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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
Commission File No.: 0-14685
GENICOM CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 51-0271821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14800 CONFERENCE CENTER DRIVE
SUITE 400, WESTFIELDS
CHANTILLY, VIRGINIA 20151
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (703) 802-9200
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 and (2) has been subject to such
filing requirements for the past 90 days. YesX No -
-- --
As of November 1, 1996, there were 10,975,039 shares of Common Stock
of the Registrant outstanding.
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FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Balance Sheets - September 29, 1996 and
December 31, 1995 3
Consolidated Statements of Income - Three and Nine Months Ended
September 29, 1996 and October 1, 1995 4
Consolidated Statements of Cash Flows - Nine Months Ended
September 29, 1996 and October 1, 1995 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits E-1
</TABLE>
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
(In thousands, except share data) 1996 1995
--------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,969 $ 4,271
Accounts receivable, less allowance for
doubtful accounts of $2,334 and $1,616 53,422 53,572
Other receivables 3,149 3,767
Inventories 30,474 43,079
Prepaid expenses and other assets 2,252 1,432
--------------- --------------
TOTAL CURRENT ASSETS 103,266 106,121
Property, plant and equipment 26,602 30,896
Goodwill 18,914 21,632
Intangibles and other assets 8,830 2,890
--------------- --------------
$ 157,612 $ 161,539
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt maturing within one year $ 3,923 $ 7,865
Accounts payable and accrued expenses 47,706 52,115
Deferred income 12,325 11,611
--------------- --------------
TOTAL CURRENT LIABILITIES 63,954 71,591
Long-term debt, less current portion 47,013 44,474
Other non-current liabilities 12,498 10,941
--------------- --------------
TOTAL LIABILITIES 123,465 127,006
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 18,000,000 shares
authorized, 10,975,139 and 10,839,399 shares issued 110 108
Additional paid-in capital 26,173 26,023
Retained earnings 9,965 10,503
Foreign currency translation adjustment (1,331) (1,331)
Pension liability adjustment (770) (770)
--------------- --------------
TOTAL STOCKHOLDERS' EQUITY 34,147 34,533
--------------- --------------
$ 157,612 $ 161,539
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED, NINE MONTHS ENDED,
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
(In thousands, except per share data) 1996 1995 1996 1995
-------------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
REVENUES, NET:
Products $ 38,888 $ 41,462 $ 122,190 $ 123,497
Services 29,923 37,044 89,313 94,985
------------ ------------ ------------ ------------
68,811 78,506 211,503 218,482
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of revenues:
Products 26,089 27,887 84,727 83,804
Services 26,201 30,645 77,789 76,622
Selling, general and administration 14,534 13,738 39,821 39,111
Engineering, research and
product development 1,937 2,166 5,834 6,430
Gain on sale of investment in subsidiary (1,481)
Environmental costs 1,479 1,479
Restructuring costs 4,183 4,183
Acquisition related costs 1,204
------------ ------------ ------------ ------------
74,423 74,436 212,352 207,171
------------ ------------ ------------ ------------
OPERATING (LOSS) INCOME (5,612) 4,070 (849) 11,311
Interest expense, net 1,147 2,069 3,299 5,714
Other income (63) (153)
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES (6,696) 2,001 (3,995) 5,597
Income tax (benefit) expense (4,467) 298 (3,876) 1,034
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (2,229) 1,703 (119) 4,563
EXTRAORDINARY ITEM - LOSS ON EXTINGUISHMENT
OF DEBT, NET OF $258 TAX (422)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (2,229) $ 1,703 $ (541) $ 4,563
============ ============ ============ ============
(Loss) earnings per common share
and common share equivalent
(primary and fully diluted) $ (0.20) $ 0.14 $ (0.05) $ 0.38
============ ============ ============ ============
Weighted average number of common shares
and common share equivalents outstanding
Primary 10,968 12,212 10,918 11,977
============ ============ ============ ============
Fully diluted 10,968 12,212 10,918 11,992
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
NINE MONTHS ENDED,
SEPTEMBER 29, OCTOBER 1,
(In thousands) 1996 1995
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (541) $ 4,563
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 10,856 10,360
Amortization 2,505 3,292
Gain on sale of Genicom de Mexico (1,481)
Environmental accrual 1,479
Restructuring charge 4,183
Effect of acquisition related costs 1,204
Changes in assets and liabilities net of effects from acquisitions:
Accounts receivable 4,391 (7,989)
Inventories 14,310 (5,008)
Accounts payable and accrued expenses (13,290) (1,546)
Deferred income 714 (571)
Other (6,691) 1,984
--------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,435 6,289
--------------- -------------
Cash flows from investing activities:
Payment for purchase of businesses, net of cash acquired (9,793)
Sale of Genicom de Mexico 3,950
Additions to property, plant and equipment (8,811) (11,628)
Other (259) (208)
--------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (5,120) (21,629)
--------------- -------------
Cash flows from financing activities:
Borrowings from long-term debt 63,806 27,867
Payments on long-term debt (63,934) (12,297)
Financing costs and transactions (1,509)
--------------- -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,637) 15,570
--------------- -------------
Effect of exchange rate changes on cash and cash equivalents 20 (369)
--------------- -------------
Net increase (decrease) in cash and cash equivalents 9,698 (139)
Cash and cash equivalents at beginning of period 4,271 673
--------------- -------------
Cash and cash equivalents at end of period $ 13,969 $ 534
=============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying unaudited consolidated
financial statements of GENICOM Corporation and subsidiaries (the
"Company" or "GENICOM") contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the Company's
consolidated financial position as of September 29, 1996, and the
results of operations and cash flows for the periods indicated.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's December 31, 1995 Annual Report. The results of
operations for the three and nine months ended September 29, 1996, are
not necessarily indicative of the operating results to be expected for
the full year. Certain reclassifications have been made to the 1995
condensed financial statements in order to conform to the 1996
presentation.
2. Inventories are stated at the lower of cost, determined on the
first-in, first-out method, or market. Inventories consist of, in
thousands:
<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1996 1995
============== =============
<S> <C> <C>
Raw Materials $ 1,378 $ 2,594
Work in process 2,989 4,899
Finished goods 26,107 23,327
Atlantic Design inventory 12,259
-------------- -------------
$ 30,474 $ 43,079
-------------- -------------
</TABLE>
3. Earnings per share are based upon the weighted average number of
common shares and dilutive common share equivalents (using the
treasury stock method) outstanding during the period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
=================== ===================
SEPT. 29, OCT. 1, SEPT. 29, OCT. 1,
1996 1995 1996 1995
========= ======= ========== =======
SHARES USED IN COMPUTATION:
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 10,968 10,809 10,918 10,733
Shares applicable to stock options, net of shares
assumed to be purchased from proceeds at
average market price 1,403 1,244
--------- ------- -------- -------
Total shares for earnings per common share
and common share equivalent (primary) 10,968 12,212 10,918 11,977
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 market price 15
--------- ------- -------- -------
Total fully diluted shares 10,968 12,212 10,918 11,992
========= ======= ======== =======
</TABLE>
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4. During the first quarter ended March 31, 1996 the Company adopted the
provisions of SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". The
implementation of SFAS No. 121 did not have a material effect on the
Company's financial condition or results of operations in 1996.
5. On January 12, 1996, the Company reached an agreement with NationsBank
of Texas, N.A., as agent for a syndicate of banks, ("NationsBank") on
$75 million of credit facilities. The Company used this new credit
agreement with NationsBank to retire all the debt associated with its
former credit agreement with CIT and to retire all of the Company's
outstanding 12.5% Senior Subordinated Notes. As a result of the
retirement of this debt the Company recognized a loss on the
extinguishment of debt of $422,000, net of tax of $258,000.
On September 30, 1996, the Company amended the credit facilities with
NationsBank. This amendment redefined the financial covenants, the
interest rates and the principal payments of the agreement.
6. Following the end of the quarter, as of September 30, 1996, the
Company acquired certain assets of Texas Instruments worldwide printer
and related supplies business for the purchase price of approximately
$27 million. The acquisition was financed primarily through the
Company's credit facility with NationsBank and a note to Texas
Instruments payable over two years.
During a scheduled transition period of approximately six months,
Texas Instruments will manufacture on behalf of the Company the
products relating to the business acquired. The Company has entered
into an interim agreement with Atlantic Design Company, with whom the
Company has an existing outsourcing manufacturing agreement, for the
performance of manufacturing oversight and other functions during this
period. In conjunction therewith, all manufacturing equipment
acquired by the Company from Texas Instruments was transferred to
Atlantic Design as of September 30, 1996. Under this interim
agreement, and unlike the Company's existing agreement with Atlantic
Design pursuant to which Atlantic Design owns all inventory until
transfer to the Company as finished goods, the Company will own all
inventory (raw materials, work in process and finished goods) during
this period. The Company is negotiating to expand its existing, five
year outsourcing agreement with Atlantic Design under which Atlantic
Design would be the primary manufacturer of all value-added Genicom
printer products, including those relating to the business acquired
from Texas Instruments.
