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November 27, 1988

IBM NOTIFIES GENISCO TECHNOLOGY OF THE TERMINATION FOR DEFAULT OF ITS CONTRACT

By CBR Staff Writer

Genisco Technology Corp, La Mirada (where?), California seems to be in more trouble: the company says that IBM has notified it of the termination for default of its contract for the development and production of Genisco’s ECR-42 recorder: Genisco is disputing the default termination and negotiating the matter with IBM – it says it has already spent about $4m more than the $3.7m it received from IBM on the contract, and that in the quarter to June 30, it reversed prior revenue of about $700,000 and provided for reserves for losses of about $1.1m against the contract – and reckons thereby that it is adequately reserved for this contract, apart from the impact of the termination (they do talk funny in La Mirada); while there could be additional costs resulting from a termination for default, we believe that we will be able to negotiate a conversion of the termination to one for convenience; if that effort is successful, the resulting recovery of Genisco’s costs would have a significant positive financial impact.

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