SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1994
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 1-9348
QMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0737870
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE MAGNUM PASS, MOBILE, AL 36618
(Address of principal executive offices) (Zip Code)
(205) 633-4300
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the
latest practicable date 10,667,055 at July 29, 1994.
QMS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(unaudited) as of July 1, 1994 and
October 1, 1993 3 - 4
Condensed Consolidated Statements of Operations
(unaudited) for the three and nine months ended
July 1, 1994 and July 2, 1993 5
Condensed Consolidated Statements of Cash Flows
(unaudited) for the nine months ended
July 1, 1994 and July 2, 1993 6
Notes to Condensed Consolidated Financial Statements
(unaudited) for the nine months ended
July 1, 1994 and July 2, 1993 7
Computation of Earnings Per Common Share 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 10
PART II - OTHER INFORMATION 11
Item 1.Legal Proceedings
Item 2.Changes in Securities
Item 3.Defaults upon Securities
Item 4.Submission of Matters to a Vote of Security Holders
Item 5.Other Information
Item 6.(a) Exhibits
(b) Reports on Form 8 - K
SIGNATURES 12
QMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
as of July 1, 1994 and October 1, 1993
(Unaudited)
July 1, October 1,
in thousands 1994 1993
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 4,768 $ 3,582
Trade Receivables (less allowance for
doubtful accounts of $523 at July 1994
and $580 at October 1993) 48,096 39,471
Inventories, Net (Note 3) 63,085 70,461
Other Current Assets 6,277 7,806
-------- -------
Total Current Assets 122,226 121,320
-------- --------
PROPERTY, PLANT AND EQUIPMENT 70,914 66,440
Less Accumulated Depreciation 40,377 33,774
-------- --------
Property, Plant and Equipment, Net 30,537 32,666
-------- --------
OTHER ASSETS 17,006 16,231
-------- --------
TOTAL ASSETS $169,769 $170,217
======== ========
See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of July 1, 1994 and October 1, 1993
(Unaudited)
July 1, October 1,
in thousands 1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and Notes Payable $ 16,776 $ 11,060
Other 33,326 31,901
-------- -------
Total Current Liabilities 50,102 42,961
-------- --------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 32,207 41,527
STOCKHOLDERS' EQUITY 87,460 85,729
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $169,769 $170,217
======== ========
See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JULY 1, 1994 AND JULY 2, 1993
(Unaudited)
Three Months Ended Nine Months Ended
July 1, July 2, July 1, July 2,
in thousands, except 1994 1993 1994 1993
per share amounts
NET SALES $ 73,538 $ 70,455 $215,474 $ 230,219
COST OF GOODS SOLD 49,790 47,725 144,624 153,639
-------- -------- -------- --------
GROSS PROFIT 23,748 22,730 70,850 76,580
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 21,617 22,953 66,025 70,288
OPERATING INCOME (LOSS) 2,131 (223) 4,825 6,292
OTHER INCOME (EXPENSE)
Interest Income 19 79 52 401
Interest Expense (780) (824) (2,489) (2,450)
Miscellaneous 376 (951) (374) (1,341)
-------- -------- -------- --------
Total Other Expense (385) (1,696) (2,811) (3,390)
INCOME (LOSS) BEFORE INCOME
TAXES 1,746 (1,919) 2,014 2,902
INCOME TAX PROVISION (BENEFIT) 541 (682) 624 812
-------- -------- -------- --------
NET INCOME (LOSS) $ 1,205 ($1,237) $ 1,390 $ 2,090
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON
