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 September 30, 1999
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
of incorporation or organization) Identification No.)
90 Coles Road , Blackwood, New Jersey 08012
(Address of principal executive offices) (Zip Code)
(856) 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 November 11, 1999 there were 5,415,992 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 -
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1999 and
September 30, 1998 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and
September 30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Part II - Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
10 Convertible Line of Credit Note dated August 26, 1999 between
Metrologic Instruments, Inc. and PNC Bank, National Association
10.1 Amendment To Loan and Security Agreement dated August 26, 1999
between Metrologic Instruments, Inc. and PNC Bank, National
Association
10.2 Security Agreement dated August 26, 1999 between Metrologic
Instruments, Inc. and PNC Bank, National Association
27 Financial Data Schedule.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Metrologic Instruments, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands except share data)
September 30, December 31,
1999 1998
-------- --------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 6,529 $ 10,684
Accounts receivable, net of allowance 19,892 14,542
Inventory 9,832 6,900
Deferred income taxes 1,526 1,308
Other current assets 1,183 1,073
-------- --------
Total current assets 38,962 34,507
Property, plant and equipment, net 8,716 6,382
Patents and trademarks, net of amortization 2,252 1,745
Holographic technology, net of amortization 745 832
Advance license fee, net of amortization 1,676 1,765
Security deposits and other assets 1,118 1,065
-------- --------
Total assets $ 53,469 $ 46,296
======== ========
Liabilities and shareholders' equity
Current liabilities:
Current portion of notes payable $ 3,812 $ 908
Accounts payable 3,137 4,155
Accrued expenses 9,227 7,260
Accrued legal settlement - 688
-------- --------
Total current liabilities 16,176 13,011
Notes payable, net of current portion 3,555 2,608
Deferred income taxes 611 676
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; 5,414,030 and 5,404,512 shares
issued and outstanding in 1999 and 1998,
respectively 54 54
Additional paid-in capital 17,021 16,933
Retained earnings 16,492 13,069
Accumulated other comprehensive income (440) (55)
-------- --------
Total shareholders' equity 33,127 30,001
-------- --------
Total liabilities and shareholders' equity $ 53,469 $ 46,296
======== ========
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Sales $20,153 $17,001 $57,872 $48,297
Cost of sales 11,538 10,180 34,139 29,166
Gross profit 8,615 6,821 23,733 19,131
Selling, general and
administrative expenses 5,407 4,143 14,927 11,320
Research and development
expenses 1,066 956 3,049 3,115
Operating income 2,142 1,722 5,757 4,696
Other (expenses) income
Interest income 99 126 313 386
Interest expense (64) (45) (170) (123)
Foreign currency transaction
(loss) gain (280) 63 (622) 83
Other, net - (1) - 57
Total other (expenses) income (245) 143 (479) 403
Income before provision for
income taxes 1,897 1,865 5,278 5,099
Provision for income taxes 664 671 1,855 1,835
Net income $ 1,233 $1,194 $ 3,423 $ 3,264
Basic earnings per share
Weighted average shares
outstanding 5,413,894 5,399,642 5,411,417 5,387,559
Basic earnings per share $ 0.23 $0.22 $ 0.63 $ 0.61
Diluted earnings per share
Weighted average shares
outstanding 5,413,894 5,399,642 5,411,417 5,387,599
Net effect of dilutive
securities 710 99,732 32,095 151,457
Total shares outstanding
used in computing diluted
earnings per share 5,414,604 5,499,374 5,443,512 5,539,016
Diluted earnings per share $ 0.23 $0.22 $ 0.63 $ 0.59
See accompanying notes.
