UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to _____
Commission file number 0-24172
Metrologic Instruments, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-1866172
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
90 Coles Road , Blackwood, New Jersey 08012
(Address of principal executive offices) (Zip Code)
(609) 228-8100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
As of May 13, 1998 there were 5,392,249 shares of Common Stock, $.01 par value
per share, outstanding.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
INDEX
Page
No.
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and
March 31, 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and
March 31, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
Convertible Line of Credit Note between Metrologic
Instruments, Inc. and PNC Bank, National Association 14
Financial Data Schedule 21
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Metrologic Instruments, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands except share data)
March 31, December 31,
1998 1997
-------- --------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 12,207 $ 13,096
Accounts receivable, net of allowance
of $409 and $408 in 1998 and 1997,
respectively 10,704 9,249
Inventory 6,444 4,684
Deferred income taxes 1,884 1,698
Other current assets 676 604
-------- -------
Total current assets 31,915 29,331
Property, plant and equipment, net 5,330 4,625
Patents and trademarks, net of
amortization of $536 and $511 in 1998
and 1997, respectively 1,295 1,254
Holographic technology, net of
amortization of $177 and $154 in 1998
and 1997, respectively 730 734
Deferred income taxes 323 414
Advance license fee, net of amortization
of $147 and $118 in 1998 and 1997,
respectively 1,853 1,882
Security deposits and other assets 761 218
-------- --------
Total assets $ 42,207 $ 38,458
======== ========
Liabilities and shareholders' equity
Current liabilities:
Current portion of notes payable $ 512 $ 543
Accounts payable 3,501 2,859
Accrued expenses 8,821 6,505
Accrued legal settlement 835 825
-------- --------
Total current liabilities 13,669 10,732
Notes payable, net of current portion 1,360 1,496
Deferred income taxes 662 524
Accrued legal settlement 577 805
Shareholders' equity:
Preferred stock, $0.01 par value:
500,000 shares authorized;
none issued - -
Common stock, $0.01 par value:
10,000,000 shares authorized;
5,379,218 and 5,369,090 shares
issued and outstanding in 1998
and 1997, respectively 54 54
Additional paid-in capital 16,506 16,389
Retained earnings 9,596 8,576
Deferred compensation (1) (2)
Accumulated other comprehensive loss (216) (116)
-------- -------
Total shareholders' equity 25,939 24,901
-------- -------
Total liabilities and shareholders'
equity $ 42,207 $ 38,458
======== ========
See accompanying notes.
<PAGE>
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands except share and per share data)
Three Months Ended
March 31,
1998 1997
(unaudited)
Sales $ 15,227 $ 12,762
Cost of sales 9,367 7,967
-------- --------
Gross profit 5,860 4,795
Selling, general and administrative expenses 3,343 2,928
Research and development expenses 1,114 808
-------- --------
Operating income 1,403 1,059
Other income (expenses)
Interest income 137 92
Interest expense (38) (42)
Foreign currency transaction gain (loss) 57 (165)
Other, net 34 (3)
-------- --------
Total other income (expenses) 190 (118)
-------- --------
Income before provision for income taxes 1,593 941
Provision for income taxes 573 357
-------- --------
Net income $ 1,020 $ 584
======== ========
Basic earnings per share
Weighted average shares outstanding 5,371,626 $ 5,291,772
======== ========
Basic earnings per share $ 0.19 $ 0.11
======== ========
Diluted earnings per share
Weighted average shares outstanding 5,371,626 5,291,772
Net effect of dilutive securities 169,343 135,173
-------- --------
Total shares outstanding used in
computing diluted earnings per share 5,540,969 5,426,945
======== ========
Diluted earnings per share $ 0.18 $ 0.11
======== ========
See accompanying notes.
<PAGE>
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Three Months Ended
March 31,
1998 1997
(Unaudited)
Operating activities
Net cash provided by (used in) operating
activities $ 811 $ (812)
Investing activities
Purchase of property, plant and equipment (920) (126)
Patents and trademarks (66) (59)
Advance license fee (125) (125)
Other intangibles (536) -
Purchase of Holoscan, Inc. and holographic
technology, net of cash acquired (19) (18)
------- -------
Net cash used in investing activities (1,666) (328)
Financing activities
Proceeds from exercise of stock options and
employee stock purchase plan 85 414
Principal payments on notes payable (126) (44)
Payments of amounts due to former officer - (50)
Capital lease payments (41) (61)
------- -------
Net cash (used in) provided by financing activities (82) 259
Effect of exchange rates on cash 48 12
------- -------
Net decrease in cash and cash equivalents (889) (869)
Cash and cash equivalents at beginning of period 13,096 10,358
------- -------
Cash and cash equivalents at end of period $ 12,207 $ 9,489
======== =======
Supplemental Disclosure
Cash paid for interest $ 28 $ 30
Cash paid for income taxes $ 29 $ 9
Tax benefit from stock options $ 32 $ -
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
(Unaudited)
1. Business
Metrologic Instruments, Inc. and its wholly owned subsidiaries (the
"Company") design, manufacture and market bar code scanning equipment
incorporating laser and holographic technology. These scanners rapidly,
accurately and efficiently read and decode all widely used bar codes and
provide an efficient means for data capture and automated data entry into
computerized systems.
2. Accounting Policies
Interim Financial Information
The accompanying unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair presentation of
the Condensed Consolidated Financial Statements have been included. The results
of the interim periods are not necessarily indicative of the results to be
obtained for a full fiscal year. The Condensed Consolidated Financial
Statements and these Notes should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in this Quarterly Report on Form 10-Q and the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, including the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements for the
year ended December 31, 1997.
