spending was primarily due to the costs of handling the increased product
revenues.

FINANCING EXPENSE

Financing expense for 1997 increased by $8.6 million to $29.0 million.
Financing expense increased primarily due to higher average daily borrowings.
Average daily borrowings for 1997 were $122.0 million more than the average
borrowings during 1996. The average daily borrowing financing rate decreased
approximately 26 basis points from 1996. The increase in the average daily
borrowings resulted primarily from financing additional accounts receivable
resulting from an increase in revenues, and an increase in inventory levels. The
decrease in the average daily borrowing financing rate resulted from the Company
selling an additional $100.0 million of accounts receivable in January 1997 for
a total of $200.0 million in an asset securitization program, and the issuance
of $86.25 million of 4.5% convertible subordinated debentures in November 1997
(see "Liquidity and Capital Resources").

NET EARNINGS

Net earnings for 1997 increased 57.2% to $29.5 million compared to net
earnings of $18.7 million, which included non-recurring charges of $1.0 million,
for 1996. Earnings per share increased to $2.17 per diluted share from the $1.66
per diluted share, which includes non-recurring charges of $0.07 per diluted
share, reported for 1996. The increase resulted from the factors discussed
above.

NON-MATERIAL BUSINESS COMBINATIONS AND NON-RECURRING CHARGES

In December 1996, the Company effected two business combinations accounted
for as poolings of interest transactions. The overall impact of the combinations
with relation to the financial statements taken as a whole are not material and
thus prior periods for the Company have not been restated to reflect the
business combinations. The Company recognized a non-recurring charge of $1.0
million to net earnings

17
<PAGE>
related to the business combinations during the fourth quarter of 1996. The
effect of the non-material poolings was to increase stockholders' equity by
approximately $0.6 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are provided through a senior
secured revolving credit facility of up to $250.0 million with Deutsche Bank, an
asset securitization program of up to $250.0 million with JP Morgan, and
convertible subordinated debentures of $141.5 million. In connection with the
February 1999 merger with Vanstar, InaCom acquired additional sources of
liquidity which include a $350.0 million line of credit under a financing
agreement with IBM Credit Corp. ("IBMCC"), an asset securitization program of up
to $175.0 million with Nesbitt Burns, and $201.3 million in convertible
preferred securities of a subsidiary trust.

As a result of the February 1999 merger between InaCom and Vanstar, all
amounts outstanding under the $250.0 million senior secured revolving credit
facility and the $250.0 million asset securitization program became immediately
due and payable. The Company has received written waivers precluding such debt
acceleration under each of the agreements from the parties to these agreements.
In addition, as a result of the merger, the Company will give notice to the
holders of $141.5 million of convertible subordinated debentures that a holder
can require the Company to repurchase such holder's debentures at 100% of the
principal amount plus accrued and unpaid interest. The holders may only exercise
such repurchase option during the 30-day period following the date of the
notice.

In July 1998, the Company entered into a new agreement to fund up to $250.0
million by selling certain direct division trade accounts receivable, with
limited recourse, to an unrelated financial institution. New qualifying
receivables are sold to the financial institution as collections reduce
previously sold receivables. On December 26, 1998, $231.0 million was funded
under the program. The implicit interest rate on the receivable sales
transaction was 5.7% on December 26, 1998.

The $141.5 million of convertible subordinated debentures consists of $86.25
million of 4.5% convertible subordinated debentures issued in November 1997 and
$55.25 million of 6.0% convertible subordinated debentures issued in June 1996.

The 1997 debentures are due November 1, 2004 and are convertible into common
stock of the Company at a conversion rate of 25.235 shares per each $1,000
principal amount of debentures (equivalent to a conversion price of $39.63 per
share), subject to adjustments under certain circumstances. The 1997 debentures
are not redeemable by the Company prior to November 1, 2001; thereafter the
Company may redeem the debentures at various premiums to principal amount. The
1997 debentures may also be redeemed at the option of the holder if there is a
Change in Control (as defined in the indenture) at a price equal to 100% of the
principal amount plus accrued interest at the date of redemption. The merger
between InaCom and Vanstar is a Change in Control. As a result, the Company will
give notice to the holders of the 1997 debentures that a holder can require
InaCom to repurchase such holder's debentures at 100% of the principal amount
plus accrued and unpaid interest. The holders may only exercise such repurchase
option during the 30-day period following the date of the notice. Subject to
certain conditions, InaCom will either pay the repurchase price in cash or in
InaCom common stock valued at 95% of the average of the closing prices of InaCom
common stock for a five trading day period ending on the third trading day
preceding the repurchase date.

18
<PAGE>
The 1996 debentures are due June 15, 2006 and are convertible into common
stock of the Company at a conversion price of $24.00 per share, subject to
adjustments under certain circumstances. The 1996 debentures are not redeemable
by the Company prior to June 16, 2000; thereafter the Company may redeem the
debentures at various premiums to principal amount. The 1996 debentures may also
be redeemed at the option of the holder if there is a Change in Control (as
defined in the indenture) at a price equal to 100% of the principal amount plus
accrued interest at the date of redemption. The merger between InaCom and
Vanstar is a Change in Control. As a result, the Company will give notice to the
holders of the 1996 debentures that a holder can require InaCom to repurchase
such holder's debentures at 100% of the principal amount plus accrued and unpaid
interest. The holders may only exercise such repurchase option during the 30-day
period following the date of notice.

Long-term debt was 32.2% of total long-term debt and equity on December 26,
1998 versus 30.3% on December 27, 1997. The decrease was a result of an increase
in equity due to earnings and the issuance of additional shares of common stock
primarily in relation to business combinations.

The senior secured revolving credit facility entered into in April 1998, as
amended, and the asset securitization program entered into in July 1998 contain
certain restrictive covenants, including the maintenance of minimum levels of
working capital and net worth, limitations on the amount of funded debt and
interest expense, limitations on incurring additional indebtedness, and
restrictions on the amount of dividends the Company can pay to stockholders. On
December 26, 1998, the Company was in compliance with the covenants or had
received written waivers to the covenants contained in the senior secured
revolving credit facility and the asset securitization facility.

Vanstar has a $350.0 million line of credit under a financing agreement with
IBMCC which expires on March 31, 1999. On December 26, 1998, Vanstar had $247.4
million outstanding under that facility, of which $70.9 million was included in
accounts payable and $176.5 million was classified as short-term borrowings. The
Company presently plans to allow this line of credit to expire, and to replace
the interest-bearing working capital portion with the Company's senior secured
bank facility and to transfer the non-interest bearing floor planning portion to
the Company's existing $400.0 million floor planning facility with IBMCC.

Vanstar's asset securitization facility, which was assumed by InaCom in the
merger, currently provides up to $175.0 million in available credit. Pursuant to
this asset securitization facility, the Company sells an undivided percentage
ownership interest in certain accounts receivable. As of December 26, 1998, the
proceeds of this receivable sale transaction totaled $175.0 million. On December
26, 1998, the implicit interest rate on the receivable sale transaction was
5.5%.

In October 1996, Vanstar's subsidiary trust issued certain preferred
securities, raising gross proceeds of $201.3 million. The holders of the
preferred securities are entitled to cumulative cash distributions at an annual
rate of 6 3/4% of the liquidation amount of $50 per security. The distributions
are payable quarterly in arrears in the aggregate amount of approximately $3.5
million per quarter. The aggregate net proceeds to Vanstar from this offering
totaled $194.4 million after selling expenses, discounts, and commissions. The
preferred securities are convertible at the option of the holder into InaCom
common stock at a conversion rate of 1.113 shares of InaCom common stock for
each preferred security (equivalent to a conversion price of $44.92 per share).

19
<PAGE>
agreement with a call provision at the provider's option after three years. An
interest rate swap agreement entered into in January 1997 carrying a fixed-rate
interest payment obligation of 5.8%, for an aggregate notional amount of $100.0
million expired in January 1998, an interest rate swap agreement entered into in
October 1997 carrying a fixed-rate interest payment obligation of 5.7%, for an
aggregate notional amount of $100.0 million was terminated in September 1998,
and an interest rate swap agreement entered into in March 1998 carrying a
fixed-rate interest payment obligation of 5.7%, for an aggregate notional amount
of $100.0 million was terminated in November 1998. As a result of the above
mentioned swap agreements, financing expense increased by approximately $0.2
million in 1998. Based on amounts outstanding on December 26, 1998, for every
interest rate movement of 100 basis points higher or lower with respect to the
swap agreements, financing expense would increase or decrease approximately $2.0
million.

During 1998, the Company generated $24.1 million of cash from operations.
Inventory decreased by $163.3 million during 1998 with a portion of the decrease
offset by a decrease in accounts payable of $57.2 million. Accounts receivable
increased $166.9 million during 1998. Inventory decreased as a result of changes
in vendors' term and conditions and the Company's efforts in managing its
inventory levels. Accounts payable decreased as a result of the decrease in
inventory levels. Accounts receivable increased as a result of the increase in
revenues and an increase in vendor receivables.

The Company used $114.6 million in cash for investing activities in 1998.
Cash of $57.2 million was used for business combinations and contingent payments
related to business combinations (See Notes to Consolidated Financial
Statements--Business Combinations). Cash of $40.2 million was used to purchase
fixtures and equipment.

Net cash provided from financing activities in 1998 totaled $92.2 million,
of which $60.0 million was provided from short-term borrowings and $31.0 million
was provided from the sale of additional certain direct division trade accounts
receivable.

The Company believes the funding expected to be generated from operations
and provided by the credit facilities existing on December 26, 1998 and the
credit facilities acquired in the February 1999 merger with Vanstar, will be
sufficient to meet working capital and capital investment needs in 1999.

YEAR 2000

InaCom began preparing its computer-based systems for year 2000 ("Y2K")
computer software compliance issues in 1996. Historically, certain computer
programs were written using two digits rather than four to define the applicable
year. As a result, software may recognize a date using the two digits "00" as
1900 rather than the year 2000. Computer programs that do not recognize the
proper date could generate erroneous data or cause systems to fail. InaCom's Y2K
project covers both traditional computer systems and infrastructure ("IT
Systems") and computer-based hardware and software, facilities and equipment
("Non-IT Systems"). InaCom's Y2K project has six phases: inventory, assessment,
renovation, testing, implementation and contingency planning.

InaCom completed the remediation of its critical business systems during the
fourth quarter of 1998. InaCom expects to replace any non-compliant IT Systems
by the end of the first quarter of 1999, with testing and implementation
completed by the end of the second quarter of 1999. InaCom will replace
non-compliant systems acquired pursuant to the Vanstar merger in the third
quarter of 1999. InaCom has also completed an inventory and assessment of its
Non-IT Systems, which are primarily located at its distribution centers and
office locations. InaCom expects to replace any non-compliant systems by the end
of the first quarter of 1999, with testing and implementation completed by the
end of the second quarter of 1999.