<PAGE>
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Nine Months Ended
September 30,
1999 1998
(Unaudited)
Operating activities
Net cash used in operating
activities $ (4,620) $(1,072)
Investing activities
Purchase of property, plant and equipment (3,250) (2,184)
Proceeds from sale of property - 65
Patents and trademarks (620) (359)
Other intangibles - (559)
Purchase of holographic technology - (45)
------- -------
Net cash used in investing activities (3,870) (3,082)
Financing activities
Proceeds from exercise of stock options and
employee stock purchase plan $ 88 $ 353
Net proceeds from line of credit 2,525 -
Proceeds from issuance of notes payable 2,162 1,371
Principal payments on notes payable (520) (375)
Capital lease payments (94) (123)
------- -------
Net cash provided by financing activities 4,161 1,226
Effect of exchange rates on cash 159 (476)
------- -------
Net decrease in cash and cash equivalents (4,170) (3,404)
Cash and cash equivalents at beginning of period 10,684 13,096
------- -------
Cash and cash equivalents at end of period $ 6,514 $ 9,692
======== =======
Supplemental Disclosure
Cash paid for interest $ 186 $ 139
Cash paid for income taxes $ 900 $ 607
Tax benefit from stock options $ - $ 130
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, 1998, including the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements for the
year ended December 31, 1998 contained therein.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
3. Inventory
Inventory consists of the following:
September 30, December 31,
1999 1998
Raw materials $ 4,019 $ 3,280
Work-in-process 3,685 2,614
Finished goods 2,128 1,006
------- -------
$ 9,832 $ 6,900
4. Comprehensive Income
The Company's total comprehensive earnings were as follows:
Nine Months Ended
September 30,
(Unaudited)
1999 1998
Net earnings $ 3,423 $ 3,264
Other comprehensive losses:
Change in equity due to foreign
currency translation adjustments (385) (32)
------- -------
Comprehensive earnings $ 3,038 $ 3,232
<PAGE>
5. Geographical Information
The Company generates its revenue from the sale of laser bar code scanners
primarily to distributors, value-added resellers, original equipment
manufacturers and directly to end users, in locations throughout the world. No
individual customer accounted for 10% or more of revenues in 1999 or 1998.
The Company has operations in the United States and Germany. Sales were
attributed to geographic areas in the following table based on the location of
the Company's customers.
United States Operations German
North Other Operations Total
America Europe Export Total Europe Consolidated
Three months ended September 30, 1999:
Sales $ 8,745 $297 $ 3,769 $12,811 $ 7,342 $20,153
Income (loss)
before provision
for income taxes $ 2,334 $ (437) $ 1,897
Identifiable
assets $43,114 $10,355 $53,469
Three months ended September 30, 1998:
Sales $ 7,397 $ 317 $ 3,126 $10,840 $ 6,161 $17,001
Income (loss)
before provision
for income taxes $ 2,209 $ (344) $ 1,865
Identifiable
assets $38,534 $ 7,762 $46,296
Six months ended September 30, 1999:
Sales $23,944 $2,119 $ 9,502 $35,565 $22,307 $57,872
Income (loss)
before provision
for income taxes $ 6,343 $(1,065) $ 5,278
Six months ended September 30, 1998:
Sales $19,576 $ 976 $ 7,789 $28,341 $19,956 $48,297
Income (loss)
before provision
for income taxes $ 5,071 $ 28 $ 5,099
<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, 1998 appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
Condensed Consolidated Financial Statements for the three and nine months ended
September 30, 1999 and September 30, 1998 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 90 foreign countries.
Most of the Company's product sales in Western Europe, Singapore and
Brazil are billed in foreign currencies and are subject to currency exchange
rate fluctuations. Substantially all of the Company's products are manufactured
in the Company's U.S. facility, and therefore, sales and results of operations
are affected by fluctuations in the value of the U.S. dollar relative to
foreign currencies. Accordingly, in the three and nine months ended September
30, 1999 and 1998, sales and gross profit were adversely affected by the
continuing rise in the value of the U.S. dollar in relation to foreign
currencies.
Three Months Ended September 30, 1999 Compared with Three Months Ended
September 30, 1998 (amounts in thousands except per share information)
Sales increased 18.5% to $20,153 in the three months ended September
30, 1999 from $17,001 in the three months ended September 30, 1998, 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
industrial laser scanners, and an increase in sales of the Company's
HoloTrak(R) industrial holographic laser scanners. The increase in sales volume
in the third quarter of 1999 was offset by lower average unit selling prices on
certain POS products compared to the corresponding period in 1998 and due to
unfavorable foreign exchange fluctuations. Average unit selling prices
reflected significant unfavorable foreign currency exchange rate fluctuations.
