SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-8328
ANACOMP, INC.
Indiana 35-1144230
12365 Crosthwaite Circle
Poway, California 92064
Registrant's Telephone Number is (619) 679-9797
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 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 whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
The number of shares outstanding of the Common Stock of the registrant on
December 31, 1997, the close of the period covered by this report, was
13,851,927.
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
December 31, 1997 and September 30, 1997................. 3
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 1997 and 1996............ 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 1997 and 1996............ 5
Condensed Consolidated Statements of
Stockholders' Equity
Three Months Ended December 31, 1997 and 1996............ 7
Notes to Condensed Consolidated Financial Statements..... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities.................................... 14
Item 6. Exhibits and Reports on Form 8-K......................... 14
SIGNATURES.................................................................. 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries
December 31, September 30,
(Dollars in thousands, except per share amounts) 1997 1997
- ---------------------------------------------------------------------- ----------------- -------------------
ASSETS (unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents.................................... $ 31,909 $ 58,060
Restricted cash.............................................. 4,552 7,433
Accounts and notes receivable, less allowances for doubtful
accounts of $5,732 and $5,501, respectively............. 63,889 58,628
Current portion of long-term receivables..................... 3,571 3,647
Inventories.................................................. 26,298 25,261
Prepaid expenses and other................................... 7,677 6,853
----------------- -------------------
Total current assets............................................. 137,896 159,882
Property and equipment, at cost less accumulated depreciation and
amortization................................................. 32,628 29,063
Long-term receivables, net of current portion.................... 6,446 6,587
Excess of purchase price over net assets of businesses acquired and
other intangibles, net....................................... 23,688 17,800
Reorganization value in excess of identifiable assets............ 143,651 163,856
Other assets..................................................... 14,360 14,763
================= ===================
$358,669 $391,951
================= ===================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current portion of long-term debt............................ $ 8,234 $ 9,595
Accounts payable............................................. 38,213 39,270
Accrued compensation, benefits and withholdings.............. 15,082 16,481
Accrued income taxes......................................... 14,959 13,471
Accrued interest............................................. 8,892 14,738
Other accrued liabilities.................................... 27,644 34,529
----------------- -------------------
Total current liabilities........................................ 113,024 128,084
----------------- -------------------
Noncurrent liabilities:
Long-term debt, net of current portion....................... 245,446 247,889
Other noncurrent liabilities................................. 1,112 1,458
----------------- -------------------
Total noncurrent liabilities..................................... 246,558 249,347
----------------- -------------------
Stockholders' equity:
Preferred stock, 1,000,000 shares authorized, none issued.... -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
13,851,927 and 13,789,764 issued and outstanding,
respectively............................................. 139 138
Capital in excess of par value............................... 105,870 105,329
Cumulative translation adjustment from May 31, 1996.......... (1,735) (1,128)
Accumulated deficit from May 31, 1996........................ (105,187) (89,819)
----------------- -------------------
Total stockholders' equity....................................... (913) 14,520
================= ===================
$358,669 $391,951
================= ===================
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
(Amounts in thousands, except per share amounts) 1997 1996
- ---------------------------------------------------------------------- -----------------
-------------------
Revenues:
<S> <C> <C>
Services provided............................................ $ 48,507 $ 45,425
Equipment and supply sales................................... 69,307 71,028
----------------- -------------------
117,814 116,453
----------------- -------------------
Operating costs and expenses:
Costs of services provided................................... 27,199 24,107
Costs of equipment and supplies sold......................... 51,071 50,932
Selling, general and administrative expenses................. 26,461 21,448
Amortization of reorganization asset......................... 18,745 19,247
----------------- -------------------
123,476 115,734
----------------- -------------------
Income (loss) from operations before interest, other income and
income taxes................................................. (5,662) 719
----------------- -------------------
Interest income.................................................. 785 984
Interest expense and fee amortization............................ (7,921) (9,802)
Other expense.................................................... (170) (15)
----------------- -------------------
(7,306) (8,833)
----------------- -------------------
Loss before income taxes ........................................ (12,968) (8,114)
Provision for income taxes....................................... 2,400 4,800
================= ===================
Net loss available to common stockholders........................ $ (15,368) $ (12,914)
================= ===================
Weighted average common shares outstanding....................... 13,814 12,818
================= ===================
Earnings (loss) per common share:
Net loss available to common stockholders.................... $ (1.11) $ (1.01)
================= ===================
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
(Dollars in thousands) 1997 1996
- ------------------------------------------------------------------------ ----------------
------------------
Cash flows from operating activities:
<S> <C> <C>
Net loss......................................................... $(15,368) $(12,914)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization.................................. 24,993 22,967
Non-cash compensation.......................................... 251 259
Non-cash charge in lieu of taxes............................... 1,460 2,625
Other non-cash items........................................... 38 184
Restricted cash requirements................................... 2,881 --
Change in assets and liabilities, net of effects from acquisitions:
Increase in accounts and long-term receivables.............. (2,812) (534)
Decrease in inventories and prepaid expenses................ 247 2,318
Increase in other assets.................................... (207) (225)
Increase (decrease) in accounts payable and accrued
expenses................................................. (17,637) 2,205
Decrease in other noncurrent liabilities.................... (338) (605)
---------------- ------------------
Net cash provided by (used in) operating activities....... (6,492) 16,280
---------------- ------------------
Cash flows from investing activities:
Purchases of property, plant and equipment....................... (2,331) (3,202)
Payments to acquire companies and customer rights................ (13,020) (3,379)
---------------- ------------------
Net cash used in investing activities..................... (15,351) (6,581)
---------------- ------------------
Cash flows from financing activities:
Proceeds from exercise of common stock rights ................... -- 24,574
Proceeds from exercise of common stock options .................. 421 --
Principal payments on long-term debt............................. (3,951) (482)
---------------- ------------------
Net cash provided by (used in) financing activities....... (3,530) 24,092
---------------- ------------------
Effect of exchange rate changes on cash.............................. (778) (415)
---------------- ------------------
Increase (decrease) in cash and cash equivalents..................... (26,151) 33,376
Cash and cash equivalents at beginning of period..................... 58,060 38,198
---------------- ------------------
Cash and cash equivalents at end of period........................... $31,909 $71,574
================ ==================
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
(Dollars in thousands) 1997 1996
- ------------------------------------------------------------- ----------------------- ----------------------
Cash paid during the period for:
<S> <C> <C>
Interest............................................. $12,834 $ 269
Income taxes......................................... $ 1,090 $ 2,080
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Three Months Three Months
Ended Ended
December 31, December 31,
(Dollars in thousands) 1997 1996
- ------------------------------------------------------------- ----------------------- ----------------------
Assets acquired by assuming liabilities ................. $ 702 $ 670
Interest on subordinated notes satisfied with
additional notes........................................ $ -- $ 11,960
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1997
Capital in Cumulative
Common excess of Translation Accumulated
(Dollars in thousands) Stock par value Adjustment Deficit Total
- ------------------------------------------------ -------------- ------------ ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1997 $138 $105,329 $(1,128) $(89,819) $ 14,520
Common stock issued for exercise of options 1 541 542
Translation adjustments for period......... (607) (607)
Net loss for the period.................... (15,368) (15,368)
-------------- ------------ ------------- ---------------- -------------
BALANCE AT DECEMBER 31, 1997 $139 $105,870 $(1,735) $(105,187) $ (913)
============== ============ ============= ================ =============
THREE MONTHS ENDED DECEMBER 31, 1996
Capital in Cumulative
Common excess of Translation Accumulated
(Dollars in thousands) Stock par value Adjustment Deficit Total
- ------------------------------------------------ -------------- ------------ ------------- ---------------- -------------
BALANCE AT SEPTEMBER 30, 1996 $101 $80,318 $159 $(22,009) $58,569
Common stock issued for exercise of rights 36 24,538 -- -- 24,574
Translation adjustments for period......... -- -- 344 -- 344
Other...................................... -- -- -- 1 1
Net loss for the period.................... -- -- -- (12,914) (12,914)
============== ============ ============= ================ =============
BALANCE AT DECEMBER 31, 1996 $137 $104,856 $503 $(34,922) $70,574
============== ============ ============= ================ =============
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Anacomp, Inc. and Subsidiaries
NOTE 1. GENERAL:
The Condensed Consolidated Financial Statements ("Financial
Statements") included herein have been prepared by Anacomp, Inc. and
its wholly owned subsidiaries ("Anacomp" or the "Company") without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations; however, the Company believes
that the disclosures are adequate to make the information presented not
misleading. The Financial Statements included herein should be read in
conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997.