InaCom's Y2K project also considers the readiness of significant customers
and vendors. Such significant vendors have indicated to InaCom an expectation to
be Y2K compliant. However, the non-compliance of such vendors could impair the
ability of InaCom to obtain necessary products or to sell

20
<PAGE>
or provide services to its customers. Disruptions of the computer systems of
InaCom's vendors could have a material adverse effect on InaCom's financial
conditions and results of operations for the period of such disruption.

InaCom believes that the most reasonably likely worst case Y2K scenario is
that a small number of vendors will be unable to supply components for a short
time after January 1, 2000, with a resulting disruption of product shipments and
services to InaCom's customers. As part of its Y2K process, InaCom plans to
develop contingency plans with respect to such scenario and the vendors who are
either unable or unwilling to develop remediation plans to become Y2K compliant.
InaCom is currently developing these plans. InaCom's contingency plans will
include a combination of actions including stockpiling of products and
components and selective resourcing of business to Y2K compliant vendors.

InaCom has incurred approximately $3.3 million of Y2K project expenses as of
December 26, 1998. Future expenses are estimated to include approximately $1.2
million of additional costs. Such cost estimates are based upon presently
available information and may change as InaCom continues with its Y2K project.

RECENT DEVELOPMENTS

The stockholders of InaCom Corp., at a special stockholders' meeting on
February 17, 1999, approved the issuance of InaCom common stock to stockholders
of Vanstar Corporation. On the same day the Vanstar stockholders approved the
merger. As a result, Vanstar became a wholly-owned subsidiary of InaCom on
February 17, 1999 following the foregoing stockholder approvals.

21
<PAGE>
The following supplemental consolidated selected financial data and
supplemental selected quarterly financial data give retroactive effect to the
merger (also see Notes to Consolidated Financial Statements-- Note 2 Business
Combinations):

<TABLE>
<CAPTION>
SUPPLEMENTAL CONSOLIDATED SELECTED FINANCIAL DATA (INCLUDES
RETROACTIVE IMPACT OF VANSTAR MERGER)
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Income statement data:
Revenue.................................. $ 6,887,414 $ 6,735,104 $ 5,316,841 $ 4,084,979 $ 3,231,124
Net earnings (loss) from continuing
operations............................. (8,560) 65,403 47,540 19,221 (504)
Earnings (loss) per share from continuing
operations
Basic.................................. (0.19) 1.66 1.27 0.61 (0.02)
Diluted................................ $ (0.19) $ 1.57 $ 1.21 $ 0.59 $ (0.02)
Balance sheet data:
Total assets............................. $ 1,880,984 $ 2,052,499 $ 1,609,023 $ 1,454,246 $ 1,240,844
Long-term debt, less current maturities
of long-term debt...................... 201,941 143,837 61,196 325,944 379,861
Company-obligated mandatorily redeemable
convertible preferred securities of
subsidiary trust holding solely
convertible subordinated debt
securities of the Company.............. 194,974 194,739 194,518 -- --
Stockholders' equity..................... $ 565,224 $ 533,164 $ 343,801 $ 274,818 $ 157,708
</TABLE>

<TABLE>
<CAPTION>
SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA
(INCLUDES RETROACTIVE IMPACT OF VANSTAR MERGER)
-------------------------------------------------------------------------------
WEIGHTED-AVERAGE
SHARES OUTSTANDING
NET PER SHARE
GROSS NET -------------------- --------------------
REVENUES MARGIN EARNINGS BASIC DILUTED BASIC DILUTED
------------ ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998
First............................... $ 1,671,888 $ 182,650 $ 16,737 $ 0.39 $ 0.37 42,700 48,200
Second.............................. 1,841,387 197,604 11,857 0.27 0.26 43,300 48,900
Third............................... 1,658,116 187,599 (12,887) (0.29) (0.29) 44,600 44,600
Fourth.............................. 1,716,023 190,365 (24,267) (0.54) (0.54) 44,800 44,800
------------ ---------- --------- --------- --------- --------- ---------
Year................................ $ 6,887,414 $ 758,218 $ (8,560) $ (0.19) $ (0.19) 43,900 43,900
------------ ---------- --------- --------- --------- --------- ---------
------------ ---------- --------- --------- --------- --------- ---------
1997
First............................... $ 1,522,324 $ 161,667 $ 11,805 $ 0.31 $ 0.29 38,500 41,800
Second.............................. 1,713,963 186,669 16,009 0.41 0.39 39,000 42,500
Third............................... 1,716,698 192,399 17,686 0.45 0.43 39,300 42,500
Fourth.............................. 1,782,119 202,941 19,903 0.48 0.45 41,300 45,900
------------ ---------- --------- --------- --------- --------- ---------
Year................................ $ 6,735,104 $ 743,676 $ 65,403 $ 1.66 $ 1.57 39,500 43,000
------------ ---------- --------- --------- --------- --------- ---------
------------ ---------- --------- --------- --------- --------- ---------
</TABLE>

22
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Liquidity and Capital Resources" for a discussion of the
Company's occasional use of derivative financial instruments to limit the effect
of increases in the interest rates on certain floating-rate debt.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Consolidated Financial Statements of the Company listed in the index
appearing under Items 14(a)(1) and (2) hereof are filed as part of this Annual
Report on Form 10-K and are incorporated by reference in this Item 8. See also
"Index to Financial Statements" on page 27 hereof. Certain quarterly financial
data is set forth below.
<TABLE>
<CAPTION>
WEIGHTED- AVERAGE CLOSING
STOCK
SHARES OUTSTANDING MARKET
NET PER SHARE PRICE
GROSS NET ------------------------ ---------------------- ---------
REVENUES MARGIN EARNINGS BASIC DILUTED BASIC DILUTED HIGH
--------- --------- ----------- ----- ----------- --------- ----------- ---------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
First...................... $1,000,453 $ 82,037 $ 9,484 $ 0.63 $ 0.54 15,000 19,700 $ 32.75
Second..................... 1,139,253 93,116 11,407 0.74 0.62 15,500 20,200 36.75
Third...................... 1,061,704 97,677 11,035 0.66 0.57 16,700 21,400 33.63
Fourth..................... 1,057,015 109,205 10,658 0.63 0.55 16,800 21,300 20.75
--------- --------- ----------- ----- ----- --------- ----------- ---------
Year....................... $4,258,425 $ 382,035 $ 42,584 $ 2.66 $ 2.26 16,000 20,700 $ 36.75
--------- --------- ----------- ----- ----- --------- ----------- ---------
--------- --------- ----------- ----- ----- --------- ----------- ---------
1997
First...................... $ 841,690 $ 69,089 $ 5,245 $ 0.48 $ 0.42 11,000 13,600 $ 40.13
Second..................... 972,214 81,015 6,709 0.59 0.51 11,400 14,000 32.50
Third...................... 1,013,334 85,893 7,229 0.62 0.55 11,600 14,100 37.63
Fourth..................... 1,069,064 92,995 10,273 0.76 0.64 13,500 17,400 39.38
--------- --------- ----------- ----- ----- --------- ----------- ---------
Year....................... $3,896,302 $ 328,992 $ 29,456 $ 2.48 $ 2.17 11,900 14,600 $ 40.13
--------- --------- ----------- ----- ----- --------- ----------- ---------
--------- --------- ----------- ----- ----- --------- ----------- ---------

LOW
---------

<S> <C>
1998
First...................... $ 23.44
Second..................... 26.00
Third...................... 16.38
Fourth..................... 15.13
---------
Year....................... $ 15.13
---------
---------
1997
First...................... $ 20.63
Second..................... 20.00
Third...................... 31.13
Fourth..................... 24.38
---------
Year....................... $ 20.00
---------
---------
</TABLE>

The Company's Common Stock is listed on the New York Stock Exchange under
the ticker symbol "ICO". Prior to September 12, 1997, the Company's Common Stock
traded in the over-the-counter market and was quoted on the National Association
of Securities Dealers Automated Quotations ("NASDAQ") National Market System
under the symbol "INAC". As of March 12, 1999, the Company estimates there were
16,200 beneficial holders of the Company's Common Stock.

The Company has never declared or paid a cash dividend to stockholders. The
Board of Directors presently intends to retain all earnings to finance the
expansion of the Company's operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash dividends in the future
will depend upon the Company's earnings, capital requirements, and other
factors. The Company's debt agreements restrict the amount of dividends which
may be paid by the Company.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None

23
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Except for the information relating to the executive officers of the Company
set forth in Part I of this Report, the information called for by items 10, 11,
12 and 13 is incorporated herein by reference to the following sections of the
Company's Proxy Statement for its Annual Meeting of Stockholders to be held on
April 22, 1999: Certain Stockholders; Election of Directors; Directors Meetings
and Compensation; Summary Compensation Table; Option Grants in Fiscal Year 1998;
Option Exercises in Fiscal 1998 and Fiscal Year-End Values; and Employment,
Consulting and Other Agreements.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) (1) (2) Financial Statements. See index to consolidated financial statements
and supporting schedules.

(a) (3) Exhibits. See exhibit index, which index is incorporated herein by
reference.

(b) The Company filed a current report on Form 8-K dated October 9, 1998
reporting that InaCom and Vanstar entered into the Merger Agreement by which
InaCom would acquire Vanstar.

The Company filed a current report on Form 8-K dated February 17, 1999
reporting that the InaCom stockholders approved (1) the issuance of InaCom
common stock to Vanstar stockholders pursuant to the Merger Agreement, (2)
an amendment to the InaCom certificate of incorporation to increase the
number of authorized shares of InaCom common stock to 100,000,000 shares and
(3) an increase of an additional 10,000,000 shares of InaCom common stock
authorized for issuance under the 1997 InaCom Stock Plan. The Form 8-K also
reported the consummation of the merger by which Vanstar became a
wholly-owned subsidiary of InaCom. The Company filed an amendment to the
current report on Form 8-K dated February 17, 1999 reporting, among other
matters, (1) supplemental consolidated financial statements that give
retroactive effect to the Merger, (2) the increase of the size of InaCom
Board of Directors from nine to thirteen members and the election of an
additional four members and (3) certain historical financial statements of
Vanstar and combined pro forma information of InaCom and Vanstar.

24
<PAGE>
INACOM CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1998 AND DECEMBER 27, 1997
(WITH INDEPENDENT AUDITORS' REPORT THEREON)

25
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
InaCom Corp.:

We have audited the accompanying consolidated financial statements of InaCom
Corp. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of InaCom Corp.
and subsidiaries at December 26, 1998 and December 27, 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 26, 1998, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

[/S/KPMG PEAT MARWICK LLP]

KPMG Peat Marwick LLP

Omaha, Nebraska
February 19, 1999

26
<PAGE>
INACOM CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
PAGE(S)
-----------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations -
Three-Year Period Ended December 26, 1998.......................................................... 28
Consolidated Balance Sheets -
December 26, 1998 and December 27, 1997............................................................ 29
Consolidated Statements of Stockholders' Equity -
Three-Year Period Ended December 26, 1998.......................................................... 30
Consolidated Statements of Cash Flows
Three-Year Period Ended December 26, 1998.......................................................... 31
Notes to Consolidated Financial Statements
Three-Year Period Ended December 26, 1998.......................................................... 32--45
FINANCIAL STATEMENT SCHEDULE SUPPORTING CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE--Valuation and Qualifying Accounts.......................................................... 46
</TABLE>

All other schedules have been omitted as the required information is
inapplicable or the information is included in the consolidated financial
statements or related notes.

