<PAGE> 1
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------- --------
Commission File No.: 0-14685
GENICOM CORPORATION
(Exact name of registrant as specified in its charter)
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)
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. Yes /x/ No -
As of May 1, 1998, there were 11,556,597 shares of Common Stock of the
Registrant outstanding.
================================================================================
<PAGE> 2
FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets - March 29, 1998 and December 28, 1997 3
Consolidated Statements of Income - Three Months Ended
March 29, 1998 and March 30, 1997 4
Consolidated Statements of Cash Flows - Three Months Ended
March 29, 1998 and March 30, 1997 5
Notes to Consolidated Financial Statements 6 - 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Index to Exhibits E-1
</TABLE>
Page 2
<PAGE> 3
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
(In thousands, except share data) 1998 1997
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,299 $ 4,622
Accounts receivable, less allowance for
doubtful accounts of $4,724 and $4,470 93,580 89,692
Other receivables 2,280 3,252
Inventories 64,260 67,553
Prepaid expenses and other assets 10,571 8,390
--------- ---------
TOTAL CURRENT ASSETS 173,990 173,509
Property, plant and equipment, net 39,494 36,146
Goodwill 33,522 33,800
Intangibles and other assets 5,562 6,594
--------- ---------
$ 252,568 $ 250,049
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,032 $ 6,391
Accounts payable and accrued expenses 78,666 84,578
Deferred income 16,878 16,350
--------- ---------
TOTAL CURRENT LIABILITIES 99,576 107,319
Long-term debt, less current portion 95,000 87,072
Other non-current liabilities 10,407 10,262
--------- ---------
TOTAL LIABILITIES 204,983 204,653
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 18,000,000 shares
authorized, 11,538,597 and 11,365,750 shares issued
and outstanding 115 114
Additional paid-in capital 28,868 26,959
Retained earnings 20,192 20,020
Foreign currency translation adjustment (1,590) (1,697)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 47,585 45,396
--------- ---------
$ 252,568 $ 250,049
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
MARCH 29, MARCH 30,
(In thousands, except per share data) 1998 1997
--------- ---------
<S> <C> <C>
REVENUES, NET:
Products $ 80,331 $65,634
Services 41,779 30,711
-------- -------
122,110 96,345
-------- -------
OPERATING COSTS AND EXPENSES:
Cost of revenues:
Products 56,960 44,956
Services 37,736 27,424
Selling, general and administration 20,271 17,117
Engineering, research and
product development 4,325 2,545
-------- -------
119,292 92,042
-------- -------
OPERATING INCOME 2,818 4,303
Interest expense, net 2,593 1,373
-------- -------
INCOME BEFORE INCOME TAXES 225 2,930
Income tax expense 56 413
-------- -------
NET INCOME $ 169 $ 2,517
======== =======
Earnings per common share (basic) $ 0.01 $ 0.23
======== =======
Earnings per common share (diluted) $ 0.01 $ 0.21
======== =======
Weighted average number of common shares
outstanding (basic) 11,464 10,998
======== =======
Weighted average number of common shares
and dilutive shares (diluted) 12,672 12,189
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
MARCH 29, MARCH 30,
(In thousands) 1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 169 $ 2,517
Adjustments to reconcile net income to cash provided
by (used in) operating activities:
Depreciation 3,477 3,358
Amortization 1,994 1,162
Changes in assets and liabilities:
Accounts receivable (2,916) (1,441)
Inventories 3,218 (5,831)
Accounts payable and accrued expenses (3,340) (9,036)
Deferred income 528 835
Other (4) (100)
------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,126 (8,536)
------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (6,727) (2,666)
Other investing (1,095)
------- --------
NET CASH USED IN INVESTING ACTIVITIES (7,822) (2,666)
------- --------
Cash flows from financing activities:
Borrowings on long-term debt 8,521 10,100
Payments on long-term debt (2,952) (8,282)
Bank overdraft (2,172) 5,682
Financing costs (62) (155)
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,335 7,345
------- --------
Effect of exchange rate changes on cash and cash equivalents 38 (65)
------- --------
Net decrease in cash and cash equivalents (1,323) (3,922)
Cash and cash equivalents at beginning of period 4,622 5,866
------- --------
Cash and cash equivalents at end of period $ 3,299 $ 1,944
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
Page 5
<PAGE> 6
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 March 29, 1998, 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 28, 1997 Annual Report. The results of operations for the
three months ended March 29, 1998, are not necessarily indicative of
the operating results to be expected for the full year.
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>
MARCH 29, DECEMBER 28,
1998 1997
--------- ------------
<S> <C> <C>
Raw Materials $ 6,480 $ 9,295
Work in process 1,564 1,994
Finished goods 56,216 56,264
------- -------
$64,260 $67,553
======= =======
</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 March 29, 1998
------------------------------------
Income Shares Per Share
------ -------- ---------
<S> <C> <C> <C>
BASIC EPS
Income available to shareholders $ 169 11,464 $ 0.01
------ -------- -------
Weighted shares from stock options 1,208
-------
DILUTED EPS $ 169 12,672 $ 0.01
------ -------- -------
Three Months Ended March 30, 1997
-----------------------------------
BASIC EPS
Income available to shareholders $2,517 10,998 $ 0.23
------ -------- -------
Weighted shares from stock options 1,191
--------
DILUTED EPS $2,517 12,189 $ 0.21
------ -------- -------
</TABLE>
PAGE 6
<PAGE> 7
4. Segment Information
The Company operates in the serial, line and page printer business
where it designs, manufactures and markets printers as well as the
related supplies and spare parts (Document Solutions company). The
Company's operation in services provides customers with a full range of
network information technology services with field services, depot
repair, parts and logistics and network products (Enterprising Service
Solutions company). The production and sales of relay products, a
product line the Company sold in November 1997, comprised less than 10%
of revenue, operating income and identifiable assets. This product line
is included in the Document Solutions segment for 1997. Revenue between
industry segments are not material.
<TABLE>
<CAPTION>
Three Months Ended or As of
March 29, March 30,
(in thousands) 1998 1997
--------- ---------
<S> <C> <C>
REVENUE
Document Solutions $ 80,331 $ 65,634
Enterprising Service Solutions 41,779 30,711
--------- ---------
$ 122,110 $ 96,345
--------- ---------
OPERATING INCOME
Document Solutions $ 6,276 $ 6,583
Enterprising Service Solutions (3,458) (2,280)
--------- ---------
$ 2,818 $ 4,303
--------- ---------
DEPRECIATION AND AMORTIZATION
Document Solutions $ 1,548 $ 1,320
Enterprising Service Solutions 3,540 2,896
Corporate and other 383 304
--------- ---------
$ 5,471 $ 4,520
--------- ---------
ASSETS
Document Solutions $ 137,877 $ 114,213
Enterprising Service Solutions 91,549 61,873
Corporate and other 23,142 11,515
--------- ---------
$ 252,568 $ 187,601
--------- ---------
CAPITAL EXPENDITURES
Document Solutions $ 1,065 $ 632
Enterprising Service Solutions 4,191 1,704
Corporate and other 1,471 330
--------- ---------
$ 6,727 $ 2,666
--------- ---------
</TABLE>
5. Business Acquisitions
Novadyne Computer Systems, Incorporated
On November 14, 1997, the Company purchased selected assets of Novadyne
Computer Systems, Inc. for approximately $17.3 million including the
assumptions of certain liabilities. The transaction was financed
through the Company's credit facility with NationsBank of Texas, N.A.