SHARE (Note 2)
Primary $0.11 ($0.11) $0.13 $0.19
Fully Diluted $0.11 ($0.11) $0.13 $0.19
SHARES USED IN PER SHARE
COMPUTATION (Note 2)
Primary 10,721 10,851 10,739 10,815
Fully Diluted 10,721 10,851 10,739 10,850
See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 1, 1994 AND JULY 2, 1993
(Unaudited)
July 1, July 2,
in thousands 1994 1993
Cash Flows from Operating Activities:
Net Income $ 1,389 $ 2,090
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating
Activities:
Depreciation of Property, Plant and
Equipment 7,123 6,791
Amortization of Capitalized and Deferred
Software 8,736 5,663
Provision for Losses on Inventory 4,309 (1,876)
Other 236 328
Changes in Assets and Liabilities that
provided (used) cash:
Trade Receivables (8,749) 3,016
Inventories 3,067 (12,954)
Accounts Payable 5,716 2,091
Income Tax Payable 849 (1,017)
Other (1,391) (1,286)
-------- --------
Net Cash Provided by Operating
Activities 21,285 2,846
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment (5,242) (5,622)
Additions to Capitalized and Deferred
Software Costs (6,216) (7,726)
Other 135 0
-------- --------
Net Cash Used in Investing Activities (11,323) (13,348)
Cash Flows from Financing Activities:
Proceeds from Long-Term Debt and Capital
Leases 825 14,441
Payments of Long-Term Debt and Capital
Leases, including Current Maturities (9,945) (8,236)
Purchase of Treasury Stock 0 (307)
Proceeds from Stock Options Exercised 19 545
Other 0 (661)
-------- --------
Net Cash Used in Financing Activities (9,101) (5,782)
Effect of Exchange Rate Changes on Cash 325 (436)
-------- --------
Net Change in Cash and Cash Equivalents 1,186 (5,156)
Cash and Cash Equivalents at Beginning of
Period 3,582 8,086
-------- --------
Cash and Cash Equivalents at End of Period $ 4,768 $ 2,930
======== =========
See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 1, 1994 AND JULY 2, 1993
(Unaudited)
1. MANAGEMENT OPINION
In the opinion of management, the condensed consolidated financial
statements reflect all adjustments necessary to present fairly the
financial position of the Company as of July 1, 1994 and October 1,
1993, the results of operations for the three-month and nine-month
periods ended July 1, 1994 and July 2, 1993 and changes in cash flows
for the nine months ended July 1, 1994 and July 2, 1993. The results
of operations for the nine months ended July 1, 1994 are not
necessarily indicative of the results to be expected for the fiscal
year ending September 30, 1994.
2. PER COMMON SHARE COMPUTATIONS
Per share computations are based on the weighted average number of
common shares outstanding during the period and the dilutive effect of
the assumed exercise of stock options.
3. INVENTORIES
Inventories at July 1, 1994 and October 1, 1993 are summarized as
follows (in thousands):
July 1, October 1,
1994 1993
Raw materials $ 21,286 $ 26,104
Work in process 4,024 4,052
Finished goods 44,038 46,609
Inventory reserve (6,263) (6,304)
-------- --------
TOTAl $ 63,085 $ 70,461
======== ========
4. COMMITMENTS AND CONTINGENCIES
At October 1, 1993, the Company had a commitment of approximately $31
million under contracts to purchase print engines. As of July 1, 1994
the Company had a commitment of approximately $22.9 million to
purchase print engines under purchase contracts.
The Company was contingently liable for approximately $3.8 million as
of July 1, 1994. This was principally the result of letters of credit
issued in the normal course of business for the purchase of inventory.