In the opinion of management, the accompanying Financial Statements
contain all material adjustments necessary to present fairly the
consolidated financial condition, results of operations, and changes in
financial position and stockholders' equity of Anacomp and its
subsidiaries for the interim periods presented. Certain amounts in the
prior consolidated financial statements included herein have been
reclassified to conform to the current period presentation.
NOTE 2. COMPONENTS OF CERTAIN BALANCE SHEET ACCOUNTS:
Inventories
Inventories are stated at the lower of cost or market, with cost being
determined by methods approximating the first-in, first-out basis. The
cost of the inventories is distributed as follows:
<TABLE>
<CAPTION>
December 31, September 30,
(Dollars in thousands) 1997 1997
----------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
Finished goods....................................... $ 14,326 $ 14,887
Work in process...................................... 3,209 3,299
Raw materials and supplies........................... 8,763 7,075
=================== =================
$ 26,298 $ 25,261
=================== =================
</TABLE>
Property and Equipment
Property and equipment are carried at cost. Depreciation and
amortization of property and equipment are generally provided under the
straight-line method for financial reporting purposes over the shorter
of the estimated useful lives or the lease terms. Tooling costs are
amortized over the total estimated units of production, not to exceed
three years.
Restricted Cash
Restricted cash represents cash reserved as collateral for letters of
credit issued by the Company or cash held in escrow primarily to secure
certain contingent obligations of the Company. The contingent
obligations are primarily related to environmental liabilities and
certain insurance policies.
NOTE 3. INCOME TAXES:
Amortization of "Reorganization value in excess of identifiable assets"
is not deductible for income tax purposes. Accordingly, the Company
incurs income tax expense even though it reports a pre-tax loss due to
such amortization.
For the three months ended December 31, 1997, and 1996, income tax
expense is reported for the Company based upon the estimated effective
tax rates. For fiscal 1998 and 1997, the effective tax rates were 42%
and 43% of pretax income before amortization of reorganization value in
excess of identifiable assets, respectively. Also, for the three months
ended December 31, 1997, and 1996, the limited tax benefit of the U.S.
Federal net operating loss carryforwards ("NOLs") of the Company
resulted in a reduction of $1.5 million and $2.6 million, respectively,
to "Reorganization value in excess of identifiable assets" and does not
reduce income tax expense.
At December 31, 1997, the Company had NOLs of approximately $145
million available to offset future taxable income. This amount will
increase to $195 million as certain temporary differences reverse in
future periods. Usage of these NOLs by the Company is limited to
approximately $4 million annually. However, the Company may authorize
the use of other tax planning techniques to utilize a portion of the
remaining NOLs before they expire. In any event, the Company expects
that substantial amounts of the NOLs will expire unused. NOLs available
to offset taxable income for fiscal year 1998 are estimated to be $11
million.
NOTE 4. EARNINGS (LOSS) PER SHARE:
The computation of basic earnings (loss) per common share is based upon
the weighted average number of common shares outstanding during the
periods. Diluted earnings (loss) per share are the same as basic
earnings per share for the periods presented due to the losses reported
for the periods.
NOTE 5. ACQUISITIONS:
During the three months ended December 31, 1997, the Company acquired
either the customer bases and other specified assets or the stock of
five businesses. Total consideration at closing was $13.7 million, of
which approximately $9.3 million was assigned to excess of purchase
price over net assets acquired.
The aggregate purchase prices consisted of $13.0 million cash at
closing, $0.7 million in assumed liabilities and contingent cash
payments of up to $6.7 million based upon future operating results over
the next 10 years.
<PAGE>
NOTE 6. RIGHTS OFFERING:
On October 30, 1996, the Company completed a rights offering to its
existing shareholders that resulted in the issuance of 3.6 million
shares of common stock. For each share of Anacomp common stock held as
of the close of business on September 18, 1996, the Company distributed
0.36 rights to purchase an additional share of common stock at a
subscription price of $6.875 per share. The Company used the proceeds
of the rights offering, approximately $25 million, for the acquisition
of businesses, assets and technologies.
NOTE 7. SUBSEQUENT EVENTS:
Subsequent to December 31, 1997, the Company acquired two businesses.
Total consideration at closing was $2.6 million, of which
approximately $2.4 million was assigned to excess of purchase
price over net assets acquired.
The purchase price consisted of $2.4 million cash at closing, $0.2
million in assumed liabilities and contingent cash payments of up to
$4.2 million based upon future operating results over the next five
years.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
General
Anacomp reported a net loss of $15.4 million for the three months ended December
31, 1997, compared to a net loss of $12.9 million for the three months ended
December 31, 1996. Included in the net loss for the three months ended December
31, 1997 is non-cash amortization of the Company's reorganization value asset of
$18.7 million. Included in the net loss for the three months ended December 31,
1996 is non-cash amortization of the Company's reorganization value asset of
$19.2 million and receipt of a one-time $3.6 million prepayment relating to a
long-standing OEM purchase agreement with the Eastman Kodak Company ("Kodak").
