<PAGE>   1
                                   FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 1997
                                       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

       Securities registered pursuant to Section 12(b) of the Act:  None
          Securities registered pursuant to Section 12(g) of the Act:
                          Common stock, $.01 par value

         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
                                             ---   ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K. X
                                         -

         As of January 30, 1998, there were 11,384,606 shares of Common Stock
of the Registrant outstanding.  The aggregate market value of the shares of
Common Stock held by non-affiliates (without admitting that any person whose
shares are not included in determining such value is an affiliate) was
approximately $119,538,363 based upon the closing price of the shares in the
NASDAQ over-the-counter market on January 30, 1998.

                      DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's definitive proxy statement with respect
to the Annual Meeting of Stockholders to be held on May 20, 1998:  Part III
<PAGE>   2
                      GENICOM CORPORATION AND SUBSIDIARIES
                                FORM 10-K INDEX

<TABLE>
<S>                                                                                         <C>
                                       PART I


Item 1.        Business                                                                       3
Item 2.        Properties                                                                    14
Item 3.        Legal Proceedings                                                             14
Item 4.        Submission of Matters to a Vote of Security Holders                           15

Executive Officers of the Registrant.                                                        16

                                       PART II


Item 5.        Market for the Registrant's Common Stock and Related Stockholder Matters      17
Item 6.        Selected Financial Data                                                       18
Item 7.        Management's Discussion and Analysis of Financial Condition
                 and Results of Operations                                                   19
Item 8.        Financial Statements and Supplementary Data                                   26
Item 9.        Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure                                                    51


                                       PART III


Item 10.       Directors and Executive Officers of the Registrant                            51
Item 11.       Executive Compensation                                                        51
Item 12.       Security Ownership of Certain Beneficial Owners and Management                51
Item 13.       Certain Relationships and Related Transactions                                51


                                       PART IV

Item 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K               51
Signatures                                                                                   56
Index to Financial Statements and Schedules                                                 F-1
Index to Exhibits                                                                           E-1
</TABLE>





                                       2
<PAGE>   3
ITEM 1. BUSINESS

GENERAL

GENICOM Corporation ("GENICOM" or the "Company"), through its worldwide
operations, provides  maintenance and repair services for computer systems
produced by multiple vendors, network planning, integration and optimization
services.  The Company develops, manufactures, and distributes printers and
related products. GENICOM's service business include information management,
procurement, on-site installation and repair, and off-site repair,
refurbishment, and re-manufacturing. With the acquisition of certain assets of
Novadyne Computer Systems on November 14, 1997, GENICOM significantly increased
the size of  its service business.  GENICOM continues to design, manufacture,
and distribute impact and page printers for (i) use in cost sensitive
environments; (ii) the printing of multi-part forms and bar-codes; (iii)
providing printing connectivity in proprietary systems; and (iv) the travel
industry.  On September 30, 1996, GENICOM acquired Texas Instruments' worldwide
printer business which enabled the Company to expand its printer product line
in mid-range printers and products specifically directed at the travel
industry.  In August 1997, GENICOM entered into agreements with Digital
Equipment Corporation ("DEC") to design, market, distribute and support DEC
printer products, giving GENICOM access to certain distribution channels to
which the Company did not have access previously.  The Company also provides
spare parts and supplies such as print heads, printed wire boards, ribbons and
printer cartridges for both the Company's as well other manufacturers'
printers.

BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company's businesses are reported in two business segments: Enterprising
Service Solutions and Document Solutions.  Financial information by business
segment and geographic location appears on pages 46, 47 and 48 of this Annual
Report on Form 10-K.  This information includes sales and service revenues,
operating income and identifiable assets for the years ended December 28, 1997
and December 29, 1996.

Operation of the Company's subsidiaries in Australia, Canada, and Europe is
subject to various risks associated with political and economic developments in
such countries, such as tariffs imposed to discourage imports, varying product
standards and specifications, and value added and excise taxes.  In addition,
GENICOM is exposed to currency fluctuation risks as a result of its
international sales and sourcing of products from foreign vendors.
Accordingly, sales or cost of components may decrease or increase as the value
of the United States dollar appreciates or depreciates relative to the currency
of the source country.  The Company  purchases forward exchange contracts as a
strategy to assist in minimizing these currency risks and expects to continue
this practice in the future.

ENTERPRISING SERVICE SOLUTIONS

                                    GENERAL

GENICOM performs a wide range of service related activities through its
Enterprising Service Solutions company ("ESSC").  ESSC provides customer
services and support to assist in the performance of networked business
systems.  ESSC's services are classified as follows:

        - Professional Services            - On-Site
        - Procurement Services             - Off-Site





                                       3
<PAGE>   4
                             PROFESSIONAL SERVICES

Professional Services provides a full range of information management services
including creation, operation and maintenance of a customer's information
system.  With the acquisition of certain assets of Novadyne Computer Systems in
November 1997, Professional Services expanded its portfolio and delivery
capabilities to include Wide Area Networking (WAN) products, staff augmentation
and deployment services with many telecommunication voice and data circuit
providers as well as the ability to support SUN operating systems.

Professional Services offers the following products:

         Help Desk Services - Provides call screening and first and second
         level technical support.

         Network Professional Services - Provides network performance
         baselining, asset baselining, consultation and analysis, network
         administration, network monitoring and network design.

         Project Management Services - Provides management reporting, network
         changes including moves, adds, deletes and upgrades, network roll-out
         or deployment, service planning, staff augmentation and training.

         Logistics Services - Provides logistics planning, logistics
         procurement and provisioning and parts logistics management.

                              PROCUREMENT SERVICES

Procurement Services provides Value-Added Resale of computer systems,
peripherals and network hardware, software and spare parts.  Procurement
Services offers two product lines.  System Provisioning Services provides all
network product procurement requirements.  Spare Part Sales provides support
for the provisioning of multivendor printers, monitors and other computer
systems and peripherals in quantities and with same day shipment.

                                ON-SITE SERVICES

On-Site Services provides repair and installation of information and networked
systems.  Field engineers are dispatched from a central telecommunications
support site to the customer's local premise.  All required services are
performed at the customer's location.  In addition to ESSC's own field
engineers, the Company has access to qualified Authorized Third-Party Service
Providers to increase geographic service coverage.

In 1997, ESSC began using a two-way paging system which allows field engineers
to update, check status and close out service calls real-time.  This system
also provides the field engineers with Internet access email and data
retrieval.  In 1998, ESSC should complete implementation of a computer support
system which provides customers and the Company an advanced and responsive
networked business system for managing services.





                                       4
<PAGE>   5
On-Site Services offers three products.

         Installation Services - Performs the physical installation of
         supported equipment at the customer's location and ensures the
         equipment is operational.

         Remedial Services - Repairs and maintains equipment at the customer's
         site.

         Preventive Maintenance Service - Periodic checks are performed to
         avoid unscheduled down time of a computer system.

                               OFF-SITE SERVICES

Off-Site Services repair, refurbish and re-manufacture business equipment and
systems at one of two repair depots in Louisville, Kentucky or Fort Worth,
Texas.  The services at the Louisville depot were formerly performed at two
other depots in Bedford, Massachusetts and Waynesboro, Virginia.  Both of these
depots ceased operations in 1997 and the majority of the business from these
depots was transferred to the Louisville depot.

The Louisville depot repairs printers, keyboards, personal computers,
controllers, other network related hardware, workstations, systems, and
monitors.  The Fort Worth depot repairs laptop and desktop computers.  The Fort
Worth facility is used principally to perform out-sourced services for AST
Research, Inc.

Off-Site Services offers three products.

         Depot Repair Services - Unit repair or refurbishment in a GENICOM
         quality controlled repair facility by qualified depot technicians.

         Integration Services - Multivendor products are set-up, tested,
         wrapped and shipped to a customer's location for "plug and play"
         installation.

         Asset Management Services - Repair and refurbishment of equipment and
         return to the customer within twenty-four hours.

SALES AND MARKETING

ESSC's acquisition of certain assets of Novadyne Computer Systems, Inc.
provided a significant increase in sales and marketing resources.  The sales
force has more than doubled from the prior year, providing increased customer
and geographic coverage.  The sales team has been divided to service the four
major product groups.  These sales teams target specific customers and vertical
markets with a specific set of services.  These customers include systems and
peripherals manufacturers, systems integrators, systems VARs and resellers, and
major end-users.

COMPETITION

The market size of ESSC related services is expected to be almost $35 billion
in 1998, according to Dataquest estimates.  Currently, there is no individual
company with a significant market share.  The markets in which ESSC operates
are highly competitive.  Due to the scope of service capabilities ESSC delivers
to their customers, many competitors of various size and focus are encountered.
These competitors range from the service divisions of worldwide systems and
peripheral manufacturers to small regional service providers with less than 10
employees.





                                       5
<PAGE>   6
ESSC competes with, among others, independent providers of repair services,
in-house repair centers of OEMs and third party maintenance organizations
(TPMs).  ESSC believes that it offers cost-effective maintenance and repair
solutions to OEMs and TPMs and, therefore, considers these entities potential
customers.

The Company believes that ESSC has developed significant scope and scale in a
broad range of service solutions.  This should allow ESSC to provide its
customers with consistent service solutions at a low overall cost.  ESSC
competes primarily on the basis of the scope and quality of its value-added
services and price.  Due in part to the capital costs necessary to maintain
adequate inventory and equipment as well as the geographic disbursement of need
to service large OEMs and TPMs, ESSC believes the economic constraints of small
maintenance and repair companies preclude them from competing with ESSC for
large programs.  ESSC also believes that the scope of its maintenance and
repair operations and capabilities provides it with some competitive advantages
over some of its competitors.

DOCUMENT SOLUTIONS

                         PRINTERS AND RELATED PRODUCTS

The Company offers a wide range of serial (one character at a time), line (one
or more lines at a time) and page (one page at a time) printers, with
performance features and prices suitable for a varied range of printing
applications.  Besides offering a wide range of technologies and print speeds,
GENICOM's printers offer multiple combinations of features that make them
suitable for diverse applications.  Such features include multiple copy and
extensive paper handling capabilities, multiple type styles (fonts) and bar
codes.  GENICOM's printers are used with desktop workstations and with various
networks and stand alone configurations in conjunction with micro, mini,
super-mini and mainframe computers.

On August 10, 1997, the Company entered into agreements with Digital Equipment
Corporation (DEC) Printing Systems Business and became the exclusive supplier
of Digital Branded Printer Solutions worldwide.  The Company acquired design
rights, product intellectual property rights, vendor and customer contracts,
inventory and a license to use the Digital Logo, DEC Trademark and other
trademarks for programs within the Cooperative Marketing Agreement.  The
agreements expanded the Company's product lines in the mid-range client/server
environment and enabled the Company to provide custom applications in the
Digital VMS environments.

Document Solutions also sells spare parts and supplies, for both GENICOM
products and those manufactured by other vendors.  Supplies include items that
have a relatively short life such as printer ribbons and cartridges, while
spare parts include items that have generally a longer life such as print heads
and printed wire boards.





                                       6
<PAGE>   7
The following table sets forth a summary of certain performance features of
GENICOM's principal printer products.  Manufacturer's List Price Range is as of
January, 1998.  Sales price may vary depending on features installed,
customization, discounts and other factors.

<TABLE>
<CAPTION>
                                                                                                      Manufacturer's
                                                                                                        Suggested
      Printer         Technology        Draft                                                           List Price
   Product Family        Type        Print Speed           Features                  Options              Range
-------------------------------------------------------------------------------------------------------------------------
 <S>                 <C>            <C>             <C>                       <C>                      <C>
 IMPACT-SERIAL

 93Xe series         9 wire         300 to 435      personal workstation      pull tractor, serial     $550-$883
                     serial         cps             printer, ideal for        interface board,
                     matrix                         small footprint           tabletop printer
                                                    applications              stand

 2400 Series         9 wire         270 to 320      designed for attachment                            $1,492-$1,658
                     serial         cps             to IBM 3270 controllers
                     matrix                         (coax and IBM AS/400
                                                    twinax) with versatile
                                                    paper handling

 880 Series          9 wire         300 cps         heavy duty printer        barcode kit, acoustic    $2,195-$2,320
                     serial                                                   cover, pedestal and
                     matrix                                                   paper handling
                                                                              options

 885 Series          9 wire         300 cps         80 column, heavy duty     barcode kit, acoustic    $2,295-$2,420
                     serial                         printer                   cover, pedestal and
                     matrix                                                   paper handling
                                                                              options

 3400 Series         9, 18 or 24    400 to 840      mid-range and             paper handling           $1,395-$2,995
                     wire serial    cps             high-speed network        options, colorkit and
                     matrix                         printers, advanced        pedestal
                                                    paper handling to
                                                    include dual tractors
                                                    and auto sheet feeder,
                                                    postnet and bar codes,
                                                    with automatic
                                                    switching serial
                                                    (parallel interface)

 3500 Series         9, 18 or 24    400-840 cps     designed for attachment   paper handling           $2,195 - $3,595
                     wire                           to IBM 3270 controllers   options, colorkit and
                     serial                         (coax )and IBM AS/400     pedestal
                     matrix                         (twinax) with
                                                    additional
                                                    autoswitching parallel
                                                    interface, dual
                                                    tractors and sheet
                                                    feeder and resident bar
                                                    codes

 8900 Series         18 wire        400 cps         heavy duty, mid-range     bar code and font        $2,345-$2,859
                     serial                         printers with the         kits, DEC LA 120
                     matrix                         ability to print on       emulation, RS-422
                                                    9-part forms              kit, current loop
                                                                              kit, MacAdapter kit,
                                                                              acoustic cover,
                                                                              pedestal and paper
                                                                              handling options

 3800 Series         18 wire        600 cps         high-speed, heavy duty,   QMS /IGP graphics,       $2,125 - $3,168
                     serial                         network printer,          RS-422 kit, pedestal
                     matrix                         advanced paper handling   and paper handling
                                                    and single/dual path,     options
                                                    POSTNET and bar codes


 3900 Series         18 wire        600 cps         designed for attachment   pedestal and paper       $2,999 - $3,400
                     serial                         to IBM 3270 controllers   handling options
                     matrix                         (coax) and IBM Systems
                                                    3X or AS/400 (twinax),
                                                    high-speed, advanced
                                                    paper handling and bar
                                                    codes
</TABLE>





                                       7
<PAGE>   8
<TABLE>
 <S>                 <C>            <C>             <C>                       <C>                      <C>
 IMPACT
 4490 Series
                     shuttle        1400 lpm        heavy-duty cycle,         additional fonts and     $10,158 -
                     matrix line                    maintenance free          paper motion             $11,660
                     printer                        features, advanced        detector, QMS/IGP
                                                    paper handling,           graphics
                                                    graphics and bar codes

 4590 Series         shuttle        1400 lpm        designed for attachment   additional fonts and     $11,158 -
                     matrix line                    to IBM 3270 controllers   paper motion             $12,955
                     printer                        (coax), IBM Systems 3X    detector, QMS/IGP
                                                    or AS/400 (twinax) and    graphics
                                                    bar codes

 4800 Series         shuttle        400 to 800      reliable, low cost of     QMS & IGP graphics       $5,995 - $8,995
                     matrix line    lpm             ownership printer         IBM twinax and coax
                     printer                        designed for
                                                    connectivity to
                                                    stand-alone systems and
                                                    ethernet and token ring
                                                    LANS running TCP/IP and
                                                    other protocols

 4900 Series         shuttle        400 to 800      designed for attachment   additional fonts         $7,047 - $10,290
                     matrix line    lpm             to IBM 3270 controllers   QMS/IGP bar codes
                     printer                        (coax), IBM Systems 3X
                                                    or AS/400 (twinax), bar
                                                    codes and IPDS

 NONIMPACT

 microLaser          laser          12 to 17 ppm    desktop, network and      versatile                $1,499 - $1,599
 Series              printers                       multiuser environments,   input/output paper
                                                    high resolution,          handling devices and
                                                    multiple resident         duplexing
                                                    fonts, PostScript level
                                                    2 & PCL5E compatible.
                                                    Supports various paper
                                                    sizes.