The acquisition is being accounted for as a purchase and the
allocation of the purchase price and related acquisition costs is
subject to adjustment based upon refinements in the application of
purchase method accounting and the final determination of the purchase
price.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition:
RESULTS OF OPERATIONS
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<CAPTION>
====================================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================== ===================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues - Enterprising Service Solutions $ 29.9 $ (7.1) $ 37.0 $ 89.3 $ (5.7) $ 95.0
Revenues - Document Solutions 38.9 (2.6) 41.5 122.2 (1.3) 123.5
------- ---------- ------- ------- ---------- -------
Total Revenues $ 68.8 $ (9.7) $ 78.5 $211.5 $ (7.0) $218.5
------- ---------- ------- ------- ---------- -------
Percentage change (12.4)% (3.2)%
====================================================================================================================
</TABLE>
Revenue in the third quarter of 1996 decreased 12.4% compared to the year-ago
quarter primarily due to a revenue fall off in Enterprising Service Solutions.
Enterprising Service Solutions ("ESS") revenue declined $7.1 million or 19.2%
in the third quarter of 1996. The Multivendor Service revenue increased $0.2
million as a result of significant new business that has been partially offset
by the decline in legacy business. Integrated Network Service revenue
decreased $7.4 million over last year's third quarter due to unique customer
opportunities the Company realized in Canada and with Nasdaq in 1995. During
the initial growth phase and due to large contract values and long selling
cycles associated with the Integrated Network Services, the Company anticipates
that Integrated Network Services revenue may grow at an uneven rate. The
Company is continuing to invest in the business directed at the fast growing
network management market.
Document Solutions ("DS") revenues during the third quarter of 1996 decreased
$2.6 million from the same period last year. Printer sales declined 10.0% due
to laser printer sales being 25.1% lower than the same period a year ago.
Impact printer sales declined 6.6% for the third quarter of 1996 as compared to
the third quarter of 1995. Supply and part sales decreased 6.0% from the third
quarter of 1995.
Relay revenues, which are included as part of Document Solutions, increased by
$0.6 million or 21.1% in the third quarter of 1996 as compared to the prior
year quarter.
Revenues for the first nine months of 1996 decreased $7.0 million from the same
period in 1995 primarily as a result of the decline in Integrated Network
Service revenue and printer revenue which was partially offset by increased
relay and multivendor service revenue. Revenues for Enterprising Service
Solutions decreased $5.7 million for the period. This decrease is primarily
related to the decline in Integrated Network Management revenues previously
discussed. Document Solutions revenues were 1.1% lower for the first nine
months of 1996 as compared to 1995. While printer revenues declined for both
laser and impact printers, parts and supplies revenues increased 5.2% partially
offsetting the decline in printer sales. Relay revenues increased 13.6%.
<TABLE>
<CAPTION>
==========================================================================================================
(in millions) 3RD QUARTER 4TH QUARTER 3RD QUARTER
1996 1995 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Order backlog $ 39.5 $ 47.5 $ 49.3
Change: 3rd Quarter of 1996 compared to
Amount (8.0) (9.8)
Percentage (16.8)% (19.9)%
==========================================================================================================
</TABLE>
The decrease in order backlog from the 1995 fourth quarter and the third
quarter of 1996 primarily reflects selected declining legacy business within
ESS and the certain systems integration contracts that
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were completed in 1995. In addition, new service contracts represent potential
revenue versus firm commitments. The backlog reflects only fixed-price
contracts for all orders associated with relays, service, systems integration,
network monitoring and those orders for printers, spare parts and supplies for
which a delivery date within approximately six months has been specified by the
customer. The Company's backlog as of any particular date should not be the
sole measurement used in determining sales for any future period.
<TABLE>
<CAPTION>
==============================================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================= ================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross margin - Enterprising Service Solutions $ 3.7 $ (2.7) $ 6.4 $ 11.5 $ (6.9) $ 18.4
Gross margin - Document Solutions 12.8 (0.7) 13.5 37.5 (2.2) 39.7
--------- ---------- --------- --------- -------- --------
Total gross margin 16.5 (3.4) 19.9 49.0 (9.1) 58.1
--------- ---------- --------- --------- -------- --------
As a % of revenue 24.0 % 25.4 % 23.2 % 26.6 %
==============================================================================================================================
</TABLE>
Gross margin, as a percentage of revenue, decreased in the third quarter of
1996 as compared to the prior year quarter. This decrease is principally
attributable to the fixed costs associated with the Massachusetts depot which
has been affected by the decline in the legacy service business. The Company
is restructuring its service business to better align costs to revenue.
For the first nine months of 1996, gross margin also declined as a percentage
of revenue when compared to 1995 principally due to the effect of the declining
legacy service business, the consumption of inventory transferred to Atlantic
Design pursuant to the outsourcing agreement, and increased costs associated
with the extreme snow conditions which impacted the service depots in Virginia
and Massachusetts for a full week of production in January 1996.
<TABLE>
<CAPTION>
===========================================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
========================================= ===========================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating expenses:
Selling, general and
administrative $ 14.5 $ 0.8 $ 13.7 $ 39.8 $ 0.7 $ 39.1
Engineering, research and
product development 2.0 (0.2) 2.2 5.8 (0.6) 6.4
--------- ---------- --------- ---------- --------- ----------
Total $ 16.5 $ 0.6 $ 15.9 $ 45.6 $ 0.1 $ 45.5
As a % of revenue 24.0 % 20.3 % 21.6 % 20.8 %
===========================================================================================================================
</TABLE>
Operating expenses increased in the third quarter of 1996 as compared to the
year-ago period, due to a number of factors including employee costs and the
outsourcing of the Company's MIS function. This outsourcing of the MIS
function is directed at a long-term plan to upgrade systems and technology
skills base which the Company believes is necessary for the Company to remain
competitive. In July 1996, the Company reached an agreement with Electronic
Data Systems ("EDS") to outsource its information systems and data processing
activities. Under the agreement, EDS will operate and service the Company's
systems as well as design, install and service new business systems and global
networks. The agreement is for a period of ten years. Operating expenses were
flat for year-to-date 1996 compared to the first nine months of 1995 primarily
due to the management's focus on cost controls partially offset by MIS expenses
and the Texas Instruments acquisition costs.
In addition, in the third quarter of 1996, following Board of Directors review,
the Company accrued $1.5 million associated with environmental charges and $4.2
million for restructuring the worldwide service business. The environmental
charge is the Company's best estimate at the present time of the
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remaining costs associated with certain environmental matters including
$617,000 for pond closure and monitoring for ten years at the Company's
Waynesboro, Virginia facility and $862,000 for litigation costs associated with
the Linn-Faysville Aquifer in Texas. The restructuring charge for the service
business involves among other things, costs to facilitate the establishment of
the Company's new "end of runway" depot service center in Louisville, Kentucky
and other changes in the delivery of services by the Enterprising Service
Solutions group.
<TABLE>
<CAPTION>
======================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================ ================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest expense, net $ 1.1 $ (1.0) $ 2.1 $ 3.3 $ (2.4) $ 5.7
Percentage change (47.6)% (42.1)%
======================================================================================================
</TABLE>
The decrease in interest expense in the third quarter of 1996 as compared to
the year-ago quarter and for the nine months ended is primarily due to the
Company's retirement of its outstanding 12.5% senior subordinated notes in
February 1996 and the refinancing of the Company's credit facility through
NationsBank of Texas, N.A., as agent for a group of banks, in January 1996.
<TABLE>
<CAPTION>
=====================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================== ======================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income tax expense $ (4.5) $ (4.8) $ 0.3 $ (3.9) $ (4.9) $ 1.0
Effective tax rate -66.7% 14.9% -97.0% 18.5%
======================================================================================================
</TABLE>
The Company's effective income tax rate for the third quarter of 1996 was a
benefit of (66.7%) as compared to an expense of 14.9% for the year-ago period.
The tax rate for the nine months ended September 29, 1996 was a benefit of
(97.0%) as compared to an expense of 18.5% for the same period in 1995. In
1995, the rate was significantly affected by foreign income taxes and tax
credits and the utilization of net operating losses. In the third quarter of
1996, the Company took a tax benefit of $2.8 million associated with the
reversal of the deferred tax asset valuation allowance. Based on forecasts
including the expected positive effect of the Texas Instruments acquisition,
management estimates that these tax assets will be fully recoverable.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
==================================================================================================
NINE MONTHS ENDED
========================================
(in millions) 3RD QUARTER 3RD QUARTER
1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by operations $ 16.4 $ 6.3
Cash used in investing activities (5.1) (21.6)
Cash (used in) provided by financing activities (1.6) 15.6
==================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
==================================================================================================
(in millions) 3RD QUARTER 4TH QUARTER
1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Working capital $ 37.8 $ 34.5
Inventories 30.5 43.1
Debt obligations 50.9 52.4
Debt to equity ratio 1.5 to 1 1.5 to 1
==================================================================================================
</TABLE>
The Company's working capital increased $3.3 million as of September 29, 1996
as compared to December 31, 1995 due primarily to the reduction in current
liabilities, as partially offset by a reduction in inventories. As of
September 29, 1996, the Company's current debt consists of payments due within
one year on its term notes with NationsBank and notes associated with the
purchase of Harris Adacom and Printer Systems in 1995. The acquisition of
Texas Instruments printer business was financed through facilities which did
not increase required debt payments in the year immediately following the
acquisition.