Pursuant to the 1990 OEM agreement noted above, Kodak was obligated to purchase
an additional 151 XFP 2000 systems by October 1997 or pay a cash penalty to the
Company. In an amendment to this agreement, the Company accepted the $3.6
million prepayment and a commitment to purchase an additional 41 XFP 2000
systems by October 1997. As of December 31, 1997, the purchase commitment was
completed.
Earnings before interest, other expense, taxes, depreciation and amortization
("EBITDA") was $19.1 million for the three months ended December 31, 1997
compared to $23.3 million for the three months ended December 31, 1996.
Excluding the Kodak prepayment, EBITDA was $19.7 million for the prior period.
Total revenues for the first quarter of $117.8 million represents a $1.4 million
increase from the revenues for the first quarter of the prior year. Excluding
the Kodak prepayment from the prior year revenues, the increase was $5.0
million, or 4.4%. A variety of factors contributed to the higher revenues,
including large contracts with new customers, higher volumes in the Company's
COM services business, strong sales of the XFP2000 COM recorder, higher CD
system and services sales and the positive effect of acquisitions.
Cost of services provided as a percentage of services revenue was 56% for the
three months ended December 31, 1997, compared to 53% for the same period of the
prior year. Cost of equipment and supplies sold as a percentage of equipment and
supplies sales was 74% for the three months ended December 31, 1997, compared to
76% for the same period of the prior year, excluding the one-time $3.6 million
payment noted above.
Selling, general and administrative expenses were 22% of revenue in 1997 and 19%
in 1996, excluding the one-time $3.6 million payment noted above. These
increased costs are due to investments in the Company's sales force including
one-time training costs, to costs incurred in the transitioning of acquisitions
into the company and to additional amortization expense associated with
acquisitions subsequent to December 31, 1996.
Interest expense and fee amortization of $7.9 million for the three months ended
December 31, 1997, decreased $1.9 million over the prior year, as a result of
the refinancing of the Company's indebtedness in the second quarter of fiscal
1997.
Products and Services
Output services revenues increased $5.4 million, or 22%, for the three months
ended December 31, 1997 compared to the same three months of fiscal 1997. COM
services volumes increased 13%, while the average selling price decreased 11.0%.
Data center acquisitions in the United States and Europe as well as several
large customer gains have contributed to both the increase in volumes and the
decrease in average selling price. The acquired data centers contributed
volumes, but at somewhat lower selling prices. The large customer gains received
favorable pricing due to their volumes. Gross margins as a percentage of revenue
decreased by 3.2 percentage points due to the aforementioned impact of the lower
average selling price.
Technology services (primarily maintenance) revenues decreased $1.0 million for
the three months ended December 31, 1997 compared to the prior year, primarily
due to the continuing decrease in the population of older generation COM systems
in the customer base. Gross margins as a percentage of revenue improved 2.1
percentage points as a result of decreased personnel and equipment costs.
COM systems revenues for the three months ended December 31, 1997 increased $3.3
million compared to the same period of the prior year. The increase in revenue
is mainly attributable to the sale of 12 XFP COM systems sold to Kodak in the
current period compared to zero systems in the same period of the prior year. In
total, the Company sold or leased 29 XFP COM systems in the current period
compared to 20 XFP COM systems sold in the same period of the prior year.
Digital systems revenues for the three months ended December 31, 1997 were $3.8
million compared to $1.6 in the prior year. The increase was primarily due to
the sales of DataWare CD systems, a product line acquired in January 1997, and
the sale of COLD systems by a business acquired in October 1997.
Micrographics supplies revenues for the three months ended December 31, 1997
decreased $4.9 million compared to the same period of the prior year. This
decrease is due to the decline in original COM film ($2.9 million) and duplicate
film ($2.2 million), which is consistent with long-term trends. Gross margins as
a percentage of revenue were comparable between periods.
Magnetic media revenues for the three months ended December 31, 1997 remained
level compared to the same period of the prior year. Magnetics gross margins as
a percentage of revenue were comparable between periods.
Liquidity and Capital Resources
Anacomp's working capital at December 31, 1997, excluding the current portion of
long-term debt, was $33.1 million, compared to $41.4 million at September 30,
1997. Net cash used in operating activities was $6.5 million for the first three
months of fiscal 1998, compared to net cash provided by operating activities of
$16.3 million in the comparable prior period. The change in net cash provided by
(used in) operating activities was caused by a semi-annual interest payment on
the 10 7/8% Senior Subordinated Notes along with usual working capital changes.
Net cash used in investing activities was $15.4 million in the current period
compared to $6.6 million in the comparable prior period. The change in net cash
used in investing activities was caused by a large acquisition in Switzerland
during the current period.
Net cash used in financing activities was $3.5 million for the three months
ended December 31, 1997, compared to net cash provided by financing activities
of $24.1 million in the comparable prior period.
The Company's cash balance (including restricted cash) as of December 31, 1997
was $36.5 million, compared to $65.5 million at September 30, 1997, primarily
due to cash used for acquisitions. The Company also has availability of $22.6
million on its $25 million revolving credit facility at December 31, 1997.
The Company has significant debt service obligations. The ability of the Company
to meet its debt service and other obligations will depend upon its future
performance and is subject to financial, economic and other factors, some of
which are beyond its control. However, the Company believes that cash on hand
and cash generated from operations will be sufficient to fund its debt service
requirements, acquisition strategies and working capital requirements in the
foreseeable future.
Year 2000
Anacomp has undertaken a comprehensive "Year 2000" program for the products that
it sells or distributes in the marketplace. Under this program, the Company has
sought to assess all of its critical software and hardware products to determine
what remediation, if any, is necessary for the proper functioning of these
systems in the year 2000 and beyond. The Company is also working with its
outside vendors to ensure that they will continue to support the products that
the vendors supply to Anacomp for resale, including the performance by the
vendors of any required Year 2000 remediation.
Anacomp is also in the process of analyzing the software and hardware systems
that it uses internally to determine if there are any Year 2000 issues. Where
necessary, the Company is updating its internal systems and working with the
vendors of any products from whom the Company still receives support.
Based upon its assessment to date, Anacomp believes that it will be able to
complete all required remediation of its supported and internal products in a
timely fashion, and that the effort and the cost of such remediation will not
have a material effect upon the Company's results of operations, liquidity or
capital resources. The Company expenses these costs as they are incurred.