 7900 Series         laser          10 to 16 ppm    multiuser, IBM client     MarkNet internal         $2,582 - $4,125
                     printers                       server environments,      network adapter
                                                    full IBM 4028 IPDS        connects up to 18
                                                    emulation, PCL5E &        different operating
                                                    Postscript Level 2        systems, versatile
                                                    compatible up to 1200     input/output paper
                                                    dpi, bar codes, labels,   handling devices and
                                                    graphics, electronic      duplexing, various
                                                    forms.                    memory options

 7930/40 Series      page           30 to 40 ppm    multi-user materials,     network connectivity     $16,900 -
                     printers                       IBM client server         options, printer         $28,500
                     (LED array)                    environments, full IBM    cabinet, high
                                                    4028 IPDS emulation,      capacity paper
                                                    PCL5E and PostScript      handling options
                                                    Level 2 compatible,
                                                    hard drive for software
                                                    upgradability and
                                                    storage of forms and
                                                    fonts

 6000 Series         thermal        2 to 8          full range of bar code    additional memory,       $705 -  $6,560
                     transfer       inches per      and label printers        emulations,  and
                     and direct     second          designed for portable,    media handling
                     thermal                        desktop and industrial
                     printers                       environments


 TRAVEL INDUSTRY
 PRODUCTS

 BT201e              Direct         4.9             Airlines baggage tag      memory                   $2138
                     thermal        inches/sec.     and boarding pass
                                                    thermal printer

 GR122               Magnetic       N/A             Decodes magnetic data     pedestal                 $4605
                     coupon         (not a          from ATB format coupons   2nd display
                     decoder        printer)
</TABLE>





                                       8
<PAGE>   9
<TABLE>
 <S>                 <C>            <C>             <C>                       <C>                      <C>
 895e                9 wire         300 CPS         Impact printing of TAT    bar code scanner         $1763 - $3638
                     serial                         and ATB format pin fed
                     matrix                         stock

 ATB1600             Direct         40              Thermal printing to       memory                   $5922 - $6700
                     thermal        coupons/min.    magnetic                  modem
                                                    encoding/decoding of
                                                    ATB format coupons

 ATB1800             Thermal        40              Direct thermal and        memory                   $6488 - $7225
                     transfer &     coupons/min.    thermal transfer          modem
                     direct                         printing magnetic
                     thermal                        encoding/decoding of
                                                    ATB format coupons

 ATB2000             Electro-       40              Toner based printing,     memory                   $6619 - $8031
                     photographic   coupons/min.    magnetic printing,        modem
                     (laser)                        magnetic
                                                    encoding/decoding of
                                                    ATB format non-thermal
                                                    coupons

 DIGITAL BRANDED
 IMPACT-SERIAL

 LA30N               24 wire        300 cps         personal workstation      Color kit                 $679
                     serial                         printer, ideal for
                     matrix                         small footprint
                                                    applications

 LA30W               24 wire        300 cps         Personal workstation      Color kit                 $859
                     serial                         printer, 132 column
                     matrix

 LA400               24 wire        400 cps         heavy duty printer, 132   Color kit, pull           $1,549
                     serial                         column                    tractor, printer stand
                     matrix

 LA600               24 wire        600 cps         132 column, heavy duty    Color kit, printer        $2,976
                     serial                         industrial printer        stand, auto sheet
                     matrix                                                   feeder

 DIGITAL BRANDED
 IMPACT-LINE

 LG05/LGL5           shuttle        500 lpm         heavy-duty cycle,         PGL/VGL                   $5,995/5,295
                     matrix line                    maintenance free
                     printer                        features, advanced
                                                    paper handling,
                                                    graphics and bar codes

 LG09                shuttle        900 lpm                                   PGL/VGL                   $8,995
                     matrix line                    Heavy-duty cycle,
                     printer                        maintenance free
                                                    features, advanced
                                                    paper handling,
                                                    graphics and bar codes

 LG14                shuttle        1400 lpm        Heavy-duty cycle,         PGL/VGL                   $11,895
                     matrix line                    maintenance free
                     printer                        features, advanced
                                                    paper handling,
                                                    graphics and bar codes
 DIGITAL BRANDED
 NONIMPACT

 LN17+/LN17+ps       laser          17 ppm          desktop, network and      versatile                $1,595/2,439
                     printers                       multiuser environments,   input/output paper
                                                    high resolution,          handling devices and
                                                    multiple resident         duplexing
                                                    fonts, PostScript level
                                                    2 & PCL5E compatible.
</TABLE>


The following are trademarks or registered trademarks of their respective
companies:
DEC of Digital Equipment Corporation; Geniscript of GENICOM Corporation; IBM
and IBM Proprinter of International Business Machines Corporation; PCL5 & PCL5E
of Hewlett-Packard Company, Postscript of Adobe Systems, Inc.

Definitions: cps-characters per second, lpm-lines per minute, ppm-pages per
minute





                                       9
<PAGE>   10
MANUFACTURING

Document Solutions products are manufactured and assembled primarily at
facilities in Reynosa, Mexico and McAllen, Texas under an agreement with
Atlantic Design Company ("ADC") and to a lesser extent at the Company's
facility in  Temple, Texas.  The Reynosa facility assembles certain impact
printer product lines and produces printed circuit boards, high-speed matrix
printheads, ribbon cartridges and a variety of conventional electromechanical
assemblies. The Temple facility is used to manufacture some of the Travel
products.

In 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 had been scheduled to begin in April 1998.  In late March 1998, Ogden
and ADC requested and received permission from the arbitrator to file an
amended claim to seek recision of the agreement.  While ADC has not formally
filed its claim for recision, the Company is not aware of any basis for such a
claim and will vigorously contest any 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.

SALES AND MARKETING

The major portion of printer and relay sales are made pursuant to purchase
agreements, blanket purchase orders and similar arrangements whereby products
are deliverable only after the customer issues a purchase order, release or
schedule covering specific numbers of units and specifying firm delivery dates.
Such arrangements usually contain price protection provisions which provide
that if the Company decreases its prices, customers will receive the benefit of
such price decreases for products then held in inventory.  The Company's
agreements with larger OEMs for printer sales generally require the customer to
provide GENICOM with continuously updated forecasts of its requirements.





                                       10
<PAGE>   11
GENICOM markets its products and services through several domestic and
international channels. GENICOM's distribution channels consist of (i) national
and regional distributors who sell to value added resellers ("VARs"), dealers
and end users, and (ii) a direct sales force which sells to OEMs, end users and
value added resellers and dealers.

Most printers are available in several standard models, enabling Document
Solutions to serve a wide range of customer requirements.  A combination of
accessories satisfies various printing applications.  In addition, standard
models are customized for OEMs and end users using GENICOM's engineering design
capabilities.  No customer accounted for more than 10% of GENICOM's total sales
in 1997.  Although in 1997, sales to DEC did not account for more than 10% of
revenue, it is expected in 1998 for DEC to be a significant customer.

GENICOM maintains international sales and marketing subsidiaries in Australia,
Canada, Sweden, Belgium, France, Germany, Italy and the United Kingdom.  These
subsidiaries offer GENICOM products and services to distributors, small OEMs,
system houses, VARs and retail dealers in over 66 countries in primarily local
currencies.  See "Business Segment and Geographic Information."

COMPETITION

Document Solutions' printer products compete in markets characterized by rapid
technological change and strong competition.  The Company competes primarily in
the medium and high-performance segments of the printer market where users
require reliable printers principally for word processing, shared network
printing, graphics, bar codes and other business applications.  The Company
competes against many well-established companies, some with financial,
technical and operating resources greater than its own.  Such competitors
include large computer system manufacturers that produce printers for their own
product lines and, in certain cases, for sale to other suppliers or end users.
In addition, there are a number of independent printer manufacturers producing
printers that compete with those offered by GENICOM.

Competitive factors within the printer market include price, performance,
reliability, cost of ownership, versatility, ease of maintenance, applications
solutions support, after-sales service and support and marketing channels.  As
the computer industry continues to move toward product standardization and
relies less on proprietary designs, GENICOM will be challenged to continue to
differentiate its products based on competitive factors other than price.  The
Company believes that its ability to maintain a competitive market position
depends on the following: development of applications solutions to customer
needs, continued growth of nonimpact printer technologies, sustained migration
to shared printing environments, effective channels to market, continued
enhancement of the Company's product line and improvements in the Company's
productivity.  To enhance its competitive position in the impact and nonimpact
market, the Company purchased the printer assets of Texas Instruments on
September 30, 1996.  The addition of Texas Instruments' printer and supplies
business complemented GENICOM's other product offerings, globally expanded its
customer base and, broadened the Company's offerings in the travel industry.
The addition of travel related products provided the Company with a broad
family of impact and nonimpact products targeted at specific applications such
as itinerary confirmation, ticketing, bag tag and boarding automation.  The
Company has further expanded its nonimpact printer product line with the
introduction of thermal bar coding products as complementary offerings to its
impact bar coding products.

The Company believes that the market for impact printers has largely shifted to
shared-resource, application-specific environments such as bar coding and
multipart forms.  As this occurs, the Company is narrowing its focus to these
niche markets, de-emphasizing or





                                       11
<PAGE>   12
discontinuing low-end offerings and channeling resources to markets where
growth potential is greatest.  As the market for this technology has declined,
the Company is also focusing on the replacement market.  By addressing
connectivity issues and applications such as industrial graphics and labels,
the Company has designed products which appeal to the existing user base as
well as new customers.  Impact printers continue to meet customer application
needs not yet satisfied by nonimpact technologies, in such areas as multipart
forms, high-volume reliability and low cost ownership. As a result of the DEC
agreements, the Company's market for impact printers should increase due to the
fact that many of the operating environments within the DEC customer base have
a continuing need for both serial and line matrix impact products.

RELAYS

Until late 1997, the Company offered a line of relays that were used
principally in signal switching applications requiring high functional
reliability and product quality and were sold primarily  for aerospace and
defense applications, automatic test equipment applications and to a lesser
extent, communication, industrial control and transportation control
applications.  Relay revenues, as a percentage of total revenues, were 3.4%,
4.5% and 4.0% in 1997, 1996 and 1995, respectively.  The Company sold this
product line on November 30, 1997.

                                    GENERAL

ENVIRONMENTAL MATTERS

As a result of manufacturing processes, the Company generated and managed
hazardous wastes at its facilities.  The Company does not believe that
compliance with Federal, State and local regulations will have a material
effect on its capital expenditures, financial condition or results of
operations.  See "Legal Proceedings."

BACKLOG

The Company's order backlog at December 28, 1997 was approximately $44.9
million, compared with approximately $56.7 million at December 29, 1996.  The
principal cause of the backlog decline was the sale of the relay product line.
GENICOM's reportable backlog reflects only fixed-price contracts for all orders
associated with service, systems integration 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 expects to ship
substantially all printer, spares and supplies orders in reported backlog
within fiscal year 1998.  The Company normally experiences lower sales each
year in its third quarter due to European holidays.

GENICOM's working capital practices are consistent with the working capital
practices of the printer and service industry.  GENICOM's customer payment
terms generally require invoices to be paid within thirty days of the date of
issue.

ENGINEERING, RESEARCH AND PRODUCT DEVELOPMENT

GENICOM incurs engineering, research and product development costs for the
following purposes: development of new products; applications solutions
development; modification, enhancement and achievement of cost reductions for
existing product lines; customization of products for OEMs; market research;
and development of process inspection criteria to ensure new products are built
to specification.  GENICOM's expenditures for engineering, research and product
development were $13.8 million, $8.5 million, and $8.4 million in 1997, 1996





                                       12
<PAGE>   13
and 1995, respectively.  In 1997, 1996, and 1995 the Company expended 4.7%,
4.7%, and 5.0% of products revenue, respectively, in engineering, research and
product development.

GENICOM maintains in-house capabilities and facilities to support its
engineering and design activities.  The Company also engages a number of highly
specialized independent firms to supplement its own engineering capabilities
and to design certain software and components for its products.

PROPRIETARY RIGHTS

GENICOM relies on patent, copyright and trade secret laws to protect its
proprietary and technology rights.  GENICOM obtained certain patents, licenses
and cross-licenses when it acquired the Data Communication Products Business
Department from General Electric Company (collectively "G.E.") in 1983, when it
acquired the Printer related assets of Ekco Group, Inc. (formerly Centronics
Data Computer Corporation, "Centronics") in 1987, and when it acquired Harris
Adacom Network Services, Inc. and Printer Systems Corporation in 1995, as well
as Texas Instruments' printer business which the Company acquired in 1996.  In
addition, in 1997, GENICOM entered into agreements with DEC and acquired
certain rights and patents, as well as the right to use the Digital name in
connection with its activities under the Digital Cooperative Marketing
Agreement.  GENICOM also acquired certain rights with the acquisition of assets
of Novadyne Computer Systems.   GENICOM continues to patent certain
developments, holds certain patents pending and retains numerous patents
expiring at various times between 1998 and 2012.  In addition, the Company has
a cross-licensing agreement with IBM that expires 17 years after the date of
issue of certain patents pending prior to January 1, 1991.

"GENICOM" and certain other marks used in connection with the sale of the
Company's products are registered trademarks of GENICOM in the United States
and, in some cases, certain foreign countries.  Under United States law, a
registered trademark remains valid for 10 years if affirmed at the end of the
sixth year.  There is no limit to the number of times the registration may be
renewed for additional 10-year periods.  Thereafter, each registration may be
renewed for additional 10 year periods; otherwise the registration will expire
automatically.

GENICOM's Document Solutions strategic business unit specializes in raster
imaging technology and has numerous related patents and trademarks which the
Company expects to  assist in GENICOM's continued penetration into the
nonimpact market in 1998.

In connection with the acquisition of the printer-related assets of Centronics,
GENICOM acquired a license to use the name "Centronics" as a trademark,
tradename and service name.  Along with a Service Agreement with AST Research,
Inc., GENICOM was granted the right to use AST's registered trademark for
refurbished equipment packaging.

HP Laserjet is a registered trademark of Hewlett-Packard Company.

SUPPLIERS

GENICOM currently purchases raw materials, components and printers from various
domestic and foreign suppliers.  GENICOM utilizes supply agreements and other
arrangements whereby volume discounts can be obtained.

GENICOM purchases certain products - printers, options, supplies and component
parts, including print engines, from sole suppliers who have developed
proprietary processes that the Company incorporates into its products.  In the
event that those suppliers were unable or unwilling to supply these products,
the Company believes it could establish alternate sources





                                       13
<PAGE>   14
for these products or similar products.  The time required to establish an
alternate source could disrupt the manufacture or distribution of these
products, thus causing delays that could adversely affect revenues.  Currently,
the Company considers most of its relationships with vendors to be good and
does not anticipate any disruption in the supply of these products.

In 1997, GENICOM procured 28% of its total inventory purchases from ADC
pursuant to the agreement.  No other supplier accounted for a significant
portion of GENICOM's total 1997 purchases.  In 1996, GENICOM purchased 64% of
its total purchases from ADC (See "Manufacturing" above and "Management's
Discussion and Analysis" for discussion about the Company's agreement with ADC
and disputes that have arisen under that agreement).