27
<PAGE>
INACOM CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Products.............................................................. $ 3,879,334 $ 3,626,532 $ 2,944,681
Services.............................................................. 379,091 269,770 157,374
------------ ------------ ------------
4,258,425 3,896,302 3,102,055
------------ ------------ ------------
Direct costs:
Products.............................................................. 3,647,653 3,419,366 2,771,650
Services.............................................................. 228,737 147,944 89,629
------------ ------------ ------------
3,876,390 3,567,310 2,861,279
------------ ------------ ------------
Gross margin............................................................ 382,035 328,992 240,776
Selling, general and administrative expenses............................ 275,953 250,097 188,652
------------ ------------ ------------
Operating income........................................................ 106,082 78,895 52,124
Financing expense, net.................................................. 33,785 29,024 20,405
------------ ------------ ------------
Earnings before income taxes............................................ 72,297 49,871 31,719
Income tax expense...................................................... 29,713 20,415 12,986
------------ ------------ ------------
Net earnings............................................................ $ 42,584 $ 29,456 $ 18,733
------------ ------------ ------------
Earnings per share:
Basic................................................................. $ 2.66 $ 2.48 $ 1.80
Diluted............................................................... $ 2.26 $ 2.17 $ 1.66
------------ ------------ ------------
Common shares and equivalents outstanding:
Basic................................................................. 16,000 11,900 10,400
Diluted............................................................... 20,700 14,600 11,900
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

28
<PAGE>
INACOM CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 26, 1998 AND DECEMBER 27, 1997

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 54,416 $ 52,592
Accounts receivable, less allowance for doubtful accounts of $5,732 in 1998 and $5,941
in 1997............................................................................. 408,052 252,067
Deferred income taxes................................................................. 9,068 6,327
Inventories........................................................................... 267,775 429,362
Other current assets.................................................................. 15,568 7,431
------------ ----------
Total current assets................................................................ 754,879 747,779
------------ ----------
Property and equipment, at cost......................................................... 211,585 175,117
Less accumulated depreciation........................................................... 113,383 85,270
------------ ----------
Net property and equipment.............................................................. 98,202 89,847
------------ ----------
Other assets, net of accumulated amortization of $17,601 in 1998 and $17,410 in 1997.... 39,105 34,502
Cost in excess of net assets of businesses acquired, net of accumulated amortization of
$20,063 in 1998 and $11,662 in 1997................................................... 211,353 88,411
------------ ----------
$ 1,103,539 $ 960,539
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 369,492 $ 409,513
Income taxes payable.................................................................. 3,937 5,908
Other current liabilities............................................................. 100,499 74,372
------------ ----------
Total current liabilities............................................................... 473,928 489,793
------------ ----------
Convertible subordinated debentures and other long-term debt............................ 201,500 141,500
Other long-term liabilities............................................................. -- 226
Deferred income taxes................................................................... 2,974 3,804
Stockholders' equity:
Capital stock:
Class A preferred stock of $1 par value. Authorized 1,000,000 shares; none issued... -- --
Common stock of $.10 par value. Authorized 100,000,000 shares; issued 16,768,473
shares in 1998 and 14,825,049 in 1997............................................. 1,677 1,482
Additional paid-in capital............................................................ 274,868 216,671
Accumulated other comprehensive income................................................ 182 --
Retained earnings..................................................................... 149,647 107,063
------------ ----------
426,374 325,216
Unearned restricted stock............................................................. (1,237) --
------------ ----------
Total stockholders' equity.............................................................. 425,137 325,216
------------ ----------
$ 1,103,539 $ 960,539
------------ ----------
------------ ----------
</TABLE>

See accompanying notes to consolidated financial statements.

29
<PAGE>
INACOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER UNEARNED
------------------------ PAID-IN TREASURY COMPREHENSIVE RETAINED RESTRICTED
SHARES AMOUNT CAPITAL STOCK INCOME EARNINGS STOCK
----------- ----------- ----------- ----------- ----------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 30, 1995.... 10,040 $ 1,004 $ 89,528 $ (161) $ -- $ 58,874 $ (470)
Net earnings.................... -- -- -- -- -- 18,733 --
Shares issued in connection with
business combinations.......... 691 69 6,581 -- -- -- --
Shares issued, net of treasury,
under stock option plans, net
of tax effect.................. 113 12 1,956 161 -- -- --
Shares issued as directors'
compensation................... 3 -- 60 -- -- -- --
Shares issued as stock awards,
net of forfeitures............. 3 -- 28 -- -- -- --
Amortization of unearned
restricted stock............... -- -- -- -- -- -- 455
----------- ----------- ----------- ----------- ----- --------- -----------
Balance at December 28, 1996.... 10,850 1,085 98,153 -- -- 77,607 (15)
Net earnings.................... -- -- -- -- -- 29,456 --
Shares issued through public
offering, net of offering
expenditures................... 3,000 300 92,650 -- -- -- --
Shares issued in connection with
business combinations.......... 893 89 24,394 -- -- -- --
Shares issued as directors'
compensation................... 3 -- 66 -- -- -- --
Shares issued under stock
options plans, net of tax
effect......................... 79 8 1,408 -- -- -- --
Amortization of unearned
restricted stock............... -- -- -- -- -- -- 15
----------- ----------- ----------- ----------- ----- --------- -----------
Balance at December 27, 1997.... 14,825 1,482 216,671 -- -- 107,063 --
Comprehensive income, net of
tax:
Net earnings.................. -- -- -- -- -- 42,584 --
Foreign currency translation
adjustment.................. -- -- -- -- 182 -- --
Comprehensive income............
Shares issued in connection with
business combinations.......... 1,785 179 53,789 -- -- -- --
Shares issued in connection with
equity investment.............. 54 5 1,457 -- -- -- --
Shares issued as directors'
compensation................... 6 1 195 -- -- -- --
Shares issued under stock
options plans, net of tax
effect......................... 59 6 1,182 -- -- -- --
Shares issued as stock awards,
net of forfeitures............. 39 4 1,574 -- -- -- (1,529)
Amortization of unearned
restricted stock............... -- -- -- -- -- -- 292
----------- ----------- ----------- ----------- ----- --------- -----------
Balance at December 26, 1998.... 16,768 $ 1,677 $ 274,868 $ -- $ 182 $ 149,647 $ (1,237)
----------- ----------- ----------- ----------- ----- --------- -----------
----------- ----------- ----------- ----------- ----- --------- -----------

TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Balance at December 30, 1995.... $ 148,775
Net earnings.................... 18,733
Shares issued in connection with
business combinations.......... 6,650
Shares issued, net of treasury,
under stock option plans, net
of tax effect.................. 2,129
Shares issued as directors'
compensation................... 60
Shares issued as stock awards,
net of forfeitures............. 28
Amortization of unearned
restricted stock............... 455
------------
Balance at December 28, 1996.... 176,830
Net earnings.................... 29,456
Shares issued through public
offering, net of offering
expenditures................... 92,950
Shares issued in connection with
business combinations.......... 24,483
Shares issued as directors'
compensation................... 66
Shares issued under stock
options plans, net of tax
effect......................... 1,416
Amortization of unearned
restricted stock............... 15
------------
Balance at December 27, 1997.... 325,216
Comprehensive income, net of
tax:
Net earnings.................. 42,584
Foreign currency translation
adjustment.................. 182
------------
Comprehensive income............ 42,766
Shares issued in connection with
business combinations.......... 53,968
Shares issued in connection with
equity investment.............. 1,462
Shares issued as directors'
compensation................... 196
Shares issued under stock
options plans, net of tax
effect......................... 1,188
Shares issued as stock awards,
net of forfeitures............. 49
Amortization of unearned
restricted stock............... 292
------------
Balance at December 26, 1998.... $ 425,137
------------
------------
</TABLE>

See accompanying notes to consolidated financial statements.

30
<PAGE>
INACOM CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................................. $ 42,584 $ 29,456 $ 18,733
Net cash provided (used) by operating activities:
Depreciation and amortization.......................................... 45,753 31,274 21,814
Changes in assets and liabilities, net of effects from business
combinations:
Accounts receivable.................................................. (166,885) (29,028) (123,648)
Inventories.......................................................... 163,295 (29,994) (31,794)
Other current assets................................................. (7,469) (2,954) 97
Accounts payable..................................................... (57,231) (27,943) 71,162
Other liabilities.................................................... 7,726 (10,461) 20,896
Income taxes......................................................... (3,696) (44) 4,451
----------- ----------- -----------
Net cash provided (used) by operating activities........................... 24,077 (39,694) (18,289)
----------- ----------- -----------
Cash flows from investing activities:
Business combinations.................................................... (57,211) (14,850) (23,386)
Additions to property and equipment...................................... (40,174) (50,656) (26,240)
(Advances of) receipts from notes receivable............................. (2,465) (420) 446
Other, including investments in unconsolidated affiliates................ (14,773) (13,044) (11,950)
----------- ----------- -----------
Net cash used in investing activities...................................... (114,623) (78,970) (61,130)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from (payments of) notes payable................................ 60,000 (140,770) 63,094
Proceeds from receivables sold........................................... 31,000 100,000 --
Principal payments on long-term debt..................................... -- -- (30,334)
Proceeds from offering of public stock................................... -- 92,950 --
Proceeds from long-term debt............................................. -- 86,250 55,250
Proceeds from the exercise of employee stock options..................... 1,188 1,416 2,129
----------- ----------- -----------
Net cash provided by financing activities.................................. 92,188 139,846 90,139
----------- ----------- -----------
Change in foreign currency translation adjustment.......................... 182 -- --
----------- ----------- -----------
Net increase in cash and cash equivalents.................................. 1,824 21,182 10,720
Cash and cash equivalents, beginning of year............................... 52,592 31,410 20,690
----------- ----------- -----------
Cash and cash equivalents, end of year..................................... $ 54,416 $ 52,592 $ 31,410
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

31
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) ORGANIZATION

The consolidated financial statements include the accounts of InaCom Corp.
and its wholly-owned subsidiaries ("InaCom" or the "Company"). The Company is a
single-source provider of information technology products and technology
management services designed to enhance the productivity of information systems
primarily of Fortune 1000 clients. The Company offers a comprehensive range of
integrated life cycle services to manage the entire technology life cycle. The
Company sells its products and services through a marketing network of
Company-owned business centers throughout the United States that focus on
serving large corporations. The Company also has a network of value-added
independent dealers that typically have regional, industry, or specific product
focus. The Company has international locations in Central America, South
America, and Mexico and international affiliations in Europe, Asia, the
Caribbean, the Middle East, Africa, and Canada to satisfy the management needs
of its multinational clients. All significant intercompany balances and
transactions have been eliminated in consolidation.