The reduction in the value of the German mark (Euro) against the U.S. dollar
since January 1999 negatively affected the recorded U.S. dollar value of
quarterly German operation sales by approximately 11.2% and quarterly
consolidated sales by approximately 4.1%.
International sales accounted for $11,408 (56.6% of total sales) in
the three months ended September 30, 1999 and $9,604 (56.5% of total sales) in
the three months ended September 30, 1998. Two customers accounted for 6.0% and
5.5%, respectively of total revenues in the three months ended September 30,
1999. Two customers accounted for 6.5% and 5.9%, respectively, of the Company's
total revenues in the three months ended September 30, 1998.
Cost of sales increased 13.3% to $11,538 in the three months ended
September 30, 1999 from $10,180 in the three months ended September 30, 1998,
while cost of sales as a percentage of sales decreased to 57.3% from 59.9%. 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 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, offset by lower average unit selling prices on certain of the
Company's POS products as noted above. If sales in the three months ended
September 30, 1999 are adjusted to negate the effect of the reduction in the
value of the Euro against the U.S. dollar since January 1999, cost of sales as
a percentage of sales would have been 55.0% in the three months ended September
30, 1999.
Selling, general and administrative ("SG&A") expenses increased 30.5%
to $5,407 in the three months ended September 30, 1999 from $4,143 in the three
months ended September 30, 1998 and increased as a percentage of sales to 26.8%
from 24.4%. The increase in SG&A expenses was due primarily to increased
marketing efforts, which include costs associated with the Company's
Concert(TM) program, a business partner program used to market and promote the
Company's products.
<PAGE>
Research and development ("R&D") expenses increased 11.5% to $1,066 in
the three months ended September 30, 1999 from $956 in the three months ended
September 30, 1998, and decreased as a percentage of sales to 5.3% from 5.6%.
The increase in absolute dollars is due to an increase in R&D personnel and
higher expenditures in the development of new POS products.
Operating income increased 24.4% to $2,142 in the three months ended
September 30, 1999 from $1,722 in the three months ended September 30, 1998,
and operating income as a percentage of sales increased to 10.6% from 10.1%.
Other income/expenses reflect net other expenses of $245 in the three
months ended September 30, 1999 compared to net other income of $143 in the
corresponding period in 1998. Net other expenses for the three months ended
September 30, 1999 reflect foreign currency transaction losses of $280, which
were primarily a result of the increased value of the U.S. dollar relative to
the Brazilian real, compared to foreign currency transaction gains of $63 in
the corresponding period in 1998.
Net income increased 3.3% to $1,233 in the three months ended
September 30, 1999 from $1,194 in the three months ended September 30, 1998.
Net income reflects a 35.0% effective income tax rate for the three months
ended September 30, 1999 compared to 36.0% for the corresponding period in
1998. 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. The increase in the value of the U.S. dollar relative to other
foreign currencies since January 1999 negatively affected diluted earnings per
share by approximately $0.12.
Nine Months Ended September 30, 1999 Compared with Nine Months Ended September
30, 1998 (amounts in thousands except per share information)
Sales increased 19.8% to $57,872 in the nine months ended September
30, 1999 from $48,297 in the nine months ended September 30, 1998, principally
as a result of an increase in sales of the Company's industrial laser scanners,
the continued increase in market acceptance of the Company's 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 1999 was offset by lower average unit selling prices on its POS
products, compared to the corresponding period in 1998, and reflected more
unfavorable foreign exchange fluctuations. Average unit selling prices
reflected significant unfavorable foreign rate fluctuations. The reduction in
the value of the Euro against the U.S. dollar since January 1999 negatively
affected the recorded U.S. dollar value of the year-to-date German operation
sales by approximately 11.2% and year-to-date consolidated sales by 4.2%.
International sales accounted for $33,928 (58.6% of total sales) in
the nine months ended September 30, 1999 and $28,721 (59.5% of total sales) in
the nine months ended September 30, 1998. One customer accounted for 5.3% of
the Company's total revenues in the nine months ended September 30, 1999. Two
customers accounted for 5.7% and 5.5%, respectively, of the Company's total
revenues in the nine months ended September 30, 1998.