EMPLOYEES

As of December 28, 1997, the Company and its subsidiaries employed 1,749
employees.  The Company believes its relations with its employees are
satisfactory.

The Company's production and maintenance employees at its Waynesboro facility
are represented by the United Electrical, Radio and Machine Workers of America
Local 124, under a collective bargaining agreement which expires in July 1999.
These employees were affected by the relocation of the Waynesboro depot to
Louisville, Kentucky and the sale of the relay product line.  There are still
some union employees at the Waynesboro facility.

ITEM 2. PROPERTIES

The following table sets forth certain information with respect to the
Company's owned or leased property as of December 29, 1996:
<TABLE>
<CAPTION>
                                                                      SQUARE         OWNED OR         YEAR LEASE
 LOCATION                     PRINCIPAL USES                           FEET           LEASED            EXPIRES
========================    =====================================    =========     ============      ============
 <S>                          <C>                                     <C>            <C>                 <C>
 Fort Worth, TX               Service                                  37,000        Subleased           2002
 Chantilly, VA                Corporate Headquarters                   23,000         Leased             1998
 Waynesboro, VA               Service, Manufacturing, Office          377,000          Owned              --
 Louisville, KY               Service                                 320,000         Leased             2007
 McAllen, TX (1)              Distribution                             37,500         Leased             1998
 Temple, TX                   Manufacturing                            44,000         Leased             2001
 Carrollton, TX               Service                                 105,000         Leased             2002
</TABLE>

(1) This facility is currently being subleased by Atlantic Design Company as
    part of the manufacturing agreement mentioned above.

GENICOM's leased property is occupied under standard industrial and commercial
leases.  Each lease generally contains an optional renewal provision.

ITEM 3.  LEGAL PROCEEDINGS

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 final
investigative report to the EPA.  The EPA has not





                                       14
<PAGE>   15
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 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.

The Company had been named as a defendant in an Original Petition and Petition
for Injunctive Relief filed in August 1995 which alleged that the Company and
certain other defendants are strictly liable for damages allegedly suffered by
the plaintiffs as a result of contamination of groundwater at the
Linn-Faysville Aquifer in Texas, due to the disposal of dangerous products and
materials at a landfill which is alleged to be the source of the contamination.
This matter was settled during 1997.  The Company was fully reserved for the
settlement amount.

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 had been scheduled to begin in April 1998.  In late March 1998, Ogden
and ADC requested and received permission from the arbitrator to file an
amended claim to seek recision of the agreement.  While ADC has not formally
filed its claim for recision, the Company is not aware of any basis for such a
claim and will vigorously contest any 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.





                                       15
<PAGE>   16
EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the
Company's executive officers as of December 28, 1997:

<TABLE>
<CAPTION>
 NAME                              AGE       TITLE
===========================      ======   =====================================================================
 <S>                               <C>      <C>
 Paul T. Winn                      53       Director, President and Chief Executive Officer
 James C. Gale                     55       Senior Vice President Finance and Chief Financial Officer
 Raymond D. Stapleton              58       Senior Vice President, Marketing and Sales, Enterprising Service
                                            Solutions Company
 Karen M. Morinelli                42       Vice President, Human Resources
 B. Garrett Buttner                49       Vice President and General Manager, Annuities
 Harold L. McIlroy                 59       Vice President, Operations and General Manager, Relays
 Arthur D. Gallo                   55       Corporate Vice President and General Manager, Document Solutions Company
 Michael J. Shelor                 49       Offsite Services Vice President and General Manager, Enterprising
                                            Service Solutions Company
 John Keyser                       53       Vice President and General Manager, Field Services, Enterprising Service
                                            Solutions Company
</TABLE>

Mr. Winn joined the Company in April 1990 as President and Chief Executive
Officer and became a director in May 1990.  Previously, Mr. Winn was employed
by IBM Corporation.

Mr. Gale joined the Company as Senior Vice President Finance and Chief
Financial Officer in August 1991.

Mr. Stapleton became Senior Vice President, Marketing and Sales, Enterprising
Service Solutions in October 1996 after serving the Company and its
predecessor, G.E., in various capacities for 30 years.

Ms. Morinelli was appointed Vice President, Human Resources in December 1996.
Previously Ms. Morinelli was employed by Brown and Williamson for two years and
two years with Charlotte County.

Mr. Buttner was appointed Vice President and General Manager, Annuities in
November 1995 after having served as Vice President and General Manager
Supplies Business Unit since April 1993.  Prior to his appointment as a
corporate officer, Mr. Buttner had served in sales, marketing and business
management positions with GENICOM since 1988.

Mr. McIlroy was appointed Vice President in July 1995 after joining the Company
October 1991 and serving in various operations management capacities.

Mr. Gallo was appointed Corporate Vice President and General Manager, Document
Solutions Company in November 1995 after having been the President of Printer
Systems Corporation, a printer company GENICOM acquired in 1995, since 1985.

Mr. Shelor was appointed Offsite Services Vice President and General Manager,
Enterprising Service Solutions Company in November 1995 after serving the
Company and its predecessor, G.E., in various operating positions since 1969.

Mr. Keyser was appointed Vice President and General Manager, Field Service,
Enterprising Service Solutions Company in January 1997 after joining the
Company in late 1996.  Prior to





                                       16
<PAGE>   17
joining the Company, Mr. Keyser worked for Memorex Telex as Vice President
Customer Support.

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

Stock Trading:

GENICOM's common stock is quoted and traded on the Nasdaq National Market
System (Symbol: GECM). As of January 30, 1998 there were approximately 718
shareholders of record.  The following table sets forth, for the periods
indicated, the high and low closing prices per share of GENICOM common stock as
reported by Nasdaq:


<TABLE>
<CAPTION>
                                       1997                                   1996
                       -------------------------------        --------------------------------
                            High              Low                  High               Low
                       -------------    --------------        --------------    --------------
<S>                      <C>              <C>                   <C>               <C>
First Quarter            $  5 1/2         $  3 9/16             $   6 3/8         $   4 1/2
Second Quarter              6 5/16            4 3/8                 7 1/8             4 1/4
Third Quarter               13 3/4           6 11/16                5 1/4               4
Fourth Quarter              15 3/8           10 1/2                 5 1/8             3 3/8
</TABLE>

GENICOM has not paid a cash dividend on its common stock.  The Company's
current financing agreement with NationsBank, as agent for a group of banks,
prohibits the payment of dividends, thus the Company does not anticipate paying
cash dividends in the foreseeable future.





                                       17
<PAGE>   18
ITEM 6.  SELECTED FINANCIAL DATA

The information is set forth below:


GENICOM CORPORATION AND SUBSIDIARIES
FIVE YEAR FINANCIAL HISTORY

<TABLE>
<CAPTION>
Fiscal year, (1)                                  1997                1996              1995              1994            1993
                                              -------------        ------------      ------------     -------------    ------------
(In thousands, except per share and other data)
<S>                                         <C>                  <C>               <C>              <C>               <C>
INCOME STATEMENT DATA:
Revenues                                    $      421,128       $     303,258     $     294,052    $      233,797    $    221,865
Operating costs and expenses (2)                   404,870             300,054           278,874           224,629         219,220
                                              -------------        ------------      ------------     -------------     -----------
Operating income                                    16,258               3,204            15,178             9,168           2,645
Interest expense, net                                7,092               4,903             7,741             7,458           7,559
Other income (3)                                                           122                               1,908           1,741
                                              -------------        ------------      ------------     -------------     -----------
Income (loss) before income taxes and
  extraordinary item                                 9,166              (1,577)            7,437             3,618          (3,173)
Income tax expense (benefit)                         1,308              (3,658)            1,285             1,048              56
                                              -------------        ------------      ------------     -------------     -----------
Income (loss) before extraordinary item              7,858               2,081             6,152             2,570          (3,229)
Extraordinary loss (4)                                                    (422)
                                              -------------        ------------      ------------     -------------     -----------
Net income (loss)                           $        7,858       $       1,659     $       6,152    $        2,570    $     (3,229)
                                              =============        ============      ============     =============     ===========

Earnings (loss) per share (diluted)
  Income (loss) before extraordinary item   $         0.63       $        0.17     $        0.51    $         0.23    $      (0.30)
  Extraordinary loss                                                     (0.03)
                                              -------------        ------------      ------------     -------------     -----------
Net income (loss)                           $         0.63       $        0.14     $        0.51    $         0.23    $      (0.30)
                                              =============        ============      ============     =============     ===========

Weighted average shares (diluted)                   12,570              12,168            12,056            11,416          10,621
                                              =============        ============      ============     =============     ===========

BALANCE SHEET DATA:
  Working capital                           $       66,190       $      36,091     $      34,530    $       40,780    $     33,642
  Total assets                                     250,049             186,079           161,539           127,267         141,159
  Total debt obligations                            93,463              54,553            51,544            47,563          69,020
  Stockholders' equity                              45,396              37,591            34,533            28,083          24,575

OTHER DATA (UNAUDITED):
Employees (5)                                        1,749               1,671             1,638             2,382           2,147
Price range per common share:
  Low                                       $      3  9/16       $       3 3/8     $        2       $        1        $      1 1/8
  High                                              15 3/8               7 1/8              5 7/8            3 1/4           3 1/2
</TABLE>


(1)      The Company's fiscal year ends on the Sunday nearest December 31.
         Accordingly, the Company is reporting for 52-week periods for all
         years presented.
(2)      Includes restructuring costs of $1.0 million in 1993.  In addition,
         includes $1.2 million for acquisition related charges in 1995.  In
         1996, the Company recognized $5.7 million for restructuring and
         environmental charges and $1.5 million gain on the sale of its Mexican
         subsidiary.
(3)      The Company recognized a gain of $0.9 and $1.7 million from the sale
         of its investment in a Belgian printer development and manufacturing
         company in 1994 and 1993, respectively.  The Company also recognized a
         gain of $1.0 million on the early extinguishment of $9.2 million
         principal amount of its Senior Securities Subordinated Notes in 1994.
(4)      In 1996, the Company recognized an extraordinary loss on the
         extinguishment of the balance of its senior suborniated notes of $0.4
         million, net of $0.3 million of taxes.
(5)      Substantial staff reductions occurred in 1995 as a result of the
         service agreement with ADC.





                                       18
<PAGE>   19
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

GENERAL

GENICOM Corporation ("GENICOM" or the "Company") is comprised of two distinct
operating companies.  The Enterprising Service Solutions company provides logo
and multivendor product field support, depot repair, express parts,
professional services and network information technology and services.  The
Document Solutions company designs and markets page and impact printers for a
variety of business applications as well as related supplies and spare parts.
The production and sales of relay products, which comprised less than 10% of
consolidated revenue, operating income and assets, are included with the
Document Solutions company.  This product line was sold in November of 1997.

NET REVENUE

For 1997, revenues were $421.1 million, an increase of 38.9% from 1996.  The
increase in revenue was primarily the result of the acquisition of the Texas
Instruments printer business as of September 30, 1996 and the Company's
agreements with Digital Equipment Corporation ("DEC") entered into in August
1997.  The DEC agreements added $37.7 million in sales for the year.  The
Documents Solutions company ("DSC") total revenue, excluding relays, was $278.8
million, an increase of 64.9%, principally attributable to the Texas
Instruments acquisition and the DEC agreements.  For Enterprising Service
Solutions company ("ESSC"), revenue increased $7.4 million to $128.0 million.
This increase primarily resulted from the systems integration business that
benefited from a contract with NASDAQ and increased integration business in
Canada.  In November of 1997, the Company acquired certain assets and selected
liabilities of Novadyne Computer Systems, Inc. which also contributed  to the
revenue increase for 1997.  These revenue increases were affected slightly by a
decline in service depot revenue as a result of the transition of this activity
to the Louisville, Kentucky depot.  Relay revenues were $14.3 million, an
increase of $0.7 million from 1996.

The consolidated revenue was $303.3 million and $294.0 million for the fiscal
years ended December 29, 1996 and December 31, 1995.  For the fiscal year ended
December 29, 1996, revenue was 3.1% higher than for the fiscal year ended
December 31, 1995.  The increase in revenue for 1996 was primarily attributable
to the Texas Instruments acquisition.  Relay revenues increased $1.9 million in
1996 as compared to 1995.

ORDER BACKLOG

Order backlog was $44.9 million at December 28, 1997, a decrease of $11.8
million or 20.8% from December 29, 1996.  Order backlog increased $9.2 million
or 19.4%  in 1996 as compared with 1995.  The decrease in order backlog in 1997
is primarily attributable to the sale of the relay product line.  The backlog
reflects only fixed-price contracts for all orders associated with relays,
service, systems integration 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.

GROSS MARGIN

Gross margin, as a percentage of revenue, declined in 1997 as compared to 1996
due to several factors including lower margins associated with DEC products,
foreign exchange and





                                       19
<PAGE>   20
start up costs related to the Louisville depot.  In 1996 gross margin decreased
slightly as compared to 1995 due to the effect of declining legacy service
business, fixed costs associated with the Bedford depot, the decapitalization
of costs associated with inventory transferred to Atlantic Design pursuant to
the outsourcing agreement, the impact on operating efficiency of heavy snowfall
in January 1996 at the service depots and lower margins associated with certain
products the Company began to sell after the transaction with Texas
Instruments.

OPERATING EXPENSES

Operating expenses in 1997 increased in actual dollars but decreased as a
percentage of revenue over 1996.  As a percentage of revenue, operating
expenses declined to 19.2% compared to 22.3% in 1996.  The absolute dollar
increase in operating expense primarily related to elevated levels of spending
needed to support the higher revenue including the new product lines acquired
from Texas Instruments and the DEC agreements, increased compensation and
benefits and engineering expense for development costs related to the new
travel printer business acquired from Texas Instruments and product development
undertaken under the DEC agreements.

Operating expenses in 1996 as compared with 1995 increased overall and as a
percentage of revenue due to costs associated with the integration of the Texas
Instruments printer business and increased MIS costs as a result of the
outsourcing of this business function.  The increase was partially offset by
management's focus on cost controls.

OPERATING INCOME

The Company's operating income increased $13.1 million in 1997 as compared to
1996 as a result of the increased revenues from the Texas Instruments
acquisition and the DEC agreements partially offset by DEC agreement costs and
the loss associated with the sale of the Relays product line.  In 1996,
operating income was affected by the creation of restructuring and
environmental reserves, partially offset by the gain on the sale of the Mexican
subsidiary.  Operating income decreased $12.0 million in 1996 compared to 1995
as a result of increased costs and declining legacy and network integration
revenues as well as restructuring and environmental reserve accruals.


INTEREST EXPENSE

Interest expense increased 44.6% or $2.2 million in 1997 as compared to 1996 as
a result of the higher level of borrowing needed to support the working capital
needs of the business, the DEC agreements and the acquisition of certain assets
of Novadyne Computer Systems, Inc.

The decrease in interest expense in 1996 of $2.8 million from 1995 was a result
of the retirement of the Company's outstanding 12.5% senior subordinated notes
in February 1996 and the refinancing of the Company's credit facility through
NationsBank of Texas, as an agent for a group of banks in January 1996.