3. Inventory
Inventory consists of the following:
March 31, December 31,
1998 1997
Raw materials $ 2,902 $ 2,542
Work-in-process 2,221 1,590
Finished goods 1,321 552
------- ------
$ 6,444 $4,684
======= ======
4. Financial Instruments
The Company has selectively entered into derivative financial
instruments to offset its exposure to foreign currency risks. These financial
instruments currently include (i) foreign currency forward exchange contracts
with its primary bank for periods not exceeding six months, which partially
hedge sales to the Company's German subsidiary and (ii) German mark based loans
which act as a partial hedge against outstanding intercompany receivables and
the net assets of its German subsidiary, which are denominated in German marks.
The Company's forward exchange contracts do not subject the Company to risk
from exchange rate movements because gains and losses on such contracts offset
losses and gains, respectively, on the assets, liabilities, and intercompany
transactions being hedged. Forward exchange contracts are adjusted to market
value and the resulting gains and losses are reflected in income. At March 31,
1998, the Company had $1,540 of foreign currency forward exchange contracts
outstanding with a fair market value that approximated cost. The forward
exchange contracts generally require the Company to exchange German marks for
U.S. dollars at maturity, at rates agreed to at the inception of the contracts.
5. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), at December 31, 1997. SFAS
130 establishes standards for reporting comprehensive income and requires
foreign currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Adoption of SFAS 130 had no impact on net income or shareholders'
equity.
During the three months ended March 31, 1998 and 1997, total
comprehensive income amounted to $920 and $305, respectively.
(The remainder of this page is intentionally blank)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the Company's results of operations and
liquidity and capital resources should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements of the Company and the
related Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q
and the Consolidated Financial Statements and the Notes to Consolidated
Financial Statements for the year ended December 31, 1997 appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997. The
Condensed Consolidated Financial Statements for the three months ended March
31, 1998 and March 31, 1997 are unaudited.
The Company derives its revenues from sales of its scanners through
distributors, value-added resellers ("VARs") and original equipment
manufacturers ("OEMs") and directly to end-users in the United States and in
over 85 foreign countries.
Since 1997, the Company has been exposed to overall unfavorable
foreign currency fluctuations due to the reduction in the value of the German
mark against the U.S. dollar. The Company's German subsidiary accounted for
approximately 45.1% of the Company's consolidated sales for the three months
ended March 31, 1998. Substantially all of the German subsidiary's products are
manufactured at the Company's U.S. facility. Therefore, the subsidiary's
product manufacturing costs, which represent approximately 81.4% of the
subsidiary's total operating costs for the three months ended March 31, 1998,
are incurred by the Company in U.S. dollars. As a result, the subsidiary's
sales are significantly affected by fluctuations between the German mark and
the U.S. dollar; however, there is minimal offsetting effect in the product
costs of the subsidiary. Accordingly, the Company's consolidated operating
profit is significantly affected by changes in the exchange rate between the
German mark and U.S. dollar. (See "Liquidity and Capital Resources" for a
discussion of the Company's derivative financial instruments utilized to
mitigate such exposure.)
Three Months Ended March 31, 1998 Compared with Three Months Ended March 31,
1997 (amounts in thousands except per share information)
Sales increased 19.3% to $15,227 in the three months ended March 31,
1998 from $12,762 in the three months ended March 31, 1997, principally as a
result of the continued increase in market acceptance of the Company's
point-of-sale ("POS") products, an increase in sales of the Company's
HoloTrak(TM) industrial holographic laser scanners, and increased sales and
marketing efforts. The increase in sales volume in 1998 was offset by lower
average unit selling prices on its POS products, compared to the corresponding
period in 1997, and reflected unfavorable foreign exchange fluctuations. The
reduction in the value of the German mark against the U.S. dollar negatively
affected the recorded U.S. dollar value of the Company's German subsidiary's
sales by approximately 8.6% or $647 in the three months ended March 31, 1998
compared to the corresponding period in 1997.
International sales accounted for $9,151 (60.1% of total sales) in the
three months ended March 31, 1998 and $8,228 (64.5% of total sales) in the
three months ended March 31, 1997. One customer accounted for 5.9% of the
Company's revenues in the three months ended March 31, 1998. No customer
accounted for 5% or more of the Company's revenues in the three months ended
March 31, 1997.
Cost of sales increased 17.6% to $9,367 in the three months ended
March 31, 1998 from $7,967 in the three months ended March 31, 1997, and cost
of sales as a percentage of sales decreased to 61.5% from 62.4%. The decrease
in cost of sales as a percentage of sales was due primarily to increased sales
of the Company's industrial laser scanners which traditionally yield higher
gross profit margins than the Company's POS products, reduced product costs
resulting from engineering enhancements to certain POS products, and
manufacturing efficiencies and operating leverage that result from greater unit
volumes, partially offset by lower average unit selling prices on certain of
the Company's products as noted above. If sales are adjusted to negate the
effect of unfavorable foreign currency fluctuations as compared to the
corresponding period in 1997, cost of sales as a percentage of sales would have
been 59.0% for the three months ended March 31, 1998 compared with 62.4% for
the three months ended March 31, 1997.
<PAGE>
Selling, general and administrative ("SG&A") expenses increased 14.2%
to $3,343 in the three months ended March 31, 1998 from $2,928 in the three
months ended March 31, 1997 and decreased as a percentage of sales to 22.0%
from 22.9%. The increase in SG&A expenses was primarily due to increased
salaries resulting from the hiring of additional sales and marketing personnel
throughout North America, Europe and the rest of the world and increased
marketing efforts. SG&A expenses in the three months ended March 31, 1998 were
positively affected by reductions in the value of the German mark against the
U.S. dollar as compared to the corresponding period in 1997. The positive
impact of the reduced value of the German mark on the Company's German
subsidiary's SG&A expenses was approximately 8.7% or $100 in the three months
ended March 31, 1998.