Page 7
<PAGE> 8
Pro Forma Financial Information
Presented below are the unaudited actual and pro forma statements of
operations as if the acquired operations had been integrated into the
Company effective December 30, 1996. Accounting adjustments have been
made in the pro forma financial information to include estimated costs
of the combinations and to reflect the integration and consolidation of
facilities and personnel. Included in such integration costs are
relocation costs associated with facilities and employee expenses. This
pro forma information has been prepared for comparative purposes only
and does not purport to be indicative of the results that actually
would have been obtained if the acquired operations had been conducted
by the Company during the period presented, and is not intended to be a
projection of future results. Presentation is in thousands except for
earnings per share amounts.
<TABLE>
<CAPTION>
Actual Three Pro Forma Three
Months Ended Months Ended
March 29, 1998 March 30, 1997
-------------- --------------
<S> <C> <C>
Revenue $122,110 $105,030
Pre-Tax Income 225 4,000
-------- --------
Net Income 169 3,159
-------- --------
Earnings per share - Basic $ .01 $ .29
-------- --------
Earnings per share - Diluted .01 .26
-------- --------
Weighted average shares outstanding
Basic 11,464 10,998
-------- --------
Diluted 12,672 12,189
-------- --------
</TABLE>
Digital Equipment Corporation Agreements
On August 10, 1997, the Company purchased Digital Equipment
Corporation's Printing Systems Business and became Digital's exclusive
supplier of Digital-branded printer products. The multi-year agreement
also established a cooperative alliance where the Company will provide
a broad line of products, business planning, technical support and
distribution services to Digital's marketing channels in each of their
global geographies. The Company and Digital have also agreed to pursue
joint marketing programs for each other's capabilities, products and
services.
6. Commitments and Contingencies
Environmental matters:
The Company and the former owner of its Waynesboro, Virginia facility,
General Electric Company ("G.E."), have generated and managed hazardous
wastes at the facility for many years as a result of their use of
certain materials in manufacturing processes. The Company and the
United States Environmental Protection Agency ("EPA") have agreed to a
corrective action consent order (the "Order"), which became effective
on September 14, 1990. The Order requires the Company to undertake an
investigation of solid waste management units at its Waynesboro,
Virginia facility and to conduct a study of any necessary corrective
measures that may be required. The investigative work under the Order
was completed in December 1997 and the Company submitted a report to
the EPA. The EPA has not yet responded to the report. Although not
required by the Order, the Company has agreed to install and operate an
interim ground water stabilization system, subject to EPA approval of
the system design. The interim groundwater stabilization program may be
chosen as the final remedy for the site, or additional corrective
measures may eventually be required. It is
Page 8
<PAGE> 9
not possible to reliably estimate the costs that any such possible
additional corrective measures would entail. However, if additional
corrective measures are required, the Company expects that it will
enter into discussion with EPA concerning their scope and a further
order for that purpose.
The Company has been notified by the EPA that it is one of 700
potentially responsible parties ("PRPs") under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, for
necessary corrective action at a hazardous waste disposal site in
Greer, South Carolina. In prior years, the Company arranged for the
transportation of wastes to the site for treatment or disposal. During
1995, the PRPs entered into an administrative consent order with EPA
under which they will undertake a remedial investigation and
feasibility study which is currently underway.
Atlantic Design:
December of 1995, the Company entered into a five year agreement which
was extended an additional year in June 1996 (renewable annually after
6 years) with Atlantic Design Company, a subsidiary of Ogden Services
Corporation, pursuant to which ADC acquired the Company's manufacturing
operations in McAllen, Texas and Reynosa, Mexico. Under the agreement,
ADC is committed to manufacturing a significant part of the Company's
impact printer products, printed circuit boards, related supplies and
spare parts, while the Company retains design, intellectual and
distribution rights with respect thereto.
Ogden Services Corporation has divested certain ADC facilities and has
been attempting to divest the Reynosa operations. The Company's
contract with ADC contains a clause requiring GENICOM's consent to the
sale, which consent cannot be unreasonably withheld. The Company has
evaluated preliminary information received from ADC concerning a
potential buyer, but, to the Company's knowledge, the sale of the
Reynosa facility is not imminent.
In August 1997, ADC filed a Demand for Arbitration with the American
Arbitration Association seeking a legal interpretation of the pricing
provisions in the agreement between ADC and the Company and the
recovery of an amount in dispute said to be approximately $2 million.
The Company filed a counterclaim against ADC for approximately $10
million alleging various breaches of the agreement. Ogden Services
Corporation and ADC have filed counterclaims against the Company
seeking damages in excess of $10 million alleging additional various
breaches by the Company of the agreement. The Company, Ogden and ADC
have engaged in settlement discussions, but no agreement has been
reached to date. Discovery is in progress in the arbitration and
hearings are scheduled to begin in July 1998. In April 1998, Ogden and
ADC filed an amended claim to seek recision of the agreement. The
Company does not believe there is any basis for such a claim and is
vigorously contesting such assertion. While the Company remains hopeful
that a negotiated solution can be reached, the Company cannot presently
predict the outcome of this matter or how the respective claims will be
resolved. There can be no assurance that such outcomes will not have a
material adverse effect upon the Company.
Other matters:
In the ordinary course of business, the Company is party to various
environmental, administrative and legal proceedings. In the opinion of
management, the Company's liability, if any, in all pending litigation
or other legal proceedings, other than those
Page 9
<PAGE> 10
discussed above, will not have a material effect upon the financial
condition, results of operations or liquidity of the Company.
7. The Company adopted SFAS 130, "Reporting Comprehensive Income", in the
first quarter of 1998. The Company's income, if reported on a
comprehensive basis, would be $249,000 for the first quarter of 1998.
The Company had a gain in its foreign currency translation amount of
$107,000 from December 28, 1997, with an after tax gain of $80,000. For
the first quarter of 1997, the foreign currency translation loss was
$139,000, with an after tax loss of $119,000. The Company's
comprehensive income for the first quarter of 1997 would have been $2.4
million.
Page 10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition:
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(in millions) 1ST QUARTER 1ST QUARTER
1998 CHANGE 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues - Enterprising Service Solutions $ 41.8 $ 11.1 $ 30.7
Revenues - Document Solutions 80.3 14.7 65.6
-------- ------- -------
Total Revenues $ 122.1 $ 25.8 $ 96.3
-------- ------- -------
Percentage change 26.8%
- -------------------------------------------------------------------------------------
</TABLE>
Revenue in the first quarter of 1998 increased 26.8% from the first
quarter of 1997 primarily due to the agreements with Digital Equipment
("DEC") and the acquisition of certain assets of Novadyne Computer
Systems. Documents Solutions company ("DSC") revenue was 31.0% higher
than the first quarter of 1997 as a result of the DEC agreements.