Nevertheless, there can be no assurance that the Company will be able to
complete all of such remediation in the required time frame, or that the Company
will be able to identify all Year 2000 issues before problems manifest
themselves. Further, it is possible that the future level of expenses in the
Company's remediation efforts could rise significantly. Finally, there can be no
assurance that, if left unremedied, the products that the Company sells or
distributes would remain competitive in the marketplace or the products that the
Company uses internally would not have a material effect upon the ability of the
Company to report its financial results.
Anacomp has set a goal of completing its Year 2000 program, including all
required remediation work, by December 31, 1998, both for the products that it
supports and for the products that it uses internally. The Company is hopeful,
however, that it will complete its program for certain of its products before
that internal deadline.
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) Unregistered sales of securities
Pursuant to the 1996 Non-Employee Director Stock Option Plan
(Amended and Restated as of December 1, 1997), non-employee
directors of the Company may elect to receive their annual
retainer in the form of options to acquire Common Stock of the
Company. Pursuant to such elections, during the period covered by
this report, an aggregate of 625 options were granted to one
director in lieu of aggregate cash compensation of $3,125. The
issuance of such options was effected in reliance on the private
placement exception set forth in Section 4(2) of the Securities
Act of 1933, as amended, on the basis of the familiarity of such
directors with the business and affairs of the Company. No
underwriting fees or discounts were applicable to the
transactions. The options are first exercisable six months after
the date of grant and remain exercisable through the tenth
anniversary of the grant date, at an exercise price of $15.125
per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) Employment Agreement, effective October 1, 1997, between the
Company and Ralph W. Koehrer
(27) Financial data schedule (required for electronic filing
only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANACOMP, INC.
/s/ Donald L. Viles
Donald L. Viles
Executive Vice President and
Chief Financial Officer
Dated this 17th day of February, 1998
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
ANACOMP, INC.
("ANACOMP")
with offices located at
11550 North Meridian Street
Suite 600
Carmel, Indiana 46032
and
RALPH W. KOEHRER
("EMPLOYEE")
Date of Agreement: December 7, 1997
Effective Date of Agreement: October 1, 1997
Date of Expiration of Agreement: September 30, 2000
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is entered into between ANACOMP, INC. or any of its
subsidiaries or affiliates (herein referred to as "ANACOMP") and EMPLOYEE. The
full identification of each party, date of Agreement, effective date of
Agreement, and date of expiration of Agreement are all included on the cover
sheet immediately preceding this page which is incorporated herein by this
reference. The following conditions and terms shall apply:
SECTION I
Merger of All Prior Agreements
1.1 Merger. This Agreement between the parties shall supersede and
terminate all prior employment contracts and agreements between EMPLOYEE and
ANACOMP. In the event of any conflict, the terms of this Agreement shall govern.
SECTION II
Scope and Term of Employment, Compensation
2.1 Scope of Employment. ANACOMP and EMPLOYEE mutually agree that
Addendum I, attached hereto and incorporated herein by this reference, is
intended to define the scope of employment, base salary, and incentive
compensation.
2.2 Employment Term. Subject always to termination provisions as
provided elsewhere in this Agreement, the term of this Agreement shall begin on
the Effective Date of Agreement and shall terminate on the Date of Expiration of
Agreement, both as shown on the cover sheet. Unless otherwise terminated as
provided elsewhere herein, this Agreement shall automatically renew after
expiration date on an annual basis unless either party gives the other party
thirty (30) days prior written notice requesting that said Agreement not be
renewed. If this Agreement is not renewed and EMPLOYEE continues working beyond
Termination Date at the request of ANACOMP, said employment shall be on a
month-to-month basis. If, at the expiration of the original three-year term or
any renewal term, ANACOMP declines to renew this Agreement and does not request
that EMPLOYEE continue working, of if ANACOMP terminates the month-to- month
employment basis described in the previous sentence, EMPLOYEE shall be entitled
to all benefits due him under this Agreement and not previously paid, a
severance payment equal to EMPLOYEE's prior twelve months' salary, payable in a
lump sum or biweekly at EMPLOYEE's option, health benefits until other
employment is secured or for twelve months, whichever is sooner, and the
immediate vesting of all of EMPLOYEE's existing already awarded options to
acquire ANACOMP common stock. If, on the other hand, EMPLOYEE elects not to
renew the Agreement, EMPLOYEE shall only be entitled to all benefits due him
under the Agreement through the end of the then term of the Agreement.
2.3 Compensation. Compensation is confidential and is to be discussed
only with the Board of Directors of ANACOMP, as required.
SECTION III
Fringe Benefits
3.1 Benefits. In addition to the regular compensation, EMPLOYEE shall
be entitled to the normally available employee fringe benefits including regular
holidays, vacations and health insurance. ANACOMP, however, reserves the right
to change or alter these fringe benefits from time to time with the
understanding that the EMPLOYEE will be treated on an equal basis with other
employees of similar status.
SECTION IV
Insurance on Employee
4.1 Insurance. EMPLOYEE agrees that ANACOMP may, at its option and
expense, obtain life insurance on the life of the EMPLOYEE and the ownership of
all such policies and the proceeds therefrom shall be the sole property of
ANACOMP. EMPLOYEE agrees to undergo a routine physical examination for insurance
purposes within fifteen (15) days upon the request and at the expense of
ANACOMP.
SECTION V
Termination
5.1 Compensation and Benefits Upon Termination. This Agreement may be
terminated prior to the expiration of the initial term or any renewal term by
any of the following events:
(a) mutual written agreement expressed in a single document signed by
both ANACOMP and EMPLOYEE;
(b) voluntary written resignation by EMPLOYEE given to ANACOMP ninety
(90) days prior to the date of resignation;
(c) death of EMPLOYEE;
(d) written notice of termination by ANACOMP without cause as defined
in Section 5.2;
(e) written notice of termination by ANACOMP with cause as defined in
Section 5.3; or
(f) the occurrence of any of the events specified in Section 5.4.1,
which EMPLOYEE elects to treat as a termination.
(g) the occurrence of any of the events specified in Section 5.4.2,
which EMPLOYEE elects to treat as a termination.
Upon termination for any of the foregoing reasons, EMPLOYEE shall
continue to render his services and shall be paid his regular compensation and
benefits up to the date of termination. If this Agreement is terminated under
Sections 5.1(b), 5.1(c) or 5.1(e), no Severance Allowance (as defined below)
shall be paid to EMPLOYEE (except, with respect to any termination pursuant to
Section 5.1(e), as otherwise provided in Section 5.3). If this Agreement is
terminated under Sections 5.1(a), 5.1(d), 5.1(f) or 5.1(g), then ANACOMP shall
pay to EMPLOYEE a severance allowance equal to the EMPLOYEE's prior twenty-four
months cash compensation ($1 million maximum), payable in a lump sum or biweekly
at EMPLOYEE's option, health benefits until other employment is secured or for
twenty-four months, whichever is sooner, and all of EMPLOYEE's existing already
awarded options to acquire ANACOMP common stock shall immediately vest
(collectively, the "Severance Allowance"). This Severance Allowance is in
addition to the regular compensation and benefits which EMPLOYEE shall receive
up to the date of termination. In the event of such termination, this Agreement
shall be deemed terminated for all purposes except to the extent otherwise
herein provided.