(B) INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of computer hardware, software, voice and data equipment, and
related materials. Periodically, the Company assesses the appropriateness of the
inventory valuations giving consideration to obsolete, slow-moving and
nonsalable inventory.

Other assets include vendor authorization rights, long-term notes
receivable, and long-term investments which are valued at cost. Vendor
authorization rights are being amortized over their contractual life of ten
years.

(D) COST IN EXCESS OF NET ASSETS OF BUSINESS ACQUIRED

The excess of the cost over the fair value of assets of businesses acquired
is being amortized on a straight-line basis over the expected periods to be
benefited, generally over twenty years. The Company assesses the recoverability
of intangible assets by determining whether the amortization of the asset
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.

(E) DEPRECIATION

Depreciation on property and equipment is calculated on the straight-line
method over the estimated useful lives of the respective assets ranging from
three to thirty-nine years.

32
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) INCOME TAXES

Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

(G) REVENUE AND EXPENSE RECOGNITION

The Company recognizes revenue from product sales upon shipment to the
customer. Revenues from consulting and other services are recognized as the
Company performs the services.

(H) ADVERTISING AND PROMOTIONAL COSTS

Advertising and promotional costs are expensed as incurred and amounted to
$13.2 million, $11.1 million, and $8.3 million for the three years ended
December 26, 1998, respectively.

(I) RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to current
year presentation.

(J) MARKETING DEVELOPMENT FUNDS

Primary vendors of the Company provide various incentives, in cash or credit
against obligations, for promoting and marketing their product offerings.
Beginning in May 1998, funds or credits received became primarily based on the
sales of the vendors' products and are earned through performance of specific
marketing programs or upon completion of objectives outlined by the vendors.
Funds or credits earned are applied to direct costs or selling, general and
administrative expenses depending on the objectives of the program. Funds or
credits from the Company's primary vendors typically range from 1% to 5% of
sales.

(K) RISKS AND UNCERTAINTIES

Financial instruments, which potentially expose the Company to a
concentration of credit risk, principally consist of accounts receivable. The
Company sells products to a large number of customers in many different
industries and various geographies. To minimize credit concentration risk, the
Company utilizes several financial services organizations, which purchase
accounts receivable, and the Company performs ongoing credit evaluations of its
customers' financial conditions.

The Company's business is dependent in large measure upon its relationship
with key vendors since a substantial portion of the Company's revenue is derived
from the sales of the products of such key vendors. Termination of, or a
material change to the Company's agreements with these vendors, or a material
decrease in the level of marketing development programs offered by
manufacturers, or an insufficient or interrupted supply of vendors' product
would have a material adverse effect on the Company's financial statements.

33
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

(L) FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, accounts receivable,
accounts payable, and notes payable approximate fair value because of the short
maturity of these instruments. The fair values of the convertible subordinated
debentures are based on the amount of future cash flows associated with each
instrument discounted using the Company's current borrowing rate for similar
debt instruments of comparable maturity. The estimated fair value of the
Company's convertible subordinated debentures at December 26, 1998 and December
27, 1997 approximates book value.

The Company occasionally uses derivative financial instruments to limit the
effect of increases in the interest rates on certain floating-rate debt. The
Company does not hold or issue derivative financial instruments for trading
purposes. On December 26, 1998, the Company had two separate interest rate swap
agreements for an aggregate notional amount of $100.0 million each with
unrelated financial institutions, which were entered into in September 1998 and
November 1998 and resulted in certain floating-rate interest payment obligations
becoming fixed-rate interest payment obligations at 5.2% and 4.7%, respectively.
The September 1998 interest rate swap agreement is a one-year agreement with a
one-year extension at the provider's option. The November 1998 interest rate
swap is a four-year agreement with a call provision at the provider's option
after three years. An interest rate swap agreement entered into in January 1997
carrying a fixed-rate interest payment obligation of 5.8%, for an aggregate
notional amount of $100.0 million expired in January 1998, an interest rate swap
agreement entered into in October 1997 carrying a fixed-rate interest payment
obligation of 5.7%, for an aggregate notional amount of $100.0 million was
terminated in September 1998, and an interest rate swap agreement entered into
in March 1998 carrying a fixed-rate interest payment obligation of 5.7%, for an
aggregate notional amount of $100.0 million was terminated in November 1998. As
a result of the above mentioned swap agreements, financing expense increased by
approximately $0.2 million in 1998. On December 26, 1998, the fair value of the
swap agreements totaled $1.1 million.

(M) CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, the Company
considers cash and temporary cash investments with a maturity of three months or
less to be cash equivalents.

(2) BUSINESS COMBINATIONS

In 1998, the Company completed several business combinations and made
contingent payments in relation to business combinations completed in 1998,
1997, and 1996. The total consideration given in 1998 for business combinations,
including contingent payments, was $57.2 million in cash and 1,785,170 shares of
common stock. The excess purchase price over the estimated fair value of the net
assets acquired was $131.3 million in 1998; the excess is being amortized using
the straight-line method over twenty years. The

34
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(2) BUSINESS COMBINATIONS (CONTINUED)
business combinations, accounted for as purchases, reflect the operations of the
acquired entities since the respective acquisition dates.

During 1997, the Company completed several acquisitions. The total
consideration given for the 1997 acquisitions was $39.4 million, which included
$14.9 million in cash and 892,708 shares of common stock, in transactions
accounted for as purchases. The excess purchase price over the estimated fair
value of the net assets acquired was $40.0 million in 1997; the excess is being
amortized using the straight-line method over twenty years.

During 1996, the Company completed several acquisitions. The total
consideration given for the 1996 acquisitions was $30.5 million, which included
$23.4 million in cash and 327,495 shares of common stock, in transactions
accounted for as purchases. The excess purchase price over the estimated fair
value of the net assets acquired was $24.2 million in 1996; the excess is being
amortized using the straight-line method over twenty years.

In connection with certain acquisitions, the Company may be required to make
additional payments that are contingent upon the acquired businesses achieving
certain performance criteria. The Company made additional payments in 1998 of
$4.2 million in cash and 226,780 shares of common stock and additional payments
in 1997 of $2.3 million in cash. These additional payments have been recorded as
cost in excess of net assets of businesses acquired.

The following unaudited pro-forma financial information presents the
combined results of operations of the Company as if the acquisitions accounted
for as purchase transactions had occurred as of the beginning of the year
preceding the consummation of the transaction after giving effect to certain
adjustments. The pro-forma financial information does not necessarily reflect
the results of operations that would have occurred had the Company and the
acquired entities constituted a single entity during such periods.

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues............................................ $ 4,302,847 $ 4,185,114 $ 3,381,772
Net earnings........................................ 39,822 27,179 18,269
Basic earnings per share............................ 2.40 1.96 1.62
Diluted earnings per share.......................... $ 2.07 $ 1.77 $ 1.51
</TABLE>

Also during 1996, the Company acquired all the issued and outstanding shares
of two network consulting organizations for 272,726 and 90,910 shares of common
stock, respectively, in transactions accounted for as poolings of interests. The
Company's consolidated financial statements for the year ended December 28,
1996, include the fourth fiscal quarter's activity for the acquired businesses.
Prior period financial statements were not restated as the results of operations
would not have been materially different than those previously reported by the
Company. The effect of the non-material poolings was to increase stockholders'
equity by approximately $0.6 million.

On February 17, 1999, subsequent to the Company's fiscal year ended December
26, 1998, the Company issued 0.64 shares of common stock for each share of
Vanstar Corporation common stock outstanding, which was approximately 28.0
million shares of the Company's common stock for all of the outstanding common
stock of Vanstar Corporation ("Vanstar"). Vanstar is a provider of products and

35
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(2) BUSINESS COMBINATIONS (CONTINUED)
services to Fortune 1000 companies and other large enterprises which enable
those customers to build, manage and enhance their personal computer networks.
This business combination will be accounted for as a pooling of interests, and
accordingly, the Company's historical consolidated financial statements
presented in future reports will be retroactively restated to include the
accounts and results of Vanstar.

The following pro-forma data summarizes the combined results of operations
of the Company and Vanstar as if the combination had been consummated on
December 26, 1998.

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues............................................ $ 6,887,414 $ 6,735,104 $ 5,316,841
Net earnings (loss)................................. (8,560) 65,403 47,540
Basic earnings (loss) per share..................... (0.19) 1.66 1.27
Diluted earnings (loss) per share................... $ (0.19) $ 1.57 $ 1.21
</TABLE>

In the first quarter of 1999, the Company expects to record a material
pre-tax charge following consummation of the Vanstar merger to cover (1) the
direct costs of the merger (including the fees of financial advisors, legal
counsel, and independent auditors), (2) the cost of integrating certain aspects
of the businesses of the Company and Vanstar, (3) the cost of canceling certain
purchase commitments, (4) the costs of employee terminations and facility
expenses to eliminate duplicative functions and locations, and (5) other merger
related items. This pre-tax charge is estimated to be in the range of $120.0 to
$155.0 million. The after-tax impact of this charge is estimated to be in the
range of $83.0 to $107.0 million. The estimated charges and nature of the costs
included therein as well as the periods in which these costs are recorded are
subject to change as the Company's integration plan is more fully developed and
more accurate estimates become available.

Prior to the combination, Vanstar's fiscal year ended April 30. In recording
the pooling of interests combination on a pro-forma basis, Vanstar's financial
statements for the twelve months ended December 26, 1998 were combined with the
Company's financial statements for the same period and Vanstar's financial
statements for the years ended April 30, 1998 and 1997 were combined with the
Company's financial statements for the years ended December 27, 1997 and
December 28, 1996, respectively. Vanstar's unaudited results of operations for
the four months ended April 30, 1998 included revenues of $942.0 million and net
earnings of $16.5 million. An adjustment will be made to stockholders' equity as
of the consummation of the merger, to eliminate the effect of including
Vanstar's results of operations for the four months ended April 30, 1998 in both
the years ended December 26, 1998 and December 27, 1997.

36
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(3) PROPERTY AND EQUIPMENT

A summary of property and equipment stated at cost is as follows:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Land, buildings and improvements...................................... $ 24,512 $ 22,763
Furniture, fixtures and equipment..................................... 58,873 51,681
Computer equipment.................................................... 105,135 77,783
Computer parts held for repair and exchange........................... 23,065 22,890
---------- ----------
$ 211,585 $ 175,117
---------- ----------
---------- ----------
</TABLE>

(4) INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.................................................... $ 27,669 $ 19,867 $ 10,195
State...................................................... 5,615 2,969 1,488
Deferred:
Federal.................................................... (2,692) (2,251) 1,209
State...................................................... (879) (170) 94
--------- --------- ---------
$ 29,713 $ 20,415 $ 12,986
--------- --------- ---------
--------- --------- ---------
</TABLE>

The reconciliation of the statutory federal income tax rate and the
effective tax rate are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit........................ 4.3% 3.2% 3.6%
Other............................................................. 1.7% 2.8% 2.4%
--- --- ---
41.0% 41.0% 41.0%
--- --- ---
--- --- ---
</TABLE>

37
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(4) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Valuation reserves..................................................... $ 11,554 $ 6,475
Accrued expenses not deducted until paid............................... 5,601 5,305
Other.................................................................. 1,668 163
--------- ---------
Total deferred tax assets............................................ 18,823 11,943
--------- ---------
Deferred tax liabilities:
Vendor discounts....................................................... 5,453 2,374
Depreciation........................................................... 5,499 5,600
Other.................................................................. 1,777 1,446
--------- ---------
Total deferred tax liabilities....................................... 12,729 9,420
--------- ---------
Net deferred tax assets.................................................. $ 6,094 $ 2,523
--------- ---------
--------- ---------
</TABLE>

There was no valuation allowance for deferred tax assets at December 26,
1998 or December 27, 1997.