Research and development ("R&D") expenses increased 37.9% to $1,114 in
the three months ended March 31, 1998 from $808 in the three months ended March
31, 1997, and increased as a percentage of sales to 7.3% from 6.3%. The
increase in R&D expenses was due primarily to higher expenditures for the
development of new POS and industrial products, including development of the
Company's HoloTunnel(TM), a six-sided holographic scanner tunnel system.
Operating income increased 32.5% to $1,403 in the three months ended
March 31, 1998 from $1,059 in the three months ended March 31, 1997, and
operating income as a percentage of sales increased to 9.2% from 8.3%.
Other income/expenses reflect net other income of $167 in the three
months ended March 31, 1998 compared to net other expenses of $118 in the
corresponding period in 1997. Net other income for the three months ended March
31, 1998 reflects foreign currency transaction gains of $57, which resulted
primarily from the Company's German subsidiary's foreign currency gains as a
result of the reduced value of the German mark against other European
currencies, compared to foreign currency transaction losses of $165 in the
corresponding period in 1997.
Net income increased 74.7% to $1,020 in the three months ended March
31, 1998 from $584 in the three months ended March 31, 1997. Net income
reflects a 36% effective income tax rate for the three months ended March 31,
1998 compared to 38% for the corresponding period in 1997. The reduced
effective income tax rate resulted from the utilization of the Company's
foreign sales corporation which permits the Company to reduce its United States
federal income tax liability on profits from sales to foreign customers. Also,
the Company utilized net operating loss carryforwards on certain of its foreign
subsidiaries in the three months ended March 31, 1998. The reduction in the
value of the German mark against the U.S. dollar as compared to the
corresponding period in 1997 negatively affected net income by approximately
$0.05 per share.
Inflation and Seasonality
Inflation and seasonality have not had a material impact on the
Company's results of operations. There can be no assurance, however, that the
Company's sales in future years will not be impacted by fluctuations in
seasonal demand from European customers in its third quarter or from reduced
production days in its fourth quarter.
Liquidity and Capital Resources (amounts in thousands)
The Company's working capital decreased approximately 1.9% to $18,246
as of March 31, 1998 from $18,599 as of December 31, 1997.
The Company's operating activities provided net cash of $686 compared
with net cash used of $812 for the three months ended March 31, 1998 and 1997,
respectively. Net cash provided from operating activities for the three months
ended March 31, 1998 resulted primarily from net income plus non-cash charges
and an increase in accounts payable and accrued expenses, offset by increases
in accounts receivable and inventory.
The Company's total deferred income tax asset (current and long-term)
of $2,207 and deferred tax liability of $662 are based upon cumulative
temporary differences as of March 31, 1998, which provide approximately $3,751
of future income tax deductions against future taxable income. The deferred tax
asset arises primarily from recording the December 1993 settlement of a patent
lawsuit as an expense for accounting purposes prior to receiving the related
tax benefit. The deferred tax liability arises primarily from recording the
advance license fee pursuant to the December 1996 licensing agreement with
Symbol Technologies, Inc. as an expense for tax purposes and an amortizable
asset for book purposes.
<PAGE>
The Company is a party to an Amended and Restated Loan and Security
Agreement, as amended, with its primary bank which provides for an unsecured
line of credit in the amount of $7,500. The line of credit requires the Company
to comply with certain financial covenants and other restrictions. As of March
31, 1998, the Company was in compliance with these financial covenants and no
amounts were outstanding under this line of credit. The Amended and Restated
Loan and Security Agreement expires on June 30, 1998. The Company expects to
execute another amendment which extends the term of this agreement through June
30, 1999.
The Company also has a 500 German mark unsecured revolving credit
facility with a German bank in the name of its German subsidiary, Metrologic
Instruments GmbH. As of March 31, 1998, no amounts were outstanding under this
revolving credit facility. In April 1998, the Company entered into a
convertible line of credit with its primary bank, denominated in German marks,
in an amount not to exceed $1,500, for the purchase of fixed assets.
The Company's current plans for capital expenditures for the next
twelve months potentially include the purchase of (i) the Company's office and
manufacturing facility currently being leased from the Company's principal
stockholder, Chairman, President, and CEO, and his spouse, the Company's Vice
President, Administration and Treasurer, or other additional manufacturing
facilities; (ii) manufacturing automation equipment; (iii) office equipment;
and (iv) a new integrated management information system. Potential capital
expenditures amount to approximately $6,700. The purchase of the Company's
office and manufacturing facility could potentially save the Company
approximately $200 annually of rent expenses, net of depreciation and interest
expenses. The Company expects to finance such potential expenditures with a
combination of term notes, operating and capital leases, and mortgages.
The Company's liquidity has been, and may continue to be, adversely
affected by changes in foreign currency exchange rates, particularly the value
of the German mark against the U.S. dollar. In an effort to mitigate the
financial implications of the volatility in the exchange rate between the
German mark and the U.S. dollar, the Company has selectively entered into
derivative financial instruments to offset its exposure to foreign currency
risks. Derivative financial instruments currently include (i) foreign currency
forward exchange contracts with its primary bank for periods not exceeding six
months, which partially hedge sales to the Company's German subsidiary and (ii)
German mark based loans, which act as a partial hedge against outstanding
intercompany receivables and the net assets of its German subsidiary, which are
denominated in German marks. Additionally, the German subsidiary invoices and
receives payment in certain other major European currencies, which result in an
additional mitigating measure that reduces the Company's exposure to the
fluctuation between the German mark and the U.S. dollar.