5.2 Termination Without Cause. If ANACOMP concludes that EMPLOYEE's
services are no longer required, this Agreement may be terminated without cause
by giving EMPLOYEE written notice thereof. The noninsurability of EMPLOYEE,
either present or future, does not constitute grounds for termination under this
or any other section of the Agreement. If EMPLOYEE is terminated under this
section, ANACOMP shall pay EMPLOYEE the compensation, benefits and Severance
Allowance provided in Section 5.1 above.
5.3 Termination With Cause.
5.3.1 ANACOMP may immediately terminate this Agreement at any time
with cause upon written notice to the EMPLOYEE specifying the cause and
effective date of termination. As used in this section, "cause" shall mean only
the following:
(i) Inability of EMPLOYEE, as determined by ANACOMP, to perform
EMPLOYEE's assigned duties on a fulltime basis for any continuous period of one
hundred twenty (120) days or a total of one hundred eighty (180) days in any
twelve (12) month period, which period shall commence on the initial date of
this Agreement and every anniversary thereafter.
(ii) The willful and continued failure by EMPLOYEE substantially
to perform his duties and obligations, including the continued failure to meet
business goals, or the willful engagement by EMPLOYEE in misconduct which is
materially injurious to ANACOMP, monetarily or otherwise. For purposes of this
subsection, no act or failure to act on EMPLOYEE's part shall be considered
"willful" unless done or omitted to be done by EMPLOYEE in bad faith and without
reasonable belief that his action or omission was in the best interests of
ANACOMP.
5.3.2 Employee agrees that in the event written notice of
termination is given under this Section 5.3, the EMPLOYEE agrees to treat the
contents of said notice as privileged and EMPLOYEE shall have no action against
ANACOMP or any of its officers, agents or employees due to the contents of said
notice unless the contents are intentionally false and malicious. If EMPLOYEE is
terminated under this Section 5.3, he shall receive no Severance Allowance at
the time of such termination. If EMPLOYEE is given notice of termination under
this Section 5.3 and it is later established that no "cause" existed, EMPLOYEE
shall be entitled to all compensation, benefits and allowances due him for the
period following such alleged termination and through the date of such
determination and shall be entitled to the Severance Allowance, plus legal
interest from the date of termination and all reasonable attorneys' fees
incurred by EMPLOYEE in contesting the notice of termination.
5.4 Demotion, Transfer or Reduction in Compensation, Merger, Transfer
of Assets, Change in Control or Business Discontinuation.
5.4.1 Demotion, Transfer, or Reduction in Compensation.
If any of the following takes place:
(1) EMPLOYEE is demoted, including for these purposes (i) any material
change in the title or duties described in Addendum I hereto, or (ii) any
significant reduction or change by ANACOMP in the functions, duties or
responsibilities of EMPLOYEE under this Agreement,
(2) any reduction in annual base salary (but not including a reduction
in the incentive bonus received by EMPLOYEE resulting from his or ANACOMP's
performance under any of the bonus plans discussed in Addendum II hereof),
EMPLOYEE may, in his sole discretion, elect to treat any such occurrence as a
termination of this Agreement by giving written notice of such election to
ANACOMP, entitling EMPLOYEE to payment of the compensation, benefits and
Severance Allowance provided in Section 5.1 above. In the event ANACOMP disputes
any election made by EMPLOYEE pursuant to this Section 5.4.1, ANACOMP shall
notify EMPLOYEE in writing of such dispute within ten (10) days of receiving
EMPLOYEE's written election and both parties shall proceed to negotiate a
resolution of such dispute in good faith. If ANACOMP does not so notify EMPLOYEE
within the ten (10) day period, ANACOMP shall be deemed to have accepted
EMPLOYEE's election and shall pay all compensation, benefits and Severance
Allowance provided in Section 5.1 above.
5.4.2 Merger, Transfer of Assets, Change in Control or Business
Discontinuation. In the event of any:
(a) merger or consolidation where ANACOMP is not the consolidated
or surviving company and the surviving or resulting company does not expressly
agree to be bound by and have the benefits of the provisions of this Agreement,
or
(b) transfer of all or substantially all of the assets of ANACOMP
and the transferee of ANACOMP's assets does not expressly agree to be bound by
and have the benefits of the provisions of this Agreement, or
(c) change in control of ANACOMP of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 as in effect on the
day thereof (the "Exchange Act"), provided that, without limitation, such a
change in control shall be deemed to have occurred if: (i) during any period of
two (2) consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute a majority thereof,
unless the election or nomination for election by ANACOMP's shareholders of each
new director was approved by a vote of at least 2/3 of the directors who were
directors at the beginning of such period; or (ii) transfer of all or
substantially all of the stock of ANACOMP and the transferee of ANACOMP's stock
does not expressly agree to be bound by and have the benefits of the provisions
of this Agreement, or
(d) discontinuation of the business by ANACOMP, then, (i) EMPLOYEE
may, in his sole discretion, elect to treat any such occurrence as a termination
of this Agreement by giving written notice of such election and immediate
termination of his employment to ANACOMP, and (ii) ANACOMP shall pay EMPLOYEE
within thirty (30) days of EMPLOYEE's election and termination of employment a
payment equal to the Severance Allowance. This Severance Allowance shall be in
addition to the regular compensation and benefits that EMPLOYEE is entitled to
receive up to the date EMPLOYEE's employment with ANACOMP terminates.
5.5 Return of Company Property. EMPLOYEE agrees to return all property
of ANACOMP, including but not limited to, details of equipment, prices,
specifications, programs, customer and prospective customer lists and any other
proprietary data or objects acquired through the EMPLOYEE's employment with
ANACOMP, within seven (7) days after termination of employment, regardless of
the reason therefor.
5.6 Waiver of Claims. All Severance Allowance payments made by ANACOMP
to EMPLOYEE pursuant to Section II hereof or this Section V shall be in full and
complete payment of any and all claims that EMPLOYEE may have against ANACOMP
regarding his employment or the termination thereof, and EMPLOYEE hereby
expressly waives all rights that he may have to any other payments or to bring
any other claims based upon his employment or the termination thereof. Except
for the qualification with respect to employee benefits described in Section II
above, all Severance Allowance payments due from ANACOMP to EMPLOYEE under this
Agreement are absolute, and shall not be diminished or otherwise affected by
virtue of EMPLOYEE's securing alternative employment. At the time he receives
his Severance Allowance, EMPLOYEE agrees that he will execute a release
agreement in favor of ANACOMP.