INCOME TAX

The Company's effective income tax rate for fiscal year 1997 was 14.3% compared
with (232.0)% and 17.3% for fiscal years 1996 and 1995, respectively.  The
rates in 1997, 1996





                                       20
<PAGE>   21
and 1995 were affected by reversals of  valuation allowances associated with
the Company's deferred tax assets including certain net operating loss
carryforwards.  Such assets were previously partially reserved due to
uncertainties regarding their ultimate recoverability.  The benefits were
recorded based upon management's estimates of amounts which are expected to be
recoverable through future earnings or reversals of temporary differences.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital increased to $66.2 million in 1997 as compared to
$36.1 million in 1997.  The 1997 increase was primarily the result of increases
in accounts receivable and inventory, partially offset by accounts payable
increases.  These increases were principally due to acquisitions of Texas
Instruments printer business and Novadyne Computer Systems, Inc. assets as well
as the DEC agreements.  The Company's current ratio was 1.6 to 1 at the end of
fiscal year 1997 compared to 1.4 to 1 at the end of fiscal year 1996.  Cash and
cash equivalents decreased $1.2 million from December  29, 1996 to December 28,
1997.

Net cash used by operations was $4.1 million during 1997.  The major use of
cash was an increase in working capital to support the higher levels of revenue
in 1997.  Net cash generated by operations was $36.1 million in 1996 as
compared to $34.5 million in 1995.  The 1996 increase was primarily the result
of miscellaneous changes in working capital.

In 1997, the Company invested $17.3 million in the purchase of certain assets
and selected liabilities of Novadyne Computer Systems, Inc. (see "Notes to
Consolidated Financial Statements") and $3.4 million associated with the DEC
agreements.  The Company spent another $20.3 million in capital expenditures
which included $6.1 million for hardware and software related to the Company's
new business system.  Approximately $8 million of goodwill was recorded as a
consequence of the Novadyne Computer Systems, Inc.  acquisition.  With regards
to restructuring of the service business, the Company spent approximately $5.6
million in cash in 1997.

During 1996, the Company invested $26.4 million through the acquisition of
Texas Instruments' printer business (see "Notes to Consolidated Financial
Statements") and in capital expenditures required to support operations.  The
Company does not have any material commitments of funds for capital
expenditures other than to support the current level of operations and
installation of the new business systems and global networks previously
mentioned. The Company recorded approximately $10 million of goodwill as a
consequence of the Texas Instruments acquisition.

Earnings before interest, taxes, depreciation and amortization by business were
$36.5 million, $16.1 million and $14.2 million in 1997, 1996 and 1995,
respectively for DSC.  For ESSC, earnings before interest and taxes by business
were $(1.3) million, $5.1 million and $19.1 million in 1997, 1996 and 1995,
respectively.

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 final
investigative report to the EPA.  The EPA has not 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 not





                                       21
<PAGE>   22
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.  As of December
28, 1997, the Company was fully reserved for this matter.

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.  The Company has not had and
does not anticipate any material expenditures in connection with this matter.

The Company was named as a defendant in an Original Petition and Petition for
Injunctive Relief filed in August 1995 which alleged that the Company and
certain other defendants were strictly liable for damages allegedly suffered by
the plaintiffs as a result of contamination of groundwater at the
Linn-Faysville Aquifer, in Texas, due to the disposal of dangerous products and
materials at a landfill which was alleged to be the source of the
contamination.  The matter was settled during 1997 for approximately $150,000
plus legal fees for which the Company was fully reserved.

OTHER MATTERS

On January 12, 1996, the Company reached an agreement with NationsBank of
Texas, N.A., as agent for a group 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. The Company
initially used borrowing under this 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.  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 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 term loans.  On
September 30, 1996, the Company  and the bank group amended the credit
facilities.  This amendment redefined the financial covenants, adjusted the
interest rates as well as principal payments under the agreement. On July 3,
1997, the Company and the bank group further amended the credit agreement 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 again amended and restated its credit
agreement with the bank group led by NationsBank, increasing its total credit
facility to $110 million from $80 million.  The Company used part of the
proceeds from the credit facilities to repay a $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 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 debt for a term of three years.  The fixed rate at the time the
amendment was executed was approximately 8.5%.  The revolving credit facility
was increased to $70 million in October 1997 when commitments from additional
lenders were received increasing the total credit facilities to $125 million.
As of





                                       22
<PAGE>   23
December 28, 1997, the Company had $14.2 million available under the revolving
credit agreement.

In November of 1997, the relay product line was sold to Communication
Instruments Inc. for approximately $4.8 million, an amount which approached the
book value of the assets.  As a result of the sale, the Company realized a loss
of approximately $754,000 which included a curtailment loss related to it
defined pension benefit plan of approximately $557,000.  The Company's
approximate net proceeds from the sale was $1.9 million.

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 .

In 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 had been scheduled to begin in April 1998.  In late March 1998, Ogden
and ADC requested and received permission from the arbitrator to file an
amended claim to seek recision of the agreement.  While ADC has not formally
filed its claim for recision, the Company is not aware of any basis for such a
claim and will vigorously contest any 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.

GENICOM is taking an active approach to address computer issues associated with
the onset of the new millennium - specifically, the impact of possible failure
of computer systems and computer driven equipment due to the rollover to the
year 2000.  The Year 2000 problem is pervasive and complex as virtually every
computer system could be affected in some way by the rollover of the two-digit
year value from 99 to 00.  The issue is whether computer systems will properly
recognize date sensitive information when the year changes to 2000.  Systems
that do not properly recognize such information could generate erroneous data
or cause the system to fail.





                                       23
<PAGE>   24
If not properly addressed, the Year 2000 problem could result in failures in
Company computer systems or the computer systems of third parties with whom the
Company deals with worldwide.  Any such failures of the Company's and/or third
parties computer systems could have a material impact on the Company's ability
to conduct business.

Since 1996, the Company has been identifying and seeking to minimize its
exposure to the Year 2000 problem.  In 1996, the Company began expending
significant funds under contracts with EDS to replace the majority of its
internal computer system.  During this process, the Company has required third
party vendors to make representations that the components of the new systems
and related software are Year 2000 compliant.  The replacement equipment is
scheduled to completely installed and tested by 1999.  As a result, the Company
does not anticipate Year 2000 problems with its internal systems.  The
approximately $10 million cost of the replacement system is being capitalized
by the Company.

Management has also considered whether the Year 2000 problem will affect the
products or services provided by the Company to its customers.  Because the
Company's printer products do not contain date sensitive embedded software and
do not manipulate, calculate, convert, compare, sequence or present any date
data, these products should not present Year 2000 compliance issues.  The
Company does, though its Enterprising Service Solutions company, resell and
install computer software that could be susceptible to Year 2000 problems.  The
Company's practice is to disclaim responsibility for Year 2000 compliance
relating to third party software.

At this time GENICOM is actively working to ensure that foreseeable Year 2000
related computer problems related to Company computer systems and products are
effectively addressed.  The Company does not expect that the commitment of
resources to study and correct internally any Year 2000 problems to result in
the delay of its projects or product development.  The Company cannot estimate
or predict the potential adverse consequences, if any, that could result from a
third party failure to effectively address this issue.

This annual report on Form 10-K for the year ended December 28, 1997 as well as
other public documents of the Company contain forward-looking statements which
involve risks and uncertainties.  The Company's actual results may differ
materially from those discussed in such forward-looking statements.  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.  In addition to factors that may be described in
the Company's filings with the Securities and Exchange Commission, including
this filing, the following factors, among others, could cause the Company's
results to differ materially from those expressed in any forward-looking
statements made by the Company: 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, service
customers whose business is declining, seasonality in the buying cycles of
certain of the Company's customers, the timing of product announcements by the
Company or its competitors, the release of new or enhanced products and
services by the Company or its competitors, the introduction of competitive
products and services by existing or new competitors, access to and development
of product rights and technologies, disruption in ADC's performance of its
production commitments to the Company, changes in the costs of production of
the Company's products and services including any that may arise as a result of
the resolution of claims raised by ADC, the management of growth, the
integration of acquisitions, including but not limited to the Company's
acquisition certain assets of Novadyne Computer Systems as of November 14,
1997, the resolution of start up inefficiencies at the depot in Louisville,
Kentucky, the Company's performance under the DEC agreements,





                                       24
<PAGE>   25
GENICOM's ability to retain highly skilled technical, managerial and sales and
marketing personnel, and possible litigation related to the Company's
operations, including litigation arising under various environmental laws.





                                       25
<PAGE>   26
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                      GENICOM CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                 DECEMBER 28,        December 29,         December 31,
Year Ended,                                                          1997                1996                 1995
                                                                ---------------      --------------       --------------
(In thousands, except per share data)
<S>                                                           <C>                  <C>                  <C>
REVENUES, NET:
   Products                                                   $        293,166     $       182,707      $       166,469
   Services                                                            127,962             120,551              127,583
                                                                ---------------      --------------       --------------
                                                                       421,128             303,258              294,052
                                                                ---------------      --------------       --------------
OPERATING COSTS AND EXPENSES:
   Cost of revenues:
     Products                                                          204,179             127,678              115,851
     Service                                                           119,768             104,611              101,762
   Selling, general and administration                                  64,651              55,079               52,780
   Engineering, research and product development                        13,779               8,505                8,481
   Unusual items                                                         2,493               4,181
                                                                ---------------      --------------       --------------
                                                                       404,870             300,054              278,874
                                                                ---------------      --------------       --------------

OPERATING INCOME                                                        16,258               3,204               15,178
Interest expense, net                                                    7,092               4,903                7,741
Other income                                                                                   122
                                                                ---------------      --------------       --------------
INCOME (LOSS) BEFORE INCOME TAXES                                        9,166              (1,577)               7,437
Income tax expense (benefit)                                             1,308              (3,658)               1,285
                                                                ---------------      --------------       --------------

NET INCOME BEFORE EXTRAORDINARY ITEM                                     7,858               2,081                6,152
EXTRAORDINARY ITEM - LOSS ON EXTINGUISHMENT OF
  DEBT, NET OF TAXES OF $258                                                                  (422)
                                                                ---------------      --------------       --------------

NET INCOME                                                    $          7,858     $         1,659      $         6,152
                                                                ===============      ==============       ==============

EARNINGS PER COMMON SHARE, BASIC:
  Income before extraordinary item                            $           0.71     $          0.19      $          0.57
  Extraordinary item                                                                         (0.04)
                                                                ---------------      --------------       --------------
  Net income                                                  $           0.71     $          0.15      $          0.57
                                                                ===============      ==============       ==============

EARNINGS PER COMMON SHARE ASSUMING DILUTION:
  Income before extraordinary item                            $           0.63     $          0.17      $          0.51
  Extraordinary item                                                                         (0.03)
                                                                ---------------      --------------       --------------
  Net income                                                  $           0.63     $          0.14      $          0.51
                                                                ===============      ==============       ==============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING (BASIC)                                                   11,074              10,933               10,760
                                                                ---------------      --------------       --------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
  DILUTIVE SHARES (DILUTED)                                             12,570              12,168               12,038
                                                                ---------------      --------------       --------------
</TABLE>


The accompanying notes are an integral part of these statements.





                                       26
<PAGE>   27
                      GENICOM CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 DECEMBER 28,               December 29,
(In thousands, except share data)                                                    1997                       1996
                                                                              --------------------       -------------------
<S>                                                                         <C>                        <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                $               4,622      $              5,866
   Accounts receivable, less allowance for
      doubtful accounts of $4,470 and $3,270                                               89,692                    65,404
   Other receivables                                                                        3,252                     1,835
   Inventories                                                                             67,553                    46,947
   Prepaid expenses and other assets                                                        8,390                     5,395
                                                                              --------------------       -------------------
      TOTAL CURRENT ASSETS                                                                173,509                   125,447
Property, plant and equipment, net                                                         36,146                    26,562
Goodwill                                                                                   33,800                    27,555
Intangible assets                                                                           6,049                     3,406
Other assets                                                                                  545                     3,109
                                                                              --------------------       -------------------
      TOTAL ASSETS                                                          $             250,049      $            186,079
                                                                              ====================       ===================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt                                        $               6,391      $              4,222
   Accounts payable and accrued expenses                                                   84,578                    72,040
   Deferred income                                                                         16,350                    13,094
                                                                              --------------------       -------------------
      TOTAL CURRENT LIABILITIES                                                           107,319                    89,356
Long-term debt, less current portion                                                       87,072                    50,331
Other non-current liabilities                                                              10,262                     8,801
                                                                              --------------------       -------------------
      TOTAL LIABILITIES                                                                   204,653                   148,488
                                                                              --------------------       -------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Common stock, $0.01 par value; 18,000,000 shares authorized,
      11,365,750 and 10,983,439 shares issued and outstanding                                 114                       110
   Additional paid-in capital                                                              26,959                    26,440
   Retained earnings                                                                       20,020                    12,162
   Foreign currency translation adjustment                                                 (1,697)                   (1,121)
                                                                              --------------------       -------------------
      TOTAL STOCKHOLDERS' EQUITY                                                           45,396                    37,591
                                                                              --------------------       -------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $             250,049      $            186,079
                                                                              ====================       ===================
</TABLE>

The accompanying notes are an integral part of these financial statements.





                                       27
<PAGE>   28

                      GENICOM CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended,                                                                DECEMBER 28,         December 29,        December 31,
(In thousands)                                                                 1997                 1996                1995
                                                                         -----------------    -----------------    ----------------
<S>                                                                    <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                          $            7,858   $            1,659   $           6,152
   Adjustments to reconcile net income to cash
    (used in) provided by operating activities:
      Depreciation                                                                 13,664               14,166              13,981
      Amortization                                                                  5,303                3,706               4,125
      Loss on early extinguishment of notes                                                                422
      Gain on sale of Genicom de Mexico                                                                 (1,481)
      Loss on Relays sale                                                             754
      Acquisition related costs                                                                                                654
      Restructuring accrual                                                        (5,637)               4,183
      Environmental accrual                                                                              1,479
      Deferred tax benefit                                                            364               (7,186)             (1,830)
      Changes in assets and liabilities, net of assets acquired and
        liabilities assumed
         Accounts receivable                                                      (21,050)               1,544              (9,406)
         Inventories                                                              (23,925)              10,916               3,348
         Accounts payable and accrued expenses                                     17,687                3,489              (1,730)
         Other                                                                        845                   69                 808
                                                                         -----------------    -----------------    ----------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                (4,137)              32,966              16,102
                                                                         -----------------    -----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payments for businesses, net of cash acquired                                  (14,131)             (18,233)            (10,309)
   Additions to property, plant and equipment                                     (20,329)             (11,809)            (16,325)
   Digital Equipment Corporation agreements                                        (3,373)
   Proceeds from relays sale                                                        4,798
   Proceeds from sale of Genicom de Mexico                                                               3,950
   Proceeds from sale of equipment                                                    350                                    3,031
   Other investing activities                                                        (932)                (259)               (239)
                                                                         -----------------    -----------------    ----------------
NET CASH USED IN INVESTING ACTIVITIES                                             (33,617)             (26,351)            (23,842)
                                                                         -----------------    -----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Borrowings on long-term debt                                                    77,349               70,609              31,594
   Payments on long-term debt                                                     (38,439)             (76,120)            (31,939)
   Bank overdraft                                                                    (435)               2,607
   Proceeds from Atlantic Design agreement                                                                                  11,502
   Stock option exercises                                                             523                  165                 265
   Other financing activities                                                      (1,595)              (2,372)                265
                                                                         -----------------    -----------------    ----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                37,403               (5,111)             11,687

Effect of exchange rate changes on cash and cash equivalents                         (893)                  91                (349)
                                                                         -----------------    -----------------    ----------------

Net (decrease) increase in cash and cash equivalents                               (1,244)               1,595               3,598
Cash and cash equivalents at beginning of year                                      5,866                4,271                 673
                                                                         -----------------    -----------------    ----------------
Cash and cash equivalents at end of year                               $            4,622   $            5,866   $           4,271
                                                                         =================    =================    ================

Cash paid during the year for:
   Income taxes                                                        $            1,727   $            2,724   $           1,483
   Interest                                                                         5,398                6,349               8,040
</TABLE>

The accompanying notes are an integral part of these financial statements.