QMS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(Unaudited)
Three Months Ended Nine Months Ended
July 1, July 2, July 1, July 2,
in thousands, except 1994 1993 1994 1993
per share amounts
Net Income $ 1,205 ($ 1,237) $ 1,390 $ 2,090
======== ======== ======== ========
Shares used in this
computation:
Weighted average common
shares outstanding 10,708 10,709 10,707 10,688
Shares applicable to stock
options, net of shares
assumed to be purchased
from proceeds at average
market 13 142 32 127
-------- -------- -------- --------
Total shares for earnings per
common share computation
(primary) 10,721 10,851 10,739 10,815
Shares applicable to stock
options in addition to
those used in primary
computation due to the
use of period-end market
price when higher than
average 0 0 0 35
-------- -------- -------- --------
Total fully diluted shares 10,721 10,851 10,739 10,850
======== ======== ======== ========
Earnings per common share-
primary $0.11 ($0.11) $0.13 $0.19
======== ======== ======== ========
Earnings per common share-
fully diluted $0.11 ($0.11) $0.13 $0.19
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Table 1: Net Sales Comparisons for Key Channels of Distribution
Quarter ended July 1, 1994
(000) 1994 1993 Difference
U.S. Direct $ 14,481 $ 6,790 $ 7,691
U.S. Reseller 6,281 14,472 (8,191)
QMS Europe 19,659 18,050 1,609
QMS Japan 8,951 6,691 2,260
All Other 24,166 24,452 (286)
------- -------- --------
Total $ 73,538 $ 70,455 $ 3,083
Nine months ended July 1, 1994
(000) 1994 1993 Difference
U.S. Direct $ 35,457 $ 24,526 $ 10,931
U.S. Reseller 25,838 50,278 (24,440)
QMS Europe 58,489 67,371 (8,882)
QMS Japan 21,673 12,743 8,930
All Other 74,017 75,301 (1,284)
------- -------- --------
Total $215,474 $230,219 $(14,745)
Net sales for the third quarter of 1994 increased 4.4% from the net sales
of the corresponding fiscal quarter of 1993. The significant sales by key
distribution channels in the third quarter of fiscal 1994 (the three months
ended July 1, 1994) compared to the third quarter of fiscal 1993 (the three
months ended July 2, 1993) and the nine-month periods ending on the same
dates, respectively, are shown in Table 1 above. In both comparisons,
fiscal 1994 sales through the United States reseller channel are
significantly below the fiscal 1993 net sales achievement. The United
States reseller channel is the Company's primary method of distribution for
four page-per-minute and eight page-per-minute monochrome laser printers
and color printers. As was experienced in the first and second quarters
of fiscal 1994, new competition in these product classes is the primary
cause of the lower net sales. In QMS Europe, net sales for the third
quarter of fiscal 1994 increased 8.9% over the third quarter sales of 1993;
however, sales for the nine-month period in 1994 decreased by 13.2%
compared to the same period in 1993. Net sales are principally generated
in Europe from the lower end of the Company's monochrome product offerings
and color laser and thermal transfer printer products which are sold
through distributors. Although competitive pressures and poor economic
conditions continue to affect the Company's sales in the European market,
the increase in net sales for the third quarter of 1994 compared to the
third quarter of 1993 is directly related to sales of the magicolor (TM)
color laser printer, which was introduced to this market at the end of the
quarter. The United States direct channel is the Company's primary method
of distribution for the higher end of the Company's product offerings to
major corporate accounts and governmental agencies. The net sales
improvements in the United States direct sales channels for the third
quarter and nine-month period of 1994 compared to 1993 can be attributed to
sales of products recently introduced into the channel which include the
QMS 4525, ColorScript Laser 1000 and magicolor (TM) color laser printer, in
addition to increased sales of the QMS 3225, QMS 2025 and QMS 1725; all of
these are higher end products sold through the channel. Net sales in QMS
Japan increased 33.8% for the third quarter of 1994 compared to the third
quarter of 1993 and 70.1% for the nine-month period of 1994 compared to the
nine-month period in 1993. The increased QMS Japan net sales came from
significant improvements in the sales of the QMS 860, an eight page-per-
minute monochrome printer which supports the Japanese language
requirements. In addition, QMS Japan has realized notable sales gains in
the ColorScript Laser 1000, QMS 1725, QMS 3225, and in the aftermarket
supplies business.