The Company believes that its current cash and cash equivalent
balances, along with cash generated from operations and availability under its
revolving credit facilities, will be adequate to fund the Company's operations
through at least the next twelve months.
The discussion in this Quarterly Report on Form 10-Q includes
forward-looking statements based on current management expectations. Factors
which would cause the results to differ from these expectations include the
following: general economic conditions; competitive factors and pricing
pressures; technological changes in the scanner industry; fluctuations in the
exchange rate between the German mark and the U.S. dollar; the Company's
ability to enter into and settle forward exchange contracts; availability of
patent protection for the Company's holographic scanners and other products;
and market acceptance of the Company's new products.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
10 Convertible Line of Credit Note between Metrologic
Instruments, Inc. and PNC Bank, National Association
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
METROLOGIC INSTRUMENTS, INC.
Date: May 15, 1998 By:/s/ C. Harry Knowles
------------ -----------------------
C. Harry Knowles
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1998 By:/s/Thomas E. Mills IV
------------ -------------------------
Thomas E. Mills IV
Executive Vice President,
Chief Operating Officer and Chief
Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No.
10 Convertible Line of Credit Note between Metrologic
Instruments, Inc. and PNC Bank, National Association
27 Financial Data Schedule
<PAGE>
CONVERTIBLE LINE OF CREDIT NOTE
2,685,000 DEM April 24, 1998
FOR VALUE RECEIVED, METROLOGIC INSTRUMENTS, INC. (the "Borrower"), with an
address at Coles Road at Route 42, Blackwood, New Jersey 08012, promises to pay
to the order of PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in immediately
available funds at its offices located at 1600 Market Street, Philadelphia,
Pennsylvania 19103, or at such other location as the Bank may designate from
time to time, the principal sum of Two Million Six Hundred Eighty Five Thousand
DEM (2,685,000 DEM) (the "Facility") or such lesser amount as may be advanced
to or for the benefit of the Borrower hereunder prior to the Final Conversion
Date (as hereinafter defined), together with interest accruing on the
outstanding principal balance from the date hereof, as provided below:
1. Advance Procedures; Use of Proceeds.
(a) During the period from the date of this Note to and including the
Final Conversion Date, the Borrower may borrow hereunder (but may not repay and
reborrow), subject to the terms and conditions of this Note and the Loan
Documents (as defined herein). In no event shall the aggregate unpaid principal
amount of advances under this Note exceed the lesser of the face amount of this
Note or the U.S. Dollar Commitment (as more fully set forth in Section 5(b)
hereof). On each of the First Conversion Date and the Final Conversion Date,
the then-outstanding principal amount of the loan hereunder which has not then
been previously converted shall convert to an amortizing term loan payable as
set forth below. The "First Conversion Date" shall mean December 31, 1998 and
the "Final Conversion Date" shall mean December 31, 1999, provided that, in
either such case, if earlier to occur, each of the First Conversion Date and
the Final Conversion Date shall mean (i) the date when the Bank has made
advances hereunder which, in the aggregate, equal the entire face amount of
this Note, or (ii) the date when the Bank receives written notice from the
Borrower (which notice shall be irrevocable) in which the Borrower shall state
that it does not intend to request further advances hereunder, and shall
acknowledge that the Bank shall have no obligation to make further advances
hereunder; or such later date as may be designated by the Bank by written
notice to the Borrower. A request for advance made by telephone must be
promptly confirmed in writing by such method as the Bank may require. The
Borrower authorizes the Bank to accept telephonic requests for advances, and
the Bank shall be entitled to rely upon the authority of any person providing
such instructions. The Borrower hereby indemnifies and holds the Bank harmless
from and against any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses) which may arise or be
created by the acceptance of such telephone requests or making such advances.
The Bank will enter on its books and records, which entry when made will be
presumed correct, the date and amount of each advance, as well as the date and
amount of each payment made by the Borrower.
(b) All loan advances hereunder shall: (i) be used by Borrower
exclusively for the purpose of purchasing equipment for use by Borrower in the
ordinary course of its business and (ii) be in an amount not to exceed 90% of
the cost to Borrower of the equipment for which the advance is made. If
requested by Bank, Borrower shall, as a condition to any advance, provide Bank
with a copy of the invoice for the equipment for which such advance is
requested.
(c) The Bank shall not be required to make any advance hereunder if an
Event of Default or an event which with the giving of any required notice
and/or the lapse of any grace period would become an Event of Default has
occurred and is continuing.
2. Rate of Interest. Principal outstanding under this Note (including after
conversion to a term loan) will bear interest at a rate per annum equal to the
sum of (A) the Euro-Rate plus (B) one hundred fifty (150) basis points per
annum, for the applicable Euro-Rate Interest Period in an amount equal to the
principal and having a comparable maturity as determined below.
<PAGE>
For the purpose hereof, the following terms shall have the following meanings:
"Business Day" shall mean (i) any day other than a Saturday or Sunday
or a legal holiday on which commercial banks are authorized or
required to be closed for business in Philadelphia, Pennsylvania and
(ii) with respect to matters relating to the Contractual Currency (as
defined below), (a) a day on which banks are open for dealings in
deposits in the Contractual Currency in the applicable interbank
market and (b) a day on which commercial banks are open for business
in the principal financial center of the country in which such
advances or payments are to be made or received.
.
"Euro-Rate" shall mean, with respect to any principal to which the
Euro-Rate based rate applies for the applicable Euro-Rate Interest
Period, the interest rate per annum determined by the Bank by dividing
(the resulting quotient rounded upwards, if necessary, to the nearest
1/100th of 1% per annum) (i) the rate of interest determined by the
Bank in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the deutsche mark
eurodollar rate two (2) Business Days prior to the first day of such
Euro-Rate Interest Period for an amount comparable to such principal
and having a borrowing date and a maturity comparable to such
Euro-Rate Interest Period by (ii) a number equal to 1.00 minus the
Euro-Rate Reserve Percentage.