                                       28
<PAGE>   29

                      GENICOM CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY




For the years ended December 28, 1997, December 29, 1996 and December 31, 1995
(In thousands)

<TABLE>
<CAPTION>
                                                                                                        Foreign
                                              Common Stock               Additional                     Currency      Pension
                                         ------------------------         Paid-in        Retained      Translation    Liability
                                           Shares         Amount          Capital        Earnings      Adjustment    Adjustment
                                         ---------       --------       -----------     ----------     ----------    ----------
<S>                                        <C>          <C>            <C>             <C>            <C>           <C>
BALANCE AS OF JANUARY 1, 1995              10,638       $    106       $    25,760     $    4,351     $   (1,435)   $     (699)
Exercise of stock options                     201              2               263
Net income                                                                                  6,152
Cumulative translation adjustment                                                                            104
Pension liability adjustment                                                                                               (71)
                                         ---------       --------       -----------     ----------     ----------    ----------

BALANCE AS OF DECEMBER 31, 1995            10,839            108            26,023         10,503         (1,331)         (770)
Exercise of stock options                     144              2               417
Net income                                                                                  1,659
Cumulative translation adjustment                                                                            210
Pension liability adjustment                                                                                               770
                                         ---------       --------       -----------     ----------     ----------    ----------

BALANCE AS OF DECEMBER 29, 1996            10,983            110            26,440         12,162         (1,121)            -
Exercise of stock options                     383              4               519
Net income                                                                                  7,858
Cumulative translation adjustment                                                                           (576)
                                         ---------       --------       -----------     ----------     ----------    ----------

BALANCE AS OF DECEMBER 28, 1997            11,366       $    114       $    26,959     $   20,020     $   (1,697)   $        -
                                         ----------      --------       -----------     ----------     ----------    ----------
</TABLE>

The accompanying notes are an integral part of these financial statements.





                                       29
<PAGE>   30
GENICOM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

GENICOM Corporation (the "Company") is an international supplier of network
integration services, multivendor service and printers.  The Company's
Enterprising Service Solutions company provides integrated network solutions
which include network integration, professional services and help desk support,
in addition to logo and multivendor on site and off site product repair and
parts sales.  The Company's Document Solutions company designs and markets a
wide range of computer printer technologies for general purpose applications.

The Company markets its products and services through several domestic and
international channels including national and regional distributors, value
added resellers and direct sales forces.  GENICOM has positioned its products
as mid-range solutions to corporate customers.  Operating on a worldwide basis,
the Company has operations in the United States, Canada, Europe, Australia and
Hong Kong.

Principles of Consolidation

The consolidated financial statements include the accounts of GENICOM
Corporation and its wholly-owned subsidiaries.  All significant intercompany
accounts and transactions have been eliminated.

Fiscal Year

The Company's fiscal year ends on the Sunday nearest December 31.  Accordingly,
the Company is reporting for the 52-week periods ended December 28, 1997,
December 29, 1996, and December 31, 1995.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.

Inventories

Inventories are stated at the lower of cost, determined on the first-in
first-out method, or market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost.  Depreciation is calculated
using the straight-line method for financial reporting purposes based on
estimated lives at acquisition date (generally 10 to 25 years for buildings and
18 months to 10 years for machinery and equipment).  The cost of assets retired
or otherwise disposed of and the accumulated depreciation thereon are removed
from the accounts with any gain or loss realized upon sale or disposal charged
or credited to operations.  The Company capitalizes software purchase and
development costs related to its computerized financial and business system.
Amortization of these costs occur over their estimated economic life of 60
months.


                                      30
<PAGE>   31
Significant improvements are capitalized, while repairs and maintenance costs
are charged to operations.

Goodwill and Intangibles

Goodwill includes the excess of acquisition costs over the fair market value of
net assets of acquired businesses and is being amortized on a straight-line
basis over 5 to 20 years.  Intangible assets, including patents, copyrights,
trademarks, licenses and organization and financing costs, are amortized on a
straight-line basis over periods ranging from 2 to 15 years.  The Company
assesses at each balance sheet date whether there has been a permanent
impairment in the value of the respective assets.  This is accomplished by
determining whether projected undiscounted future cash flows from operations
over the remaining life exceed the net book value of the assets as of the
balance sheet date.  Impairments are measured based on the fair value of the
assets.  The aggregate amount of accumulated amortization for goodwill and
intangibles was $24.1 million and $18.8 million at December 28, 1997 and
December 29, 1996, respectively.

Research and Development Costs and Capitalized Software

Costs incurred in basic research and development are expensed as incurred.
Certain costs relating to software and product development are capitalized and
amortized over the estimated economic life of the product.

The Company capitalized software costs of $0.4 million and $0.2 million in 1997
and 1996, respectively. The related amortization expense was $0.1 million, $0.4
million and $1.2 million in 1997, 1996 and 1995, respectively.  As of December
28, 1997 and December 29, 1996, capitalized software, net of amortization, was
$0.4 million and $0.2 million, respectively.

Income Taxes

The Company accounts for income taxes under the liability method.  Certain
expenses are recognized in different periods for financial reporting and
Federal income tax purposes. Research and development credits are recognized as
a reduction of income tax expense in the year they are recognized for Federal
tax purposes.  A valuation allowance reduces deferred tax assets when it is
"more likely than not" that some portion or all of the deferred tax asset will
not be realized.  The Company does not provide deferred taxes on the
undistributed earnings of its foreign subsidiaries as such earnings are
intended to be permanently reinvested in those operations.

Foreign Operations

The consolidated balance sheets include foreign assets and liabilities of $73.8
million and $32.8 million as of December 28, 1997, respectively, and $53.7
million and $18.3 million as of December 29, 1996, respectively.  The net
effects of foreign currency transactions reflected in income were immaterial in
fiscal years 1997, 1996, and 1995.

Assets and liabilities of most of the Company's foreign operations are
translated into U.S. dollars using exchange rates in effect at the balance
sheet date and results of operations are translated using the average exchange
rates prevailing throughout the period.  The resulting translation adjustments
are recorded as a separate component of stockholders' equity.  The Company's
former Mexican subsidiary, which was sold at the end of June 1996, remeasured





                                      31
<PAGE>   32
its financial statements in U.S. dollars, as this was the currency of the
primary economic environment in which the entity operated.

Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company periodically hedges against foreign currency fluctuations through
the use of forward exchange contracts.  Gains and losses on contracts to hedge
foreign currency commitments are deferred and accounted for as part of the
commitment transaction except for losses expected to be incurred in future
periods which are recorded when identified.

The forward exchange contracts which the Company uses as hedges are subject to
off-balance sheet market risk.  The Company believes that its risk due to
non-performance by the other parties to these contracts is remote.  The Company
had $5.3 million and $6.1 million of forward exchange contracts outstanding as
of December 28, 1997 and December 29, 1996, respectively.  The deferred gain
associated with these contracts was $0.2 million for December 28, 1997 and
December 29, 1996.

Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of receivables.  The Company extends credit to
various customers that are primarily in the computer and computer peripherals
industries.  These specific industries may be similarly affected by economic
factors, however, the Company performs ongoing credit evaluations of its
customers and establishes an allowance for doubtful accounts for specific
customers that it determines to have significant credit risk.  Generally, the
Company does not require collateral from its customers and has, historically,
not experienced significant credit related losses.

In 1997 and 1996, GENICOM procured 28% and 64%, respectively, of its total
inventory purchases from Atlantic Design Corporation ("ADC") pursuant to the
agreement (see Note 8).  No other supplier accounted for a significant portion
of GENICOM's total 1997 purchases.  In December 1995, the Company entered into
a five year agreement, later extended one year, with ADC in which ADC took over
the Company's manufacturing operations and employees in McAllen, Texas and
Reynosa, Mexico.  ADC manufactures the Company's impact printer products,
printed circuit boards, related supplies and spare parts. No customer accounted
for 10% or more of external sales in 1997, 1996, or 1995.

Revenue Recognition and Warranty Costs

Revenues from the sales of products, which include printers and relays, are
recorded when products are shipped to customers.  Revenues from services, which
include service and rentals, are recognized monthly as earned.  Advance
billings for customer maintenance contracts are deferred and amortized over the
contract life on a straight-line basis.  Estimated warranty costs for equipment
sales are provided for in the year of sale.

Net Income Per Share

Net income per common share is computed by dividing net income by the weighted
average number of outstanding common shares for basic earnings per share and
weighted average stock options outstanding plus weighted average number of
outstanding common shares outstanding for diluted earnings per share.  Weighted
average number of shares issuable upon the exercise of outstanding stock
options assumes the applicable proceeds from such exercise are used to acquire
treasury shares.





                                      32
<PAGE>   33


(in thousands except for per share amounts)
<TABLE>
<CAPTION>
                                                    ---------------------------------------------------
                                                               FOR YEAR ENDED DECEMBER 28, 1997
                                                    ---------------------------------------------------
                                                        Income            Shares           Per Share
                                                    --------------    ---------------    --------------
<S>                                               <C>                         <C>      <C>
BASIC EPS
Income available to shareholders                  $         7,858             11,074   $          0.71
                                                    --------------    ---------------    --------------

Weighted shares from stock options                                             1,496
                                                                      ---------------

DILUTED EPS                                       $         7,858             12,570   $          0.63
                                                    ==============    ===============    ==============
</TABLE>

<TABLE>
<CAPTION>
                                                    ---------------------------------------------------
                                                              For Year Ended December 29, 1996
                                                    ---------------------------------------------------
                                                        Income             Shares           Per Share
                                                    --------------    ---------------    --------------
<S>                                               <C>                         <C>      <C>
BASIC EPS
Income before extraordinary item                  $         2,081             10,933   $          0.19
                                                    --------------    ---------------    --------------

Weighted shares from stock options                                             1,235
                                                                      ---------------

DILUTED EPS                                       $         2,081             12,168   $          0.17
                                                    --------------    ---------------    --------------

BASIC EPS
Extraordinary item                                $          (422)            10,933   $         (0.04)
                                                    --------------    ---------------    --------------

Weighted shares from stock options                                             1,235
                                                                      ---------------

DILUTED EPS                                       $          (422)            12,168   $         (0.03)
                                                    --------------    ---------------    --------------

BASIC EPS
Net income                                        $         1,659             10,933   $          0.15
                                                    --------------    ---------------    --------------

Weighted shares from stock options                                             1,235
                                                                      ---------------

DILUTED EPS                                       $         1,659             12,168   $          0.14
                                                    ==============    ===============    ==============
</TABLE>

<TABLE>
<CAPTION>
                                                    ---------------------------------------------------
                                                             For Year Ended December 31, 1995
                                                    ---------------------------------------------------
                                                        Income            Shares           Per Share
                                                    --------------    ---------------    --------------
<S>                                               <C>                         <C>      <C>
BASIC EPS
Income available to shareholders                  $         6,152             10,760   $          0.57
                                                    --------------    ---------------    --------------

Weighted shares from stock options                                             1,278
                                                                      ---------------

DILUTED EPS                                       $         6,152             12,038   $          0.51
                                                    ==============    ===============    ==============
</TABLE>

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the





                                      33
<PAGE>   34
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.  Actual results could differ from those
estimates.

NOTE 2: UNUSUAL ITEMS

During the year ended December 28, 1997, the Company recorded $2.5 million in
expense consisting of the following unusual items: loss on the sale of the
relay product line ($0.8 million) and costs associated with the DEC agreements
($1.7 million).  During the year ended December 29, 1996, the Company recorded
$4.2 million in net expense consisting of the following unusual items:
restructuring charge associated with the depot relocation ($4.2 million),
environmental accrual ($1.5 million) and a gain on the sale of the Company's
Mexican subsidiary ($1.5 million).

NOTE 3: BALANCE SHEET INFORMATION

Inventories consist of:


<TABLE>
<CAPTION>
                                                              DEC. 28,                    Dec. 29,
(in thousands)                                                  1997                        1996
                                                         -------------------         -------------------
<S>                                                    <C>                         <C>
Raw materials                                          $              9,295        $              9,105
Work in process                                                       1,994                       3,383
Finished goods                                                       56,264                      34,459
                                                         -------------------         -------------------
                                                       $             67,553        $             46,947
                                                         ===================         ===================
</TABLE>

Property, plant and equipment consists of:

<TABLE>
<CAPTION>
                                                            DEC. 28,                    Dec. 29,
(in thousands)                                                1997                        1996
                                                       -------------------         -------------------
<S>                                                  <C>                         <C>
Land                                                 $                580        $                580
Buildings                                                           7,153                       7,133
Machinery and equipment                                            82,320                      83,567
Construction in progress                                           12,157                       1,378
                                                       -------------------         -------------------
                                                                  102,210                      92,658
Less: Accumulated depreciation                                     66,064                      66,096
                                                       -------------------         -------------------
                                                     $             36,146        $             26,562
                                                       ===================         ===================
</TABLE>

Accounts payable and accrued expenses consist of:




                                      34
<PAGE>   35


<TABLE>
<CAPTION>
                                                                                 DEC. 28,                 Dec. 29,
(in thousands)                                                                     1997                     1996
                                                                            -------------------      -------------------
<S>                                                                       <C>                      <C>
Trade accounts payable                                                    $             60,585     $             43,581
Accrued liabilities: Accrued compensation and benefits                                   9,768                   10,333
                     Restructuring accrual                                                                        4,183
                     Interest                                                              706                      176
                     Other                                                              13,519                   13,767
                                                                            -------------------      -------------------
                                                                          $             84,578     $             72,040
                                                                            ===================      ===================
</TABLE>

NOTE 4: SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
(in thousands)                                                                      1997                     1996
                                                                               ---------------          ---------------
<S>                                                                          <C>                      <C>
Asset purchase of Novadyne Computer Systems, Inc.:
  Total acquisition costs                                                    $         17,329
    Liabilities assumed                                                                (3,198)
                                                                               ---------------
    Cash paid                                                                $         14,131
                                                                               ===============

Purchase of Texas Instruments printer business:
  Total acquisition costs                                                                             $         29,468
    Note to Texas Instruments                                                                                   (9,000)
    Accounts payable to Texas Instruments                                                                       (1,735)
    Other accrued costs                                                                                           (500)
                                                                                                        ---------------
    Cash paid                                                                                         $         18,233
                                                                                                        ===============
</TABLE>

NOTE 5: DEBT OBLIGATIONS

Long term debt consists of:


<TABLE>
<CAPTION>
                                                                                 DEC. 28,                 Dec. 29,
(in thousands)                                                                     1997                     1996
                                                                            -------------------      -------------------
<S>                                                                       <C>                      <C>
Revolving credit facilities                                               $             39,000     $             11,000
Term loans                                                                              54,000                   33,184
Note payable to Texas Instruments                                                                                 9,000
Other                                                                                      463                    1,369
                                                                            -------------------      -------------------
                                                                                        93,463                   54,553
Less: Current portion                                                                    6,391                    4,222
                                                                            -------------------      -------------------
                                                                          $             87,072     $             50,331
                                                                            ===================      ===================
</TABLE>



The carrying value of the debt approximates its market value.  At December 28,
1997, future minimum principal payments on long term debt were $6.4 million for
1998, $4.0 million for 1999, $4.0 million for 2000, $4.0 million for 2001 and
$7.4 million for 2002.