Enterprising Service Solutions ("ESSC") revenue increased 36.0% from
the prior year quarter. The increase in ESSC revenue was principally
due to the acquisition of certain assets of Novadyne Computer Systems
which increased revenues in field service, a contract with NASDAQ for
upgrading their computer network and increased integration business in
the Canadian subsidiary. In November of 1997, the Company sold its
relay product line which accounted for $4.3 million in revenue in the
first quarter of 1997. This revenue is included in the above chart in
Document Solutions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(in millions) 1ST QUARTER 4TH QUARTER 1ST QUARTER
1998 1997 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Order backlog $ 49.6 $ 44.9 $ 63.3
Change: 1st Quarter of 1998 compared to
Amount 4.7 (13.7)
Percentage 10.5% (21.6)
- ------------------------------------------------------------------------------------
</TABLE>
The decrease in order backlog from the 1997 first quarter primarily
reflects the effect of the sale of the relay product line. The relay
backlog was $10.4 million as of March 30, 1997. The increase in backlog
from the fourth quarter of 1997 is principally due to the annual
contracts ESSC records in January, partially offset by a decline in DSC
backlog. 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>
- ---------------------------------------------------------------------------------------
(in millions) 1ST QUARTER 1ST QUARTER
1998 CHANGE 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross margin - Enterprising Service Solutions $ 4.0 $ 0.7 $ 3.3
Gross margin - Document Solutions 23.4 2.8 20.6
------- ------- -------
Total gross margin 27.4 3.5 23.9
------- ------- -------
As a % of revenue 22.4% 24.8%
- ---------------------------------------------------------------------------------------
</TABLE>
Gross margin, as a percent of revenue, decreased from 24.8% in the
first quarter of 1997 to 22.4% in the first quarter of 1998. As a
percent of revenue, gross margin for DSC decreased to 29.1% in 1998
from 32.5% in 1997. This decrease is primarily the result of the lower
margins associated with the DEC products. For ESSC, gross margin
decreased from 10.7%
Page 11
<PAGE> 12
for the first three months of 1997 to 9.7% for 1998. The gross margin
decline was principally the result of lower revenue in ESSC,
particularly at the Louisville depot which had approximately the same
fixed costs as the Waynesboro and Bedford depots combined in the first
quarter of 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in millions) 1ST QUARTER 1ST QUARTER
1998 CHANGE 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Operating expenses:
Selling, general and
administrative $ 20.3 $ 3.2 $ 17.1
Engineering, research and
product development 4.3 1.8 2.5
------- ------- -------
Total $ 24.6 $ 5.0 $ 19.6
As a % of revenue 20.1% 20.4%
- ------------------------------------------------------------------
</TABLE>
The increase of $5.0 million in operating expenses from the first
quarter of 1997 was primarily a result of elevated levels of spending
needed to support the higher revenue in 1998. Sales and marketing
expenses were higher to support the increased marketing effort for ESSC
and for the introduction of new printer products. Engineering increased
$1.8 million due to development costs related to the travel printer
business and new products for the DEC channel. These increases were
partially offset by cost containment programs.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(in millions) 1ST QUARTER 1ST QUARTER
1998 CHANGE 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Interest expense, net $ 2.6 $ 1.2 $ 1.4
Percentage change 85.7%
- -----------------------------------------------------------------
</TABLE>
Interest expense increased primarily as a result of the higher debt
needed to support the working capital needs of the business and higher
development costs associated with new product introduction. Working
capital has increased as a result of the DEC agreements and the
acquisition of Novadyne Computer Systems.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(in millions) 1ST QUARTER 1ST QUARTER
1998 CHANGE 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense $ 0.1 $ (0.3) $ 0.4
Effective tax rate 24.9% 14.1%
- -------------------------------------------------------------
</TABLE>
The Company's effective income tax rate for the first quarter of 1998
was 24.9% as compared to 14.1% for the year-ago period. During the
first quarter of 1998, the tax rate was affected by the anticipated
utilization of foreign operating losses. In 1997, the rate was affected
by the reversal of the valuation allowance associated with certain tax
assets in Australia of approximately $0.5 million.
Page 12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(in millions) 1ST QUARTER 1ST QUARTER
1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in) operations $ 3.1 $ (8.5)
Cash used in investing activities (7.8) (2.7)
Cash provided by financing activities 3.3 7.3
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
(in millions) 1ST QUARTER 4TH QUARTER
1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Working capital $ 74.4 $ 66.2
Inventories 64.3 67.6
Debt obligations 99.0 93.5
Debt to equity ratio 2.1 to 1 2.1 to 1
- ----------------------------------------------------------------------
</TABLE>
Cash provided by operations was $3.1 million for the first quarter of
1998 compared to cash used by operations of $8.5 million in the first
quarter of 1997. The change in cash from operations was principally due
to the decrease in inventory and the increase in amortization expense.
The Company's working capital increased $8.2 million as of March 29,
1998 as compared to December 28, 1997 due primarily to the following: a
$3.9 million increase in accounts receivable which was primarily due to
a higher number of days sales outstanding; a $5.9 million decrease in
accounts payable which declined principally due to payments to Digital
Equipment Corporation; a $3.3 million decrease in inventory mainly due
to lower base product revenue. Debt increased slightly from December
1997. This increase was needed to support the working capital needs of
the business and from the acquisition of certain assets of Novadyne
Computer Systems. Debt to equity ratio remained unchanged from 1997
year end. As of March 29, 1998, the Company had $4.3 million available
for borrowing on its revolving credit agreement.
On July 3, 1997, the Company amended its credit agreement with
NationsBank of Texas, N.A., as agent for a group of banks,
("NationsBank") which increased the Company's revolving credit line
from $35 million to $40 million. Other terms and conditions of the
credit agreement generally remained unchanged.
On September 5, 1997, the Company further amended and restated its
credit agreement with NationsBank, increasing its total credit
facilities to $110 million from $80 million. The Company used part of
the proceeds from the credit facilities to repay the $9 million note to
Texas Instruments. The term notes totaled $55 million with maturities
of 5 and 7 years and the revolving credit line was increased from $40
million to $55 million. The financial
Page 13
<PAGE> 14
covenants for the facility were redefined. The Company entered into a
new interest rate swap which fixes the interest rate on $37.5 million
of the debt for a term of three years. The fixed rate at the time the
amendment was executed was approximately 8.5%. The revolving credit
line was increased to $70 million in October 1997 when commitments from
additional lenders were received increasing the total credit facilities
to $125 million.
Of the four coverage ratios the Company is required to meet quarterly
as part of its credit facility agreement with NationsBank, the Company
fell short of meeting the Consolidated Funded Debt Coverage Ratio and
the Consolidated Fixed Charges Coverage Ratio for the fiscal quarter
ended March 29, 1998 due principally to higher levels of capital
expenditures in ESSC and low earnings. NationsBank waived the
requirement for the quarter. The Company is currently negotiating to
reset the coverage ratios.
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. Terms such as
"believes", "expects", "plans", "intends", "estimates", or
"anticipates", and variations of such words and similar expressions are
intended to identify such forward looking statements. There are certain
important factors and risks, including the change in hardware and
software technology, economic conditions in the North American, Western
European and Asian markets, the anticipation of growth of certain
market segments and the positioning of the Company's products and
services in those segments, certain 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 arbitration with Atlantic Design Corporation, the
integration of acquisitions, including but not limited to the Company's
acquisition of certain assets of Novadyne Computer Systems as of
November 14, 1997, GENICOM's ability to attract and 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:
The following information with respect to securities recently issued by
the Company in transactions which were not registered under the
Securities Act of 1933, as amended. Exemption from registration is
claimed under Section 4(2) of the 1933 Act.