"Euro-Rate Interest Period" shall mean the period of one (1), two (2)
or three (3) months selected by the Borrower commencing on the date of
disbursement of an advance and each successive period selected by the
Borrower thereafter; provided, that if a Euro-Rate Interest Period
would end on a day which is not a Business Day, it shall end on the
next succeeding Business Day, unless such day falls in the succeeding
calendar month in which case the Euro-Rate Interest Period shall end
on the next preceding Business Day. In no event shall any Euro-Rate
Interest Period end on a day after the Maturity Date (as defined
below).
"Euro-Rate Reserve Percentage" shall mean the maximum effective
percentage in effect on such day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including, without limitation,
supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as
"Eurocurrency liabilities").
The Euro-Rate shall be adjusted with respect to any principal to which the
Euro-Rate based rate applies on the effective date of any change in the
Euro-Rate Reserve Percentage as of such effective date. The Bank shall give
prompt notice to the Borrower of the Euro-Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.
If the Bank determines (which determination shall be final and conclusive)
that, by reason of circumstances affecting the eurodollar market generally,
deposits in deutsche marks (in the applicable amounts) are not being offered to
banks in the eurodollar market for the selected term, or adequate means do not
exist for ascertaining the Euro-Rate, then the Bank shall give notice thereof
to the Borrower. Thereafter, until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, (a) the
availability of the Euro-Rate based rate shall be suspended, and (b) the
interest rate for all principal then bearing interest based on the Euro-Rate
shall be converted at the expiration of the then current Euro-Rate Interest
Period(s) to a per annum rate equal to one (1) percentage point below the
Bank's Prime Rate (meaning the rate in effect from time to time at Bank as its
"Prime Rate"), as such rate may vary from time to time (herein, the "Base
Rate").
In addition, if, after the date of this Note, the Bank shall determine (which
determination shall be final and conclusive) that any enactment, promulgation
or adoption of or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by a governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request
or directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for the
Bank to make or maintain or fund loans at the Euro-Rate based rate, the Bank
shall notify the Borrower. Upon receipt of such notice, until the Bank notifies
the Borrower that the circumstances giving rise to such determination no longer
apply, (a) the availability of the Euro-Rate based rate shall be suspended, and
(b) the interest rate on all advances then bearing interest at the Euro-Rate
based rate shall earn interest at the Base Rate either (i) on the last day of
the then current Euro-Rate Interest Period(s) if the Bank may lawfully continue
to maintain principal at the Euro-Rate based rate to such day, or (ii)
immediately if the Bank may not lawfully continue to maintain principal at the
Euro-Rate based rate.
<PAGE>
The foregoing notwithstanding, it is understood
that the Borrower may select no more than five (5) different Euro-Rate Interest
Periods to apply simultaneously. Interest will be calculated on the basis of a
year of 360 days for the actual number of days in each interest period. In no
event will the rate of interest hereunder exceed the maximum rate allowed by
law.
3. Payment Terms. Prior to each Conversion Date, interest only shall be due and
payable commencing on May 1,1998, and continuing on the first day of each month
thereafter until the applicable Conversion Date, when all accrued interest on
the principal being converted shall be due and payable. From and after each
Conversion Date, the principal amount converted on such Conversion Date shall
be due and payable in 54 equal consecutive monthly installments, each of which
shall be in an amount determined by dividing the outstanding principal amount
hereunder on the applicable Conversion Date by 54, commencing on the first day
of the month following the month in which the Conversion Date occurs, and
continuing on the first day of each of the next 52 months thereafter, with a
final installment equal to the remaining outstanding principal balance thereof
due on the first day of the fifty-fourth (54th) month next following the month
in which the applicable Conversion Date occurred. Interest shall be payable at
the same times as the principal payments.
If any payment under this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State where the Bank's office indicated above is
located, such payment shall be made on the next succeeding business day and
such extension of time shall be included in computing interest in connection
with such payment. The Borrower hereby authorizes the Bank to charge the
Borrower's deposit account at the Bank for any payment when due hereunder.
Payments received will be applied to charges, fees and expenses (including
attorneys' fees), accrued interest and principal in any order the Bank may
choose, in its sole discretion.
All payments made hereunder, whether principal, interest or other amounts due,
shall be due and payable in deutsche marks, except as may be otherwise
expressly set forth herein to the contrary.
4. Late Payments; Default Rate. If the Borrower fails to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within ten (10) calendar days of the date due and payable, the
Borrower also shall pay to the Bank a late charge equal to five percent (5%) of
the amount of such payment. Such ten (10) day period shall not be construed in
any way to extend the due date of any such payment. The late charge is imposed
for the purpose of defraying the Bank's expenses incident to the handling of
delinquent payments and is in addition to, and not in lieu of, the exercise by
the Bank of any rights and remedies hereunder, under the other Loan Documents
or under applicable laws, and any fees and expenses of any agents or attorneys
which the Bank may employ. Upon maturity, whether by acceleration, demand or
otherwise, and at the option of the Bank upon the occurrence of any Event of
Default (as hereinafter defined) and during the continuance thereof, this Note
shall bear interest at a rate per annum (based on a year of 360 days and actual
days elapsed) which shall be two (2) percentage points in excess of the
interest rate per annum at which one (1) day deposits (or if such amount
remains unpaid for more than three (3) business days, then for such other
period of time as the Bank may elect) in deutsche marks in the amount of such
overdue payment are offered by major banks in the appropriate market. If at any
time such deposits are not offered then the Borrower shall pay interest on such
amount at a rate per annum equal to one (1) percentage point above the Prime
Rate (the "Default Rate"). The Default Rate shall continue to apply whether or
not judgment shall be entered on this Note, and any judgment entered hereon
shall earn interest at the Default Rate.