                                      35
<PAGE>   36
On January 12, 1996, the Company reached an agreement with NationsBank of
Texas, N.A., as agent for a group 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.  The
revolver matures in five years, while the term loans are for five and seven
years, respectively.  The rate of interest on the credit facilities is tied to
LIBOR (the rate at December 28, 1997 was approximately 6.0%) or NationsBank
prime rate (the rate at December 28, 1997 was 8.5%) and is also dependent upon
the Company's performance.  On September 5, 1997, the Company amended and
restated the credit facilities increasing  the two term loans  to $55 million
and the revolving credit facility to $80 million.  The Company is subject to
certain financial covenants which will require the Company, among other things,
to maintain a minimum consolidated tangible net worth, a funded debt coverage
ratio of not more than 3.75 to 1 for the fourth quarter of 1998, a fixed
charges coverage ratio of at least 1.75 to 1 for the fourth quarter of 1998 and
a debt to capitalization ratio of less than .75 to 1 for 1998.

As part of the acquisition of certain assets of Texas Instruments' worldwide
printer and related supplies business (see Note 11), the Company delivered to
Texas Instruments a two year balloon note payable of $9 million maturing in
1998 with an interest rate of approximately 8.5% payable quarterly.  This note
was paid in full in September 1997 using the amended credit facilities
mentioned above.

As part of the purchase agreement with Printer Systems Corporation ("PSC") (see
Note 11), the Company has recorded the present value of a note payable.  The
note payable has an imputed interest rate of approximately 9% and requires
annual principal and interest payments through 1998.  This obligation was
retired in February of 1998.

The Company's international subsidiaries maintain various credit facilities for
their local operations.  Borrowings under such credit facilities bear interest
at prevailing or negotiated rates.

During 1996, the proceeds from the NationsBank agreement were used to retire
the outstanding borrowings under the Company's prior credit facilities and
senior subordinated notes.  The Company recognized a $0.4 million after tax
loss on the early extinguishment of the senior subordinated notes in 1996.

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 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 term
loans.

NOTE 6: EMPLOYEE BENEFIT PLANS

The Company provides postretirement medical and life insurance benefits to
hourly and salaried employees hired before March 22, 1993, who retire after
attaining age 60 with at least 5 years of service.  Under certain conditions,
benefits may be extended to the retirees' spouse and dependents.  Salaried
employees hired after March 22, 1993 are eligible for postretirement medical
and life insurance benefits only upon attainment of Social Security retirement
age and completion of 10 years of service, and no spouse or dependent coverage
is provided.





                                      36
<PAGE>   37
The postretirement medical coverage is contributory, while the life insurance
coverage is noncontributory.

The components of net periodic postretirement benefit costs were:


<TABLE>
<CAPTION>
                                                                             DEC. 28,             Dec. 29,             Dec. 31,
(in thousands)                                                                 1997                 1996                 1995
                                                                         ----------------     ----------------     ----------------
<S>                                                                    <C>                  <C>                  <C>
Service cost - benefits attributed to service during the period        $             349    $             363    $             337
Interest cost on accumulated postretirement benefit obligation                     1,177                1,090                1,339
Amortization of unrecognized transition obligation over 20 years                     653                  625                  840
                                                                         ----------------     ----------------     ----------------
Net periodic postretirement benefit cost                               $           2,179    $           2,078    $           2,516
                                                                         ================     ================     ================
</TABLE>

The following table sets forth the combined funded status for the Company's
postretirement benefit obligations as of the indicated actuarial valuation
dates:



<TABLE>
<CAPTION>
                                                                 DEC. 28,                 Dec. 29,
(in thousands)                                                     1997                     1996
                                                            -------------------      -------------------
<S>                                                       <C>                      <C>
Accumulated postretirement benefit obligation:
  Retirees                                                $              9,888     $              8,092
  Active plan participants                                               4,500                    7,538
                                                            -------------------      -------------------
                                                                        14,388                   15,630
Unrecognized transition obligation                                      11,419                   12,180
Unrecognized net gain                                                   (4,547)                  (3,072)
                                                            -------------------      -------------------
Accrued postretirement benefit cost                       $              7,516     $              6,522
                                                            ===================      ===================
</TABLE>



For measurement purposes 8.5% annual rates of increase in the per capita cost
of covered health care benefits were assumed for both 1998 and 1997, both rates
were assumed to decrease gradually to 5.5% for 2002 and remain at that level
thereafter.  If the health care cost trend rate was to increase 1.0%, the
accumulated postretirement benefit obligation as of December 28, 1997 and
December 29, 1996, would have increased by 8.2% and 9.7%, respectively.  The
effect of this change on the aggregate service and interest costs for 1997 and
1996 would be increases of 15.6% and 7.6%, respectively.  The weighted-average
discount rates used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.75% in 1997 and 1996, respectively.

Substantially all domestic non-collective bargaining employees are eligible to
participate in the Company's retirement savings plan (the "Savings Plan"),
which qualifies under section 401(k) of the Internal Revenue Code.  The Company
makes certain matching contributions which are allocated to the participants
and vest based on the employee's years of service.  The Company's expense under
the Savings Plan was $0.9 million, $0.8 million and $0.8 million in fiscal
years 1997, 1996 and 1995, respectively.

The Company's domestic collective bargaining employees are covered by a
contributory defined benefit pension plan (the "Pension Plan").  The Pension
Plan benefits are based on years of credited service and the participant's
compensation. Eligible employees must elect to participate and contribute 3.0%
of compensation between $12,000 and $25,650 per calendar year.  The Company
makes contributions to the Pension Plan sufficient to meet federal funding
requirements.





                                      37
<PAGE>   38
Components of periodic pension costs were:



<TABLE>
<CAPTION>
                                                                      DEC. 28,     Dec. 29,     Dec. 31,
(in thousands)                                                          1997         1996         1995
                                                                      ----------   ----------   ----------
<S>                                                                 <C>         <C>          <C>
Service cost - benefits attributed to service during the period     $       327  $       416  $       340
Interest cost on projected benefit obligation                             1,023          896          806
Actual return on plan assets                                             (2,633)      (1,012)      (2,277)
Net amortization and deferral                                             1,531          125        1,681
                                                                      ----------   ----------   ----------
Net periodic pension expense                                        $       248  $       425  $       550
                                                                      ==========   ==========   ==========
</TABLE>

As a result of the Waynesboro depot consolidation and the sale of the relay
product line, the Company recognized additional expense associated with the
Company's pension plan.  The curtailment expense for the depot consolidation
was charge against the restructuring reserve and  for the relay sale, the
curtailment expense was approximately $0.6 million.

The following table sets forth the Pension Plan's funded status as of the
indicated actuarial valuation dates:


<TABLE>
<CAPTION>
                                                                                 DEC. 28,                 Dec. 29,
(in thousands)                                                                     1997                     1996
                                                                            -------------------      -------------------
<S>                                                                       <C>                      <C>
Actuarial present value of benefit obligation:
  Vested benefits                                                         $             13,844     $             11,661
  Non-vested benefits                                                                      179                      639
                                                                            -------------------      -------------------
Total accumulated benefit obligation                                                    14,023                   12,300
Effect of projected future compensation levels                                             807                      458
                                                                            -------------------      -------------------
Projected benefit obligation                                                            14,830                   12,758
Fair value of plan assets                                                               14,642                   13,056
                                                                            -------------------      -------------------
Fair value of plan assets (less than) in excess of
  projected benefit obligation                                                            (188)                     298
Unrecognized net losses from actuarial experience                                          496                    1,084
                                                                            -------------------      -------------------
Prepaid pension cost                                                      $                308     $              1,382
                                                                            ===================      ===================
</TABLE>

The Company's assumptions used in determining the pension cost and pension
liability shown above were as follows:


<TABLE>
<CAPTION>
                                                        DEC. 28,       Dec. 29,        Dec. 31,
                                                          1997           1996            1995
                                                       -----------    ------------    -----------
<S>                                                        <C>             <C>            <C>
Discount rate                                              7.50            7.75           7.25
Rate of compensation progression                           4.00            4.00           4.00
Rate of return on plan assets                              9.00            9.00           9.00
</TABLE>

Pension Plan assets consist primarily of treasury notes, government and
corporate bonds, corporate equities and cash equivalent funds.





                                      38
<PAGE>   39
The Company makes contributions to various employee benefit plans for certain
of its foreign subsidiaries and the expense for these plans was not material in
fiscal years 1997, 1996 and 1995.

NOTE 7: STOCK OPTIONS

Under the Company's stock option plan, 1,785,917 shares of unissued common
stock are reserved for issuance pursuant to options outstanding and to be
granted.  Stock option activity for the respective fiscal periods is as
follows:


<TABLE>
<CAPTION>
                                                                            Weighted
                                   Number of         Option Amount        Average Price
                                    Shares             Per Share            Per Share
                               ---------------   -------------------    ----------------
<S>                                 <C>          <C>                              <C>
OUTSTANDING,
   JANUARY 1, 1995                  1,759,134    $     1.00-7.50                  $1.21
          Granted                     410,000          1.75-4.50                   1.96
          Exercised                  (201,100)         1.00-2.13                   1.32
          Cancelled                  (195,467)         1.00-7.50                   1.30
                               ---------------    ------------------    ----------------

OUTSTANDING,
   DECEMBER 31, 1995                1,772,567          1.00-7.50                   1.36
          Granted                     263,180          3.25-4.25                   3.84
          Exercised                  (144,040)         1.00-2.38                   1.14
          Cancelled                  (221,407)         1.00-7.50                   2.20
                               ---------------    ------------------    ----------------

OUTSTANDING,
   DECEMBER 29, 1996                1,670,300          1.00-4.50                   1.66
          Granted                     463,550         3.125-14.25                  6.79
          Exercised                  (382,311)         1.00-4.50                   1.35
          Cancelled                   (99,384)         1.00-4.50                   2.34
                               ===============    ==================    ================

OUTSTANDING,
   DECEMBER 28, 1997                1,652,155    $     1.00-14.25                 $3.07
                               ===============    ==================    ================

OPTIONS EXERCISABLE
   DECEMBER 28, 1997                  719,369    $     1.00-4.675                 $1.28
                               ===============    ==================    ================

OPTIONS AVAILABLE FOR
  FUTURE GRANTS                       133,762
                               ===============
</TABLE>





                                      39
<PAGE>   40
The following table summarizes information about stock options outstanding at
December 28, 1997.

<TABLE>
<CAPTION>
                                       Remaining
                                    Contractual Life
    Exercise            Number     Years for Options       Number
     Price           Outstanding      Outstanding        Exercisable
----------------- ---------------  ------------------- ---------------
 <S>                   <C>             <C>                <C>
 $      1.00             654,289       2.17-6.08          509,689
 $1.25-$14.25            259,900       3.25-9.75          129,500
 $      1.75             181,020          7.17             59,520
 $      3.87             168,596           8               22,260
 $      3.13             216,950          9.08                -
 $     11.50             171,400          9.83                -
                  ---------------                      ---------------
                       1,652,155                          720,969
                  ---------------                      ---------------
</TABLE>


As of December 28, 1997, the Company had an active stock option plan.  The
Company applies APB Opinion 25 and related Interpretations in accounting for
its plans and stock option plan under which options are outstanding but new
grants are not being issued.  No compensation cost has been recognized for the
stock options.  Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant date for awards under the plan
consistent with the method of FASB Statement 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below.




<TABLE>
<CAPTION>
                                   1997          1996           1995
                               ----------    -----------    -----------
<S>                              <C>            <C>            <C>
Net income in thousands
  As reported                    $7,858         $1,659         $6,152
  Pro forma                      $6,419         $1,109         $5,712

Basic earnings per share
  As reported                     $0.71          $0.15          $0.57
  Pro forma                       $0.58          $0.10          $0.53

Diluted earnings per share
  As reported                     $0.63          $0.14          $0.51
  Pro forma                       $0.51          $0.09          $0.47
</TABLE>



Options granted under the stock option plans are granted at prices not less
than 85.0% of the fair market value of the common stock and become exercisable
in installments at dates ranging from one to ten years from the date of grant,
as determined by the Board of Directors or the Compensation Committee thereof.
The weighted average market value per share for options granted in 1997 and
1996 was $6.79 and $4.55, respectively.

The fair value of each option is estimated on the date of grant using a type of
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the years ended December 28, 1997 and
December 29, 1996, respectively: dividend yield of 0%, expected volatility
83.5%, risk free interest rate of 6.18% and 5.64% for 1997 and 1996,
respectively, on the grant date with the maturity equal to the expected term of
6 years.





                                      40
<PAGE>   41
As of December 28, 1997, the weighted average remaining contractual life of all
options is 7 years.  As of December 28, 1997 and December 29, 1996, the pro
forma tax effects at a 34% tax rate under SFAS 109 are $959,000 and $366,000,
respectively.

In 1992 and 1993, the stockholders approved nonstatutory stock option grants of
100,000 and 10,000 shares of common stock, respectively, to certain members of
the Company's Board of Directors.  The stock options become exercisable at a
rate of 33.3% per year beginning one year from grant date.  However, the stock
options become fully exercisable upon the merger of the Company into another
entity or the acquisition of the Company by another entity or the sale or
transfer of substantially all assets of the Company to another entity.  In
1997, the non-employee members of the Board of Directors were granted
additional stock options of 10,000 shares each.  These options become
exercisable at a rate of 20% per year.  As of December 28, 1997, total grants
outstanding to these Directors were 130,000 shares, of which none had been
exercised.