On January 12, 1996, the Company reached an agreement with NationsBank of
Texas, N.A., as agent for a syndicate of banks, ("NationsBank") on $75 million
of credit facilities. Under the agreement, NationsBank is providing a $35
million revolving credit facility and two term loans totaling $40 million. In
a separate transaction, the Company entered into an interest rate swap
arrangement with NationsBank which fixes the interest rate for five years on a
substantial portion of the debt. The fixed rate at the time of the agreement
was executed averaged 8.25%. In May 1996, the Company renegotiated the term of
the interest rate swap, decreasing the term from five to three years. As a
result of the term change, the Company received a payment of $530,000 resulting
in a gain which is being amortized to income over the remaining life of the
Company's term loans. On September 30, 1996, the Company amended the credit
facilities. This amendment redefined the financial covenants, adjusted the
interest rates as well as the principal payments of the agreement. As of
September 29, 1996, the Company had $15.0 million outstanding and $12.2 million
available for borrowing on the revolving credit facility and $34.8 million
outstanding in term loans.
The Company used the new credit agreement to retire all the debt associated
with its former credit agreement with CIT and to retire all of the Company's
outstanding senior subordinated notes. As part of the refinancing, the Company
recognized a loss on extinguishment of debt of $0.4 million net of tax.
At the end of June 1996, the Company sold the stock of its Mexican subsidiary,
whose principal asset was a building in Reynosa, Mexico, receiving net proceeds
of $3.5 million and recognizing a gain of $1.5 million.
Following the end of the quarter, as of September 30, 1996, the Company
acquired certain assets of Texas Instruments worldwide printer and related
supplies business for the purchase price of approximately $27 million. The
acquisition was financed primarily through the Company's credit facility with
NationsBank and a note to Texas Instruments payable over two years.
During a scheduled transition period of approximately six months, Texas
Instruments will manufacture on behalf of the Company the products relating to
the business acquired. The Company has entered into an interim agreement with
Atlantic Design Company, with whom the Company has an existing outsourcing
manufacturing agreement, for the performance of manufacturing oversight and
other functions during this period. In conjunction therewith, all
manufacturing equipment acquired by the Company from Texas Instruments was
transferred to Atlantic Design as of September 30, 1996. Under this interim
agreement, and unlike the Company's existing agreement with Atlantic Design
pursuant to which Atlantic Design owns all inventory until transfer to the
Company as finished goods, the Company will own all inventory (raw materials,
work in process and finished goods) during this period. The Company is
negotiating to
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expand its existing, five year outsourcing agreement with Atlantic Design under
which Atlantic Design would be the primary manufacturer of all value-added
Genicom printer products, including those relating to the business acquired
from Texas Instruments.
As a result of this acquisition, the Company anticipates that it will add
scale, products and customers to its existing printer business. The printer
business now includes Texas Instruments ticketing printer product line which is
directed at the transportation industry. In addition to the ticketing
printers, the Company acquired mid-range laser products, high-end serial
products and the supplies related to each respective product line. This
acquisition was driven by the Company's strategy of focusing on the mid-range
printer market.
The acquisition is being accounted for as a purchase and the allocation of the
purchase price and related acquisition costs is subject to adjustment based
upon refinements in the application of purchase method accounting and the final
determination of the purchase price.
GENICOM provides an array of services and products addressing different niches
of the information processing industry, competing against a wide range of
companies from large multinationals to small domestic entrepreneurs. Except
for the historical information contained herein, the matters discussed in this
10Q include forward-looking statements that involve a number of risks and
uncertainties. There are certain important factors and risks, including
changes in hardware and software technology, changing economic conditions in
the North American and Western European markets, the anticipation of growth of
certain market segments and the positioning of the Company's products and
services in those segments, selective service customers whose business is
declining, seasonality in the buying cycles of certain of the Company's
customers, the timing of product announcements, the release of new or enhanced
products and services, the introduction of competitive products and services by
existing or new competitors, access to and development of product rights and
technologies, the management of growth, the integration of acquisitions,
GENICOM's ability to retain highly skilled technical, managerial and sales and
marketing personnel, possible litigation related to the Company's operations,
including litigation arising under various environmental laws, and the other
risks detailed from time to time in the Company's SEC reports, including
reports on Form 10K, that could cause results to differ materially from those
anticipated by the statements contained herein.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities:
Not applicable.
Item. 3 Defaults Upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable.
Item 5. Other Information:
Following the end of the quarter, as of September 30, 1996, the Company
acquired certain assets of Texas Instruments worldwide printer and related
supplies business for the purchase price of
PAGE 12
<PAGE> 13
approximately $27 million. The acquisition was financed primarily through the
Company's credit facility with NationsBank and a note to Texas Instruments
payable over two years.
During a scheduled transition period of approximately six months, Texas
Instruments will manufacture on behalf of the Company the products relating to
the business acquired. The Company has entered into an interim agreement with
Atlantic Design Company, with whom the Company has an existing outsourcing
manufacturing agreement, for the performance of manufacturing oversight and
other functions during this period. In conjunction therewith, all
manufacturing equipment acquired by the Company from Texas Instruments was
transferred to Atlantic Design as of September 30, 1996. Under this interim
agreement, and unlike the Company's existing agreement with Atlantic Design
pursuant to which Atlantic Design owns all inventory until transfer to the
Company as finished goods, the Company will own all inventory (raw materials,
work in process and finished goods) during this period. The Company is
negotiating to expand its existing, five year outsourcing agreement with
Atlantic Design under which Atlantic Design would be the primary manufacturer
of all value-added Genicom printer products, including those relating to the
business acquired from Texas Instruments.
As a result of this acquisition, the Company anticipates that it will add
scale, products and customers to its existing printer business. The printer
business now includes Texas Instruments ticketing printer product line which is
directed at the transportation industry. In addition to the ticketing
printers, the Company acquired mid-range laser products, high-end serial
products and the supplies related to each respective product line. This
acquisition was driven by the Company's strategy of focusing on the mid-range
printer market.
The acquisition is being accounted for as a purchase and the allocation of the
purchase price and related acquisition costs is subject to adjustment based
upon refinements in the application of purchase method accounting and the final
determination of the purchase price.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
=========== =======================================================================
<S> <C>
10.1 Credit Agreement dated as of January 12, 1996, Third Amendment to Credit
Agreement and Security Agreement
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on October 15, 1996, which
reported the Company's acquisition of the Texas Instruments
printer business. A copy of the purchase agreement is included as
Exhibit 2.1 to the form.
PAGE 13
<PAGE> 14
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.
GENICOM Corporation
-----------------------------------
Registrant
Date: November 13, 1996
/s/ Harold L. McIlroy
===================================
Signature
Harold L. McIlroy
Vice President, Quality &
Customer Satisfaction, General Manager,
Operations
(Mr. McIlroy is a Corporate Vice
President and has been duly authorized
to sign on behalf of the Registrant)
PAGE 14
<PAGE> 15
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
=========== ================================================================= =============================
<S> <C> <C>
10.1 Credit Agreement dated as of January 12, 1996, Third Amendment to E-2 - E-27
Credit Agreement and Security Agreement
27.1 Financial Data Schedule Filed only with EDGAR version
</TABLE>
E - 1
<PAGE> 1
THIRD AMENDMENT TO CREDIT AGREEMENT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND SECURITY AGREEMENT (this
"Amendment"), dated as of September 30, 1996, is by and among Genicom
Corporation (the "Borrower"), the subsidiaries of the Borrower identified on
the signature pages hereto (the "Guarantors"), the several lenders identified
on the signature pages hereto (each a "Lender" and, collectively, the
"Lenders") and NationsBank of Texas, N.A., as agent for the Lenders (in such
capacity, the "Agent"). Capitalized terms used herein which are not defined
herein and which are defined in the Credit Agreement shall have the same
meanings as therein defined.
W I T N E S S E T H
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent
entered into that certain Credit Agreement dated as of January 12, 1996, as
previously amended (as previously amended, the "Existing Credit Agreement").
WHEREAS, the Borrower, the Guarantors and the Agent entered into that
certain Security Agreement dated as of January 12, 1996, as previously amended
(as previously amended, the "Existing Security Agreement").
WHEREAS, the parties have agreed to amend the Existing Credit
Agreement and the Existing Security Agreement as set forth herein.