Overall, the Company's gross profit as a percentage of sales remained the
same at 32.3% in the three-month comparison and declined slightly from
33.3% to 32.9% in the nine-month comparison. This decline is primarily due
to lower overall sales volumes which reduced the Company's ability to
absorb fixed manufacturing costs and because of increased competition
principally in the United States reseller channel and in Europe which
resulted in the need to reduce some sales prices. The Company has
undertaken a number of actions to reduce the total costs associated with
product procurement and conversion to finished goods; however these costs
reductions, to date, have not been sufficient to offset the impact of lower
net sales. The Company purchases print engine mechanisms and memory
components from Japanese suppliers. Fluctuations in foreign currency
exchange rates will affect the prices of these products. Negative impacts
can be mitigated through yen-sharing arrangements with suppliers, foreign
exchange contracts, price negotiations and the natural hedge provided by
sales denominated in the yen; however, severe price increases resulting
from exchange rate fluctuations could develop which would adversely affect
operating results.
Selling, general and administrative expenses were managed down in the third
quarter comparison by 5.8% and in the nine-month comparison by 6.1%. These
improvements are a direct result of the cost reduction measures that the
Company initiated during the fourth quarter of fiscal 1993 and continued
emphasis of expense containment. The third quarter of fiscal 1994 is the
third consecutive quarter in which total selling, general and
administrative expenses have been reduced.
Total other expense decreased by $1.3 million in the three-month comparison
and $.6 million in the nine-month comparison. These differences result
primarily from changes in the translation of balance sheet elements that
were denominated in foreign currencies.
The Company's effective tax rate was 31% for the third quarter of fiscal
1994 and for the nine-month period of fiscal 1994. The effective tax rate
for the entire fiscal year 1993 was 31%.
Liquidity and Capital Resources
During the third quarter of fiscal 1994 the Company's financing came
principally from operations and capital leases. The Company's net working
capital was $72.1 million at July 1, 1994 compared to $78.4 million at
October 1, 1993.
The Company has reduced long-term debt levels for the fourth consecutive
quarter and has also reduced inventory levels for the fourth consecutive
quarter. These achievements have resulted in improved cash flow which was
positive for the third consecutive quarter. Bank borrowings under the
Company's secured revolving credit agreement have been reduced to $18.7
million at July 1, 1994 compared to $25.5 million at October 1, 1993. At
July 1, 1994, borrowing capacity under the credit agreement totaled $30
million. At the end of the third quarter of 1994 the company decided that
the supplemental line of credit of $7.5 million was no longer required and
it was not renewed.
The Company was not in compliance with certain of its revolving credit
agreement covenants at the end of the third quarter of fiscal 1994, but has
received a waiver of the non-compliance.
Management believes that the Company's continuing working capital and
capital expenditure needs will be met by cash flow from operations and by
the secured revolving credit agreement. Although management believes that
the Company's relationship with its lenders is good, future waivers from
the lenders, if necessary, will depend on the Company's performance.
QMS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS - None.
ITEM 2 - CHANGES IN SECURITIES - None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
ITEM 5 - OTHER INFORMATION - None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit
Number Description
10(f)(xii) Waiver Agreement dated as of May 3, 1994 waiving certain
provisions of the Note Agreement dated March 15, 1988.1
10(g)(xvi) Waiver Agreement dated as of May 3, 1994 waiving certain
provisions of the Note Agreement dated October 2, 1992.2
10(l)(vi) Waiver Agreement dated as of May 3, 1994 waiving certain
provisions of the Note Agreement dated June 30, 1993.3
b) Reports - None.
QMS, INC. AND SUBSIDIARIES
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.
QMS, INC.
(Registrant)
Date:August 12, 1994 /s/ Charles D. Daley
CHARLES D. DALEY
Executive Vice President - Finance and
Administration, Chief Financial Officer
(Mr. Daley is the Principal Financial
Officer and has been duly authorized
to sign on behalf of the registrant.)
_______________________________
1 Incorporated herein by reference to exhibit of same number in
Registrant's quarterly report on Form 10-Q for the quarter ended April
1, 1988 (Commission File No. 1-9348).