Cost of sales increased 17.1% to $34,139 in the nine months ended
September 30, 1999 from $29,166 in the nine months ended September 30, 1998,
and cost of sales as a percentage of sales decreased to 59.0% from 60.4%. 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 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 POS products as noted above. If sales in the nine months ended
September 30, 1999 are adjusted to negate the effect of the reduction in the
value of the Euro against the U.S. dollar since January 1999, cost of sales as
a percentage of sales would have been 56.7% for the nine months ended September
30, 1999.
SG&A expenses increased 31.9% to $14,927 in the nine months ended
September 30, 1999 from $11,320 in the nine months ended September 30, 1998 and
increased as a percentage of sales to 25.8% from 23.4%. The increase in SG&A
expenses was due primarily to increased marketing efforts, which include costs
associated with the Company's Concert Program(TM).
R&D expenses decreased 2.1% to $3,049 in the nine months ended
September 30, 1999 from $3,115 in the nine months ended September 30, 1998, and
decreased as a percentage of sales to 5.3% from 6.4%. The decrease in absolute
dollars on a year-to-date basis results from higher expenditures overall in
1998 for the development of new industrial and POS products, including
development of the Company's HoloTunnel(TM), a six-sided holographic tunnel
system.
<PAGE>
Operating income increased 22.6% to $5,757 in the nine months ended
September 30, 1999 from $4,696 in the nine months ended September 30, 1998, and
operating income as a percentage of sales increased to 9.9% from 9.7%.
Other income/expenses reflect net other expenses of $479 in the nine
months ended September 30, 1999 compared to net other income of $403 in the
corresponding period in 1998. Net other expenses for the nine months ended
September 30, 1999 reflects higher interest expenses, net foreign currency
transaction losses of $622, and lower interest income and other miscellaneous
income compared to the corresponding period in 1998.
Net income increased 4.9% to $3,423 in the nine months ended September
30, 1999 from $3,264 in the nine months ended September 30, 1998. Net income
reflects a 35.0% effective income tax rate for the nine months ended September
30, 1999 compared to 36.0% for the corresponding period in 1998. 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. The
increase in the value of the U.S. dollar relative to other foreign currencies
since January 1999 negatively affected diluted earnings per share by
approximately $0.31 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 periods will not be impacted by fluctuations in
seasonal demand from European customers in its third quarter or from reduced
production days in the Company's fourth quarter.
Liquidity and Capital Resources (amounts in thousands)
The Company's working capital increased to $22,786 as of September 30,
1999 from $21,496 as of December 31, 1998.
The Company's operating activities used net cash of $4,620 compared
with net cash used of $1,072 for the nine months ended September 30, 1999 and
1998, respectively. Net cash used by operating activities for the nine months
ended September 30, 1999 resulted primarily from increases in accounts
receivable and inventory, offset by an increase in net income plus non-cash
charges and an increase in accrued expenses.
The Company's total deferred income tax asset of $1,526 and deferred
tax liability of $621 are based upon cumulative temporary differences as of
September 30, 1999, which provide approximately $2,334 of future net tax
deductions against future taxable income. The deferred tax asset arises
primarily from recording reserves on current assets as expenses for accounting
purposes prior to receiving the related tax benefits.
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
September 30, 1999, the Company was in compliance with these financial
covenants and $2,525 was outstanding under this line of credit.
The Amended and Restated Loan and Security Agreement expires on June 30, 2000.
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 September 30, 1999, no amounts were outstanding under
this revolving credit facility.
In December 1998, the Company entered into a line of credit with its
primary bank, in an amount not to exceed $1,500, for the purchase of fixed
assets. As of September 30, 1999, this line was fully utilized. The Company is
currently making interest-only payments until December 31, 1999, at which time
amounts outstanding will convert to a term note, payable over a 54-month
period.
In August 1999, the Company entered into an additional $2,400 line of
credit with its primary bank for the purchase of fixed assets. As of September
30, 1999, $993 was outstanding under this line. The Company is currently making
interest-only payments until December 31, 2000, at which time amounts
outstanding will convert to a term note, payable over a 60-month period.