NOW, THEREFORE, in consideration of the agreements hereinafter set
forth, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
PART I
DEFINITIONS
SUBPART I.1 Certain Definitions. Unless otherwise defined herein or
the context otherwise requires, the following terms used in this Amendment,
including its preamble and recitals, have the following meanings:
"Amended Credit Agreement" means the Existing Credit Agreement
as amended hereby.
"Amended Security Agreement" means the Existing Security
Agreement as amended hereby.
"Amendment No. 3 Effective Date" is defined in Subpart 4.1.
E-2
<PAGE> 2
SUBPART I.2 Other Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendment, including its
preamble and recitals, have the meanings provided in the Amended Credit
Agreement.
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 3
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART II.1 Amendments to Section 1.1.
(a) The definition of "Alternative Assets" set forth in
Section 1.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
"Alternative Assets" means, in connection with any
proposed Asset Disposition pursuant to the terms of Section
8.4(b)(v), fixed assets (whether new, additional or
replacement assets but exclusive of assets acquired in the
course of regular upkeep and maintenance) which are similar in
nature or purpose to other assets owned or leased by the
Borrower and/or its Subsidiaries prior to or at the time of
the acquisition of such fixed assets and useful in the conduct
of the business of the Borrower and its Subsidiaries as
permitted to be conducted pursuant to Section 8.3.
(b) The definition of "Applicable Percentage" set forth
in Section 1.1 of the Existing Credit Agreement is hereby amended in
its entirety to read as follows:
"Applicable Percentage" means, for purposes of
calculating the applicable interest rate for any day for any
Eurodollar Loan which is a Revolving Loan, Tranche A Term
Loan, Tranche B Term Loan or Foreign Currency Loan or for any
Base Rate Loan which is a Revolving Loan, Tranche A Term Loan
or Tranche B Term Loan, the applicable rate of the Revolving
Unused Fee for any day for purposes of Section 3.5(a) or the
applicable rate of the Standby Letter of Credit Fee for any
day for purposes of Section 3.5(b)(i), the appropriate
applicable percentage corresponding to the Consolidated Funded
Debt Coverage Ratio in effect as of the most recent
Calculation Date:
E-3
<PAGE> 3
<TABLE>
<CAPTION>
====================================================================================================================================
Applicable Applicable Applicable Applicable Applicable Applicable
Percentage for Percentage for Percentage for Percentage for Percentage for Percentage
Consolidated Eurodollar Base Rate Eurodollar Base Rate Standby Letter for
Pricing Funded Debt Loans which are Loans which are Loans which Loans which are of Credit Fee Revolving
Coverage Revolving Loans, Revolving Loans are Tranche B Tranche B Term Unused Fee
Ratio Tranche A Term or Tranche A Term Loans Loans
Level Loans or Foreign Term Loans
Currency Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
I Greater than 2.75% 1.50% 3.25% 2.00% 2.75% 0.50%
or equal to
3.50 to 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
II Greater than 2.50% 1.25% 3.00% 1.75% 2.50% 0.50%
or equal to
3.00 to 1.00
but less than
3.50 to 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
III Greater than 2.25% 1.00% 3.00% 1.75% 2.25% 0.50%
or equal to
2.50 to 1.00
but less than
3.00 to 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
IV Greater than 2.00% 0.75% 3.00% 1.75% 2.00% 0.375%
or equal to
2.00 to 1.00
but less than
2.50 to 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
V Less than 2.00 1.75% 0.50% 3.00% 1.75% 1.75% 0.375%
to 1.00
====================================================================================================================================
</TABLE>
Determination of the appropriate Applicable Percentages based
on the Consolidated Funded Debt Coverage Ratio shall be made
for the Calculation Date occurring on December 31, 1996 and on
each Calculation Date thereafter upon receipt by the Agent at
the Agency Services Address of the Required Financial
Information for such Calculation Date. The Consolidated
Funded Debt Coverage Ratio in effect as of a Calculation Date
shall establish the Applicable Percentages that shall be
effective as of the date designated by the Agent as the
Applicable Percentage Change Date. The Agent shall determine
the Applicable Percentages as of the Calculation Date
occurring on December 31, 1996 and on each
E-4
<PAGE> 4
Calculation Date thereafter and shall promptly notify the
Borrower and the Lenders of the Applicable Percentages so
determined and of the Applicable Percentage Change Date. Such
determinations by the Agent of the Applicable Percentages
shall be conclusive absent demonstrable error. The initial
Applicable Percentages shall be based on Pricing Level I until
the first Applicable Percentage Change Date occurring after
November 29, 1996 and if the Borrower fails to provide the
Required Financial Information for a Calculation Date to the
Agent at the Agency Services Address, the Applicable
Percentages shall be based on Pricing Level I until such time
as the Required Financial Information is provided whereupon
the Pricing Level shall be determined by the then current
Consolidated Funded Debt Coverage Ratio.
(c) The definition of "Applicable Percentage Change Date"
set forth in Section 1.1 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
"Applicable Percentage Change Date" means, with
respect to the Calculation Date occurring on December 31, 1996
and any Calculation Date thereafter, a date designated by the
Agent that is not more than five (5) Business Days after
receipt by the Agent at the Agency Services Address of the
Required Financial Information for such Calculation Date.
(d) The definition of "Application Period" set forth in
Section 1.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
"Application Period" shall have the meaning assigned
to such term in Section 8.4(b)(v).
(e) The definition of "Asset Disposition" set forth in
Section 1.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
"Asset Disposition" means any sale, lease, transfer
or other disposition (including any such transaction effected
by way of merger, amalgamation or consolidation) by the
Borrower or any of its Subsidiaries subsequent to the Closing
Date of any asset (including stock in Subsidiaries), including
without limitation any sale leaseback transaction (whether or
not involving a Capital Lease), but excluding (a) the sale of
inventory in the ordinary course of business for fair
consideration, (b) the sale or disposition of machinery and
equipment no longer used or useful in the conduct of such
Person's business, (c) the sale or other disposition of the
TIWP Assets in accordance with the terms of Section
8.4(b)(iii) and (d) any Equity Transaction.
(f) The definition of "Asset Disposition Prepayment
Event" set forth in Section 1.1 of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
"Asset Disposition Prepayment Event" means, with
respect to any Asset Disposition made pursuant to the terms of
Section 8.4(b)(v), the failure of the Borrower to apply (or
cause its applicable Subsidiary to apply) an amount equal to
E-5
<PAGE> 5
the Net Proceeds of such Asset Disposition to the purchase,
acquisition or construction of Alternative Assets during the
Application Period for such Asset Disposition.
(g) The definition of "Collateral" set forth in Section
1.1 of the Existing Credit Agreement is hereby amended in its entirety
to read as follows:
"Collateral" means a collective reference to the
collateral, including without limitation those assets of TIWP
Business acquired pursuant to the Purchase Agreement, which at
any time will be covered by the Collateral Documents.
(h) The definition of "Consolidated EBITDA" set forth in
Section 1.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
"Consolidated EBITDA" means, for any period, the sum
of (i) Consolidated Net Income for such period (provided,
however, that ----------------------------------------------
------ (i) provided that such charges are taken on or before
September 30, 1997 and do not exceed $4,800,000 in the
aggregate), plus (ii) an amount which, in the determination of
Consolidated Net Income for such period, has been deducted for
(A) Consolidated Interest Expense, (B) total federal, state,
local and foreign income, value added and similar taxes and
(C) depreciation and amortization expense, all as determined
in accordance with GAAP, plus (iii) the pre-tax amount of any
provision associated with environmental remediation and
liabilities related principally to the Borrower's Waynesboro,
Virginia facility accrued during such period, provided that
the aggregate amount of all such items with respect to this
subclause (iii) hereof after September 1, 1996 shall not
exceed $1,500,000, minus (iv) actual cash expenses for such
period associated with -------------------------------------
(i) The definition of "Consolidated Fixed Charge Coverage
Ratio" set forth in Section 1.1 of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
"Consolidated Fixed Charge Coverage Ratio" means, as
of the end of any period, the ratio of (i) Consolidated EBITDA
for the applicable period minus Consolidated Capital
Expenditures for the applicable period, to (ii) Consolidated
Interest Expense for the applicable period plus Consolidated
Scheduled Funded Indebtedness Payments for the applicable
period plus Restricted Payments by the Borrower and its
Subsidiaries on a consolidated basis for the applicable
period.
(j) The definition of "Consolidated Net Worth" set forth
in Section 1.1 of the Existing Credit Agreement is hereby amended in
its entirety to read as follows:
"Consolidated Net Worth" means, at any time, the sum
of (i) total shareholders' equity of the Borrower and its
Subsidiaries on a consolidated basis at such time, as
determined in accordance with GAAP (provided, however, that
(a)
E-6
<PAGE> 6
foreign currency translation adjustments and pension liability
adjustments and (b) --------------------------------------,
shall not be taken into account in calculating any amount
determined pursuant to this clause (i) provided that such
charges are taken on or before September 30, 1997 and do not
exceed $4,800,000 in the aggregate), plus (ii) the after-tax
effect of any then accrued provisions associated with
environmental remediation and liabilities related principally
to the Borrower's Waynesboro, Virginia facility, provided that
the aggregate amount of all such items with respect to this
clause (ii) hereof after September 1, 1996 shall not exceed
$1,500,000.