(5) NOTES PAYABLE AND CONVERTIBLE SUBORDINATED DEBENTURES

The Company's primary sources of liquidity are provided through a senior
secured revolving credit facility of up to $250.0 million, an asset
securitization program of up to $250.0 million (see Note 6), and convertible
subordinated debentures of $141.5 million.

The senior secured revolving credit facility, which expires in April 2002,
was entered into in April 1998 for $200.0 million and was increased in August
1998 to $250.0 million. Certain inventory and assets of the Company secure the
senior secured revolving credit facility with an interest rate based on LIBOR.
On December 26, 1998, $60.0 million was outstanding under the senior secured
revolving credit facility with an interest rate of 6.6% based on LIBOR. This
amount has been classified as long-term debt based upon the terms of the
agreement. As a result of the February 1999 merger between InaCom and Vanstar,
all amounts outstanding under the Company's $250.0 million senior secured
revolving credit facility were accelerated and immediately due. The Company has
received a written waiver precluding such debt acceleration under the agreement
from the party to this agreement.

38
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(5) NOTES PAYABLE AND CONVERTIBLE SUBORDINATED DEBENTURES (CONTINUED)
redeemed at the option of the holder if there is a Change in Control (as defined
in the indenture) at a price equal to 100% of the principal amount plus accrued
interest at the date of redemption. The February 1999 merger between InaCom and
Vanstar is a Change in Control. As a result, the Company will give notice to the
holders of the 1997 debentures that a holder can require InaCom to repurchase
such holder's debentures at 100% of the principal amount plus accrued and unpaid
interest. The holders may only exercise such repurchase option during the 30-day
period following the date of the notice. Subject to certain conditions, InaCom
will either pay the repurchase price in cash or in InaCom common stock valued at
95% of the average of the closing prices of InaCom common stock for a five
trading day period ending on the third trading day preceding the repurchase
date.

The 1996 debentures are due June 15, 2006 and are convertible into common
stock of the Company at a conversion price of $24.00 per share, subject to
adjustments under certain circumstances. The 1996 debentures are not redeemable
by the Company prior to June 16, 2000; thereafter the Company may redeem the
debentures at various premiums to principal amount. The 1996 debentures may also
be redeemed at the option of the holder if there is a Change in Control (as
defined in the indenture) at a price equal to 100% of the principal amount plus
accrued interest at the date of redemption. The February 1999 merger between
InaCom and Vanstar is a Change in Control. As a result, the Company will give
notice to the holders of the 1996 debentures that a holder can require InaCom to
repurchase such holder's debentures at 100% of the principal amount plus accrued
and unpaid interest. The holders may only exercise such repurchase option during
the 30-day period following the date of notice.

The 1997 and 1996 debentures have been classified as long-term debt as the
Company has the ability and intent to refinance the debentures under its
long-term revolving credit facility or will retire the debentures by issuing
InaCom common stock.

(6) ACCOUNTS RECEIVABLE AND CREDIT ARRANGEMENTS

In July 1998, the Company terminated its existing agreement to sell $200.0
million of accounts receivable, with limited recourse, to an unrelated financial
institution. In conjunction with this termination, on July 1, 1998, the Company,
through a non-consolidated wholly-owned special purpose corporation, entered
into a new agreement to fund up to $250.0 million by selling certain direct
division trade accounts receivable, with limited recourse, to an unrelated
financial institution. In connection with this asset securitization program, the
Company sells on a revolving basis, certain pooled receivables to a special
purpose corporation which in turn sells a percentage ownership interest in the
pooled receivables to a commercial paper conduit sponsored by a financial
institution. These transactions have been recorded as a sale in accordance with
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
The Company is retained as servicer of the pooled receivables. Although
management believes that the servicing revenues earned will be adequate
compensation for performing the services, estimating the fair value of the
servicing asset was not considered practicable. Consequently, a servicing asset
has not been recognized. The gross proceeds resulting from the sale of the
percentage ownership interests in the pooled receivables totaled $231.0 million
and $200.0 million as of December 26, 1998 and December 27, 1997, respectively,
and is reflected as a reduction in accounts receivable. Changes in the amount of
pooled receivables sold are included in cash flows from financing activities in
the consolidated statements of cash flows. The implicit

39
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(6) ACCOUNTS RECEIVABLE AND CREDIT ARRANGEMENTS (CONTINUED)
interest rate on the receivable sales transaction was 5.7% on December 26, 1998.
As a result of the February 1999 merger between InaCom and Vanstar, all amounts
outstanding under the asset securitization agreement were accelerated and
immediately due. The Company has received a written waiver precluding such debt
acceleration under the agreement from the party to this agreement.

The Company also has floor plan agreements to take advantage of vendor
financing programs. The Company has entered into dealer working-capital
financing agreements with several financial services organizations which
purchase, primarily, accounts receivable from the Company. The Company had
contingent liabilities of $1.0 million on December 26, 1998 and $2.4 million on
December 27, 1997 relating to these agreements.

(7) COMPREHENSIVE INCOME

Effective for the year ended December 26, 1998, the Company adopted SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
the reporting and display of comprehensive income in a full set of general
purpose financial statements, however, the adoption of this statement has no
impact on the Company's net income or stockholders' equity. Comprehensive income
includes net income plus items that, under generally accepted accounting
principles, are excluded from net income and are reflected as a component of
equity, such as currency translation adjustments and unrealized gains and losses
on available-for-sale securities. SFAS No. 130 also requires the accumulated
balance of other comprehensive income to be displayed separately from retained
earnings and additional paid-in capital in the equity section of the
consolidated balance sheets. Prior period financial statements have been
reclassified to conform to the requirements of SFAS No. 130.

The components of accumulated other comprehensive income are presented net
of related income tax. The tax benefit related to accumulated foreign currency
translation was $0.1 million for 1998.

(8) LEASES

The Company operates in leased premises which include the general offices,
distribution and customization facilities, and Company-owned branches. Operating
lease terms range from monthly to ten years and generally provide for renewal
options.

Rent expense for operating leases was approximately $20.7 million, $17.9
million, and $12.0 million for the three years ended December 26, 1998,
respectively.

Future minimum operating lease obligations for the years 1999 through 2003
are $17.8 million, $15.2 million, $12.0 million, $9.4 million, and $6.8 million,
respectively. It is anticipated that leases will be renewed or replaced as they
expire such that future annual lease obligations will approximate rent expense
for 1998.

(9) EMPLOYEE BENEFIT PLAN

The Company maintains a qualified savings plan under Section 401(k) of the
Internal Revenue Code (IRC) which covers substantially all full-time employees.
The Company makes annual contributions to the qualified plan, based on
participants' annual pay. Participants may also elect to make contributions to
the

40
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(9) EMPLOYEE BENEFIT PLAN (CONTINUED)
plan. Employee contributions are matched by the Company up to limits prescribed
by the IRC. Company contributions to the plan approximated $7.3 million in 1998,
$5.1 million in 1997, and $3.3 million in 1996.

The Company maintains a nonqualified savings plan for employees whose
benefits under the qualified savings plans are reduced because of limitations
under Federal tax laws. Contributions made to this plan were not material.

(10) LITIGATION

The Company is involved in various claims and legal actions arising in the
ordinary course of business. Management believes that the ultimate resolution of
these matters will not have a material adverse effect on the Company's
consolidated financial statements.

(11) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Financing expenses and income taxes paid are summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Financing expenses paid...................................... $ 33,352 $ 29,537 $ 19,611
Income taxes paid............................................ $ 35,255 $ 20,459 $ 8,176
--------- --------- ---------
--------- --------- ---------
</TABLE>

Components of cash used for acquisitions as reflected in the consolidated
statements of cash flows are summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Fair value of assets acquired, including goodwill........... $ 146,563 $ 94,098 $ 41,965
Liabilities assumed......................................... (35,384) (54,765) (11,929)
Fair value of common stock issued........................... (53,968) (24,483) (6,650)
---------- --------- ---------
Cash paid, net of cash acquired............................. $ 57,211 $ 14,850 $ 23,386
---------- --------- ---------
---------- --------- ---------
</TABLE>

(12) STOCK OPTION AND AWARD PROGRAMS

Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price.
Accordingly, the Company has not recognized compensation expense for its options
granted in 1998, 1997 and 1996. In 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro-forma net earnings
and pro-forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro-forma disclosure provisions
of SFAS No. 123.

41
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(12) STOCK OPTION AND AWARD PROGRAMS (CONTINUED)
The Company has three stock plans approved by the stockholders in 1997, 1994
and 1990, and a nonqualified stock option plan approved by stockholders in 1987.
Options granted under the stock plans may be either nonqualified or incentive
stock options. The option price, vesting period and term under the stock plans
and the nonqualified stock option plan are set by the Compensation Committee of
the Board of Directors of the Company. The option price may not be less than the
fair market value per share at the time the option is granted. The vesting
period of options granted typically ranges from two to five years, and the term
of any option granted may not exceed ten years. The stock plans also permit the
issuance of restricted or bonus stock awards by the Compensation Committee. On
December 26, 1998, the Company had approximately 780,000 shares available for
issuance pursuant to subsequent grants under the plans. On February 17, 1999,
the 1997 stock plan was amended in conjunction with the stockholder approval of
the Vanstar merger. The amendment increased the number of shares issuable under
the 1997 plan by 10 million shares, of which approximately 3.8 million shares
were used to convert Vanstar options assumed in the merger to InaCom options.