<PAGE>
Property, plant and equipment expenditures were $3,250 and $2,184 for
the nine months ended September 30, 1999 and 1998, respectively. During the
second quarter of 1999, the Company substantially completed its IT system
implementation and continued expenditures related to manufacturing automation
and capacity expansion. The Company's current plan for future capital
expenditures include: (i) investment in the Company's Suzhou, China facility;
(ii) continued investment in manufacturing capacity expansion at the Blackwood,
NJ headquarters; and (iii) enhancements to existing information systems, and
additional information systems.
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 U.S. dollar relative to the German mark and the Brazilian real. 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 may 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, including the British pound, which result in an additional
mitigating measure that reduces the Company's exposure to the fluctuation
between the German mark (Euro) and the U.S. dollar although it does not offer
protection against fluctuations of that currency against 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
current revolving credit facilities, as well as planned expanded credit
facilities, will be adequate to fund the Company's operations through at least
the next twelve months.
Forward Looking Statements; Certain Cautionary Language
Statements provided by the Company in this report include forward looking
information, as that term is defined in the Private Securities Litigation
Reform Act of 1995 (the "Act") and in releases made by the Securities and
Exchange Commission ("SEC"). The cautionary statements which follow are being
made pursuant to the provisions of the Act and with the intention of obtaining
the benefits of the "safe harbor" provisions of the Act. While the Company
believes that the assumptions underlying such forward looking information are
reasonable based on present conditions, forward looking statements made by the
Company involve risks and uncertainties and are not guarantees of future
performance. Actual results may differ materially from those in the Company's
forward looking statements as a result of various factors, including but not
limited to, the following:
Reliance on third party resellers, distributors and OEMs which subjects the
Company to risks of business failure, credit and collections exposure, and
other business concentration risks; foreign currency exchange rate fluctuations
between the U.S. Dollar and other major currencies including, but not limited
to, the German Mark / Euro, Singapore Dollar, Brazilian Real, and British Pound
can significantly affect the Company's results of operations; continued or
increased competitive pressure which could result in reduced selling prices of
products, like the decrease in unit sale prices, or continued increases in
sales and marketing promotion costs; a prolonged disruption of scheduled
deliveries from suppliers when alternative sources of supply are not available
to satisfy the Company's requirements for raw material and components;
continued or prolonged capacity constraints that may hinder the Company's
ability to deliver ordered product to customers; the effects of and changes in
trade, monetary and fiscal policies, laws and regulations and other activities
of governments, agencies and similar organizations, including but not limited
to trade restrictions or prohibitions, inflation, monetary fluctuations, import
and other charges or taxes, nationalizations and unstable governments;
difficulties or delays in the development, production, testing and marketing of
products, including, but not limited to, a failure to ship new products when
<PAGE>
anticipated, failure of customers to accept these products when planned, any
defects in products or a failure of manufacturing efficiencies to develop as
planned; the costs of legal proceedings or assertions by or against the Company
relating to intellectual property rights and licenses, and adoption of new or
changes in accounting policies and practices; occurrences affecting the slope
or speed of decline of the life cycle of the Company's products, or affecting
the Company's ability to reduce product and other costs, and to increase
productivity; the impact of unusual items resulting from the Company's ongoing
evaluation of its business strategies, acquisitions, asset valuations and
organizational structures; the future health of the U.S. and international
economies and other economic factors that directly or indirectly affect the
demand for the Company's products; the economic slowdown of other foreign
nations may also adversely affect the Company's results of operations; issues
that have not been anticipated in the transition to the new European currency
that may cause prolonged disruption of the Company's business; the inability of
parties external to the Company to provide goods and services in a timely,
accurate manner as a result of Year 2000 processing problems; and increased
competition due to industry consolidation or new entrants into the Company's
existing markets.
All forward-looking statements included herein are based upon information
presently available, and the Company assumes no obligation to update any
forward-looking statements.