(k) The definition of "Net Proceeds" set forth in Section
1.1 of the Existing Credit Agreement is hereby amended in its entirety
to read as follows:
"Net Proceeds" means cash proceeds received by the
Borrower or any of its Subsidiaries from time to time in
connection with any Asset Disposition or Equity Transaction,
net of the actual costs (excluding intercompany items) and
taxes incurred by such Person in connection with and
attributable to such Asset Disposition or Equity Transaction,
as applicable.
(l) The word "and" at the end of existing clause (xi) of
the definition of "Permitted Liens" set forth in Section 1.1 of the
Existing Credit Agreement is hereby deleted, the "." at the end of
existing clause (xii) of such definition is hereby deleted and a ";"
and the word "and" are hereby substituted therefor and the following
new clause (xiii) is hereby added to such definition immediately
succeeding such clause (xii):
"Permitted Liens" means:
**********
(xiii) Liens on Property constituting Collateral and
securing the Indebtedness permitted pursuant to Section
8.1(h), provided that such Liens shall be subordinated to the
Liens of the Agent in such Property on terms satisfactory to
the Agent.
(m) The definition of "Termination Date" set forth in
Section 1.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
"Termination Date" means (i) as to Revolving Loans,
Letters of Credit (and the related LOC Obligations), Foreign
Currency Loans and the Tranche A Term Loan, December 29, 2000,
and (ii) as to the Tranche B Term Loan, December 27, 2002.
(n) The following definitions are hereby added to Section
1.1 of the Existing Credit Agreement in appropriate alphabetical
order:
E-7
<PAGE> 7
"Agency Services Address" means NationsBank of Texas,
N.A., 901 Main Street, Floor 13, Dallas, Texas 75202 Attn:
Agency Services, or such other address as may be identified by
written notice from the Agent to the Borrower.
"Purchase Agreement" means (i) that certain Asset
Purchase Agreement between Texas Instruments and Genicom
Corporation dated as of July 23, 1996 (including all schedules
and exhibits thereto), as amended as of September 30, 1996 and
(ii) all collateral agreements referred to in such Asset
Purchase Agreement.
"Texas Instruments" means Texas Instruments
Incorporated, a Delaware corporation.
"TI Deferred Financing Note" means that certain
subordinated promissory note dated September 30, 1996 executed
by the Borrower in favor of Texas Instruments in the original
principal amount of $9,000,000.
"TIWP Assets" means the raw materials and work in
process, and the equipment, tools and fixtures used in the
manufacturing process of the TIWP Business.
"TIWP Business" means, that certain business (printer
business component) within the Personal Productivity Products
Division of Texas Instruments through which Texas Instruments
operates the design, development, marketing and sale of travel
ticket document printers and readers, impact and laser
printers and other various related technologies.
SUBPART II.2 Amendments to Section 2.5. Subsection (c) of Section
2.5 of the Existing Credit Agreement is hereby amended in its entirety to read
as follows:
2.5 Tranche A Term Loan.
**********
(c) Repayment of Tranche A Term Loan. The principal
amount of the Tranche A Term Loan shall be repaid in eighteen (18)
consecutive quarterly installments as follows:
<TABLE>
<CAPTION>
Tranche A Principal
Payment Date Amortization Payment
------------ --------------------
<S> <C>
September 30, 1996 $682,261
December 27, 1996 $700,000
March 28, 1997 $800,000
June 27, 1997 $800,000
September 26, 1997 $800,000
December 26, 1997 $800,000
</TABLE>
E-8
<PAGE> 8
<TABLE>
<S> <C>
March 27, 1998 $800,000
June 26, 1998 $800,000
September 25, 1998 $800,000
December 31, 1998 $800,000
March 26, 1999 $1,025,000
June 25, 1999 $1,025,000
September 24, 1999 $1,025,000
December 31, 1999 $1,025,000
March 31, 2000 $1,255,000
June 30, 2000 $1,255,000
September 29, 2000 $1,255,000
December 29, 2000 Remaining principal
balance
</TABLE>
SUBPART II.3 Amendments to Section 2.6. Subsections (d) and (e) of
Section 2.6 of the Existing Credit Agreement is hereby amended in its entirety
to read as follows:
2.6 Tranche B Term Loan.
**********
(d) Repayment of Tranche B Term Loan. The principal
amount of the Tranche B Term Loan shall be repaid in twenty-six (26)
consecutive quarterly installments as follows:
<TABLE>
<CAPTION>
Tranche B Principal
Payment Date Amortization Payment
------------ --------------------
<S> <C>
September 30, 1996 $113,710
December 27, 1996 $115,000
March 28, 1997 $115,000
June 27, 1997 $115,000
September 26, 1997 $115,000
December 26, 1997 $115,000
March 27, 1998 $115,000
June 26, 1998 $115,000
September 25, 1998 $115,000
December 31, 1998 $115,000
March 26, 1999 $115,000
June 25, 1999 $115,000
September 24, 1999 $115,000
December 31, 1999 $115,000
March 31, 2000 $115,000
June 30, 2000 $115,000
September 29, 2000 $115,000
December 29, 2000 $115,000
</TABLE>
E-9
<PAGE> 9
<TABLE>
<S> <C>
March 30, 2001 $1,935,000
June 29, 2001 $1,935,000
September 28, 2001 $1,935,000
December 28, 2001 $1,935,000
March 29, 2002 $2,050,000
September 28, 2002 $2,050,000
November 27, 2002 $2,050,000
December 27, 2002 Remaining principal
balance
</TABLE>
(e) Interest. Subject to the provisions of Section 3.1,
the Tranche B Term Loan shall bear interest at a per annum rate equal
to:
(A) Base Rate Loans. During such periods as the
Tranche B Term Loan (or any portion thereof) shall consist of
Base Rate Loans, the Base Rate plus the Applicable Percentage.
(B) Eurodollar Loans. During such periods as the
Tranche B Term Loan (or any portion thereof) shall consist of
Eurodollar Loans, the Eurodollar Rate plus the Applicable
Percentage.
Interest on the Tranche B Term Loan shall be payable in arrears on
each applicable Interest Payment Date (or at such other times as may
be specified herein).
SUBPART II.4 Amendments to Section 3.3. Subsection (c)(i) of Section
3.3 of the Existing Credit Agreement is hereby amended in its entirety to read
as follows:
3.3 Prepayments.
**********
(c) Mandatory Prepayments of Tranche A Term Loan and
Tranche B Term Loan.
(i) Immediately upon the occurrence of any Asset
Disposition Prepayment Event, the Borrower shall prepay the
Tranche A Term Loan and the Tranche B Term Loan in an
aggregate amount equal to the Net Proceeds of the related
Asset Disposition not applied (or caused to be applied) by the
Borrower during the related Application Period to the
purchase, acquisition or construction of Alternative Assets as
contemplated by the terms of Section 8.4(b)(v).
SUBPART II.5 Amendments to Section 6.15. Section 6.15 of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
6.15 Purpose of Loans and Letters of Credit. The proceeds
of the Loans hereunder shall be used solely by the Borrower for
general corporate purposes of the Borrower and its Subsidiaries,
including, but not limited to, (1) working capital advances,
E-10
<PAGE> 10
(2) capital expenditures in the ordinary course of business, (3)
Permitted Investments and (4) the acquisition of certain assets of the
TIWP Business pursuant to the Purchase Agreement. The Letters of
Credit shall be used only for or in connection with appeal bonds,
reimbursement obligations arising in connection with performance,
surety and reclamation bonds, reinsurance, domestic or international
trade transactions and obligations not otherwise aforementioned
relating to transactions entered into by the Borrower in the ordinary
course of business.
SUBPART II.6 Amendments to Section 7.11. Section 7.11 of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
7.11 Financial Covenants.
(a) Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth at all times shall be no less than the sum of
$5,000,000, increased on a cumulative basis by an amount equal to (i)
as of the last day of each fiscal quarter commencing with December 27,
1996, 50% of the Consolidated Net Income (without deduction for any
losses) for the fiscal quarter then ended, plus (ii) as of the date of
any Equity Transaction consummated on or after June 28, 1996, 100% of
the proceeds received from such Equity Transaction.