On February 4, 1998, Mr. Don E. Ackerman, Chairman of the GENICOM Board
of Directors, exercised a stock option for 100,000 shares of GENICOM
common stock granted to him on February 3, 1992. The exercise price of
these shares was $1.00 and was paid in cash.
On March 2, April 1 and April 7, 1998, Mr. Edward Lucente, a GENICOM
director until January 1998, exercised stock options for 5,000 shares,
5,000 shares and 10,000 shares of
Page 14
<PAGE> 15
GENICOM common stock, respectively. Mr. Lucente was granted options for
10,000 shares of common stock on May 4, 1993 with an exercise price of
$1.625 and for 10,000 shares of common stock on January 28, 1997 with
an exercise price of $3.125. The exercise price of all the shares was
paid in cash.
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:
Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Number Description
------ -----------------------------------------------------
10.1 Lease between Genicom Corporation and Gault
Riverport, LLC dated January 31, 1997, filed
herewith.
10.2 Amendment to Services Agreement with Atlantic Design
Company, Inc. dated May 29, 1996, filed herewith.
10.3 Amendment to Services Agreement with Atlantic Design
Company, Inc. dated June 24, 1996, filed herewith.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
On March 17, 1998, the Company filed an 8-K/A regarding its acquisition
of certain assets of Novadyne Computer Systems, Inc. on November 14,
1998.
Page 15
<PAGE> 16
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: May 13, 1998
/s/James C. Gale
--------------------------------------
Signature
James C. Gale
Senior Vice President
Finance and Chief Financial
Officer
(Mr. Gale is the Chief
Financial Officer and has
been duly authorized to sign
on behalf of the Registrant)
Page 16
<PAGE> 17
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1998
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------- ---------------
10.1 Lease between Genicom Corporation and Gault
Riverport, LLC dated January 31, 1997
10.2 Amendment to Services Agreement with Atlantic Design
Company, Inc. dated May 29, 1996
10.3 Amendment to Services Agreement with Atlantic Design
Company, Inc. dated June 24, 1996
27.1 Financial Data Schedule Filed only with
EDGAR version
E-1
<PAGE> 1
Exhibit 10.1
LEASE
THIS LEASE made this 31st day of January, 1997, between GAULT
RIVERPORT, LLC, a Kentucky limited liability corporation having its principal
place of business at 1466 Gardiner Lane, Suite 200, Louisville, KY 40213-1988
(LESSOR) and GENICOM CORPORATION, a Delaware corporation, having its principal
place of business at 14800 Conference Center Drive, Suite 400, Westfields,
Chantilly, VA 22021-3806 (LESSEE),
WITNESSETH:
That the LESSOR, in consideration of the undertakings to be performed
by the LESSEE, its successors and assigns, hereby leases to the LESSEE and
LESSEE leases from LESSOR certain real property (Premises) located in the County
of Jefferson, Commonwealth of Kentucky, comprising 32.293 acres in Jefferson
Riverport International Phase II, at the northwest corner of Trade Port Drive
and Greenbelt Highway, Tax District 25, Block 2895, lot 0152 (see exhibit A
attached).
1. TERM.
1.1 Term. The term of this lease shall be ten (10) years,
beginning on the Rent Commencement Date as defined in Paragraph 4, unless sooner
terminated pursuant to any provision hereof.
1.2 Early Possession. If LESSEE occupies the Premises prior to
said commencement date, such occupancy shall be subject to all provisions
hereof. Such occupancy shall not advance the terminate date, and LESSEE shall
pay rent for such period at the initial monthly rates set forth below.
2. RENT AND ESCROW PAYMENTS.
2.1 The LESSEE agrees to pay to the LESSOR as rent for the
Premises on a triple net basis the sum of NINE HUNDRED TWENTY EIGHT THOUSAND AND
00/100 DOLLARS ($928,000.00) per annum, payable in advance in monthly
installments of SEVENTY SEVEN THOUSAND THREE HUNDRED THIRTY THREE AND 33/100
DOLLARS ($77,333.33) on the first day of each and every month of said
1
<PAGE> 2
term, together with escrow payments set forth in Paragraph 2.2 below, such total
rent to be payable to the LESSOR at Gault Riverport, LLC, 1466 Gardiner Lane,
Suite 200, Louisville, KY 40213-1988. Rent for any period during the term hereof
which is for less than one month shall be a pro-rata portion of the monthly
installment. Rent shall be payable in lawful money of the United States.
2.2 During each month of the term of this Lease, on the same day that
rent is due hereunder, LESSEE shall escrow with LESSOR an amount equal to 1/12
of the estimated annual cost of real estate tax and all risk property insurance
items. The initial monthly escrow payments are based upon the estimated amounts
for the year in question, and shall be increased or decreased annually to
reflect the projected costs of such items. If LESSEE's escrow payments are less
than actual costs, LESSEE shall pay the difference to LESSOR within thirty (30)
days after LESSOR furnishes appropriate documentation to LESSEE. If the escrow
payments are more than actual costs, LESSOR shall credit the excess against
LESSEE's next annual escrow payments. The amount of the monthly rental and
initial monthly escrow payments are as follows:
<TABLE>
<S> <C> <C>
(1) Base Rent as set forth in Paragraph 2.1 $ 77,333.33
(2) Real Estate Tax Escrow Payment 6,666.67
(estimated @ $.25/SF/YR)
(3) All Risk Property Insurance Escrow 1,333.33
Payment (estimated @ $.05/SF/YR) -----------
Total Monthly Rental Payment $ 85,333.33
===========
</TABLE>
3. CONSTRUCTION OF PREMISES
3.1 Construction. LESSOR agrees, prior to the Rent
Commencement Date of this lease, to construct at its sole cost and expense and
complete the Project as described below in accordance with plans and
specifications approved and initialed by the parties, and attached as Exhibit B,
(hereafter referred to as "Plans"). The Project shall consist of a building
providing approximately 320,000 square feet on 32.293 acres, together with
driveways, parking areas, site work and related improvements. Minor changes from
such plans and specifications which may be necessary during construction shall
not affect, change or invalidate this lease and will be communicated to lessee.
2
<PAGE> 3
3.2 LESSEE's Representatives. For the purposes of Paragraph
3.1, the LESSEE's representatives shall be either Dana Pittman or Michael J.
Shelor and no modification, amendment or waiver of the execution of Paragraph
3.1 shall be effective unless signed by one of the aforementioned individuals,
provided, however, that in an emergency, the consent of one of the
aforementioned individuals shall be permitted orally if confirmed in writing
within ten (10) days.
3.3 Delay in Leasing. In the event LESSOR shall be delayed or
hindered in the construction of the Premises or prevented from completing such
construction by any strike, lockout, labor dispute, fire, damage or destruction
or casualty, unavailability of material, weather, power failures, unavailability
of utilities, restrictive governmental laws or regulations, riots, insurrection,
war or similar reason beyond its control, then LESSOR shall be excused for the
period of delay and the time limit for construction shall be extended for such
period of delay; provided, however, if such delay exceeds three (3) months, then
either party may terminate this lease upon prior written notice to the other and
neither party shall have any further liability under this lease.