NOTE 8: INCOME TAXES

The components of (loss) income before income taxes were as follows:



<TABLE>
<CAPTION>
(in thousands)            DEC. 28,          Dec. 29,          Dec. 31,
                            1997              1996              1995
                        ------------      ------------      ------------
<S>                   <C>               <C>               <C>
Domestic              $       5,622     $      (1,225)    $       7,860
Foreign                       3,544              (352)             (423)
                        ------------      ------------      ------------
                      $       9,166     $      (1,577)    $       7,437
                        ============      ============      ============
</TABLE>


Income tax expense (benefit) consists of the following:


<TABLE>
<CAPTION>
(in thousands)            DEC. 28,         Dec. 29,         Dec. 31,
                           1997             1996             1995
                        -----------      -----------      -----------
<S>                   <C>              <C>              <C>
Current
  Federal             $      1,423     $      2,103     $      2,299
  State                        414              800              557
  Foreign                   (1,278)             625              259
                        -----------      -----------      -----------
                             3,115            3,528            3,115
                        -----------      -----------      -----------
Deferred
  Federal                      289           (6,226)          (1,414)
  State                         75             (960)            (416)
  Foreign                   (2,171)               -                -
                        -----------      -----------      -----------
                            (1,807)          (7,186)          (1,830)
                        -----------      -----------      -----------
                      $      1,308     $     (3,658)    $      1,285
                        ===========      ===========      ===========
</TABLE>





                                      41
<PAGE>   42
A reconciliation of the U.S. statutory Federal tax rate of 34.0% to the
Company's effective tax rate is as follows:



<TABLE>
<CAPTION>
(in thousands)                                      DEC. 28,            Dec. 29,            Dec. 31,
                                                      1997                1996                1995
                                                 ---------------     ---------------     ---------------
<S>                                            <C>                <C>                  <C>
Tax expense (benefit) at statutory rate        $          3,116    $           (536)   $          2,529
(Decrease) increase related to:
  State income taxes, net of
    Federal tax benefit                                     323                (106)                557
  Foreign income taxes                                   (1,061)                323                 259
  Foreign operating losses generating
    no current tax benefit                                                      120                 144
  Domestic operating profit not taxed
    due to carryforward losses                                                                     (383)
  Reduction in valuation allowance                       (1,037)             (3,570)             (1,830)
  Other, net                                                (33)                111                   9
                                                 ---------------     ---------------     ---------------
                                               $          1,308    $         (3,658)   $          1,285
                                                 ===============     ===============     ===============
Effective rate                                            14.3%             (232.2)%              17.3%
                                                 ---------------     ---------------     ---------------
</TABLE>


The major components of the Company's deferred tax assets and liabilities are
as follows:



<TABLE>
<CAPTION>
(in thousands)                             DEC. 28,            Dec. 29,
                                             1997               1996
                                        -------------      ---------------
<S>                                   <C>                <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards      $        7,668     $          7,181
Inventory valuation                            3,976                5,162
Vacation accrual                               1,051                1,146
Bad debt reserve                               1,129                  796
Employee benefits                              2,875                3,041
Restructuring reserve                                               1,673
Depreciation                                     303                1,040
Warranty reserve                               1,021                    -
Environmental reserve                            234                    -
Deferred maintenance contracts                   982                    -
Other                                            436                4,070
Valuation allowance                           (8,450)              (9,487)
                                        -------------      ---------------
   Total deferred tax assets          $       11,225     $         14,622
                                        =============      ===============

DEFERRED TAX LIABILITIES:
Other intangible assets                         (398)               3,780
Other long term liabilities                    3,162                3,045
Other                                              -                  847
                                        -------------      ---------------
    Total deferred tax liabilities    $        2,764     $          7,672
                                        =============      ===============
</TABLE>

During 1997 and 1996, the Company recorded a deferred tax benefit of
approximately $2.4 and $3.6 million, respectively, relating to the reversal of
a portion of the Company's valuation allowance for its foreign and domestic
deferred tax assets, respectively.  Such assets were previously partially
reserved due to uncertainties regarding their ultimate recoverability.  The
benefits were recorded in 1997 and 1996 based upon management's estimate of
amounts





                                      42
<PAGE>   43
which are expected to be recoverable through future earnings or reversals of
temporary differences.  The remaining valuation allowance relates primarily to
the Company's remaining foreign net operating losses.

The cumulative amount of undistributed earnings of foreign subsidiaries which
the Company intends to permanently invest and upon which no deferred U.S.
income taxes have been provided is $11.3 million. The Company cannot
practically determine the amount of deferred income tax liability that would
result had such earnings actually been remitted. The amount of foreign
withholding taxes, at current rates, that would have been due on the earnings
had they actually been remitted was $0.5 million.

NOTE 9: RESTRUCTURING COSTS

In 1996, following Board of Directors review, the Company accrued $4.2 million
for restructuring its worldwide service business.  The restructuring charge for
the service business involved, 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 company.  The restructuring charge include
approximately $2.3 million for severance and termination benefits for 321
employees at the Company's Bedford, Massachusetts and Waynesboro, Virginia
facilities. As of December 28, 1997, the restructuring reserve had been fully
utilized.

NOTE 9: COMMITMENTS AND CONTINGENT LIABILITIES

Leasing arrangements:

As lessee:

The Company leases certain manufacturing and warehousing properties.  Rent
expense amounted to $6.4 million, $6.7 million and $7.2 million in 1997, 1996
and 1995, respectively.

Minimum future lease commitments for operating leases as of December 28, 1997,
are as follows:  1998 - $5.7 million, 1999 - $4.8 million, 2000 - $3.8 million,
2001 - $2.9 million, 2002 - $2.8 million, and $8.0 million thereafter.

As lessor:

The Company has rental agreements for the leasing of printers.  Operating lease
terms vary, generally from one to sixty months.  Rental revenue was $3.1
million, $3.2 million and $2.3 million for 1997, 1996 and 1995, respectively.

On December 28, 1997 and December  29, 1996, the cost of equipment leased was
$3.1 million and $1.4 million, respectively, which is included in property,
plant and equipment, net of accumulated depreciation of $2.4 million and $1.8
million, respectively.

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





                                      43
<PAGE>   44
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 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.

The Company has been named as a defendant in an Original Petition and Petition
for Injunctive Relief filed in August 1995 which alleges that the Company and
certain other defendants are strictly liable for damages allegedly suffered by
the plaintiffs as a result of contamination of groundwater at the
Linn-Faysville Aquifer, in Texas, due to the disposal of dangerous products and
materials at a landfill which is alleged to be the source of the contamination.
This matter was settled in May 1997 for approximately $0.2 million without the
Company admitting liability, curtailing additional legal expenses.  The Company
was fully reserved for the amount of the settlement and related legal expenses.

During the third quarter of 1996, the Company accrued $1.5 million associated
with environmental charges.  The environmental charge was the Company's best
estimate of remaining costs associated with certain environmental matters,
including $0.6 million for pond closure and monitoring for ten years at the
Company's Waynesboro, Virginia facility and $0.9 million for litigation costs
associated with the Linns-Faysville Aquifer in Texas.  The balance of the
environmental reserve at December 28, 1997 was approximately $0.6 million.

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.





                                      44
<PAGE>   45
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 had been scheduled to begin in April 1998.  In late March 1998, Ogden
and ADC requested and received permission from the arbitrator to file an
amended claim to seek recision of the agreement.  While ADC has not formally
filed its claim for recision, the Company is not aware of any basis for such a
claim and will vigorously contest any 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 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 with an average base cost of $4.3
million per year.

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 discussed above, will not have a material
effect upon the financial condition, results of operations or liquidity of the
Company.

NOTE 10: RELATED PARTY TRANSACTIONS

G.E. is one of the principal stockholders of the Company.  Sales by the Company
to G.E. and its affiliates amounted to $1.9 million, $2.2 million and $2.4
million in 1997, 1996 and 1995, respectively.  Amounts receivable from G.E.
were immaterial as of December 28, 1997 and December 29, 1996, respectively.

In late 1997, G.E. transferred all of its holdings in GENICOM to a charitable
trust.

NOTE 11: SEGMENT AND GEOGRAPHIC INFORMATION

Industry Segments

The Company operates in the serial, line and page printer business where it
designs and markets printers as well as in 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 and services with
field services, depot repair, parts, logistics and network products
(Enterprising Service Solutions company).  The production and sales of relay
products comprise less than 10% of revenue, operating income and identifiable
assets and are included in the Document Solutions segment.  Revenue between
industry segments are not material.





                                      45
<PAGE>   46


<TABLE>
<CAPTION>
(in thousands)                                        1997                  1996                  1995
                                                 ----------------      ----------------      ----------------
<S>                                            <C>                   <C>                   <C>
REVENUES
Document Solutions*                            $         293,166     $         182,707     $         166,469
Enterprising Service Solutions                           127,962               120,551               127,583
                                                 ----------------      ----------------      ----------------
                                               $         421,128     $         303,258     $         294,052
                                                 ----------------      ----------------      ----------------
OPERATING INCOME
Document Solutions+#                           $          29,713     $          11,954     $           7,415
Enterprising Service Solutions#                          (13,417)               (8,750)                7,763
                                                 ----------------      ----------------      ----------------
                                               $          16,296     $           3,204     $          15,178
                                                 ----------------      ----------------      ----------------
DEPRECIATION AND AMORTIZATION
Document Solutions                             $           5,851     $           3,146     $           4,471
Enterprising Service Solutions                            11,741                13,239                 9,487
Corporate and other                                        1,375                 1,487                 4,148
                                                 ----------------      ----------------      ----------------
                                               $          18,967     $          17,872     $          18,106
                                                 ----------------      ----------------      ----------------
ASSETS
Document Solutions                             $         145,467     $          96,147     $          85,130
Enterprising Service Solutions                            85,387                53,248                49,264
Corporate and other                                       19,195                36,684                27,145
                                                 ----------------      ----------------      ----------------
                                               $         250,049     $         186,079     $         161,539
                                                 ----------------      ----------------      ----------------
CAPITAL EXPENDITURES
Document Solutions                             $           3,440     $           2,493     $           2,970
Enterprising Service Solutions                            10,469                 8,961                11,680
Corporate and other                                        6,417                   355                 1,675
                                                 ----------------      ----------------      ----------------
                                               $          20,326     $          11,809     $          16,325
                                                 ----------------      ----------------      ----------------
</TABLE>

*Includes relay revenues of $14,342, $13,651 and $11,726 for 1997, 1996 and
1995, respectively.
+Includes relay operating income (loss) of $1,236, $(807) and $(1,367) for
1997, 1996 and 1995, respectively.
#Includes restructuring accrual of $4,183 included with Enterprising Services
and environmental accrual of $1,479 for Document Solutions in 1996.

Geographic Segments

Transfers (sales) between geographic areas are accounted for at prices
approximating market. Information regarding the Company's operations in the
Pacific Rim, which are not material relative to total operations, has been
combined with its European operations.  Additionally, information regarding the
Company's former Mexican subsidiary has been combined with its U.S. operations
because of the vertical integration and its close proximity to the United
States.





                                      46
<PAGE>   47
Financial information by geographic area:




<TABLE>
<CAPTION>
(in thousands)                              United States
FISCAL YEAR 1997                             and Canada          Europe          Eliminations      Consolidated
                                           --------------    ---------------    --------------    ---------------
<S>                                      <C>               <C>                <C>               <C>
Sales to unaffiliated customers          $       316,397   $        104,731   $                 $        421,128
Transfers between geographic areas                67,430                              (67,430)               -
                                           --------------    ---------------    --------------    ---------------
Total sales                              $       383,827   $        104,731   $       (67,430)  $        421,128
                                           --------------    ---------------    --------------    ---------------
Operating income (loss)                  $        12,099   $          4,197   $                 $         16,296
                                           --------------    ---------------    --------------    ---------------
Identifiable assets                      $       130,634   $        119,415   $                 $        250,049
                                           ==============    ===============    ==============    ===============
</TABLE>

<TABLE>
<CAPTION>
                                            United States
FISCAL YEAR 1996                             and Canada          Europe          Eliminations      Consolidated
                                           --------------    ---------------    --------------    ---------------
<S>                                      <C>               <C>                <C>               <C>
Sales to unaffiliated customers          $       235,780   $         67,478   $                 $        303,258
Transfers between geographic areas                47,818                              (47,818)               -
                                           --------------    ---------------    --------------    ---------------
Total sales                              $       283,598   $         67,478   $       (47,818)  $        303,258
                                           --------------    ---------------    --------------    ---------------
Operating income (loss)                  $         3,479   $           (275)  $                 $          3,204
                                           --------------    ---------------    --------------    ---------------
Identifiable assets                      $       146,923   $         39,156   $                 $        186,079
                                           ==============    ===============    ==============    ===============
</TABLE>

<TABLE>
<CAPTION>
                                            United States
FISCAL YEAR 1995                             and Canada          Europe          Eliminations      Consolidated
                                           --------------    ---------------    --------------    ---------------
<S>                                      <C>               <C>                <C>               <C>
Sales to unaffiliated customers          $       231,709   $         62,343   $                 $        294,052
Transfers between geographic areas                39,870                              (39,870)               -
                                           --------------    ---------------    --------------    ---------------
Total sales                              $       271,579   $         62,343   $       (39,870)  $        294,052
                                           --------------    ---------------    --------------    ---------------
Operating income (loss)                  $        15,021   $            157   $                 $         15,178
                                           --------------    ---------------    --------------    ---------------
Identifiable assets                      $       123,806   $         37,733   $                 $        161,539
                                           ==============    ===============    ==============    ===============
</TABLE>

Total sales to customers outside the United States amounted to $139.0 million,
$94.2 million and $84.7 million for 1997, 1996 and 1995, respectively; these
amounts include export sales from the United States of $2.3 million, $1.0
million and $1.1 million in 1997, 1996 and 1995, respectively.

 NOTE 13: BUSINESS ACQUISITIONS AND DISPOSITIONS

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 assumption
of certain liabilities.  The transaction was financed through the Company's
credit facility with NationsBank of Texas, N.A..

PRO FORMA FINANCIAL INFORMATION

Presented below are the unaudited pro forma statements of operations as if the
acquired operations had been integrated into the Company effective January 1,
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 the 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





                                      47
<PAGE>   48
periods presented, and is not intended to be a projection of future results.
Presentation is in thousands except for earnings per share amounts.


<TABLE>
<CAPTION>
                                                 December 28, 1997         December 29, 1996
                                                ---------------------     ---------------------
<S>                                           <C>                       <C>
Revenue                                       $            451,527      $             341,532
Pre-Tax Income                                              12,209                      3,286
                                                ---------------------     ---------------------
Net Income                                                  10,104                      3,087
                                                ---------------------     ---------------------
Earnings per share - Basic                    $               0.91      $                0.28
                                                ---------------------     ---------------------
Earnings per share - Diluted                                  0.80                       0.25
                                                ---------------------     ---------------------
Weighted average shares outstanding
  Basic                                                     11,074                     10,933
                                                ---------------------     ---------------------
  Diluted                                                   12,570                     12,168
                                                ---------------------     ---------------------
</TABLE>
RELAYS BUSINESS

The Company recorded an operating loss of $0.8 million associated with the sale
of its relay product line in 1997.  This loss included $0.6 million for pension
curtailment.

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.

During the fourth quarter the Company expensed approximately $1.7 million
dollars associated with the agreements.

TEXAS INSTRUMENTS WORLDWIDE PRINTER BUSINESS

On September 30, 1996, the Company acquired certain assets of Texas Instruments
worldwide printer and related supplies business for the purchase price of
approximately $29.5 million.  The acquisition was financed primarily through
the Company's credit facility with NationsBank and a note of $9 million to
Texas Instruments with interest of approximately 8.5% payable over two years.
This note was paid in September 1997.  The goodwill of approximately $10
million associated with the purchase is being amortized over seven years.

PRINTER SYSTEMS CORPORATION

On February 16, 1995, the Company acquired Printer Systems Corporation ("PSC"),
a privately held company whose primary business was the design, manufacture,
distribution and support of printer networking products for commercial
customers.  PSC had 1994 revenues of approximately $10.0 million.  Pursuant to
the purchase agreement, the Company acquired all of PSC's outstanding common
and preferred shares for consideration aggregating to potentially $4.8 million.
Of the consideration $0.8 million was payable at closing and $1.2 million is
payable over the three subsequent years to closing.  The remaining balance of
up to $2.8 million in consideration is contingent upon attainment of
performance objectives during the three years subsequent to closing, and will
be funded from the Company's cash flows from operations and credit facilities.
There was no contingent liability remaining as of December





                                      48
<PAGE>   49
28, 1997. The acquisition has been accounted for as a purchase.  The goodwill
associated with the purchase is being amortized over seven years.

HARRIS ADACOM NETWORK SERVICES, INC.

On March 1, 1995, the Company acquired substantially all of the assets and
certain liabilities of Harris Adacom Network Services, Inc. ("HANS"), including
all of the stock of its Canadian subsidiary, Harris Adacom Inc. for cash and
notes totaling $7.3 million.  The assets acquired relate to HANS' service depot
facility, field service operations, systems integration business, and network
baselining and monitoring operations.  HANS had 1994 revenues of  approximately
$36.1 million.  The purchase price was funded from the Company's cash flows
from operations and credit facilities and the acquisition has been accounted
for as a purchase.  The goodwill associated with the purchase is being
amortized over ten years.