SECTION VI
Restrictive Covenant and Non-Competition
Confidential Information
6.1 Non-Competition. EMPLOYEE and ANACOMP shall enter into the
"Confidentiality, Non-Competition and Non-Disclosure Agreement" attached hereto
as Addendum III. In the event of any conflict between the terms of this
Agreement and such Non-Disclosure Agreement, this Agreement shall govern. If
EMPLOYEE violates such Non-Disclosure Agreement, ANACOMP shall have the right to
stop all termination payments due under Sections II and/or V hereof, which have
not yet been fully paid to EMPLOYEE.
The provisions of this Section shall not prevent EMPLOYEE from
complying with the terms of this Agreement with ANACOMP nor from owning any
shares of stock of any competitor of ANACOMP so long as such shares are
regularly traded on a recognized security exchange or are listed for trade by
NASDAQ in the Over-the-Counter Market.
SECTION VII
Warranties and Representations
7.1 EMPLOYEE hereby warrants and represents as follows:
(1) That the execution of this Agreement and the discharge of
EMPLOYEE's obligations hereunder will not breach or conflict with any other
contract, agreement or understanding between EMPLOYEE and any other party or
parties.
(2) That EMPLOYEE has ideas, information and know-how relating to the
type of business conducted by ANACOMP and EMPLOYEE's disclosure of such ideas,
information and know-how to ANACOMP will not conflict with or violate the rights
of any third party or parties with respect thereto.
SECTION VIII
Remedies
8.1 The parties agree that the remedy for breach of this Agreement
shall include actions in equity for injunctive relief as well as money damages.
The remedies given to or reserved by each party hereunder shall be cumulative
and not exclusive of any other remedy available under law.
SECTION IX
No Waiver
9.1 The failure of EMPLOYER to terminate this Agreement for the breach
of any condition or covenant herein by the EMPLOYEE shall not affect EMPLOYER's
right to terminate for subsequent breaches of the same or other conditions or
covenants. The failure of either party to enforce at any time or for any period
of time any of the provisions of this Agreement shall not be construed as a
waiver of such provisions or of the right of the party thereafter to enforce
each and every such provision.
ARTICLE X
Benefit
10.1 This Agreement shall bind, benefit, and be enforceable by ANACOMP,
its successors and assigns, and by EMPLOYEE, EMPLOYEE's heirs, executors,
administrators, and legal representatives.
ARTICLE XI
Severability
11.1 Should any provision of this Agreement not be enforceable in any
jurisdiction, the remainder of the Agreement shall not be affected thereby.
ARTICLE XII
Survival
12.1 The obligations contained in Sections II, V, and VI shall survive
the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day, month and year stated on the cover page
of this Agreement, which Agreement shall be effective only upon approval by
ANACOMP, INC., as evidenced by the authorized signature of an officer of ANACOMP
below.
APPROVED BY:
ANACOMP, INC. EMPLOYEE:
By: /Talton R. Embry/ /Ralph W. Koehrer
Talton R. Embry Ralph W. Koehrer
Chairman, Compensation Committee
<PAGE>
ADDENDUM I
TO
EMPLOYMENT AGREEMENT DATED DECEMBER 7, 1997
BETWEEN
ANACOMP, INC. ("ANACOMP")
AND
RALPH W. KOEHRER ("EMPLOYEE")
Scope of Employment
ANACOMP will employ the EMPLOYEE in the capacity of President and Chief
Executive Officer of ANACOMP. EMPLOYEE will be responsible for establishing
ANACOMP's strategic direction and operational priorities, determining the
organizational structure for all of ANACOMP's operating divisions and strategic
business units, establishing all ANACOMP management compensation plans and
submitting such plans to ANACOMP's Board of Directors, and developing ANACOMP's
policies and procedures.
Location
EMPLOYEE will be based at ANACOMP's Poway, California facility.
Base Salary
For all services rendered by EMPLOYEE under this Agreement, EMPLOYEE
shall receive a Base Salary of $400,000 per year payable bi-weekly. This Base
Salary will take effect on October 1, 1997. Base Salary will be reviewed at the
beginning of each fiscal year.
Incentive Compensation
Bonuses
In addition to Base Salary, EMPLOYEE shall receive an annual bonus
opportunity of $266,667 payable quarterly, as more particularly described in the
EMPLOYEE's Compensation Plan attached hereto as Addendum II. This annual bonus
will take effect on October 1, 1997. The annual bonus shall be established at
the beginning of each fiscal year.
Stock Options
ANACOMP has awarded EMPLOYEE with an additional non-qualified stock
option to purchase 42,500 shares of ANACOMP Common Stock at a price of $13.50
per share, vesting on 9/30/98.
<PAGE>
ANACOMP, INC. EMPLOYEE
By: /Talton R. Embry/ /Ralph W. Koehrer/
Talton R. Embry Ralph W. Koehrer
Chairman, Compensation Committee
<PAGE>
ADDENDUM II
TO
EMPLOYMENT AGREEMENT DATED
BETWEEN
ANACOMP, INC. ("ANACOMP")
AND
RALPH W. KOEHRER ("EMPLOYEE")
MANAGEMENT 1A
<TABLE>
<CAPTION>
PERIOD: 10/1/97 TO 9/30/98 NAME: Ralph W. Koehrer
You are assigned the following compensation related items:
(Percentage Total Compensation)
<S> <C> <C> <C> <C> <C>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
1. Base Salary $ 400,000
2. Area Profit Bonus (10%) $ $ $ $ $ 66,667
16,667 16,667 16,667 16,667
Area Profit Goal $ 3,919,000 $ 4,332,000 $ 6,384,000 $ 7,821,000 $ 22,455,000
Area Profit Center(s)
0001
3. Area Revenue Bonus (16%) $ $ $ $ $ 106,667
26,667 26,667 26,667 26,667
Area Revenue Goal $118,675,000 $121,008,000 $127,589,000 $129,628,000 $496,900,000
Area Revenue Center(s)
0001
4. Asset Management Bonus(6%) $ $ $ $ $ 40,000
10,000 10,000 10,000 10,000
Asset Management Target - Inventory $ 3,200,000
Asset Management Center(s) See Attached Schedule for A/R Target Information
0001
5. Corporate EBITDA Bonus (8%) $ $ $ $ $ 53,333
13,333 13,333 13,333 13,333
Corporate EBITDA Goal $ 19,918,000 $ 20,736,000 $ 23,911,000 $ 26,151,000 $ 90,716,000
</TABLE>
COMPENSATION COMPUTATIONS:
AREA PROFIT BONUS: Upon the quarterly closing of the corporate books, the
quarter's actual performance as a percentage of the quarter's quota is
calculated and computed for Anacomp Adjusted Net Income. Payment percentage is
calculated per the attached Accelerator and Decelerator Schedule.