3.4 Substantial Completion Date. Subject to Paragraph 3.3, the
Project shall be substantially completed on or before July 27, 1997. Substantial
completion is defined as the date on which a Certificate of Occupancy has been
issued by the appropriate governmental agency stating that construction is
sufficiently complete so that LESSEE can utilize the Project for its intended
purpose or the date upon which LESSEE begins using or occupying any portion of
the Project, whichever occurs first. In the event LESSEE begins using or
occupying any portion of the Project prior to LESSOR's delivery of a Certificate
of Occupancy, LESSOR shall thereafter procure and deliver such Certificate to
LESSEE within a reasonable period of time and LESSOR's failure to deliver such
Certificate shall give LESSEE the right to cancel this lease upon fifteen (15)
days prior written notice to LESSOR.
3.5 Compliance with Laws. LESSOR shall construct and complete
the Project as defined by the Plans in compliance with all laws, statutes,
orders, ordinances, rules and regulations of any federal, state or municipal
body or other governmental agency having jurisdiction thereof (specifically
including OSHA requirements, hazardous
3
<PAGE> 4
substance requirements, pollution standards or requirements, etc.) then in
effect as of the date the Certificate of Occupancy is issued.
3.6 Construction Warranty. Construction shall be done in a
workmanlike manner. LESSOR warrants that the Project shall be free of defects in
workmanship for a period of two (2) years following LESSEE's acceptance of the
Project (see reference to this Paragraph in Paragraph 8.1). If any such defects
are discovered, LESSEE will promptly notify LESSOR, who shall have thirty (30)
days within which to correct such defects or such reasonable additional time as
the circumstances may fairly require to correct said defects. Lessor will
warrant such repairs for a period of one (1) year. LESSOR furthermore hereby
assigns to LESSEE all transferable warranties, including those in excess of 2
years, made available to LESSOR from manufacturers of products or the providers
of services or labor used in the construction of the Project.
4. POSSESSION.
4.1 Rent Commencement Date. LESSOR shall deliver actual
possession of the Premises to LESSEE and LESSEE shall accept delivery of
possession no later than the completion date specified in Paragraph 3.4, and the
date upon which such possession is delivered shall constitute the Rent
commencement Date. LESSOR shall give LESSEE at least thirty (30) days prior
written notice of the anticipated Rent Commencement Date. On the Rent
Commencement Date, LESSEE will be deemed to have accepted the Premises and
acknowledged that the Premises are in the condition required under this lease,
except for such matters of which written notice shall be given by LESSEE to
LESSOR within ninety (90) days after the Rent Commencement Date. The rent due
under this lease shall commence on the Rent Commencement Date. LESSEE and its
contractors installing equipment, trade fixtures, furnishings and decorations in
the Premises shall not delay or interfere with LESSOR's construction or delivery
of possession and any such delay or interference shall not postpone the
commencement of the lease term or the obligation to pay rent.
4.2 LESSOR not Liable for Delays. Under no circumstances shall
LESSOR be liable for any delays in the delivery of possession to LESSEE except
as provided in 3.3. LESSEE's sole and exclusive remedies shall be the
non-payment of rent
4
<PAGE> 5
until the Premises are ready for occupancy and possession is delivered to LESSEE
or termination as provided in Paragraph 3.3.
4.3 Memorandum of Leasehold Interest. If requested by LESSEE,
LESSOR will join with LESSEE in executing a written instrument in recordable
form evidencing LESSEE's leasehold interest in the Premises.
5. USE OF PREMISES. The Premises are to be used by the LESSEE in
connection with its business as a facility for the repair, storage and
distribution of computer and related electrical/data products, and the LESSOR
expressly represents that said Premises may be so used for such purposes.
6. ARREARS OF RENT AND DEFAULT IN COVENANTS. It is agreed between
the parties hereto that if, after forty-five (45) days written notice from the
LESSOR to the LESSEE a default other than a failure to pay the required rent
shall continue, it shall be lawful for the said LESSOR to declare said term
ended, and to enter into the Premises or any part thereof, and to expel and
remove the LESSEE or any other person or persons occupying the Premises; except
that in the event that LESSEE shall, upon receipt of said forty-five (45) days
notice, commence in good faith and with reasonable dispatch to rectify any
default hereunder, other than a default in payment of rent, the reasonable time
necessary to remedy such default shall be added to such forty-five (45) day
period and LESSEE shall not be deemed in default hereunder so long as it
continues with due diligence to remedy such default.
7. ASSIGNMENT AND SUBLETTING. LESSEE agrees that it will not
sublet the Premises or any part thereof, or assign this lease without the
written consent of the LESSOR, which consent the LESSOR agrees will not be
unreasonably withheld.
8. MAINTENANCE AND REPAIRS, TAXES AND INSURANCE.
8.1 Maintenance and Repairs. During the entire term of this
Lease, LESSOR will be liable for the repair or maintenance of the roof,
structural supports or exterior walls, unless repairs or maintenance to the
roof, structural supports or exterior walls are a result of LESSEE's sole
negligence. Additionally, during the first two (2) years of the Lease, as part
of LESSOR's warranty described in Paragraph 3.6, LESSOR shall repair and
maintain, at its sole cost and expense, all heating, ventilating and
air-
5
<PAGE> 6
conditioning equipment; all plumbing and sprinkler systems; all lighting and
electrical systems (except tube/bulb replacements); all loading doors and dock
equipment, normal wear and tear excepted. However, the repairs and maintenance
shall be made by LESSEE if they are a result of LESSEE sole negligence.
At the beginning of the third year of the Lease, LESSEE
agrees, at its reasonable cost and expense, to perform all necessary maintenance
and repairs to the Premises.
During the entire term of this Lease, LESSEE shall be
responsible for its own snow removal, trash removal, parking lot cleaning,
landscaping maintenance and lawn care.
8.2 Taxes. Using funds provided by LESSEE'S escrow payments as
set forth in Paragraph 2.2, LESSOR agrees to make payment for all real estate
taxes and assessments levied against said Premises and grounds payable during
the term of this lease and any renewal thereof. LESSEE shall pay prior to
delinquency all undisputed taxes assessed against and levied upon its trade
fixtures, furnishings, equipment and all other of its personal property
contained in the Premises.
8.3 Property Insurance. Using funds provided by LESSEE's
escrow payments as set forth in Paragraph 2.2, LESSOR agrees to provide all risk
property insurance on the Building at rates competitive in the local market.
LESSEE shall be responsible for providing insurance coverage as LESSEE may deem
appropriate for its personal property.
8.4 Liability Insurance. During the term of this lease or any
renewal thereof, LESSEE shall, at LESSEE's reasonable expense, maintain adequate
insurance for bodily injury (including death) or property damage claims arising
out of LESSEE's use or occupancy of the Premises. Such insurance shall have
minimum liability limits of $1 Million per occurrence with a $5 Million policy
aggregate. LESSOR shall be named as an "Additional Insured." A Certificate of
Insurance evidencing the foregoing coverage shall be furnished to LESSOR upon
request.