Additional information as to shares subject to options is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
---------- -------------
<S> <C> <C>
Options outstanding at December 30, 1995.......................... 799,000 $ 12.76
Granted......................................................... 36,500 35.56
Exercised....................................................... (133,000) 10.77
Canceled........................................................ (21,000) 9.56
---------- ------
Options outstanding at December 28, 1996.......................... 681,500 14.47
Granted......................................................... 710,950 33.23
Exercised....................................................... (78,100) 10.28
Canceled........................................................ (25,200) 34.03
---------- ------
Options outstanding at December 27, 1997.......................... 1,289,150 24.67
Granted......................................................... 21,000 25.70
Exercised....................................................... (59,010) 12.16
Canceled........................................................ (75,865) 30.65
---------- ------
Options outstanding at December 26, 1998.......................... 1,175,275 $ 24.92
---------- ------
---------- ------
Exercisable at December 26, 1998.................................. 712,514 $ 20.93
---------- ------
---------- ------
</TABLE>

<TABLE>
<CAPTION>
EXERCISABLE AT DECEMBER 26,
OPTIONS OUTSTANDING AT DECEMBER 26, 1998
------------------------------------------ 1998
WEIGHTED- WEIGHTED- -------------------------------
AVERAGE AVERAGE WEIGHTED-
REMAINING EXERCISE AVERAGE
RANGE OF OPTION EXERCISE NUMBER OF CONTRACTUAL PRICE NUMBER OF EXERCISE PRICE
PRICE OPTIONS LIFE PER OPTION OPTIONS PER OPTION
- ---------------------------- ---------- --------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 8.00 to 14.63 347,417 4.38 Years $ 11.45 347,417 $ 11.45
19.00 to 25.00 346,750 7.10 Years 22.46 168,728 22.54
31.66 to 36.56 481,108 8.62 Years 36.43 196,369 36.30
---------- --------------- ------ ------- ------
$ 8.00 to 36.56 1,175,275 6.92 Years $ 24.92 712,514 $ 20.93
---------- --------------- ------ ------- ------
---------- --------------- ------ ------- ------
</TABLE>

42
<PAGE>
INACOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(12) STOCK OPTION AND AWARD PROGRAMS (CONTINUED)

Pro-forma information regarding net earnings and earnings per share is
required by SFAS No. 123 and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The following weighted-average fair values for these options were estimated at
the date of grant using a Black-Scholes option-pricing model with these
weighted-average assumptions for 1998, 1997, and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Fair value of options granted during the year............................... $ 10.47 $ 21.51 $ 20.76
Risk-free interest rate..................................................... 4.9% 6.0% 6.1%
Expected dividend yield..................................................... 0.0% 0.0% 0.0%
Expected volatility factor.................................................. 72.7% 96.9% 92.5%
Expected life............................................................... 2.6 Years 3.5 Years 2.5 Years
</TABLE>

Since the Company applies APB Opinion No. 25 in accounting for its plans, no
compensation cost has been recognized for its stock options in the consolidated
financial statements. Had the Company recorded compensation cost based on the
fair value at the grant date for its stock options under SFAS No 123, the
Company's net earnings for 1998, 1997 and 1996 would have been reduced by
approximately 7.8%, 4.4%, and 1.6%, respectively, and the Company's diluted
earnings per share for 1998, 1997,and 1996 would have been reduced by
approximately 7.1%, 4.1%, and 1.3%, respectively.

Pro-forma net earnings reflects only options granted in 1998, 1997, 1996,
and 1995. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro-forma net earnings
amounts presented above, because compensation cost is reflected over the
options' vesting periods for the 1998, 1997, 1996 and 1995 options,
respectively. Compensation costs for options granted prior to January 1, 1995
are not considered.

43
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(13) SEGMENT INFORMATION

The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in 1998 which changes the way the Company
reports information about its operating segments. The information for 1997 and
1996 is presented to conform to the 1998 presentation. The Company has various
management teams and infrastructures which offer different products and
services. The business units have been aggregated into two reportable segments:
products and services. The product segment includes the sales of desktops,
laptops, servers, monitors, printers, operating systems software, phone systems,
voice mail, voice processing, data network equipment and multiple small
office-home offerings. The services segment includes sales of integrated life
cycle services which encompasses: technology planning, procurement, integration,
support, and management. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies.

Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes corporate
related items and items which cannot practically be identified within a business
unit to a reportable segment.

<TABLE>
<CAPTION>
PRODUCT SERVICES OTHER TOTAL
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
1998
Revenues..................................................... $ 3,879,334 $ 379,091 $ -- $ 4,258,425
Segment earnings before taxes................................ 35,436 36,861 -- 72,297
Total assets................................................. 685,797 159,687 258,055 1,103,539
Total current liabilities.................................... $ 413,236 $ 26,346 $ 94,346 $ 533,928

1997
Revenues..................................................... $ 3,626,532 $ 269,770 $ -- $ 3,896,302
Segment earnings before taxes................................ 20,239 29,632 -- 49,871
Total assets................................................. 657,743 166,263 136,533 960,539
Total current liabilities.................................... $ 359,366 $ 26,587 $ 103,840 $ 489,793

1996
Revenues..................................................... $ 2,944,681 $ 157,374 $ -- $ 3,102,055
Segment earnings before taxes................................ 16,787 14,932 -- 31,719
Total assets................................................. 601,971 208,112 37,517 847,600
Total current liabilities.................................... $ 345,354 $ 39,936 $ 226,705 $ 611,995
</TABLE>

44
<PAGE>
INACOM CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(14) EARNINGS PER SHARE

Basic earnings per share are computed using the weighted-average number of
shares of common stock outstanding during the period. Diluted earnings per share
are computed using the weighted-average number of shares of common stock
outstanding and dilutive potential common stock outstanding during the period.
The earnings per share calculations are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net earnings................................................................... $ 42,584 $ 29,456 $ 18,733
--------- --------- ---------
Weighted-average number of common shares outstanding........................... 16,000 11,900 10,400
--------- --------- ---------
Basic earnings per share....................................................... $ 2.66 $ 2.48 $ 1.80
--------- --------- ---------
--------- --------- ---------
DILUTED EARNINGS PER SHARE
Net earnings................................................................... $ 42,584 $ 29,456 $ 18,733
Net after-tax interest savings on convertible subordinated debentures.......... 4,246 2,271 1,057
--------- --------- ---------
Net earnings used in diluted earnings per share calculation.................... $ 46,830 $ 31,727 $ 19,790
--------- --------- ---------
Weighted-average number of common shares outstanding........................... 16,000 11,900 10,400
Dilutive potential common shares from stock options and convertible
subordinated debentures...................................................... 4,700 2,700 1,500
--------- --------- ---------
Shares used in diluted earnings per share calculation.......................... 20,700 14,600 11,900
--------- --------- ---------
Diluted earnings per share..................................................... $ 2.26 $ 2.17 $ 1.66
--------- --------- ---------
--------- --------- ---------
</TABLE>

45
<PAGE>
SCHEDULE

INACOM CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COST AND AMOUNTS BALANCE AT
OF PERIOD EXPENSES WRITTEN OFF END OF PERIOD
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 26, 1998
Allowance for Doubtful Accounts............................ $ 5,941 $ 2,605 $ 2,814 $ 5,732
Fiscal Year Ended December 27, 1997
Allowance for Doubtful Accounts............................ 4,385 3,444 1,888 5,941
Fiscal Year Ended December 28, 1996
Allowance for Doubtful Accounts............................ $ 3,537 $ 1,626 $ 778 $ 4,385

BALANCE AT CHARGED TO
BEGINNING COST AND AMOUNTS BALANCE AT
OF PERIOD EXPENSES WRITTEN OFF END OF PERIOD
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 26, 1998
Inventory Reserve.......................................... $ 4,138 $ 2,500 $ 4,374 $ 2,264
Fiscal Year Ended December 27, 1997
Inventory Reserve.......................................... 3,153 3,205 2,220 4,138
Fiscal Year Ended December 28, 1996
Inventory Reserve.......................................... $ 2,582 $ 3,491 $ 2,920 $ 3,153
</TABLE>

46
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Omaha, State of Nebraska, on the 18th day of March, 1999.

<TABLE>
<S> <C> <C>
INACOM CORP.

By: /s/ Bill L. Fairfield
-----------------------------------------
Bill L. Fairfield,
PRESIDENT
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of InaCom Corp.
and in the capacities indicated on the 18th day of March, 1999.

<TABLE>
<C> <S>
/s/ Bill L. Fairfield President (Principal Executive Officer) and
- ------------------------------------------- Director
Bill L. Fairfield

/s/ David C. Guenthner Executive Vice President and Chief Financial
- ------------------------------------------- Officer (Principal Financial and Accounting
David C. Guenthner Officer)

JOSEPH AUERBACH* Director

RICHARD H. BARD* Director

MOGENS C. BAY* Director

JAMES Q. CROWE* Director

W. GRANT GREGORY* Director

JOSEPH INATOME* Director

RICK INATOME* Director

WILLIAM H. JANEWAY* Director

JOHN R. OLTMAN* Director

GARY SCHWENDIMAN* Director

WILLIAM Y. TAUSCHER* Director

LINDA S. WILSON* Director

*Bill Fairfield, by signing his name hereto, signs this Annual Report on behalf of each of
the persons indicated. A power of attorney authorizing Bill L. Fairfield to sign the
Annual Report on Form 10-K on behalf of each of the indicated directors of InaCom Corp.
has been filed herein as Exhibit 24.

/s/ Bill L. Fairfield
- -------------------------------------------
Bill L. Fairfield,
ATTORNEY-IN-FACT
</TABLE>

47
<PAGE>

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company, as amended to
date, incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K/A dated February 17, 1999.

3.2 Bylaws of the Company, as amended to date, incorporated by reference to
Exhibit 3.2 to the Company's Current Report on Form 8-K/A dated
February 17, 1999.

4.1 Subordinated Indenture dated June 14, 1996 between the Company and
First National Bank of Omaha, and related debenture, with respect to
the Company's 6% convertible subordinated debentures due June 15, 2000,
incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 29, 1996.

4.2 Subordinated Indenture dated September 30, 1997 between the Company and
Norwest Bank Minnesota, National Association and First Supplemental
Indenture thereto dated November 4, 1997 incorporated by reference to
Exhibits 4.1 and 4.2 to the Company's Current Report on Form 8-K dated
November 4, 1997.

4.3 4.50% Subordinated Convertible Debenture, Due November 1, 2004
incorporated by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K dated November 4, 1997.

4.4 Indenture dated as of October 2, 1996 between Vanstar Corporation as
issuer and Wilmington Trust Company as trustee and First Supplemental
Indenture thereto incorporated by reference to Exhibits 4.2 and 4.5 to
the Company's Current Report on Form 8-K/A dated February 17, 1999.

4.5 Form of Vanstar Financing Trust 6 3/4% Preferred Securities
incorporated by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K/A dated February 17, 1999.

4.6 Form of Vanstar Corporation 6 3/4% Convertible Subordinated Debenture
incorporated by reference to Exhibit 4.4 to the Company's Current
Report on Form 8-K/A dated February 17, 1999.

4.7 Registration Rights Agreement between InaCom Corp. and Warburg, Pincus
Capital Company, L.P. dated as of October 8, 1998 incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form 8-K/A
dated February 17, 1999.

10.1 1987 Stock Option Plan of the Company incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 27, 1997.

10.2 1990 Stock Plan of the Company, with amendments thereto, incorporated
by reference to Exhibit 10.5 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.