Impact of Year 2000
The Year 2000 issue is the result of computer programs using only the last two
digits to indicate the year. If uncorrected, these computer programs will be
unable to interpret dates beyond the year 1999, which could cause computer
system failure or other computer errors disrupting operations. The Company has
been evaluating its year 2000 readiness and taking corrective action where
necessary. The following discussion broadly addresses the Company's efforts to
identify and address the Company's and relevant third parties' Year 2000
problems. The scope of the Year 2000 readiness effort includes (i) information
technology ("IT") such as software and hardware; (ii) non-IT ("Non-IT") systems
or embedded technology such as micro-controllers contained in various
manufacturing and lab equipment, facilities and utilities, and the Company's
products with date-sensitivity; and (iii) readiness of key third parties,
including suppliers and customers.
It would be impractical for the Company to attempt to address all Year 2000
problems of third parties that have been or may in the future be identified.
Specifically, Year 2000 problems have been or may in the future be identified
with respect to the IT and Non-IT systems of third parties having widespread
national and international interactions with persons and entities generally
(for example, IT and Non-IT systems of governmental agencies, utilities and
telecommunications, information and financial networks) that, if uncorrected,
could have a material adverse impact on the Company's business, financial
condition or results of operations. Notwithstanding anything set forth below,
the Company is not in a position to address any of these Year 2000 problems. If
needed modifications and conversions are not made on a timely basis, the Year
2000 issue could have a material adverse effect on the Company's operations.
(i) IT. Substantially all of the Company's current IT systems are Year 2000
compliant. The Company has replaced substantially all of its IT systems with
new, Year 2000 compliant, IT systems for itself and its subsidiaries. Total
expenditures amounted to approximately $1,800, which includes external resource
costs, a substantial portion of which was capitalized.
(ii) Non-IT. The Company currently uses standard mass-market vendor supplied
software on its desktop systems and laptops. These standard software
applications limit the number of information technology vendors with which the
Company must work in order to ensure Year 2000 readiness. Many of these vendors
are still implementing their Year 2000 compliance programs. The Company's
hardware for workstations, servers, and network routers are Year 2000
compliant. As of September 30, 1999, substantially all of the Company's
hardware and software applications were Year 2000 compliant. However, no
assurance can be provided that all required replacement programs will be
implemented in a timely manner or that the failure to implement such programs
will not have a material adverse effect on the Company's business, results of
operations or financial condition. As of September 30, 1999, substantially all
of the Company's facilities and manufacturing systems were Year 2000 compliant.
(iii) Third Parties. The Company has been in contact with key suppliers in an
effort to assure no interruption in the relationship between the Company and
these important third parties resulting from the Year 2000 issue. If third
parties do not convert their systems in a timely manner and in a way that is
compatible with the Company's systems, the Year 2000 issue could have a
material adverse effect on the Company's operations. The Company believes that
its actions with respect to key suppliers and customers will minimize these
risks. As of September 30, 1999, substantially all of the Company's key
suppliers (constituting all significant vendors) had responded affirmatively
<PAGE>
regarding their respective Year 2000 readiness. The Company has not
independently verified these responses and these responses do not assure Year
2000 compliance of the IT and Non-IT systems used by these suppliers, but
instead provides only an indication of the status of their efforts.
The Company currently anticipates that any identified Year 2000 problem
affecting its own systems or that of its significant customers, suppliers,
creditors, financial organizations and utilities providers will be either
corrected by December 31, 1999 or will not have a material adverse affect on
the Company's business, financial condition or results of operations. Moreover,
the Company is working to minimize any disruption to the business of its
vendors and suppliers due to Year 2000 problems that may have a material
adverse affect on the Company's business, financial condition or results of its
operations. However, notwithstanding the Company's efforts to identify and
correct these Year 2000 problems, there can be no assurance that the Company
will be successful in addressing the Year 2000 problems as they pertain to its
products and its internal systems, or that the failure to do so would not have
a material adverse effect on the Company's business, financial condition or
results of operations. In addition, notwithstanding such efforts, there can be
no assurance that the systems of third parties with which the Company interacts
will not suffer from Year 2000 problems, or that these problems will not have a
material adverse effect on the Company's business, financial condition or
results of operations. In particular, Year 2000 problems that have been or may
in the future be identified with respect to the IT and Non-IT systems of third
parties having widespread national and international interactions with persons
and entities generally (for example, some IT and Non-IT Systems of governmental
agencies, utilities and information and financial networks) could have a
material adverse impact on the Company's business, financial condition or
results of operations.