8.5 Waiver of Subrogation. The LESSOR and the LESSEE hereby
release each other from any liability for loss or damage occurring on or to the
Premises or
6
<PAGE> 7
to the contents thereof, caused by fires or other hazards ordinarily
covered by fire and extended coverage insurance policies and each waives all
rights of recovery against the other for such loss or damage. Negligence
lawfully attributable to either party which, whether in whole or in part, is a
contributing cause of the casualty giving rise to the loss or damage shall not
affect the foregoing release and waiver.
9. ALTERATIONS BY LESSEE. The LESSEE may make from time to time
such improvements to the Premises as will, in the judgment of said LESSEE,
better adapt the same to the purposes of its business, subject to prior written
consent of the LESSOR, which consent the LESSOR agrees will not be unreasonably
withheld; provided, however, that the LESSEE shall make no such improvements
which shall affect the structural capacity of the building except upon the
approval of the LESSOR. All improvements, of any nature whatsoever whether trade
fixtures or otherwise, added to such Premises by the LESSEE shall be at its own
expense unless agreed otherwise by both parties and shall remain the property of
the LESSEE and upon or at any time before the expiration of the term of this
lease or any renewal thereof, or sooner termination of the term hereunder,
LESSEE shall remove from said Premises the improvements and restore the Premises
to its original condition, reasonable wear and tear excepted.
10. DAMAGE OR DESTRUCTION BY FIRE, ETC. In the event of the total
destruction of the Premises by fire, unavoidable accident, or other casualty,
this lease shall immediately terminate and all advance payments of rent, if any,
covering periods subsequent to such destruction shall be promptly refunded to
the LESSEE. In the event a portion of the Premises is rendered untenantable by
fire, unavoidable accident or other casualty during the term hereof, the LESSOR
shall repair the same with all reasonable speed. The rent hereby reserved shall
abate during the time such portion shall remain untenantable in such proportion
as the Premises so rendered untenantable bears to the entire Premises, and rent,
if any, paid in advance shall be refunded accordingly. If the Premises are not
repaired or restored with four (4) months, LESSEE may terminate this lease upon
ten (10) days prior written notice to LESSOR.
7
<PAGE> 8
11. UTILITIES. The Premises shall be metered directly for
electricity, natural gas, water and sewer (including drainage) and LESSEE shall
pay directly to the utilities all charges for said utilities.
12. QUIET ENJOYMENT. The LESSOR hereby covenants that it has a
good indefeasible title to the said Premises and that the same, on the first day
of the term hereby granted, shall be free and clear of all liens, encumbrances,
violations, encroachments and leases and that the LESSEE, upon paying the rent
herein stipulated and performing and observing the covenants by it to be kept
and performed as herein provided, shall have peaceable and quiet possession of
said Premises during the term of this lease and any renewal thereof.
13. DEFAULT.
13.1 Mortgage Principal and Interest. If LESSOR shall default
in the payment of interest upon or principal of any mortgage or other lien
encumbering said Premises, then in priority to this lease, LESSEE may at its
option pay the same and the amount so paid, with interest from the date of such
payment, may be applied by LESSEE upon any rent theretofore or thereafter
falling due hereunder.
13.2 Foreclosure. If foreclosure of any such mortgage should
be commenced resulting in the entry of a judgment of foreclosure and sale,
LESSEE may procure any other lender to take the mortgage by assignment, or may
itself take an assignment thereof, the LESSOR hereby constituting LESSEE as its
attorney-in-fact for such purpose, and any reasonable amount of expense incurred
by the LESSEE in so doing shall be paid by LESSOR to LESSEE on demand or may be
applied by LESSEE upon any rent theretofore or thereafter falling due hereunder.
13.3 Proceeds. If pursuant to such judgment of foreclosure and
sale, the Premises shall be sold and the rights of the LESSEE in this lease
shall be completely cut off and barred, then, in such event, the LESSEE shall be
entitled to receive from any surplus monies which may be realized upon such
sale, the value of the leasehold estate hereby created and lease terminated.
14. SIGNS. The LESSEE shall have the right to erect and maintain
any appropriate sign or signs for use in connection with its business upon the
exterior and/or
8
<PAGE> 9
interior of said Premises. The location and dimension of such sign or signs
shall be subject to LESSOR's prior approval which will not be unreasonably
withheld. LESSOR shall not be liable for any damage or injury caused by the sole
negligence of the LESSEE in the maintenance or erection thereof. LESSOR agrees
to prohibit the display of any sign or signs on the Premises other than those
erected and maintained by LESSEE.
15. CONDEMNATION. If the entire Premises be taken by virtue of
condemnation, eminent domain or for any public or quasi-public improvement, or
if any part of the Premises be taken so that the use and occupancy by LESSEE of
the remaining portion of the Premises for the purposes of its business shall be
materially affected and the Premises rendered unfit therefor, then this lease
and all obligations of the LESSEE hereunder shall terminate and all advance
payments of rent, if any, covering periods subsequent to such taking, shall be
promptly refunded to the LESSEE. Any award in condemnation shall be apportioned
between the LESSOR and LESSEE according to law and the rules and practice usual
in such cases. If a part of the Premises be so taken which does not materially
affect the use and occupancy by LESSEE for its purposes nor render the Premises
unfit therefor, then LESSOR shall be entitled to the entire award and shall at
its own cost and expense perform such reconstruction work as shall be necessary
to render the Premises suitable for occupancy by LESSEE for its said purposes.
The rent hereby reserved shall abate during such time as such part of the
Premises is untenantable as a result of such reconstruction; and upon completion
thereof, the annual rental hereunder shall be reduced by multiplying the rent
prior to the taking described herein by a fraction, the numerator of which is
the area of the Premises not available for use by LESSEE as a result of the
condemnation and denominator of which is the area of the Premises before such
taking.
16. ENVIRONMENT
16.1 LESSOR'S Responsibility. LESSOR agrees to observe all
laws and regulations dealing with environmental matters and agrees to hold
LESSEE harmless from any loss, cost or expense incurred by LESSEE as a result of
LESSOR's failure to do so.
9
<PAGE> 10
16.2 Compliance with Environmental Laws. LESSEE shall at all
times and in all respects comply with all federal, state, and local laws,
ordinances, and regulations ("Hazardous Materials Laws") relating to industrial
hygiene, environmental protection, or the use, analysis, generation,
manufacture, storage, presence, disposal, or transportation of any oil,
flammable explosives, asbestos, urea formaldehyde, radioactive materials or
waste, or other hazardous toxic, contaminated, or polluting materials,
substances, or wastes, including, without limitations, any "hazardous
substances," "hazardous wastes," "hazardous materials," or toxic substances
under any such laws, ordinances, or regulations (collectively, "Hazardous
Materials").
16.3 Hazardous Materials Handling. LESSEE shall at its own
expense procure, maintain in effect, and comply with all conditions of any and
all permits, licenses, and other governmental and regulatory approvals required
for LESSEE's use of the Premises, including, without limitation, discharge of
(appropriately treated) materials or wastes into or through any sanitary sewer
serving the premises. Except as discharged into the sanitary sewer in strict
accordance and conformity with all applicable Hazardous Materials Laws, LESSEE
shall cause any all Hazardous Materials removed from the Premises to be removed
and transported solely by duly licensed haulers to duly licensed facilities for
final disposal of such materials and wastes. LESSEE shall in all respects
handle, treat, deal with, and manage any and all Hazardous Materials in, on,
under, or about the Premises in total conformity with all applicable Hazardous
Materials Laws and prudent industry practices regarding management of such
Hazardous Materials. All reporting obligations imposed by hazardous Materials
Laws are strictly the responsibility of LESSEE. LESSEE is "in charge" of
LESSEE's "facility" as such terms are used in CERCLA (Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 as amended by
the Super Fund Amendment and Reauthorization Act of 1986.)