(b) Consolidated Funded Debt Coverage Ratio. The
Consolidated Funded Debt Coverage Ratio at each Calculation Date shall
be no greater than the following proportions:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
For the period occurring 4.90 to 1.00
from the last day of
the third fiscal quarter
of fiscal year 1996 of
the Borrower and its
Subsidiaries through the
last day of the fourth
fiscal quarter of
fiscal year 1996 of
the Borrower and its
Subsidiaries
For the period occurring 4.40 to 1.00
from the first day of the
first fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries through
the last day of the first
fiscal quarter of fiscal
year 1997 of the Borrower
</TABLE>
E-11
<PAGE> 11
<TABLE>
<S> <C>
and its Subsidiaries
For the period occurring 3.90 to 1.00
from the first day of the
second fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries through
the last day of the second
fiscal quarter of fiscal
year 1997 of the Borrower
and its Subsidiaries
For the period occurring 3.40 to 1.00
from the first day of the
third fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries through
the last day of the third
fiscal quarter of fiscal
year 1997 of the Borrower
and its Subsidiaries
For the period occurring 3.00 to 1.00
from the first day of the
fourth fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries and
thereafter
</TABLE>
(c) Consolidated Fixed Charge Coverage Ratio. The
Consolidated Fixed Charge Coverage Ratio shall be no less than:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
For the period occurring 1.25 to 1.00
from the last day of
the third fiscal quarter
of fiscal year 1996 of
the Borrower and its
Subsidiaries through the
last day of the fourth
fiscal quarter of
fiscal year 1996 of
the Borrower and its
</TABLE>
E-12
<PAGE> 12
<TABLE>
<S> <C>
Subsidiaries
For the period occurring 1.50 to 1.00
from the first day of the
first fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries through
the last day of the second
fiscal quarter of fiscal
year 1997 of the Borrower
and its Subsidiaries
For the period occurring 1.75 to 1.00
from the first day of the
third fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries through
the last day of the third
fiscal quarter of fiscal
year 1997 of the Borrower
and its Subsidiaries
</TABLE>
E-13
<PAGE> 13
<TABLE>
<S> <C>
For the period occurring 2.00 to 1.00
from the first day of the
fourth fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries and
thereafter
</TABLE>
(d) Consolidated Debt to Capitalization Ratio. The
Consolidated Debt to Capitalization of each Calculation Date shall be
no greater than the following proportions:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
For the period occurring 0.70 to 1.00
from the last day of
the third fiscal quarter
of fiscal year 1996 of
the Borrower and its
Subsidiaries through the
last day of the fourth
fiscal quarter of
fiscal year 1996 of
the Borrower and its
Subsidiaries
For the period occurring 0.65 to 1.00
from the first day of the
first fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries through
the last day of the third
fiscal quarter of fiscal
year 1997 of the Borrower
and its Subsidiaries
For the period occurring 0.60 to 1.00
from the first day of the
fourth fiscal quarter of
fiscal year 1997 of the
Borrower and its
Subsidiaries and
thereafter
</TABLE>
SUBPART II.7 Amendments to Section 8.1. The word "and" at the end of
existing subsection (f) of Section 8.1 of the Existing Credit Agreement is
hereby deleted, the "." at the end
E-14
<PAGE> 14
of existing subsection (g)(ii) of Section 8.1 of the Existing Credit Agreement
is hereby deleted and a ";" is hereby substituted therefor and the following
new subsections (h) and (i) are hereby added to Section 8.1 of the Existing
Credit Agreement immediately succeeding such subsection (g)(ii):
8.1 Indebtedness. The Borrower will not, nor will it permit
any of its Subsidiaries to, contract, create, incur, assume or permit
to exist any Indebtedness, except:
**********
(h) (i) Indebtedness of the Borrower evidenced by
the TI Deferred Financing Note;
(ii) Guaranty Obligations of any Guarantor in
respect of the Indebtedness of the Borrower evidenced by the
TI Deferred Financing Note.
(i) other Indebtedness of any Foreign Subsidiary
of the Borrower provided that the aggregate principal amount
of all such Indebtedness of all such Persons, taken together
with all Indebtedness outstanding pursuant to Section 8.1(b)
and all Indebtedness outstanding pursuant to Section
8.1(g)(i), shall not exceed the Foreign Currency Equivalent of
$10,000,000.
SUBPART II.8 Amendments to Section 8.4. Subsections (b) and (c) of
Section 8.4 of the Existing Credit Agreement are hereby amended in their
entireties to read as follows:
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
The Borrower will not, nor will it permit any of its Subsidiaries to:
**********
(b) sell, lease, transfer or otherwise dispose of
any Property (including without limitation pursuant to any
sale leaseback transaction) other than (i) the sale of
inventory in the ordinary course of business for fair
consideration, (ii) the sale or disposition of machinery and
equipment no longer used or useful in the conduct of such
Person's business, (iii) the sale or other disposition of the
TIWP Assets on terms and conditions reasonably satisfactory to
the Agent, (iv) other Asset Dispositions provided that the
aggregate amount of the Net Proceeds of all such Asset
Dispositions during any fiscal year of the Borrower and its
Subsidiaries does not exceed $100,000 and (v) subject to the
terms of Section 8.8, any other Asset Disposition, provided
that, no later than 14 days prior to such Asset Disposition,
the Agent and the Lenders shall have received a certificate of
the chief financial officer or treasurer of the Borrower (A)
providing facts or computations in reasonable detail
demonstrating that (1) the aggregate cumulative book value of
assets disposed of in all the Asset Dispositions occurring on
or after the Closing Date does not exceed 20% of Consolidated
Total Assets as of the most recent Calculation Date with
respect to which the Agent and the Lenders shall have received
the Required Financial Information, (2) the aggregate
cumulative book
E-15
<PAGE> 15
value of assets disposed of in all the Asset Dispositions
occurring during the then current fiscal year of the Borrower
does not exceed 10% of Consolidated Total Assets as of the
most recent Calculation Date with respect to which the Agent
and the Lenders shall have received the Required Financial
Information and (3) after giving effect on a Pro Forma Basis
to such Asset Disposition, no Default or Event of Default
would exist hereunder and (B) specifying the anticipated or
actual date of such Asset Disposition, briefly describing the
assets sold or otherwise disposed of or to be sold or
otherwise disposed of and setting forth the net book value of
such assets and the aggregate consideration and Net Proceeds
to be received for such assets in connection with such Asset
Disposition, and thereafter the Borrower shall, within the 120
day period following the consummation of such Asset
Disposition (with respect to any such Asset Disposition, the
"Application Period"), apply (or cause its applicable
Subsidiary to apply) an amount equal to the Net Proceeds of
such Asset Disposition to the purchase, acquisition or, in the
case of real property, construction of Alternative Assets or
(y) prepay the Loans in connection with such Asset Disposition
to the extent required by Section 3.3(c)(i); or
(c) except as otherwise permitted by Section
8.4(a) and Section 8.5, except for any such transactions with
respect to which the purchase price consists of capital stock
or securities of the acquiring Person and except for the
acquisition by the Borrower of certain assets of the TIWP
Business pursuant to the Purchase Agreement, acquire all or
any portion of the capital stock or securities of any other
Person or purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any
substantial part of the Property of any other Person without
the consent of each Lender.
SUBPART II.9 Amendments to Section 8.7. Section 8.7 of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
8.7 Prepayments of Indebtedness, etc. The Borrower will not,
nor will it permit any of its Subsidiaries to, (i) after the issuance
thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness (including without limitation the
Indebtedness evidenced by the TI Deferred Financing Note) if such
amendment or modification would add or change any terms in a manner
adverse to either the issuer of such Indebtedness or any of the
Lenders, or shorten the final maturity or average life to maturity or
require any payment to be made sooner than originally scheduled or
increase the interest rate applicable thereto or change any
subordination provision thereof, (ii) (A) if any Default or Event of
Default has occurred and is continuing or would be directly or
indirectly caused as a result thereof, make (or give any notice with
respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including without limitation,
by way of depositing money or securities with the trustee with respect
thereto before due for the purpose of paying when due), refund,
refinance or exchange of, any other Indebtedness (other than
Intercompany Indebtedness), (B) except as otherwise permitted by
Section 8.6(iv), make any payment or prepayment of any Intercompany
Indebtedness or (C) make any voluntary
E-16
<PAGE> 16
prepayment of the Indebtedness evidenced by the TI Deferred Financing
Note or (iii) amend, modify or change its articles of incorporation
(or corporate charter or other similar organizational document) or
bylaws (or other similar document) where such change would have a
Material Adverse Effect.
SUBPART II.10 Amendments to Section 9.1. The "." at the end of
existing subsection (j) of Section 9.1 of the Existing Credit Agreement is
hereby deleted and a ";" and the word "or" are hereby substituted therefor and
the following new subsection (k) is hereby added to Section 9.1 of the Existing
Credit Agreement immediately succeeding such subsection (j):
9.1 Events of Default. An Event of Default shall exist upon
the occurrence of any of the following specified events (each an
"Event of Default"):
**********
(k) Purchase Price. The aggregate purchase
price, including any post-closing adjustments, paid by the
Borrower and/or any of its Subsidiaries for those assets of
the TIWP Business acquired pursuant to the Purchase Agreement
shall exceed $30,000,000.
SUBPART II.11 Amendments to Schedule 1.1B. Schedule 1.1B to the
Existing Credit Agreement is hereby deleted in its entirety and a new schedule
in the form of Schedule 1.1B to Existing Credit Agreement attached hereto is
substituted therefor.