<PAGE>
5. Prepayment.
(a) Euro-Rate Loans. If the Borrower elects or is required pursuant to
the terms hereof to prepay all or any part of the principal hereof which bears
interest at the Euro-Rate based rate on other than the last day of the
applicable interest period, the Borrower shall also pay to the Bank, on demand
therefor, the Cost of Prepayment. "Cost of Prepayment" means an amount equal to
the present value, if positive, of the product of (a) the difference between
(i) the yield, on the beginning date of the applicable interest period, of a
U.S. Treasury obligation with a maturity similar to the applicable interest
period minus (ii) the yield on the prepayment date, of a U.S. Treasury
obligation with a maturity similar to the remaining maturity of the applicable
interest period, and (b) the principal amount to be prepaid, and (c) the number
of years, including fractional years, from the prepayment date to the end of
the applicable interest period. The yield on any U.S. Treasury obligation shall
be determined by reference to Federal Reserve Statistical Release H.15(519)
"Selected Interest Rates". For purposes of making present value calculations,
the yield to maturity of a similar maturity U.S. Treasury obligation on the
prepayment date shall be deemed the discount rate. The Cost of Prepayment shall
also apply to any payments made after acceleration of the maturity of this
Note.
(b) Mandatory Prepayment. On (i) each date on which a loan advance is
to be made hereunder and prior to making the same and (ii) each date on which
an Euro-Rate Interest Period is to commence pursuant hereto and prior to giving
effect thereto, the Bank will determine, using any customary and reasonable
means, the U.S. dollar equivalent on such date of the principal outstanding
hereunder prior to making such advance or effecting such Euro-Rate. If the U.S.
dollar equivalent of the principal hereof is, or would be upon the making of
the requested loan advance or effecting such Euro-Rate based rate, in excess of
the U.S. Dollar Commitment, the Bank may, by notice to the Borrower, require
Borrower to immediately prepay the principal hereof to the extent of such
excess. As used herein, "U.S. Dollar Commitment" means $1,500,000.
(c) Indemnification. In addition, the Borrower hereby agrees to
indemnify the Bank, upon demand therefor, against any liabilities, losses or
expenses which the Bank sustains or incurs as a consequence of the Borrower's
prepayment of the principal hereof on a day other than the due date therefor
including but not limited to any liabilities, losses or expenses sustained or
incurred in (i) liquidating or re-deploying any funds denominated in a currency
other than U.S. Dollars acquired from third parties to effect, fund or maintain
the loan evidenced hereby in German deutsche marks or any part thereof or (ii)
assigning, liquidating, terminating, amending or otherwise modifying any
currency hedge, swap, forward contract or similar agreement entered into by the
Bank in connection with effecting, funding or maintaining the loan evidenced
hereby in German deutsche marks, in each case including any loss of margin.
(d) Application. All prepayments of principal hereof after conversion
of such principal to a term loan pursuant hereto shall be applied in the
inverse order of maturity.
6. Other Loan Documents. This Note is issued in connection with a certain
Amended and Restated Loan Agreement dated November 10, 1995, as amended to
date, the terms of which are incorporated herein by reference (the "Loan
Documents"), and is secured by the property described in the Loan Documents (if
any) and by such other collateral as previously may have been or may in the
future be granted to the Bank to secure this Note. Notwithstanding anything to
the contrary set forth in said Loan Documents, Borrower shall comply with all
of the covenants which by the terms thereof are to be complied with by the
Borrower so long as any amounts, whether principal, interest, costs or
otherwise, are owing by the Borrower to the Bank under the Loan Documents or
hereunder. All of Borrower's obligations and liabilities hereunder shall
constitute "Obligations" for all purposes of the Loan Documents.
7. Events of Default. The occurrence of any of the following events will be
deemed to be an "Event of Default" under this Note: (i) the nonpayment of any
principal, interest or other indebtedness under this Note within ten (10) days
when due; or (ii) the occurrence of any Event of Default under and as defined
in the Loan Documents.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; and (b) the Bank may exercise
from time to time any of the rights and remedies available to the Bank under
the Loan Documents or under applicable law.
<PAGE>
8. Right of Setoff.
In addition to all liens upon and rights of setoff against the money, securities
or other property of the Borrower given to the Bank by law, upon the occurrence
and during the continuance of an Event of Default, the Bank shall have, with
respect to the Borrower's obligations to the Bank under this Note and to the
extent permitted by law, a contractual possessory security interest in and a
contractual right of setoff against, and the Borrower hereby assigns, conveys,
delivers, pledges and transfers to the Bank all of the Borrower's right, title
and interest in and to, all deposits, moneys, securities and other property of
the Borrower now or hereafter in the possession of or on deposit with, or in
transit to, the Bank whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such
security interest and right of setoff may be exercised without demand upon or
notice to the Borrower. Every such right of setoff shall be deemed to have been
exercised immediately upon the occurrence of an Event of Default hereunder
without any action of the Bank, although the Bank may enter such setoff on its
books and records at a later time.