10.3 1994 Stock Plan of the

Company............................................................... 50
10.4 1997 Stock Plan of the Company, incorporated by reference to Exhibit
10.4 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 27, 1997 and amendment thereto incorporated by reference
to Exhibit 4.1 to the Company's Current Report on Form 8-K dated
February 17, 1999.
</TABLE>

<PAGE>

EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.5 Executive Incentive Plan incorporated by reference to Exhibit 10.5 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997.

10.6 Nonqualified Deferred Compensation Plan of the Company, incorporated by
reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.

10.7 First Amendment to the Nonqualified Deferred Compensation Plan,
incorporated by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 30, 1995.

10.8 Second Amendment to the Nonqualified Deferred Compensation Plan
incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 27, 1997.

10.9 Rick Inatome Consulting Agreement, with amendment thereto, incorporated
by reference to Exhibit 10.11 to the Company's Annual Report on Form
10-K for the fiscal year ended December 30, 1995.

10.10 Executive Death Benefit Plan incorporated by reference to Exhibit 10.10
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997.

10.11 Executive Disability Wage Continuation Plan incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 27, 1997.

10.12 Form of Severance Benefit Agreement between the Company and seven of
its officers, incorporated by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994.

10.13 Restricted Stock Agreements between the Company and Bill L. Fairfield,
incorporated by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.

10.14 Lease Agreement between the Company and Maple Avenue Limited Liability
Company dated September 5, 1994, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended September
24, 1994.

10.15 Separation, Consulting and Noncompetition Agreement dated October 8,
1998 between InaCom Corp. and William Y. Tauscher incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A
dated February 17, 1999.

12 Statement re: Ratio of Earnings to Fixed
Charges................................................................ 57
21 Subsidiaries of the
Company................................................................ 58

23 Consent of KPMG Peat Marwick
LLP.................................................................... 59

24 Powers of
Attorney............................................................... 60

27 Financial Data
Schedule............................................................... 72
</TABLE>

Pursuant to Item 601(h)(4) of Regulation S-K, certain instruments with
respect to the Company's long-term debt are not filed with this Form 10-K. The
Company will furnish a copy of such long-term debt agreements to the Securities
and Exchange Commission upon request.

Management contracts and compensatory plans are set forth as Exhibits
10.1 through 10.15 above.

<PAGE>

EXHIBIT 10.3

INACOM 1994 STOCK PLAN

SECTION 1

NAME AND PURPOSE

1.1 NAME. The name of the plan shall be the InaCom 1994 Stock Plan (the
"Plan").

1.2. PURPOSE OF PLAN. The purpose of the Plan is to foster and promote
the long-term financial success of the Company and increase stockholder value by
(a) motivating superior performance by means of stock incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees and (c) enabling the Company to attract and retain the
services of a management team responsible for the long-term financial success of
the Company.

SECTION 2

DEFINITIONS

2.1 DEFINITIONS. Whenever used herein, the following terms shall have
the respective meanings set forth below:

(a) "Act" means the Securities Exchange Act of 1934, as amended.

(b) "Award" means any Option, Stock Appreciation Right, Restricted
Stock, Stock Bonus, or any combination thereof, including
Awards combining two or more types of Awards in a single
grant.

(d) "Code" means the Internal Revenue Code of 1986, as amended.

(e) "Committee" means the Compensation Committee of the Board,
which shall consist of two or more members, each of whom shall
be "disinterested persons" within the meaning of Rule 16b-3 as
promulgated under the Act.

(f) "Company" means InaCom Corp., a Delaware corporation (and any
successor thereto) and its Subsidiaries.

(g) "Director Award" means an award of Stock granted to each
Eligible Director pursuant to Section 7.1 without any action
by the Board or the Committee.

(h) "Eligible Director" means a person who is serving as a member
of the Board and who is not an Employee.

(i) "Employee" means any employee of the Company or any of its
Subsidiaries.

(j) "Fair Market Value" means, on any date, the average of the
high and low sales prices of the Stock as reported on the
National Association of Securities Dealers Automated Quotation
system (or on such other recognized market or quotation system
on which the trading prices of the Stock are traded or quoted
at the relevant time) on such date. In the event that there
are no Stock transactions reported on such system (or such
other system) on such date, Fair

<PAGE>

Market Value shall mean the average of the high and low sale
prices on the immediately preceding date on which Stock
transactions were so reported.

(k) "Option" means the right to purchase Stock at a stated price
for a specified period of time. For purposes of the Plan, an
Option may be either (i) an Incentive Stock Option within the
meaning of Section 422 of the Code or (ii) a Nonstatutory
Stock Option.

(l) "Participant" means any Employee designated by the Committee
to participate in the Plan.

(m) "Plan" means the InaCom Corp. 1994 Stock Plan, as in effect
from time to time.

(n) "Restricted Stock" shall mean a share of Stock granted to a
Participant subject to such restrictions as the Committee may
determine.

(o) "Stock" means the Common Stock of the Company, par value $.10
per share.

(p) "Stock Appreciation Right" means the right, subject to such
terms and conditions as the Committee may determine, to
receive an amount in cash or Stock, as determined by the
Committee, equal to the excess of (i) the Fair Market Value,
as of the date such Stock Appreciation Right is exercised, of
the number shares of Stock covered by the Stock Appreciation
Right being exercised over (ii) the aggregate exercise price
of such Stock Appreciation Right.

(q) "Stock Bonus" means the grant of Stock as compensation from
the Company, which may be in lieu of cash compensation
otherwise receivable by the Participant or in addition to such
cash compensation.

(r) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such
corporation or of the capital interest or profits interest of
such partnership.

2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.

SECTION 3

ELIGIBILITY AND PARTICIPATION

Except as otherwise provided in Section 7.1, the only persons eligible
to participate in the Plan shall be those Employees selected by the Committee as
Participants.

<PAGE>

SECTION 4

POWERS OF THE COMMITTEE

4.1 POWER TO GRANT. The Committee shall determine the Participants to
whom Awards shall be granted, the type or types of Awards to be granted, and the
terms and conditions of any and all such Awards. The Committee may establish
different terms and conditions for different types of Awards, for different
Participants receiving the same type of Awards, and for the same Participant for
each Award such Participant may receive, whether or not granted at different
times.

4.2 ADMINISTRATION. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company, and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding, and conclusive for all purposes and upon all persons.
Notwithstanding anything else contained in the Plan to the contrary, neither the
Committee nor the Board shall have any discretion regarding whether an Eligible
Director receives a Director Award pursuant to Section 7.1 or regarding the
terms of any such Director Award, including, without limitation, the number of
shares subject to any such Director Award.

SECTION 5

STOCK SUBJECT TO PLAN

5.1 NUMBER. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Awards (including Director Awards) under the Plan may
not exceed 500,000 shares of Stock. The shares to be delivered under the Plan
may consist, in whole or in part, of treasury Stock or authorized but unissued
Stock, not reserved for any other purpose. The maximum number of shares of Stock
with respect to which Awards may be granted to any one Employee under the Plan
is 20% of the aggregate number of shares of Stock available for Awards under
Section 5.1.

5.2 CANCELLED, TERMINATED OR FORFEITED AWARDS. Any shares of Stock
subject to an Award which for any reason are cancelled, terminated or otherwise
settled without the issuance of any Stock shall again be available for Awards
under the Plan.

5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change, (i) the aggregate number of shares of Stock available for
Awards under Section 5.1 and (ii) the number of shares and exercise price with
respect to Options and the number, prices and dollar value of other Awards, may
be appropriately adjusted by the Committee, whose determination shall be
conclusive. If, pursuant to the preceding sentence, an adjustment is made to the
number of shares of Stock authorized for issuance under the Plan, a
corresponding adjustment shall be made to the number of shares subject to each
Director Award thereafter granted pursuant to Section 7.1.

<PAGE>

SECTION 6

STOCK OPTIONS

6.1 GRANT OF OPTIONS. Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Nonstatutory
Stock Options. The Committee shall have complete discretion in determining the
number of Options, if any, to be granted to a Participant. Each Option shall be
evidenced by an Option agreement that shall specify the type of Option granted,
the exercise price, the duration of the Option, the number of shares of Stock to
which the Option pertains, the exercisability (if any) of the Option in the
event of death, retirement, disability or termination of employment, and such
other terms and conditions not inconsistent with the Plan as the Committee shall
determine.

6.2 OPTION PRICE. Nonstatutory Stock Options and Incentive Stock
Options granted pursuant to the Plan shall have an exercise price which is not
less than the Fair Market Value on the date the Option is granted.

6.3 EXERCISE OF OPTIONS. Options awarded to a Participant under the
Plan shall be exercisable at such times and shall be subject to such
restrictions and conditions as the Committee may impose, subject to the
Committee's right to accelerate the exercisability of such Option in its
discretion, including the right to accelerate the exercisability of such Option
in the event of a change-in-control of the Company. Notwithstanding the
foregoing, no Option shall be exercisable for more than ten years after the date
on which it is granted.

6.4 PAYMENT. The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or cash equivalents,
including by personal check, at the time of exercise or pursuant to any
arrangement that the Committee shall approve. The Committee may, in its
discretion, permit a Participant to make payment (i) in Stock already owned by
the Participant valued at its Fair Market Value on the date of exercise (if such
Stock has been owned by the Participant for at least six months) or (ii) by
electing to have the Company retain Stock which would otherwise be issued on
exercise of the Option, valued at its Fair Market Value on the date of exercise.
As soon as practicable after receipt of a written exercise notice and full
payment of the exercise price, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Stock.

6.5 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
the contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded under Section 421 of the Code. In
furtherance of the foregoing, (i) the aggregate Fair Market Value of shares of
Stock (determined at the time of grant of each Option) with respect to which
Incentive Stock Options are exercisable for the first time by an Employee during
any calendar year shall not exceed $100,000 or such other amount as may be
required by the Code, (ii) an Incentive Stock Option may not be exercised more
than three months following termination of employment (except as the Committee
may otherwise determine in the event of death or disability), and (iii) if the
Employee receiving an Incentive Stock Option owns Stock possessing more than 10%
of the total combined voting power of all classes of Stock of the Company, the
exercise price of the Option shall be at least 110% of Fair Market Value and the
Option shall not be exercisable after the expiration of five years from the date
of grant.

SECTION 7

DIRECTOR AWARDS

7.1 AMOUNT OF AWARD. Each Eligible Director shall receive a
non-discretionary grant of Stock in the amount of 100 shares of Stock for each
Board meeting attended by such Eligible Director (other than

<PAGE>

meetings by written consent or telephone communications). Such grants shall be
paid at the time of each annual meeting of stockholders (beginning with the 1995
annual stockholders' meeting) based on the number of Board meetings attended
subsequent to the prior annual stockholders' meeting.