NOTE 14:         SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
(in thousands, except per share data)
                                                                          QUARTER
                                           -----------------------------------------------------------------------
1997                                           FIRST             SECOND             THIRD              FOURTH
                                           ---------------    --------------    ---------------    ---------------
<S>                                      <C>                 <C>               <C>                <C>
REVENUES                                 $         96,345    $       98,647    $       102,689    $       123,447
GROSS MARGIN                                       23,965            23,859             23,774             25,583
OPERATING INCOME                                    4,303             5,275              4,707              1,973
NET INCOME                                          2,517             2,843              2,286                212
EARNINGS PER SHARE - BASIC                           0.23              0.26               0.21               0.02
EARNINGS PER SHARE - DILUTED                         0.21              0.23               0.18               0.02
</TABLE>

<TABLE>
<CAPTION>
                                                                          Quarter
                                           -----------------------------------------------------------------------
1996                                           First             Second             Third              Fourth
                                           ---------------    --------------    ---------------    ---------------
<S>                                      <C>                 <C>               <C>                <C>
Revenues                                 $         73,553    $       69,139    $        68,811    $        91,755
Gross margin                                       17,307            15,159             16,521             21,982
Operating income (loss)                             2,845             1,918             (5,616)             4,053
Income (loss) before extraordinary item             1,421               689             (2,229)             2,200
Net income (loss)                                   1,007               681             (2,229)             2,200
Earnings (loss) per share before
  extraordinary item
       Basic                                         0.13              0.06              (0.20)              0.20
       Diluted                                       0.11              0.06              (0.20)              0.18
</TABLE>





                                      49
<PAGE>   50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1998 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.

ITEM 11.  EXECUTIVE COMPENSATION

The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1998 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1998 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1998 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Financial Statements and Schedules

         The financial statement schedule filed as part of this report is
         listed in the Index to Financial Statements and Schedules on page F-1
         immediately following the signatures to this report.





                                      50
<PAGE>   51
Exhibits Included in Response to Item 601 of Regulation S-K

<TABLE>
<CAPTION>
 NUMBER          DESCRIPTION
=========      ========================================================================================================
 <S>            <C>
 2.1            Texas Instruments Asset Purchase Agreement dated July 22, 1996, incorporated by reference to Exhibit
                2.1 to Form 8-K (File No. 0-14865) filed with the Commission on October 15, 1996.

 2.2            Amendment of Asset Purchase Agreement with Texas Instruments dated as of September 30, 1996,
                incorporated by reference to Exhibit 2.2 to Form 8-K (File No. 0-14865) filed with the Commission on
                October 15, 1996.

 2.3            Asset Purchase Agreement dated November 14, 1997 among Genicom Corporation, Heller Financial, Inc.,
                Novadyne Computer Systems, Inc. and Novadyne Acquisition Company, Inc., incorporated by reference to
                Exhibit 2.1 to Form 8-K (File No. 0-14865) filed with the Commission on December 1, 1997.

 2.4            Asset Purchase Agreement dated November 14, 1997 among Genicom Canada Inc., Novadyne Computer
                Systems (Canada), Inc., Novadyne Computer Systems, Inc. and Heller Financial, Inc. incorporated by
                reference to Exhibit 2.2 to Form 8-K (File No. 0-14865) filed with the Commission on December 1,
                1997.

 3.1            Restated Certificate of Incorporation effective as of June 15, 1992, incorporated by reference to
                Form 8-A (File No. 0-14865) filed with the Commission on July 5, 1996.

 3.2            Certificate of Amendment to Certificate of Incorporation effective as of July 17, 1995, incorporated
                by reference to Exhibit 3.2 to Form 8-A (File No. 0-14865) filed with the Commission on July 5,
                1996.

 3.3            By-laws, dated June 1, 1983, as amended January 23, 1989 - incorporated by reference to Exhibit 3.2
                to Form 10-K (File No. 0-14865) filed with the Commission on March 29, 1989.

 4.1            Rights Agreement dated as of June 16, 1996 between the Registrant and First Union National Bank of
                North Carolina, including Exhibit A thereto, Form of Rights Certificate, incorporated by reference
                to Exhibit 4.1 to Form 8-A (File No. 0-14865) filed with the Commission July 5, 1996.

 10.1*          Cooperative Marketing, Support and Development Agreement between Genicom Corporation and Digital
                Equipment Corporation dated August 10, 1997 incorporated by reference to Exhibit 2.3 to Form 8-K
                (File No. 0-14865) filed with the Commission on August 25, 1997.

 10.2           Amended and Restated Credit Agreement with NationsBank dated September 5, 1997, incorporated by
                reference to Exhibit 10.1 to Form 8-K (File No. 0-14865) filed with the Commission on September 22,
                1997.
</TABLE>





                                      51
<PAGE>   52
<TABLE>
<CAPTION>
 NUMBER          DESCRIPTION
=========      ========================================================================================================
 <S>            <C>
 10.3           First Amendment to Credit and Security Agreement with NationsBank dated as of October 31, 1997,
                incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 0-14865) filed with the Commission
                on December 1, 1997.

 10.4           Second Amendment to Credit and Security Agreement with NationsBank dated as of  March 12, 1998,
                filed herewith.

 10.5           Genicom Corporation 1997 Stock Option Plan incorporated by reference to Exhibit 4 to Form S-8 (File
                No. 333-30153) filed with the Commission on June 27, 1997.

 10.6#          Stock Option Plan, as amended and restated, effective as of February 7, 1991- incorporated by
                reference to Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q (File No. 0-14685) for the
                quarter ended March 31, 1991 filed with the Commission on May 15, 1991.

 10.7#          First Amendment to the Registrant's Stock Option Plan, dated February 3, 1992  incorporated by
                reference to Exhibit 4.2 to Form S-8 Registration Statement (No. 33-49472) filed with the Commission
                on July 10, 1992.

 10.8#          Second Amendment to the Registrant's Stock Option Plan, dated January 17, 1994 incorporated by
                reference to Exhibit 4 to Form S-8 Registration Statement (No. 33-53843) filed with the Commission
                on May 27, 1994.

 10.9#          Third Amendment to the Registrant's Stock Option Plan dated February 13, 1995 incorporated by
                reference to Exhibit 4 to Form S-8 Registration Statement (No. 333-01845) filed with the Commission
                on March 21, 1996.

 10.10#         Amendment of Stock Option Plan, dated February  13, 1995 incorporated by reference to Exhibit 10.5
                to Form 10-K (File No. 0-14865) filed with the Commission on March 27, 1997.

 10.11#         Amendment of Stock Option Plan, dated December 17, 1996, incorporated by reference to Exhibit 10.6
                to Form 10-K (File No. 014865) filed with the Commission on March 27, 1997.

 10.12#         Deferred Compensation and Savings Plan, as amended and restated, effective as of January 2, 1989
                incorporated by reference to Exhibit 10.8 to Form 10-K (File No. 0-14865) filed with the Commission
                on March 29, 1991.

 10.13#         First Amendment to the Deferred Compensation and Savings Plan, dated as of November 1, 1993
                incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 0-14865) filed with the Commission
                on March 30, 1995.

 10.14#         Second Amendment to the Deferred Compensation and Savings Plan, dated as of January 20, 1994
                incorporated by reference to Exhibit 10.2 to Form 8-K (File No. 0-14865) filed with the Commission
                on March 30, 1995.
</TABLE>





                                               52
<PAGE>   53
<TABLE>
<CAPTION>
 NUMBER          DESCRIPTION
=========      ========================================================================================================
 <S>            <C>
 10.15#         Fifth Amendment to the Deferred Compensation and Savings Plan, dated as of April 1, 1997
                incorporated by reference to Exhibit 10.8 to Form 10K (File No. 0-14865) filed with the Commission
                on March 27, 1997.

 10.16#         Incentive Compensation Plan, as amended - incorporated by reference to Exhibit 10.13 to Form S-1
                (File No. 33-5458) filed with the Commission on June 25, 1986.

 10.17#         Incentive Compensation Plan for 1997 incorporated by reference to Exhibit 10.17 to Form 10-K (File
                No. 0-14865) filed with the Commission on March 31, 1998 filed herewith.

 10.18          Lease of McAllen, Texas facility, dated January 20, 1992 incorporated by reference to Exhibit 10.12
                to Form 10-K (File No. 0-14865) filed with the Commission on March 24, 1992.

 10.19          Sublease of McAllen, Texas facilities, dated December 18, 1995 incorporated by reference to Exhibit
                10.16 to Form 10-K (File No. 0-14865) filed with the Commission on March 27, 1997.

 10.20#         Terms of employment of Paul T. Winn dated March 26, 1990 - incorporated by reference to Exhibit
                10.15 to Form S-1 Registration Statement (No. 33-23007) filed with the Commission on May 17, 1990.

 10.21*         Agreement Between GENICOM Corporation and TOSHIBA Corporation Relating to Laser Printer G751, Laser
                Printer G750 and Related Options, Supplies and Service Parts, dated March 31, 1992 - incorporated by
                reference to Exhibit 10.17 to Form 10-K filed with the Commission on March 31, 1993.

 10.22          Agreement with the General Electric Company regarding environmental matters at the Registrants'
                Waynesboro, Virginia facility, dated December 9, 1993 - incorporated by reference to Exhibit 10.1 to
                Form 8-K (File No. 0-14865) filed with the Commission on February 23, 1994.

 10.23          Manufacturing agreement between GENICOM Corporation and Atlantic Design Company - incorporated by
                reference to Exhibit 10.21 to Form 10-K (File No. 0-14865) filed with the Commission on March 28,
                1996.

 11             Statement regarding the Company's computation of earnings per share - filed herewith.

 22             Subsidiaries of the Registrant - filed herewith.

 23             Consent of Independent Accountants - filed herewith.

 27             Financial Data Schedules - Filed only with EDGAR version.
</TABLE>





                                      53
<PAGE>   54
<TABLE>
<CAPTION>
 NUMBER          DESCRIPTION
=========      ========================================================================================================
 <S>            <C>
 (b)            Reports on Form 8-K

                The Company filed a Form 8-K/A on October 22, 1997 to report that it had acquired certain assets
                from Digital Equipment Corporation ("DEC") in connection with a Cooperative Marketing, Support and
                Development Agreement ("Marketing Agreement") it had recently entered into with DEC.  The Company
                determined that the acquisition and the Marketing Agreement did not require the production and
                filing of any financial statements.

                The Company filed a Form 8-K on December 1, 1997 to report that it had purchased certain assets and
                had assumed certain liabilities of Novadyne Computer Systems, Inc.  The Company also reported a
                related amendment of its credit agreement with NationsBank.  Financial statements, not available at
                the time, were filed under cover of an amended Form 8-K on March 17, 1998.
</TABLE>





 *    Confidential treatment granted with respect to certain provisions
      pursuant to 17 C.F.R. 200.80 (b) (4).

 #    Management contracts or compensatory plans.





                                      54
<PAGE>   55
                                   SIGNATURES

Pursuant to the requirement of Section 13 or 15(d) 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
                         BY:  Paul T. Winn
                            ------------------------------------

                              Paul T. Winn
                              President and Chief Executive Officer

Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
 SIGNATURE                                                      TITLE                                      DATE
==================================           =================================================    =====================
 <S>                                           <C>                                                    <C>

 \s\Don E. Ackerman                            Chairman of the Board and Director                     March 30, 1998
----------------------------------
 Don E. Ackerman


 \s\Paul T. Winn                               President and Chief Executive Officer                  March 30, 1998
----------------------------------             and Director (Principal Executive Officer)
 Paul T. Winn


 \s\James C. Gale                              Senior Vice President Finance and Chief                March 30, 1998
----------------------------------             Financial Officer (Principal Financial Officer)
 James C. Gale


 \s\John Hill                                  Director                                               March 30, 1998
----------------------------------
 John Hill
</TABLE>





                                      55
<PAGE>   56

                      GENICOM CORPORATION AND SUBSIDIARIES

                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES



<TABLE>
<CAPTION>
                                                                                      PAGE
                                                                                   =========
 <S>                                                                                  <C>
 Independents Accountants' Report                                                     F-2

 Financial Statement
 Schedules:

 Schedule  II             Valuation and Qualifying Accounts and Reserves              F-3
</TABLE>



1.  All other schedules have been omitted since the required information is not
    present in amounts sufficient to require submission of the schedules.


                                     F - 1
<PAGE>   57
INDEPENDENT ACCOUNTANTS' REPORT



The Board of Directors and Stockholders of GENICOM Corporation:


We have audited the accompanying consolidated balance sheets of GENICOM
Corporation and Subsidiaries (the "Company") as of December 28, 1997 and
December 29, 1996, and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the three fiscal years in
the period ended December 28, 1997.  We have also audited the financial
statement schedule listed in the index on page F-1 of this Form 10-K.  These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of GENICOM
Corporation and Subsidiaries as of December 28, 1997 and December 29, 1996, and
the consolidated results of their operations and their cash flows for each of
the three fiscal years in the period ended December 28, 1997, in conformity
with generally accepted accounting principles.  In addition, in our opinion,
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.





Coopers & Lybrand L.L.P.

McLean, VA
January 29, 1998





                                    F - 2
<PAGE>   58
                      GENICOM CORPORATION AND SUBSIDIARIES

         SCHEDULE II  - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                 (In thousands)

<TABLE>
<CAPTION>

                                           BALANCE AT            ADDITIONS
             DESCRIPTION                   BEGINNING          CHARGED TO COSTS        DEDUCTIONS        BALANCE AT END
                                           OF PERIOD            AND EXPENSES         FROM RESERVES        OF PERIOD
=====================================   ===============     ===================    ================   =================
 <S>                                      <C>                   <C>                   <C>                  <C>
 ALLOWANCE FOR DOUBTFUL ACCOUNTS

 Year ended:

 DECEMBER 31, 1995                          $ 1,479               $1,284(1)              $1,147             $  1,616

 DECEMBER 29, 1996                          $ 1,616               $1,985(1)              $  331             $  3,270

 DECEMBER 28, 1997                          $ 3,270               $2,086(1)              $  886             $  4,470


 ALLOWANCE FOR INVENTORY
 OBSOLESCENCE

 Year ended:

 DECEMBER 31, 1995                        $   6,158             $  2,292(2)            $    305             $  8,145

 DECEMBER 29, 1996                        $   8,145             $  6,761(2)            $  3,337             $ 11,569

 DECEMBER 28, 1997                        $  11,569             $  2,711(2)            $  3,481             $ 10,799
</TABLE>

1.       "Additions" to the allowance for doubtful accounts include a foreign
         currency translation adjustment of $129,$(48) and $46 in 1997, 1996
         and 1995, respectively.  Net bad debt expense for 1997, 1996 and 1995
         was $2,215, $2,026 and $1,238, respectively.

2.       Foreign currency translation adjustments were immaterial in 1997, 1996
         and 1995.  1996 includes $4,666 of reserve from the Texas Instruments
         acquisition.

                                     F - 3





<PAGE>   59
                      GENICOM CORPORATION AND SUBSIDIARIES

                         INDEX TO EXHIBITS TO FORM 10-K
                  FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                     DESCRIPTION
------                                     -----------
<S>          <C>                                                                           <C>
10.4         Seconded  Amendment to Credit and Security  Agreement with NationsBank           E-2 - E-10
             dated as of March 12, 1998.

10.17        Incentive Compensation Plan for 1997                                            E-11 - E-18

11           Statement regarding computation of per share earnings                               E-19

22           Subsidiaries of the Registrant                                                      E-20

23           Consent of Independent Accountants                                                  E-21

27           Financial Data Schedules                                                      Filed only with
                                                                                            EDGAR version
</TABLE>

                                     E - 1