9. Taxes and Withholding. Any and all payments due hereunder shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imports, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding (i) taxes imposed on the Bank's net income, (ii)
franchise taxes imposed on the Bank by the jurisdiction under the laws of which
the Bank is organized or any political subdivision thereof, and (iii) if
applicable, taxes imposed on the Bank's net income, and franchise taxes imposed
on the Bank, by the jurisdiction of the Bank's lending office or any political
subdivision thereof (all such non-excluded taxes, levies, imports, deductions,
charges withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be require by law to deduct any Taxes from or in respect
of any sum payable hereunder (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this paragraph) the Bank will
receive an amount equal to the sum the Bank would have received had no such
deductions been made, (ii) the Borrower agrees to make such deductions and
(iii) the Borrower agrees to pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law. In
addition, Borrower agrees to pay any present or future stamp or document taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Note (hereinafter referred to as "Other
Taxes"). Within thirty (30) days of any payment of Taxes, the Borrower hereby
agrees to furnish to the Bank the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this paragraph) paid by the Bank or any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted, within thirty (30) days of the Bank's request therefor.
Without prejudice to the survival of any other agreement contained herein, the
agreements and obligations contained in this paragraph shall survive the
payment in full of the amounts outstanding hereunder.
10. Special Provisions Regarding Exchange Rates.
(a) The specification herein that payment be made in deutsche marks at
the location or locations designated by the Bank from time to time, is of the
essence hereof. If payment is not made in deutsche marks (the "Contractual
Currency") or if any court or tribunal shall render a judgment or order for the
payment of amounts due hereunder or under any other Loan Document (to the
extent applicable to the loan evidenced hereby) and such judgment is expressed
in a currency other than the Contractual Currency, the Borrower shall indemnify
and hold the Bank harmless against any deficiency in terms of the amount
received by the Bank arising or resulting from any variation as between (i) the
rate of exchange at which the Contractual Currency is converted into the
currency actually received or the currency in which the judgment is expressed
(the "Received Currency") and (ii) the rate of exchange at which the Bank
would, in accordance with normal banking procedures, be able to purchase the
Contractual Currency with the Received Currency by the Bank on the Business Day
following receipt of the Received Currency. If the court or tribunal has fixed
the date on which the rate of exchange is determined for the conversion of the
judgment currency into the Contractual Currency (the "Currency Conversion
Date") and if there is a change in the rate of exchange prevailing between the
Currency Conversion Date and the date of receipt by the Bank, then the Borrower
will, notwithstanding such judgment or order, pay such additional amount as may
be necessary to ensure that the amount paid in the Received Currency when
converted at the rate of exchange prevailing on the date of receipt will
produce the amount then due to the Bank from the Borrower hereunder in the
Contractual Currency.
<PAGE>
(b) If the Borrower shall wind up, liquidate, dissolve or become
bankrupt while there remains outstanding (i) any amounts owing to the Bank
hereunder or under any other Loan Document (to the extent applicable to the
loan evidenced hereby) , (ii) any damages owing to the Bank in respect of a
breach of any of the terms hereof or (iii) any judgment or order rendered in
respect of such amounts or damages, the Borrower shall indemnify and hold the
Bank harmless against any deficiency in terms of the Contractual Currency in
the amounts received by the Bank arising or resulting from any variation as
between (i) the rate of exchange at which the Contractual Currency is converted
into another currency (the "Liquidation Currency") for purposes of such
winding-up, liquidation, dissolution or bankruptcy with regard to the amount in
the Contractual Currency due or contingently due hereunder or under any other
Loan Document (to the extent applicable to the loan evidence hereby) or under
any judgment or order into which the relevant obligations hereunder or under
any other Loan Document (to the extent applicable to the loan evidence hereby)
shall have been merged and (ii) the rate of exchange at which the Bank could,
in accordance with normal banking procedures, be able to purchase the
Contractual Currency with the Liquidation Currency at the earlier of (A) the
date of payment of such amounts or damages and (B) the final date or dates for
the filing of proofs of a claim in a winding-up, liquidation, dissolution or
bankruptcy. As used in the preceding sentence, the "final date" or dates for
the filing of proofs of a claim in a winding-up, liquidation, dissolution or
bankruptcy shall be the date fixed by the liquidator or other appropriate
person or otherwise applicable under the applicable law as being the last
practicable date as of which the liabilities of the Borrower may be ascertained
for such winding-up, liquidation, dissolution or bankruptcy before payment by
the liquidator or other appropriate person in respect thereof.
(c) The Borrower agrees to indemnify the Bank against any loss or
expense which the Bank may sustain or incur in liquidating or employing
deposits acquired to effect, fund or maintain the Contractual Currency
(including any swap or hedging arrangements or similar instruments) as a
consequence of (i) the Borrower's failure to make a payment on the due date
thereof, or (ii) the Borrower's failure to borrow under, convert to or renew an
advance in the Contractual Currency on the proposed effective date of such
borrowing, conversion or renewal. The Bank's determination of an amount payable
under this paragraph (c) shall, in the absence of manifest error, be conclusive
and shall be payable on demand.
(d) If any withholding or other tax required to be paid by the
Borrower hereunder is not paid and is imposed on and paid by the Bank, the
Borrower shall indemnify the Bank and reimburse the Bank for the amount of such
payment, together with any interest, penalties and expenses in connection
therewith, whether or not such tax shall have been correctly or legally
imposed.
(e) The indemnities provided by this Section 10 shall constitute
obligations of the Borrower separate and independent from its other obligations
hereunder and under the other Loan Documents, shall give rise to separate and
independent causes of action against the Borrower, shall apply irrespective of
any indulgence granted by the Bank from time to time and shall continue in full
force and effect notwithstanding any judgment or order or the filing of any
proofs of claim in the winding-up, liquidation, dissolution or bankruptcy of
the Borrower for a liquidated sum in respect of other amounts due hereunder or
under any other Loan Document or any damages owing to the Bank in respect of
any breach of the terms hereof or of any other Loan Document or any judgment
rendered in respect of such amounts or damages.