2 Incorporated herein by reference to exhibit of same number in
Registrant's annual report on Form 10-K for the fiscal year ended
October 2, 1992 (Commission File No. 1-9348).
3 Incorporated herein by reference to exhibit of same number in
Registrant's quarterly report on Form 10-Q for the quarter ended July
2, 1993 (Commission File No. 1-9348).
WAIVER AGREEMENT
Waiver Agreement dated as of May 3, 1994 (the "Waiver Agreement")
between QMS, Inc. (the "Company") and each of Connecticut General Life
Insurance Company (the "Holder").
1. Reference is hereby made to the Note Agreement dated as of March
15, 1988 as amended by Amendment to Note Agreement dated August 22, 1989,
Second Amendments to Note Agreement dated as of April 2, 1990 and January
30, 1991, Third Amendment to Note Agreement dated as of October 2, 1992 and
the Consolidating Amendment to Note Agreement dated as of June 30, 1993 (as
so amended, the "Note Agreement") between the Company and the Holder or the
nominee of the Holder. All terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to them in the Note
Agreement.
2. Subject to the provisions herein contained, the Holders have agreed
to waive certain provisions of the Note Agreement with respect to the
Company's second fiscal quarter ending March 31, 1994.
3. The Holder hereby waives any Default or Event of Default which
existed as of the end of the fiscal quarter ending March 31, 1994 resulting
from the Company's non-compliance with Section 7.17 and Section 7.23 of the
Note Agreement as of such date.
4. If at any time during the 1994 fiscal year of the Company, the
Company shall request of the Holder a waiver of any breach or default of
the Company under the Note Agreement, the Holder shall receive a fee in the
amount of $5,500 with respect to such waiver. The right of the Holder to
receive such fee shall in no way obligate the Holder to grant any waiver
and the Company acknowledges that the granting of any waiver by the Holder
is in the sole and absolute discretion of the Holder.
5. Except as specifically modified hereby, the Note Agreement shall
remain in full force and effect in accordance with the terms hereof.
6. The Company hereby represents and warrants that this Waiver
Agreement has been duly authorized by all necessary corporate action on the
part of the Company, has been duly executed and delivered on behalf of the
Company, and constitutes the legal, valid and binding obligation of the
Company.
7. This Waiver Agreement shall not be effective as to any party hereto
until each party hereto shall have executive at least one counterpart
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver Agreement
as of the day and year first above written.
QMS, Inc.
By:\s\C. D. Daley
Name: C. D. DALEY
Title: EVP Finance & Administration
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By:CIGNA Investments, Inc.
By:\s\EDWARD LEWIS
Name: EDWARD LEWIS
Title:MANAGING DIRECTOR
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, on behalf
of one or more separate accounts
By:CIGNA Investments, Inc.
By:\s\EDWARD LEWIS
Name: EDWARD LEWIS
Title:MANAGING DIRECTOR
LIFE INSURANCE COMPANY OF NORTH AMERICA
By:CIGNA Investments, Inc.
By:\s\EDWARD LEWIS
Name: EDWARD LEWIS
Title:MANAGING DIRECTOR
WAIVER OF NON-COMPLIANCE
TO: QMS, INC. and QMS CIRCUITS, INC.
RE: Amended and Restated Secured Revolving Credit
Agreement dated October 2, 1992 (as amended to date, the "Credit
Agreement"), by and among QMS, Inc. and QMS Circuits, Inc. as
Borrowers ("Borrowers") and AmSouth Bank, N.A., as Agent ("Agent"),
and AmSouth Bank, N.A., NationsBank of Georgia, N.A. and National City
Bank, Kentucky, as Lenders ("Lenders"); and Supplemental Secured
Revolving Credit Agreement dated June 30, 1993 (as amended to date,
the "Supplemental Credit Agreement"), by and among Borrowers, Agent
and Lenders.