7.2 NO OTHER AWARDS. An Eligible Director shall not receive any other
Award under the Plan.

SECTION 8

STOCK APPRECIATION RIGHTS

8.1 SAR'S IN TANDEM WITH OPTIONS. Stock Appreciation Rights may be
granted to Participants in tandem with any Option granted under the Plan, either
at or after the time of the grant of such Option, subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine. Each Stock Appreciation Right shall only be exercisable to the
extent that the corresponding Option is exercisable, and shall terminate upon
termination or exercise of the corresponding Option. Upon the exercise of any
Stock Appreciation Right, the corresponding Option shall terminate.

8.2 OTHER STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may also
be granted to Participants separately from any Option, subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine.

SECTION 9

RESTRICTED STOCK

9.1 GRANT OF RESTRICTED STOCK. The Committee may grant Restricted Stock
to Participants at such times and in such amounts, and subject to such other
terms and conditions not inconsistent with the Plan as it shall determine. Each
grant of Restricted Stock shall be subject to such restrictions, which may
relate to continued employment with the Company, performance of the Company, or
other restrictions, as the Committee may determine. Each grant of Restricted
Stock shall be evidenced by a written agreement setting forth the terms of such
Award.

9.2 REMOVAL OF RESTRICTIONS. The Committee may accelerate or waive such
restrictions in whole or in part at any time in its discretion.

SECTION 10

STOCK BONUSES

10.1 GRANT OF STOCK BONUSES. The Committee may grant a Stock Bonus to a
Participant at such times and in such amounts, and subject to such other terms
and conditions not inconsistent with the Plan, as it shall determine.

10.2 EFFECT ON COMPENSATION. The Committee may from time to time
determine to grant a Stock Bonus in lieu of salary or cash bonuses otherwise
payable to a Participant. The Fair Market Value of any such Stock Bonus shall be
established on such date or dates as the Committee shall determine.

<PAGE>

SECTION 11

AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

11.1 GENERAL. The Board may from time to time amend, modify or
terminate any or all of the provisions of the Plan, subject to the provisions of
this Section 11.1. The Board may not change the Plan in a manner which would
prevent outstanding Incentive Stock Options granted under the Plan from being
Incentive Stock Options without the consent of the optionees concerned.
Furthermore, the Board may not make any amendment which would (i) materially
modify the requirements for participation in the Plan, (ii) increase the number
of shares of Stock subject to Awards under the Plan pursuant to Section 5.1,
(iii) materially increase the benefits accruing to Participants under the Plan,
or (iv) make any other amendments which would cause the Plan not to comply with
Rule 16b-3 under the Act, in each case without the consent and approval of the
holders of a majority of the outstanding shares of Stock entitled to vote
thereon. No amendment or modification shall affect the rights of any Employee
with respect to a previously granted Award, nor shall any amendment or
modification affect the rights of any Eligible Director pursuant to a previously
granted Director Award.

11.2 TERMINATION OF PLAN. No further Options shall be granted under the
Plan subsequent to December 31, 2003, or such earlier date as may be determined
by the Board.

SECTION 12

MISCELLANEOUS PROVISIONS

12.1 NONTRANSFERABILITY OF AWARDS. No Awards granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. All rights with
respect to Awards granted to a Participant under the Plan shall be exercisable
during his lifetime only by such Participant and all rights with respect to any
Director Awards granted to an Eligible Director shall be exercisable during his
lifetime only by such Eligible Director.

12.2 BENEFICIARY DESIGNATION. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named contingent
or successively) to whom any benefit under the Plan is to be paid or by whom any
right under the Plan is to be exercised in case of his death. Each designation
will revoke all prior designations by the same Participant shall be in a form
prescribed by the Committee, and will be effective only when filed in writing
with the Committee. In the absence of any such designation, Awards outstanding
at death may be exercised by the Participant's surviving spouse, if any, or
otherwise by his estate.

12.3 NO GUARANTEE OF EMPLOYMENT OR PARTICIPATION. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary. No Employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards.

12.4 TAX WITHHOLDING. The Company shall have the power to withhold, or
require a Participant or Eligible Director to remit to the Company, an amount
sufficient to satisfy federal, state, and local withholding tax requirements on
any Award under the Plan, and the Company may defer issuance of Stock until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall impose,
(i) to have shares of Stock otherwise issuable under the Plan withheld by the
Company or (ii) to deliver to the Company previously acquired shares of Stock,
in each case having a Fair Market Value sufficient to satisfy all or part of the
Participant's estimated total federal, state and local tax obligation associated
with the transaction.

12.5 COMPANY INTENT. The Company intends that the Plan comply in all
respects with Rule 16b-3 under the Act, and any ambiguities or inconsistencies
in the construction of the Plan shall be interpreted to give effect to such
intention.

<PAGE>

12.6 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
shares of Stock shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or securities exchanges as
may be required.

12.7 EFFECTIVE DATE. The Plan shall be effective upon its adoption by
the Board subject to approval by the affirmative vote of the holders of a
majority of the shares of Stock present in person or by proxy at a stockholders'
meeting.

12.8 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.

<PAGE>

EXHIBIT 12

INACOM CORP. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
THREE YEAR PERIOD ENDED DECEMBER 26, 1998

1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Earnings ...................................... $ 42,584 $ 29,456 $ 18,733
Add provision for income taxes ................ 29,713 20,415 12,986
-------- -------- --------

72,297 49,871 31,719
-------- -------- --------

Fixed Charges:
Financing expense............................ 33,785 29,024 20,405
Interest factor portion of rentals .......... 6,885 5,981 3,993
-------- -------- --------

Total fixed charges ....................... 40,670 35,005 24,398
-------- -------- --------

Earnings before income taxes and fixed charges $112,967 $ 84,876 $ 56,117
-------- -------- --------

Ratio of earnings to fixed charges ............ 2.78 2.42 2.30
-------- -------- --------
-------- -------- --------
</TABLE>

<PAGE>

EXHIBIT 21

Subsidiaries of InaCom Corp.

NAME STATE OF INCORPORATION
- ---- ----------------------
<S> <C>
InaCom Communications, Inc.................................................................................Nebraska

Inacomp Financial Services, Inc............................................................................Michigan

InaCom Solutions, Inc......................................................................................Delaware

Perigee Communications, Inc...............................................................................Minnesota

Networks, Inc...............................................................................................Florida

Gorham Clark, Inc..........................................................................................New York

InaCom International, Inc..................................................................................Delaware

InaCom Finance Corp........................................................................................Delaware

InaCom Funding Corp........................................................................................Delaware

InaCom Professional Services, Inc..........................................................................Nebraska

Kure Associates, Inc.......................................................................................Nebraska

Office Products of Minnesota, Inc.........................................................................Minnesota

Vanstar Corporation........................................................................................Delaware

Vanstar Financing Trust (indirectly controlled)............................................................Delaware

</TABLE>

<PAGE>

EXHIBIT 23

ACCOUNTANTS' CONSENT

The Board of Directors
InaCom Corp.:

We consent to incorporation by reference in the Registration Statement Nos.
33-21438, 33-38385, 33-42277, 33-81240, 333-25791 and 333-73335 on Form S-8 and
Registration Statement Nos. 333-11687, 333-14299, 333-25823, 333-36815,
333-39545, 333-51651 and 333-57775 on Form S-3 of InaCom Corp. of our report
dated February 19, 1999 relating to the consolidated balance sheets of InaCom
Corp. and subsidiaries as of December 26, 1998 and December 27, 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows and related financial statement schedule for each of the years in the
three-year period ended December 26, 1998, which report is included in the
December 26, 1998 Annual Report on Form 10-K of InaCom Corp.

We also consent to the incorporation by reference in the Registration Statements
set forth in the preceding paragraph of our report dated February 19, 1999, with
respect to the supplemental consolidated balance sheets of InaCom Corp. and
subsidiaries as of December 26, 1998 and December 27, 1997 and the related
supplemental consolidated statements of operations, stockholders' equity and
cash flows and related supplemental financial statement schedule for each of the
years in the three-year period ended December 26, 1998 which report is
incorporated by reference in the December 26, 1998 Annual Report on Form 10-K of
InaCom Corp. The report on the supplemental consolidated financial statements
refers to the opinion of other auditors with respect to Vanstar Corporation a
company acquired in February 1999 in a business combination accounted for as a
pooling of interests. Such statements are included in the consolidated financial
statements of the Company and reflect total assets constituting 53.3 percent as
of December 27, 1997 and total revenues constituting 42.1 percent and 41.7
percent for the years ended December 27, 1997 and December 28, 1996,
respectively, of the related consolidated totals. Those statements were audited
by other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Vanstar, is based solely on
the report of the other auditors.

KPMG Peat Marwick LLP

Omaha, Nebraska
March 18, 1999

<PAGE>

EXHIBIT 24

POWER OF ATTORNEY

The undersigned Director of InaCom Corp., a Delaware corporation,
hereby constitutes and appoints Bill L. Fairfield as Attorney-in-Fact in his
name, place and stead to execute InaCom's Annual Report on Form 10-K for the
fiscal year ended December 26, 1998, together with any and all subsequent
amendments thereof, in his capacity as a director and hereby ratifies all that
said Attorney-in-Fact may do by virtue thereof.

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ JOSEPH AUERBACH
--------------------------
Joseph Auerbach

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ RICHARD H. BARD
------------------------
Richard H. Bard

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ MOGENS C. BAY
------------------------
Mogens C. Bay

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ JAMES Q. CROWE
-----------------------
James Q. Crowe

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ W. GRANT GREGORY
----------------------------
W. Grant Gregory

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ RICK INATOME
-------------------------
Rick Inatome

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ JOSEPH INATOME
--------------------------
Joseph Inatome

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ WILLIAM H. JANEWAY
----------------------------
William H. Janeway

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ JOHN R. OLTMAN
------------------------
John R. Oltman

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ GARY SCHWENDIMAN
-----------------------------
Gary Schwendiman

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ WILLIAM Y. TAUSCHER
------------------------------
William Y. Tauscher

<PAGE>

POWER OF ATTORNEY

In WITNESS WHEREOF, the undersigned has hereunto signed this power of
attorney this 4th day of March, 1999.

/S/ LINDA S. WILSON
-------------------------------
Linda S. Wilson

71
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-26-1998
<CASH> 54,416
<SECURITIES> 0
<RECEIVABLES> 413,784
<ALLOWANCES> 5,732
<INVENTORY> 267,775
<CURRENT-ASSETS> 754,879
<PP&E> 211,585
<DEPRECIATION> 113,383
<TOTAL-ASSETS> 1,103,539
<CURRENT-LIABILITIES> 473,928
<BONDS> 201,500
0
0
<COMMON> 1,677
<OTHER-SE> 423,460
<TOTAL-LIABILITY-AND-EQUITY> 1,103,539
<SALES> 3,879,334
<TOTAL-REVENUES> 4,258,425
<CGS> 3,647,653
<TOTAL-COSTS> 3,876,390
<OTHER-EXPENSES> 275,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,785
<INCOME-PRETAX> 72,297
<INCOME-TAX> 29,713
<INCOME-CONTINUING> 42,584
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,584
<EPS-PRIMARY> 2.66
<EPS-DILUTED> 2.26

<PAGE>

</TABLE>