AREA REVENUE BONUS: Upon the quarterly closing of the corporate books, the
quarter's actual performance as a percentage of the quarter's quota is
calculated and computed for Anacomp Total Revenue. Payment percentage is
calculated per the attached Accelerator and Decelerator Schedule.
ASSET MANAGEMENT BONUS: Paid quarterly on Anacomp's quarterly asset management
targets. Asset Management Targets include $3,200,000 in inventory reductions as
well as an Accounts Receivable DSO and Percentage Past Due calculation. Nothing
paid for performance less than 90% of goal. For performance >=90% and <=100% of
goal, payment percentage is calculated as follows: Payment % = 50 +
((Performance % - 90) * 5)
.........Examples Performance Payment
......... < 90% 0%
......... 90% 50%
......... 100% 100%
......... >100% 100%
.........Maximum payment percentage is 100% of bonus amount
CORPORATE EBITDA BONUS: Paid quarterly based on Anacomp, Inc. EBITDA quarterly
goals. Nothing paid for performance less than 90% of goal. Payment percentage is
calculated as follows: Payment % = 50+((Performance % - 90) * 5)
.........Examples Performance Payment
......... < 90% 0%
......... 90% 50%
......... 100% 100%
......... >120% 200%
SCHEDULE OF ACCELERATORS AND DECELERATORS
.........% Goal % Paid Scale
----------------------------------------
.........150 185 1.75
.........140 167 1.75
.........130 150 1.75
.........120 132 1.75
.........110 115 1.75
.........106 108 1.5
.........105 106 1.5
.........104 105 1.5
.........103 103 1
.........102 102 1
.........101 101 1
.........100 100 1
......... 99 99 1
......... 98 98 1
......... 97 97 1
......... 96 95 1.625
......... 95 94 1.625
......... 94 92 1.625
......... 90 84 2
......... 80 64 2
......... 70 44 2
......... 60 24 2
......... 50 4 2
ADMINISTRATIVE PROCEDURES:
1. Achievement numbers for compensation are taken from the Company
financial statements prepared in accordance with Anacomp's policies.
2. There will be no draws against the incentive base.
3. Any Incentive Base payments discussed herein are earned by and payable
only to those managers employed by Anacomp, Inc. on the last day of the
period when such payment would be due.
4. The corporation has the right, at any time, to adjust prospectively a
manager's salary or goals, or to change any other term or condition of
this plan. All elements of the CEO's compensation plan, including
salary, incentive base and goals, need the approval of the compensation
committee of the Board of Directors.
5. Goals are assigned annually. All computations and resulting payments
are based on approved quarterly goals. Each quarter stands alone for
compensation purposes.
<PAGE>
ADDENDUM III
TO
EMPLOYMENT AGREEMENT DATED DECEMBER 7, 1997
BETWEEN
ANACOMP, INC. ("ANACOMP")
AND
RALPH W. KOEHRER ("EMPLOYEE")
In consideration of the employment or continued employment of EMPLOYEE by
Anacomp, Inc. and its successors, assigns, subsidiaries, or duly authorized
representatives (hereinafter collectively referred to as "Anacomp") and of the
award of an option for the purchase of 42,500 shares of Anacomp, Inc. Common
Stock, par value $.01 per share, at a price of $13.50 (price as set on the date
of award), EMPLOYEE hereby agrees as follows:
1. Confidentiality and Trade Secrets. The EMPLOYEE recognizes and acknowledges
that during the course of his/her employment, he/she will have access to and
become acquainted with confidential, trade secret and proprietary information
about Anacomp's businesses and customers (hereinafter collectively referred to
as the "Protected Information"). The parties hereto recognize that the Protected
Information available to EMPLOYEE may pertain both to customers and accounts
handled by EMPLOYEE personally as well as accounts with which EMPLOYEE is not
personally involved. The parties agree that all Protected Information
constitutes a trade secret of Anacomp. Protected Information may include, but is
not limited to, the names, addresses, and requirements of any customer or
prospective customer of Anacomp; the terms (including price terms) of
contractual relations with such customers; special requirements of such
customers; the identities of individual contacts at such customers; and any
other information relating to Anacomp's research, operations, business
relationships, engineering data or results, specifications, concepts, methods,
processes, rates or schedules, vendor information, products or services
(including prices, costs, sales or content), financial information or measures,
business methods, future business plans, data bases, computer programs, designs,
models, operating procedures, and knowledge of the organization. The EMPLOYEE
recognizes and acknowledges that all of the Protected Information is valuable,
special and essential to the successful and effective conduct of Anacomp's
business. Therefore, the EMPLOYEE shall not, during his/her employment with
Anacomp or at any time thereafter, regardless of the reasons for leaving that
employment, use, disclose or communicate, directly or indirectly, any Protected
Information to any third party for any reason or purpose whatsoever, except as
required in the course of his/her employment with Anacomp. Further, upon the
termination of his/her employment with Anacomp, for any reason whatsoever,
EMPLOYEE shall promptly return any and all copies of any written material,
documents, computer hardware and software, tools and equipment belonging to
Anacomp or relating to the business of Anacomp in his/her possession.
2. Non-Competition.
2.1 Non-Competition While an EMPLOYEE or Consultant. While an employee of
Anacomp, or as a consultant to Anacomp after his termination of employment,
EMPLOYEE agrees not to compete in any manner, either directly or indirectly as
an employee, consultant, investor or owner, whether for compensation or
otherwise, with Anacomp, or to assist any other person or entity to compete with
Anacomp. Further, while an employee of Anacomp, EMPLOYEE agrees not to engage in
any other employment without the prior written permission of Anacomp.
3. Non-Solicitation.
3.1 Non-Solicitation of Employees. During the term of his/her employment at
Anacomp and for two (2) years following the termination for any reason of such
employment, EMPLOYEE agrees, either on his/her own behalf or on behalf of any
other person or entity, directly or indirectly, not to hire, solicit, or
encourage to leave the employ of Anacomp any person who is then an employee of
Anacomp. The foregoing restrictions shall apply to employees located in all
geographical areas where EMPLOYEE performed services for Anacomp during the
two-year period prior to his/her termination, including areas for which EMPLOYEE
had supervisory authority.