Ladies and Gentlemen:
The undersigned, being each of the Lenders pursuant to the Credit
Agreement and the Supplemental Credit Agreement, acknowledge receipt of the
Non-Compliance Certificate dated April 22, 1994 (the "Certificate") and
executed on behalf of QMS, Inc. by Charles D. Daley, its Chief Financial
Officer, which Certificates discloses noncompliance by the Borrowers with
certain convenants pursuant to the Credit Agreement and the Supplemental
Credit Agreement. As requested by the Borrowers, each of the undersigned
hereby waives non-compliance by Borrowers with the requirements of Section
9.10 and 9.16 of each of the Credit Agreement and the Supplemental Credit
Agreement, effective upon payment of the waiver fee specified in Section 3
of the Third Amendment to the Credit Agreement made by the parties hereto
as of November 19, 1993. This waiver is effective only as to such non-
compliance specifically disclosed to Lenders in the Certificate, shall be
effective only as to non-compliance in the second quarter of Borrowers'
1994 fiscal year, and shall not be deemed a waiver of the Financial
Performance Tests set out in Section 4.02 of each of the Credit Agreement
and the Supplemental Credit Agreement or of any other provisions thereof.
Dated as of the 3rd day of May, 1994.
AMSOUTH BANK, N.A.
BY: \s\DEBRA L. HARRISON
Title: VICE PRESIDENT
NATIONSBANK OF GEORGIA, N.A. NATIONAL CITY BANK, KENTUCKY
BY: \s\SHAWN B. WELCH BY: \s\JOHN SIMMS
Title: ASST. VICE PRESIDENT Title: VICE PRESIDENT
WAIVER AGREEMENT
Waiver Agreement dated as of May 3, 1994 (the "Waiver Agreement")
between QMS, Inc. (the "Company") and each of Connecticut General Life
Insurance Company, Connecticut General Life Insurance Company, on behalf of
one or more separate accounts, and Life Insurance Company of North America
(individually, a "Holder" and, collectively, the "Holders").
1. Reference is hereby made to the Note Agreement dated as of June 30,
1993 (the "Note Agreement") between the Company and each of the Holders.
All terms used herein and not otherwise defined herein shall have the
respective meanings ascribed to them in the Note Agreement.
2. Subject to the provisions herein contained, the Holders have agreed
to waive certain provisions of the Note Agreement with respect to the
Company's second fiscal quarter ending March 31, 1994.
3. Each Holder hereby waives any Default or Event of Default which
existed as of the end of the fiscal quarter ending March 31, 1994 resulting
from the Company's non-compliance with Section 7.17 and Section 7.23 of the
Note Agreement as of such date.
4. If at any time during the 1994 fiscal year of the Company, the
Company shall request of the Holders a waiver of any breach or default of
the Company under the Note Agreement, the Holders shall receive, in the
aggregate, a fee in the amount of $4,500 with respect to such waiver. The
right of the Holders to receive such fee shall in no way obligate the
Holders to grant any waiver and the Company acknowledges that the granting
of any waiver by the Holders is in the sole and absolute discretion of each
of the Holders.
5. Except as specifically modified hereby, the Note Agreement shall
remain in full force and effect in accordance with the terms hereof.
6. The Company hereby represents and warrants that this Waiver
Agreement has been duly authorized by all necessary corporate action on the
part of the Company, has been duly executed and delivered on behalf of the
Company, and constitutes the legal, valid and binding obligation of the
Company.
7. This Waiver Agreement shall not be effective as to any party hereto
until each party hereto shall have executive at least one counterpart
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver Agreement
as of the day and year first above written.
QMS, Inc.
By:\s\C. D. DALEY
Name: C. D. DALEY
Title:EVP Finance & Administration
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By:CIGNA Investments, Inc.
By:\s\EDWARD LEWIS
Name: EDWARD LEWIS
Title:MANAGING DIRECTOR