<PAGE>
11. Special Provisions
Regarding Alternate Currencies. If the Bank determines that (a) by reason of
circumstances affecting the market generally, adequate means do not exist for
ascertaining an applicable currency rate in the Contractual Currency or (b) the
Bank shall determine, in good faith (which determination shall be final and
conclusive) that compliance by the Bank with any applicable law, treaty, order
or regulation or the interpretation or application thereof by any governmental
authority, has made it unlawful or it has otherwise become commercially
unreasonable for the Bank to make or maintain an advance in the Contractual
Currency, then Bank shall give notice thereof to the Borrower. Thereafter, (x)
the Borrower shall, at its option, repay the amount of such advance at the
expiration of the then current interest period or convert such advance to U.S.
Dollars on such expiration date (or immediately if the Bank may not lawfully
continue to so maintain such loans) and (y) the right of the Borrower to have
amounts outstanding hereunder denominated in the Contractual Currency shall be
suspended.
12. European Monetary Union.
(a) If, as a result of the implementation of European monetary union,
(i) deutsche marks ceases to be lawful currency of the Republic of Germany and
is replaced by a European common currency (the "Euro") or (ii) deutsche marks
and the Euro are at the same time recognized by the central bank of the
Republic of Germany as lawful currency of such nation and the Bank shall so
request in a notice delivered to the Borrower, then any amount payable
hereunder by any party hereto shall instead be payable in the Euro and the
amount so payable shall be determined by translating the amount payable in
deutsche marks to the Euro at the exchange rate recognized by the European
Central Bank for the purpose of implementing European monetary union. Prior to
the occurrence of the event or events described in clause (i) or (ii) of the
preceding sentence, each amount payable hereunder in deutsche marks, except as
otherwise provided herein, shall continue to be payable only in deutsche marks.
(b) The Borrower agrees, at the request of the Bank, to compensate the
Bank for any loss, cost, expense or reduction in return that the Bank shall
reasonably determine shall be incurred or sustained by Bank as a result of the
implementation of European monetary union and that would not have been incurred
or sustained but for the transactions provided for herein. A certificate of the
Bank setting forth the Bank's determination of the amount or amounts necessary
to compensate the Bank shall be delivered to the Borrower and shall be
conclusive absent manifest error so long as such determination is made on a
reasonable basis. The Borrower shall pay the Bank the amount shown as due on
any such certificate within 10 days after receipt thereof.
(c) The parties hereto agree, at the time of or at any time following
the implementation of European monetary union, to use reasonable efforts to
enter into an agreement amending this Note in order to reflect the
implementation of such monetary union, to place the parties hereto in the
position with respect to the settlement of payments of the Euro as they would
have been with respect to the settlement of the currency it replaced.
<PAGE>
13. Miscellaneous. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered
to be a waiver of any such right or power, nor shall the Bank's action or
inaction impair any such right or power. The Borrower agrees to pay on demand,
to the extent permitted by law, all costs and expenses incurred by the Bank in
the enforcement of its rights in this Note and in any security therefor,
including without limitation reasonable fees and expenses of the Bank's
counsel. If any provision of this Note is found to be invalid by a court, all
the other provisions of this Note will remain in full force and effect. The
Borrower and all other makers and indorsers of this Note hereby forever waive
presentment, protest, notice of dishonor and notice of non-payment. The
Borrower also waives all defenses based on suretyship or impairment of
collateral. If this Note is executed by more than one Borrower, the obligations
of such persons or entities hereunder will be joint and several. This Note
shall bind the Borrower and its heirs, executors, administrators, successors
and assigns, and the benefits hereof shall inure to the benefit of the Bank and
its successors and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court for the county or judicial district where the Bank's office
indicated above is located, and consents that all service of process be sent by
nationally recognized overnight courier service directed to the Borrower at the
Borrower's address set forth herein and service so made will be deemed to be
completed on the business day after deposit with such courier; provided that
nothing contained in this Note will prevent the Bank from bringing any action,
enforcing any award or judgment or exercising any rights against the Borrower
individually, against any security or against any property of the Borrower
within any other county, state or other foreign or domestic jurisdiction. The
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and the Borrower. The Borrower waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Note.
14. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY ALL RIGHTS THE
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrower acknowledges that it has read and understood all the provisions of
this Note, including the confession of judgment and waiver of jury trial, and
has been advised by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
METROLOGIC INSTRUMENTS, INC.
Attest: /s/ George Daulerio Jr. By: /s/ C. H. Knowles
Print Name: George J. Daulerio Jr. Print Name: C.H.Knowles
Title: Financial Controller Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM UNAUDITED FINANCIAL STATEMENTS FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<PERIOD-START> JAN-01-1998 JAN-01-1997
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 12,207,000 9,489,000
<SECURITIES> 0 0
<RECEIVABLES> 11,113,000 9,475,000
<ALLOWANCES> 409,000 470,000
<INVENTORY> 6,444,000 6,114,000
<CURRENT-ASSETS> 31,915,000 26,781,000
<PP&E> 5,330,000 4,599,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 42,207,000 36,374,000
<CURRENT-LIABILITIES> 13,669,000 11,233,000
<BONDS> 0 0
0 0
0 0
<COMMON> 54,000 53,000
<OTHER-SE> 25,885,000 21,717,000
<TOTAL-LIABILITY-AND-EQUITY> 42,207,000 36,374,000
<SALES> 15,227,000 12,762,000
<TOTAL-REVENUES> 15,227,000 12,762,000
<CGS> 9,367,000 7,967,000
<TOTAL-COSTS> 13,824,000 11,703,000
<OTHER-EXPENSES> (190,000) 118,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 38,000 42,000
<INCOME-PRETAX> 1,593,000 941,000
<INCOME-TAX> 573,000 357,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,020,000 584,000
<EPS-PRIMARY> .19 .11
<EPS-DILUTED> .18 .11
</TABLE>