16.4 Removal. Upon expiration or earlier termination of the
term of the Lease, LESSEE shall cause all Hazardous Materials, the presence of
which is attributable to LESSEE, to the extent possible, to be removed from the
Premises and transported for use, storage, or disposal in accordance and
compliance with all applicable Hazardous Materials Laws. LESSEE shall not take
any remedial action in response to the presence
10
<PAGE> 11
of any Hazardous Materials in or about the premises, nor enter into any
settlement agreement, consent decree, or other compromise in respect to any
claims relating to any Hazardous materials in any way connected with the
Premises without first notifying LESSOR of LESSEE's intention to do so and
affording LESSOR ample opportunity to appear, intervene, or otherwise
appropriately assert and protect LESSOR's interest with respect thereto. In
addition, at LESSOR's request, LESSEE shall remove any tanks or fixtures which
contain, contained, or are contaminated with hazardous Materials, provided
LESSEE is responsible for the presence of such Hazardous Materials.
16.5 Notices. LESSEE shall immediately notify LESSOR in
writing of: (i) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed, or threatened pursuant to any Hazardous
materials Laws; (ii) any claim made or threatened by any person against LESSEE
or the Premises, relating to damage, contribution, cost recovery compensation,
loss, or injury resulting from or claimed to result from any hazardous
Materials; and (iii) any reports made to any environmental agency arising out of
or in connection with any hazardous Materials in, on, or removed from the
Premises, including any complaints, notices, warnings, reports, or asserted
violation in connection therewith. LESSEE shall also supply to LESSOR as
promptly as possible, and in any event within five (5) business days after
LESSEE first receives or sends the same, with copies of all claims, reports,
complaints, notices, warnings, or asserted violations relating in any way to the
Premises, or LESSEE's use thereof. LESSEE shall promptly deliver to LESSOR
copies of hazardous Waste manifests reflecting the legal and proper disposal of
all Hazardous Materials removed from the Premises.
16.6 Indemnity. LESSEE shall indemnify and hold LESSOR
together with LESSOR's partners, employees, agents, attorneys, successors and
assigns, harmless from any loss, cost or expense incurred by LESSOR if such
loss, cost or expense is caused solely by the failure of LESSEE to observe any
Hazardous Materials Law, the violation of which occurs because of actions taken
solely by LESSEE.
11
<PAGE> 12
16.7 Availability of LESSOR's Phase I Environmental Report.
Upon request, LESSOR shall furnish LESSEE a copy of the Phase I audit conducted
by Ecologix, Inc.
17. SEVERABILITY. The invalidity of any provision of this lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
18. SUCCESSORS AND ASSIGNS. It is mutually covenanted and agreed
by and between the parties hereto that each and every one of the expressions,
phrases, terms, covenants, provisions, agreements, requirements, obligations and
privileges in this lease contained shall extend to and insure to the benefit of
and bind the parties hereto, their respective heirs, executors, administrators,
successors and assigns.
19. NOTICES. Any notice by the LESSOR to the LESSEE, or by the
LESSEE to the LESSOR, shall be in writing and may be given and shall be deemed
to have been duly given, if either delivered personally or mailed in any general
or branch post office enclosed in a certified or registered postpaid envelope
addressed to the respective addresses below stated:
To the LESSOR at:
Gault Riverport, LLC
1466 Gardiner Lane, Suite 200
Louisville, KY 40213-1988
Attn: Charles P. Marsh
To the LESSEE at the premises, with copy to:
Genicom Corporation
7601 Trade Port Drive
Louisville, KY 40258
Attn: Mr. Dana M. Pittman
Either party may at any time change the address for notices to such
party by delivering or mailing notice as aforesaid at least (5) days previously
stating the change and setting forth the changed address.
12
<PAGE> 13
20. CHOICE OF LAW. This lease shall be governed by the laws of the
State wherein the Premises are located.
21. CONSENTS. Wherever in this lease the consent of one party is
required to an act of the other party, such consent shall not be unreasonably
withheld.
22. AUTHORITY. Each individual executing this lease on behalf of
LESSEE and LESSOR represents and warrants that he or she is duly authorized to
execute and deliver this lease.
23. SECURITY DEPOSIT. There shall be no security deposit in
connection with this Lease.
24. COMMISSION. LESSOR shall be solely responsible for any real
estate commission due in connection with this lease.
25. RIGHT OF FIRST REFUSAL. In the event Lessor receives a bona
fide offer to purchase the Premises, any part of the Premises, or property which
includes the Premises, during the term of this Lease (the "Purchase Offer"), and
desires to accept the same or should Lessor during the term of this Lease offer
to sell the Premises, any part thereof or any property which includes the
Premises (the "Sale Offer"), Lessee shall have the right of first refusal to
purchase the subject property at the same price and upon the same terms and
conditions as contained in the Purchase Offer or Sale Offer. Immediately upon
receiving a Purchase Offer or prior to making a Sale Offer, Lessor shall notify
Lessee in writing, setting forth the name and address of the prospective
purchaser, the proposed purchase price and all other terms and conditions of the
Purchase Offer or Sales Offer. Lessee shall have a period of thirty (30) days
after receipt of said notice within which to notify Lessor of its election to
purchase on the terms contained in such offer. In the event Lessee fails to give
notice of its election to purchase within such a thirty (30) day period, this
Lease (including this RIGHT OF FIRST REFUSAL provision which shall also be
binding on subsequent purchasers, if any) shall nevertheless remain in full
force and effect, shall survive the sale of the Premises and shall be binding
upon the purchaser or purchasers of the Premises. If the sale of the property
subject to a Purchase Offer or a Sale Offer is not closed on the terms and
conditions set forth therein (with no change in the purchase price or method of
payments thereof) to the purchaser making or accepting
13
<PAGE> 14
such offer no later than ninety (90) days after the date of closing specified
therein, the Lessee's right of first refusal as provided herein shall again
apply as to such Purchase Offer or Sale Offer and shall also apply as to any
subsequent Purchase Offer or Sale Offer.
26. LESSEE'S RIGHT TO CANCEL LEASE. LESSEE may cancel this Lease
as of the end of the 84th month, provided LESSEE shall have completed both of
the following: (a) given LESSOR 180 day prior written notice of its intention to
cancel and, (b) paid to LESSOR a cancellation payment of FOUR HUNDRED SIXTY-FOUR
THOUSAND AND NO/100 DOLLARS ($464,000.00) at the end of the 84th month.
27. ESTOPPEL CERTIFICATES
Lessee shall, within twenty (20) days after written request of
Lessor, execute, acknowledge and deliver to Lessor or to Lessor's mortgagee,
proposed mortgagee, land lessor or proposed purchaser of the Premises, any
estoppel certificates requested by Lessor which shall state whether this Lease
is in full force and effect and whether any changes may have been made to the
original of this Lease; whether the Term of this Lease has commenced and full
Rent is accruing; whether there are any defaults by Lessor and, if so, the
nature of such defaults; whether possession has been assumed and all
improvements to be provided by Lessor have been completed; whether Rent has been
paid more than thirty (30) days in advance; whether there are any liens, charges
or offsets against Rent due or to become due; and whether the address shown on
such estoppel certificate is accurate.