SUBPART II.12 Amendments to Schedule 1.1C. Schedule 1.1C to the
Existing Credit Agreement is hereby deleted in its entirety and a new schedule
in the form of Schedule 1.1C to Existing Credit Agreement attached hereto is
substituted therefor.
SUBPART II.13 Amendments to Schedule 6.6. Schedule 6.6 to the
Existing Credit Agreement is hereby deleted in its entirety and a new schedule
in the form of Schedule 6.6 to Existing Credit Agreement attached hereto is
substituted therefor.
SUBPART II.14 Amendments to Schedule 6.14. Schedule 6.14 to the
Existing Credit Agreement is hereby deleted in its entirety and a new schedule
in the form of Schedule 6.14 to Existing Credit Agreement attached hereto is
substituted therefor.
SUBPART II.15 Amendments to Schedule 6.16. Schedule 6.16 to the
Existing Credit Agreement is hereby deleted in its entirety and a new schedule
in the form of Schedule 6.16 to Existing Credit Agreement attached hereto is
substituted therefor.
SUBPART II.16 Amendments to Schedule 8.1. Schedule 8.1 to the
Existing Credit Agreement is hereby deleted in its entirety and a new schedule
in the form of Schedule 8.1 to Existing Credit Agreement attached hereto is
substituted therefor.
PART III
AMENDMENTS TO EXISTING SECURITY AGREEMENT
E-17
<PAGE> 17
Effective on (and subject to the occurrence of) the Amendment No. 3
Effective Date, the Existing Security Agreement is hereby amended in accordance
with this Part III. Except as so amended, the Existing Security Agreement
shall continue in full force and effect.
SUBPART III.1 Amendments to Section 2. Subsection (d) of Section 2 of
the Existing Security Agreement is hereby amended in its entirety to read as
follows:
2. Grant of Security Interest in the Collateral. To
secure the prompt payment and performance in full when due, whether by
lapse of time, acceleration or otherwise, of the Secured Obligations
(as defined in Section 3 hereof), each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest
in, and a right to set off against, any and all right, title and
interest of such Obligor in and to the following, whether now owned or
existing or owned, acquired, or arising hereafter (collectively, the
"Collateral"):
**********
(d) All contract rights, including, without
limitation, (i) all rights under the Purchase Agreement,
specifically including the Borrower's rights to
indemnification from Texas Instruments for Texas Instruments'
breach of the warranties set forth in the second sentence of
Section 5.5 of the Purchase Agreement, the second sentence of
Section 5.6 of the Purchase Agreement and the third sentence
of Section 5.7 of the Purchase Agreement, arising under
Section 13.1(b) of the Purchase Agreement, (ii) all rights
under management agreements, tax sharing agreements and lease
agreements and (iii) all rights to payment of money, tax
refunds and insurance proceeds;
SUBPART III.2 Amendments to Section 4. Subsections (b) and (g) of
Section 4 of the Existing Security Agreement is hereby amended in its entirety
to read as follows:
4. Representations and Warranties. Each Obligor hereby
represents and warrants to the Agent, for the benefit of the Lenders,
that so long as the Credit Agreement is in effect or any amounts
payable thereunder or under any other Credit Document or any Letter of
Credit shall remain outstanding, and until all of the Commitments
thereunder shall have terminated:
***********
(b) Type and Location of Collateral. The type of
Collateral located in the United States of America
owned by such Obligor, each location of Collateral
located in the United States of America owned by such
Obligor having an aggregate book value at such
location of $100,000 or more and the owner of each
such location for which the Agent has required the
Borrower to provide a landlord waiver is as shown on
Schedule 2 attached hereto.
E-18
<PAGE> 18
**********
(g) Intellectual Property. With regard to the
Collateral of such Obligor consisting of Intellectual
Property, (i) such Obligor is the present owner of
the entire right, title and interest in and to such
Collateral and has good and indefeasible title
thereto with the rights of use free and clear of the
infringement of the rights of others, (ii) the United
States patents listed on Schedule 4 constitute all of
the registrations and applications for the United
States patents owned by such Obligor, (iii) the
United States trademarks listed on Schedule 5
constitute all of the registrations and applications
for the United States trademarks owned by such
Obligor, (iv) such Obligor has not and will not make
any assignment or agreement in conflict with the
security interest in the Intellectual Property of
such Obligor hereunder and (v) all applications
pertaining to U.S. Intellectual Property of such
Obligor have been duly and properly filed, and all
U.S. registrations or letters pertaining to such
Intellectual Property have been duly and properly
filed and issued, and all of such Intellectual
Property is valid and enforceable.
SUBPART III.3 Amendments to Schedule 1. Schedule 1 to the Existing
Security Agreement is hereby deleted in its entirety and a new schedule in the
form of Schedule 1 to Existing Security Agreement attached hereto is
substituted therefor.
SUBPART III.4 Amendments to Schedule 2. Schedule 2 to the Existing
Security Agreement is hereby deleted in its entirety and a new schedule in the
form of Schedule 2 to Existing Security Agreement attached hereto is
substituted therefor.
SUBPART III.5 Amendments to Schedule 4. Schedule 4 to the Existing
Security Agreement is hereby deleted in its entirety and a new schedule in the
form of Schedule 4 to Existing Security Agreement attached hereto is
substituted therefor.
SUBPART III.6 Amendments to Schedule 5. Schedule 5 to the Existing
Security Agreement is hereby deleted in its entirety and a new schedule in the
form of Schedule 5 to Existing Security Agreement attached hereto is
substituted therefor.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART IV.1 Amendment No. 3 Effective Date. This Amendment shall
be and become effective as of the date hereof (the "Amendment No. 3 Effective
Date") when all of the conditions set forth in this Subpart 4.1 shall have been
satisfied, and thereafter this Amendment shall be known, and may be referred
to, as "Amendment No. 3."
E-19
<PAGE> 19
SUBPART 4.1.1 Execution of Counterparts of Amendment. The
Agent shall have received counterparts (or other evidence of
execution, including telephonic message, satisfactory to the Agent) of
this Amendment, which collectively shall have been duly executed on
behalf of each of the Borrower, the Guarantors and the Required
Lenders.
SUBPART 4.1.2 Financing Statements, etc. The Agent shall
have received fully executed original UCC-3 or UCC-1 financing
statements, as appropriate, in form and substance satisfactory to the
Agent from each Credit Party, in each case in sufficient numbers in
order to effect a filing in each location where a UCC filing is
required (as determined by the Agent and its counsel) in order to
perfect the Liens in favor of the Agent for the benefit of the Lenders
arising under the Collateral Documents on the Collateral consisting of
TIWP Assets; and (ii) such patent/trademark filings as requested by
the Agent in order to perfect the Agent's security in the Collateral
consisting of TIWP Assets.
SUBPART 4.1.3 Corporate Existence. The Agent shall have
received all documents it may reasonably request relating to the
existence and good standing of each of the Credit Parties, the
corporate or other necessary authority for and the validity of this
Amendment, and any other matters relevant thereto, all in form and
substance reasonably satisfactory to the Agent.
SUBPART 4.1.4 Legal Opinion. The Agent shall have
received a legal opinion of McGuire, Woods, Battle & Boothe, counsel
for the Credit Parties in form and substance reasonably satisfactory
to the Agent.
SUBPART 4.1.5 Officer's Certificate. The Agent shall have
received a certificate executed by the chief financial officer of the
Borrower as of the Amendment No. 3 Effective Date stating that,
immediately after giving effect to this Amendment, (i) each of the
Credit Parties is Solvent, (ii) no Default or Event of Default exists
and (iii) the representations and warranties set forth in the Existing
Credit Agreement are true and correct in all material respects.
SUBPART 4.1.6 Insurance. The Agent shall have received
copies of insurance policies or certificates of insurance of the
Credit Parties evidencing liability and casualty insurance meeting the
requirements of the Credit Documents with respect to those assets of
the TIWP Business acquired pursuant to the Purchase Agreement.
SUBPART 4.1.7 Material Adverse Change. Except as otherwise
previously disclosed in writing to the Lenders (including without
limitation the forecast trend by business unit dated September 13,
1996), no material adverse change shall have occurred since June 30,
1996 in the condition (financial or otherwise), business or management
of the Borrower or of the Borrower and its Subsidiaries taken as a
whole, and no material adverse change shall have occurred in the
condition (financial or otherwise) of the TIWP Business (other than
portions of the TIWP Business related to the design, development,
marketing and sale of laser printer hardware) since the date of the
most current financial statements for the TIWP Business delivered to
the Lenders prior to the date hereof.
E-20
<PAGE> 20
SUBPART 4.1.8 Purchase Agreement. The Agent shall have
received a copy, certified by the chief financial officer of the
Borrower as true and complete, of the Purchase Agreement and of each
other document or instrument executed by the Borrower in connection
with the Purchase Agreement, in each case as originally executed and
delivered, and, no amendment or modification thereof shall have been
entered into on or prior to the date hereof which shall not have been
approved by the Agent.