3.2 Non-Solicitation of Customers. Because of EMPLOYEE's access to
Protected Information of Anacomp, EMPLOYEE agrees that, during the term of
his/her employment at Anacomp and for two (2) years following the termination
for any reason of such employment, he/she will not, directly or indirectly, in
connection with the products and services offered by Anacomp and those products
and services which are competitive with the products and services of Anacomp:
(a) solicit, attempt to obtain, or in any way transact business with any
customers which were customers of Anacomp during his/her employment or at the
time of his/her termination; (b) aid or assist any other party in the
solicitation of any such customers; or (c) interfere with Anacomp's
relationships with any of its customers by soliciting such customers or inducing
them to discontinue their relationships with Anacomp. Products and services
which are competitive with the products and services of Anacomp include but are
not limited to: Micrographics Products (computer output to
microfilm-COM-equipment and software, cameras and film, processors, duplicators,
retrieval and display equipment and software, computer aided
retrieval-CAR-systems, readers, reader printers, other micrographics equipment,
micrographics equipment maintenance, micrographics consumable supplies and
accessories, records management software); Output Services (computer output to
microfilm-COM, source document microfilming, output of data to compact disk,
laser printing, conversion of paper and film to electronic images, micrographic
or electronic imaging system design, consulting and education, system
implementation and integration); Electronic Image Management Products (hardware,
software, magnetics products including tapes, tape drives and optical media
supplies, maintenance of electronic imaging equipment); Electronic Image
Management Services (conversion of computer generated data to optical or laser
disk, COLD, electronic document imaging and workflow, conversion of paper
documents to electronic images, system design consulting and education, system
implementation and integration, conversion of microfilm to electronic images);
and Archival Services (storage, management and retrieval of all forms of
customer information and business records, including but not limited to paper,
microfiche, magnetic media and digital storage media). The foregoing
restrictions shall apply to all geographical areas where EMPLOYEE performed
services for Anacomp during the two-year period prior to his/her termination,
including areas for which EMPLOYEE had supervisory authority.
4. Remedies. EMPLOYEE acknowledges that compliance with Sections 1, 2 and 3 of
this Agreement is necessary to protect the business and good will of Anacomp and
that a breach of those sections will irreparably and continually damage Anacomp
for which money damages may not be adequate. Therefore, EMPLOYEE agrees that, in
the event he/she breaches or threatens to breach any of these Sections, Anacomp
shall be entitled to both a preliminary or permanent injunction in order to
prevent the continuation of such harm and money damages insofar as they can be
determined. Nothing in this Agreement, however, shall be construed to prohibit
Anacomp from also pursuing any other remedy, the parties having agreed that all
remedies shall be cumulative.
5. Inventions. EMPLOYEE agrees that all inventions, improvements, discoveries,
systems, techniques, ideas, processes, programs, and other things of value made
or conceived in whole or in part by EMPLOYEE while an employee of Anacomp shall
be and remain the sole and exclusive property of Anacomp, and he/she will
disclose all such things of value to Anacomp and will cooperate with Anacomp to
insure that the ownership by Anacomp of such things of value is protected.
Nothing in this Section is meant to apply to an invention for which no
equipment, supplies, facility or trade secret information of Anacomp was used,
which was developed entirely on EMPLOYEE's own time, and which does not relate
to Anacomp's business, research, development or from any work performed by
EMPLOYEE for Anacomp.
6. Employment. This Agreement does not confer upon EMPLOYEE any rights to
continue in the employ of Anacomp or affect in any way Anacomp's right to
terminate his/her employment at any time.
7. Severability. If any provision or clause of this Agreement, or portion
thereof, shall be held by any court or other tribunal of competent jurisdiction
to be illegal, void or unenforceable in such jurisdiction, the remainder of such
provisions shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. It is the intention of the parties that, if any
court construes any provision or clause of this Agreement, or any portion
thereof, to be illegal, void or unenforceable because of the duration of such
provision or the area or matter covered thereby, such court shall reduce the
duration, area or matter of such provision and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
8. Binding Effect. The rights and obligations of this Agreement shall inure to
and be binding upon the parties and their respective heirs, successors and
assigns.
9. Attorneys' Fees. In the event of any dispute, proceeding or litigation
concerning any controversy, claim or dispute between the parties hereto, arising
out of or relating to this Agreement or the interpretation or breach thereof,
each party shall pay its own expenses, attorneys' fees, expert fees, and costs
incurred therein or in the enforcement or collection of any judgment or award
rendered therein.
10. No Waiver. Anacomp's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, or prevent
Anacomp thereafter from enforcing each and every provision of this Agreement.
11. Entire Agreement. This Agreement represents the entire agreement between
EMPLOYEE and Anacomp, with respect to the subject matter hereof, superseding all
previous oral and written communications, representations, understandings or
agreements.
12. EMPLOYEE's Understanding. EMPLOYEE represents and warrants that he/she has
read each and every term of this Agreement and understands the serious duties
and obligations imposed upon EMPLOYEE thereby. EMPLOYEE further represents and
warrants that he/she has had full and ample opportunity to question Anacomp
about this Agreement and each of its terms and to consult an attorney regarding
this Agreement and each of its terms. EMPLOYEE represents that he/she is free to
enter this Agreement and to perform each of its terms and covenants. EMPLOYEE
represents that he/she is not restricted or prohibited, contractually or
otherwise, from entering into and performing this Agreement, and that his or her
execution and performance of this Agreement is not a violation or breach of any
other agreement between EMPLOYEE and any other person or entity.
DATED: January 27, 1998
ANACOMP, INC.
By: /William C. Ater/ /Ralph W. Koehrer/
William C. Ater EMPLOYEE (signature)
Its: Senior Vice President & CAO Ralph W. Koehrer
----------------
.... EMPLOYEE (printed)
......... President & Chief Executive Officer
-----------------------------------
......... Current position
......... Poway, California
-----------------
......... Current location
......... ###-##-####
-----------
......... Social Security Number
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANACOMP,
INC.'S DECEMBER 31, 1997 FORM 10-Q QUARTERLY REPORT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 36,461
<SECURITIES> 0
<RECEIVABLES> 69,621
<ALLOWANCES> 5,732
<INVENTORY> 26,298
<CURRENT-ASSETS> 137,896
<PP&E> 42,413
<DEPRECIATION> 9,785
<TOTAL-ASSETS> 358,669
<CURRENT-LIABILITIES> 104,790
<BONDS> 253,680
0
0
<COMMON> 139
<OTHER-SE> (1,052)
<TOTAL-LIABILITY-AND-EQUITY> 358,669
<SALES> 69,307
<TOTAL-REVENUES> 117,814
<CGS> 51,071
<TOTAL-COSTS> 125,876
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,921
<INCOME-PRETAX> (12,968)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> (15,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,368)
<EPS-PRIMARY> (1.11)
<EPS-DILUTED> (1.11)
</TABLE>