(balance of this page left blank)
14
<PAGE> 15
IN WITNESS WHEREOF, LESSOR and LESSEE have executed this Lease
through their respective authorized representatives, as of the day and year
written first above.
WITNESSES AS TO LESSOR: LESSOR:
GAULT RIVERPORT, LLC
Jean Mattingly a Kentucky limited liability corporation
- ------------------------------
Stephen C. Gault By: Charles P. Marsh
- ------------------------------ ------------------------------------
Charles P. Marsh
Title: Member
----------------------------------
WITNESSES AS TO LESSEE: LESSEE:
GENICOM CORPORATION
? a Delaware corporation
- ------------------------------
? By: James C. Gale
- ------------------------------ ------------------------------------
Title: CFO
----------------------------------
LESSOR ACKNOWLEDGMENT
STATE OF KENTUCKY )
) :SS
COUNTY OF JEFFERSON )
Before me, the undersigned, a Notary Public in and for said county and
state, personally appeared Charles P. Marsh as Member of Gault Riverport, LLC, a
Kentucky corporation, known to me to be the persons and officers whose names are
subscribed to the foregoing instrument and acknowledged to me that the same was
the free act and deed of the said corporation and they executed the same as the
act of such corporation for the purposes and consideration therein expressed and
in the capacity therein stated.
15
<PAGE> 16
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Louisville, Kentucky, this 31st day of January, 1997.
Terri P. Jones
Notary Public
LESSEE ACKNOWLEDGMENT
STATE OF Virginia )
) :SS
COUNTY OF Fairfax )
Before me, the undersigned, a Notary Public in and for said county and
state, personally appeared James C. Gale, as CFO, of Genicom Corporation, a
Delaware corporation, known to me to be the person and officer whose name is
subscribed to the foregoing instrument and acknowledged to me that the same was
the free act and deed of Genicom Corporation, and such person executed the same
as the act of such corporation for the purposes and consideration therein
expressed and in the capacity therein stated.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Chantilly, Virginia, this 30th day of January, 1997.
MaryAnn Martin (?)
Notary Public
16
<PAGE> 1
Exhibit 10.2
May 29, 1996
Mr. Russ Gerhard
Vice President, Engineering & Development
Genicom
Genicom Drive
Waynesboro, VA 22980
Re: Amendment to Services Agreements December 18, 1995
Dear Russ:
Genicom and ADC recently negotiated special base pricing for the new GM Model
354842AB0000A3GM printer of $2,853.00 for a quantity of 1,000 units. This is net
of ECN 96-0104. A condition of this pricing is a guarantee by Genicom of an
additional 58,000 hours added to the minimum guarantee of 980,000 man hours.
Paragraphs 2.02 (a) and (c) of the Services Agreement are amended to read:
2.02 (a) During the Minimum Guarantee Period, as defined below, Genicom
guarantees that (i) it shall purchase products from ADC at a total price to
Genicom of no less than Fifty Four Million ($54,000,000) Dollars and (ii) ADC
shall expend no fewer than 1,038,000 man-hours to meet Genicom such production
requirements (the "Minimum Guarantee").
(c) If ADC does not expend 1,038,000 or more man-hours during the
Minimum Guarantee Period, Genicom shall pay ADC within thirty (30) days of
receipt of an invoice an amount equal to the product of Six ($6.00) Dollars per
man-hour (the fixed cost portion of ADC's fully-burdened labor rate) and the
difference between 1,038,000 man-hours and actual number of man-hours expended
by ADC during the Minimum Guarantee Period.
If you agree with these changes, please have an officer of Genicom sign so that
the agreement can be amended.
Sincerely,
/s/William B. McDonough
William B. McDonough
Vice President Southeast Operations
Genicom Corporation Atlantic Design Company, Inc.
By: /s/ Russell M. Gerhard By: /s/ James N. Chavetta
Its: Its: President
Date: 6/6/96 Date: 6/14/96
<PAGE> 1
Exhibit 10.3
June 24, 1996
VIA FACSIMILE (704) 394-1722
Atlantic Design Company, Inc.
5602 Wilkinson Boulevard
Charlotte, North Carolina 28209
Attention: President
Amendment to Services Agreement
Ladies and Gentlemen:
Reference is hereby made to that certain Services Agreement dated
December 18, 1995 between Atlantic Design Company, Inc. and Genicom Corporation
(the "Services Agreement"). All capitalized terms used in this letter which are
not defined herein shall have the meanings assigned to them in the Service
Agreement. The purpose of this letter is to amend the Services Agreement
consistent with an amendment to be effected with respect to the Deed of Lease
dated December 17, 1995 between Genicom de Mexico, S.A. de C.V., as Landlord,
and Datacom de Mexico, S.A. de C.V., as Tenant (the "Deed of Lease"). The
amendment to the Services Agreement shall become effective simultaneously with
the amendment to the Deed of Lease (the "Effective Time").
At the Effective Time, the Services Agreement shall be amended as
follows:
Section 3.01 shall be amended to provide that the term of the Services
Agreement shall be six (6) years commencing on the date of the Services
Agreement (December 18, 1995). The term may continue to be extended
from year to year thereafter as provided in Section 3.01 and the
definition of "Contract Year" shall also remain unchanged.
Please confirm your agreement with the foregoing, as does Genicom
Corporation, by executing this letter where indicated below. This letter may be
executed in multiple counterparts, all of which when taken together shall
constitute one and the same agreement.
Sincerely,
GENICOM CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE> 2
AGREED: ATLANTIC DESIGN COMPANY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Ogden Services Corporation joins herein for purposes of confirming that its
guarantee of the performance of Atlantic Design Company, Inc. of the Services
Agreement contained in Section 22 of the Services Agreement shall remain in full
force and effect notwithstanding the amendment of the Services Agreement set
forth in this letter.
OGDEN SERVICES CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
cc: McGuire, Woods, Battle & Boothe, LLP
One James Center
Richmond, Virginia 23219
Attention: Jane Whitt Sellers, Esquire
Fax: (804) 775-1061
Ogden Services Corporation
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
Fax: (212) 868-5714
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> DEC-29-1997
<PERIOD-END> MAR-29-1998
<CASH> 3,299
<SECURITIES> 0
<RECEIVABLES> 98,304
<ALLOWANCES> (4,724)
<INVENTORY> 64,260
<CURRENT-ASSETS> 173,990
<PP&E> 106,341
<DEPRECIATION> (66,847)
<TOTAL-ASSETS> 252,568
<CURRENT-LIABILITIES> 99,576
<BONDS> 0
0
0
<COMMON> 115
<OTHER-SE> 47,471
<TOTAL-LIABILITY-AND-EQUITY> 252,568
<SALES> 80,331
<TOTAL-REVENUES> 122,110
<CGS> 56,960
<TOTAL-COSTS> 94,696
<OTHER-EXPENSES> 24,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,593
<INCOME-PRETAX> 225
<INCOME-TAX> 56
<INCOME-CONTINUING> 169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