SUBPART 4.1.9 Consummation of Purchase Agreement. The
Agent shall have received evidence satisfactory to it that (i) the
Purchase Agreement shall have been consummated in compliance with
applicable law and regulatory approvals and in accordance with the
terms thereof and (ii) the aggregate purchase price (including cash
and non-cash consideration, but without giving effect to post-closing
adjustments) paid by the Borrower and/or any of its Subsidiaries for
the TIWP Business acquired pursuant to the Purchase Agreement does not
exceed $28,000,000.
SUBPART 4.1.10 Financial Statements. The Agent shall have
received (i) the consolidated financial statements of the TIWP
Business for each of the two years ending December 31, 1994 and 1995,
and for the most recent fiscal quarter, including income statements
and certain balance sheet and cash flow items, (ii) a satisfactory pro
forma consolidated balance sheet of the Borrower as of the date hereof
giving effect to the acquisition of those assets of the TIWP Business
acquired pursuant to the Purchase Agreement and the other transactions
contemplated by the Purchase Agreement and (iii) a satisfactory pro
forma income statement and certain cash flow items for the TIWP
Business for fiscal year 1996.
SUBPART 4.1.11 TI Deferred Financing Note. The Agent shall
have received a copy, certified by the chief financial officer of the
Borrower as true and complete, of the TI Deferred Financing Note as
originally executed and delivered, and no amendment or modification
thereof shall have been entered into on or prior to the Amendment No.
3 Effective Date which shall not have been approved by the Agent.
SUBPART 4.1.12 Manufacturing Agreement. The Borrower shall
have entered, or shall be in the process (reasonably satisfactory to
the Agent) of entering, with an independent third party reasonably
acceptable to the Agent, into an agreement providing for the
production of product lines of the TIWP Business for the period
subsequent to the term of that certain servicing agreement between
Borrower and Texas Instruments dated as of the Amendment No. 3
Effective Date.
SUBPART 4.1.13 TIWP Business. The Agent shall have received
satisfactory evidence that the Agent, on behalf of the Lenders, holds
a perfected, first priority Lien, subject to no other Liens other than
for Permitted Liens, on those assets of the TIWP Business acquired
pursuant to the Purchase Agreement.
SUBPART 4.1.14 Amendment Fee. The Agent shall have received,
for the account of each Lender, an amendment fee equal to 37.5 basis
points on the aggregate amount of such Lender's Commitment.
E-21
<PAGE> 21
SUBPART 4.1.15 Amendment Arrangement Fee. The Agent shall
have received, for its own account, the amendment arrangement fee
separately agreed to by the Borrower and the Agent.
SUBPART 4.1.16 Other Items. The Agent shall have received
such other documents, agreements or information which may be
reasonably requested by the Agent.
PART V
GRANTING OF SECURITY INTEREST
SUBPART V.1 Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time, acceleration or
otherwise, of the Secured Obligations (as defined in Section 3 of the Existing
Security Agreement), each Obligor (as defined in the Existing Security
Agreement) hereby grants to the Agent, for the benefit of the Lenders, a
continuing security interest in, and a right to set off against, any and all
right, title and interest of such Obligor in and to all contract rights,
including, without limitation, (a) (i) all rights under the Purchase Agreement,
specifically including the Borrower's rights to indemnification from Texas
Instruments for Texas Instruments' breach of the warranties set forth in the
second sentence of Section 5.5 of the Purchase Agreement, the second sentence
of Section 5.6 of the Purchase Agreement and the third sentence of Section 5.7
of the Purchase Agreement, arising under Section 13.1(b) of the Purchase
Agreement, (ii) all rights under management agreements, tax sharing agreements
and lease agreements and (iii) all rights to payment of money, tax refunds and
insurance proceeds, and all proceeds and products of the foregoing and all
insurance relating thereto and all proceeds of such insurance, whether now
existing or hereafter arising and (b) all other TIWP Assets constituting
Collateral, as such term is defined in the Existing Security Agreement,
including without limitation all TIWP Assets at the locations set forth on
Schedule 2A attached hereto and the trademarks and trademark applications
identified on Schedule 5A attached hereto.
The Obligors, the Lenders and the Agent hereby agree that,
notwithstanding anything to the contrary contained in the Existing Security
Agreement, the Obligors shall not be deemed to have assigned, and the Agent
shall not be deemed to have taken an assignment of, any "intent to use" federal
trademark registration application until such time as either (i) an amendment
alleging use with respect to the related trademark shall have been accepted for
filing by the U.S. Patent & Trademark Office or (ii) applicable law
conclusively allows earlier assignment.
E-22
<PAGE> 22
PART VI
MISCELLANEOUS
SUBPART VI.1 Representations and Warranties. Borrower hereby
represents and warrants to the Agent and the Lenders that, after giving effect
to this Amendment, (a) no Default or Event of Default exists under the Credit
Agreement or any of the other Credit Documents and (b) the representations and
warranties set forth in Section 6 of the Existing Credit Agreement are, subject
to the limitations set forth therein, true and correct in all material respects
as of the date hereof (except for those which expressly relate to an earlier
date).
SUBPART VI.2 Cross-References. References in this Amendment to any
Part or Subpart are, unless otherwise specified, to such Part or Subpart of
this Amendment.
SUBPART VI.3 Instrument Pursuant to Existing Credit Agreement. This
Amendment is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered and applied in accordance with the terms and provisions
of the Existing Credit Agreement.
SUBPART VI.4 References in Other Credit Documents. At such time as
this Amendment No. 3 shall become effective pursuant to the terms of Subpart
4.1, all references in the Credit Documents to the "Credit Agreement" shall be
deemed to refer to the Credit Agreement as amended by this Amendment No. 3. and
all references in the Credit Documents to the "Security Agreement" shall be
deemed to refer to the Security Agreement as amended by this Amendment No. 3.
SUBPART VI.5 Counterparts. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SUBPART VI.6 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE COMMONWEALTH OF
VIRGINIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART VI.7 Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
[The remainder of this page has been left blank intentionally]
E-23
<PAGE> 23
IN WITNESS WHEREOF the parties hereto have caused
this Amendment to be duly executed on the date first above written.
BORROWER:
--------
GENICOM CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
GUARANTORS:
----------
GENICOM INTERNATIONAL HOLDINGS CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
GENICOM INTERNATIONAL SALES CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
DELMARVA TECHNOLOGIES CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
RASTEK CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
ENTERPRISING SERVICE SOLUTIONS CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
[Signatures Continued]
E-24
<PAGE> 24
PRINTER SYSTEMS CORPORATION
By /s/ James C. Gale
Title: Senior Vice President and CFO
THE PRINTER CONNECTION, INC.
By /s/ James C. Gale
Title: Senior Vice President and CFO
PRINTER SYSTEMS INTERNATIONAL, LTD.
By /s/ James C. Gale
Title: Senior Vice President and CFO
[Signatures Continued]
E-25
<PAGE> 25
LENDERS:
--------
NATIONSBANK OF TEXAS, N.A.
By /s/ Brent W. Mellow
Title: Vice President
CREDITANSTALT-BANKVEREIN
By
-----------------------------
Title:
By
-----------------------------
Title:
AERIES FINANCE, LTD.
By /s/ Ian Moore
-----------------------------
Title: Director
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By /s/ James L O'Connor
Title: Treasurer
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS, B.V.
By /s/ Christopher A. Bondy
Title: Vice President
UNITED STATES NATIONAL BANK OF OREGON
By /s/ Douglas A. Rich
Title: Vice President
[Signatures Continued]
E-26
<PAGE> 26
CRESTAR BANK
By /s/ William F. Lindlaw
Title: Vice President
THE RIGGS NATIONAL BANK OF
WASHINGTON, D.C.
By /s/ Tai M. Pham
Title: Vice President
AGENT:
NATIONSBANK OF TEXAS, N.A.,
as Agent
By /s/ Brent W. Mellow
Title: Vice President
E-27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 13,969
<SECURITIES> 0
<RECEIVABLES> 56,571
<ALLOWANCES> (2,334)
<INVENTORY> 30,474
<CURRENT-ASSETS> 103,266
<PP&E> 90,357
<DEPRECIATION> (63,755)
<TOTAL-ASSETS> 157,612
<CURRENT-LIABILITIES> 63,954
<BONDS> 0
0
0
<COMMON> 110
<OTHER-SE> 34,037
<TOTAL-LIABILITY-AND-EQUITY> 157,612
<SALES> 122,190
<TOTAL-REVENUES> 211,503
<CGS> 84,727
<TOTAL-COSTS> 162,516
<OTHER-EXPENSES> 49,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,299
<INCOME-PRETAX> (3,995)
<INCOME-TAX> (3,876)
<INCOME-CONTINUING> (119)
<DISCONTINUED> 0
<EXTRAORDINARY> (422)
<CHANGES> 0
<NET-INCOME> (541)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