Year 2000 contingency plans are being finalized. Plans currently include
alternative supply sources, among other things. The effectiveness of
contingency plans is uncertain until these plans are finalized. There can be no
assurance that these measures will prevent the occurrence of Year 2000
problems, which could have a material adverse effect upon the Company's
business, results of operations or financial condition.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information contained in Item 7A of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 is hereby incorporated herein by
reference.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently involved in matters of litigation arising
from the normal course of business including matters described below.
Management is of the opinion that such litigation will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
On July 21, 1999 the Company and six other leading members of the
Automatic Identification and Data Capture Industry jointly initiated a
litigation against the Lemelson Medical, Educational, & Research Foundation,
Limited Partnership (the "Lemelson Partnership"). The suit, which is entitled
Symbol Technologies, Inc. et. al. v. Lemelson Medical, Educational & Research
Foundation, Limited Partnerships, was commenced in the U.S. District Court,
District of Nevada in Reno, Nevada. In the litigation, the Auto ID companies
seek, among other remedies, a declaration that certain patents, which have been
asserted by the Lemelson Partnership against end users of bar code equipment,
are invalid, unenforceable and not infringed. The other six Auto ID companies
who are plaintiffs in the lawsuit are Accu-Sort Systems, Inc., Intermec
Technologies Corporation, wholly-owned subsidiary of UNOVA, Inc., PSC Inc.,
Symbol Technologies, Inc., Teklogix Corporation, a wholly-owned U.S. subsidiary
of Teklogix International, Inc., and Zebra Technologies Corporation. Symbol
Technologies, Inc. has agreed to bear approximately half of the legal and
related expenses associated with the litigation, with the remaining portion
being borne by the Company and the other Auto ID companies.
Although no claim is now or had ever been asserted by the Lemelson
Partnership directly against the Company or, to our knowledge any other Auto ID
company, the Lemelson Partnership has contacted many of the Auto ID companies'
customers demanding a one-time license fee for certain so-called "bar code"
patents transferred to the Lemelson Partnership by the late Jerome H. Lemelson.
The Company and the other Auto ID companies have received many requests from
their customers asking that they undertake the defense of these claims using
their knowledge of the technology at issue. Certain of these customers have
requested indemnification against the Lemelson Partnership's claims from the
Company and the other Auto ID companies, individually and/or collectively with
other equipment suppliers. The Company, and we understand, the other Auto ID
companies believe that generally they have no obligation to indemnify their
customers against these claims and that the patents being asserted by the
<PAGE>
Lemelson Partnership against their customers with respect to bar code equipment
are invalid, unenforceable and not infringed. However, the Company and the
other Auto ID companies believe that the Lemelson claims do concern the Auto ID
industry at large and that it is appropriate for them to act jointly to protect
their customers against what they believe to be baseless claims being asserted
by the Lemelson Partnership.
In response to the action commenced by the Company and the other
plaintiffs, the Lemelson Partnership filed a motion to dismiss the lawsuit, or
alternatively, to stay the proceedings pending the outcome of other litigation
or transfer the case in its entirety to the U.S. District Court for Arizona
where several infringement suits filed by the Lemelson Partnership are pending
against other companies. The Lemelson Partnership has primarily stated the
grounds for its motion to dismiss are the lack of a legally justifiable case or
controversy between the parties because (1) the method claims asserted by the
Lemelson Partnership apply only to the "use" of bar code equipment by the
end-users and not the bar code equipment itself; and (2) the Lemlson
Partnership has never asserted claims of infringement against the Auto ID
companies. Plaintiffs have filed papers arguing against the Lemelson
Partnerships' motion, and the motion is currently pending.
On October 13, 1999 the Company filed suit for patent infringement
against PSC Inc. (PSC) in United States District Court for the District of New
Jersey. The complaint asserts that at least seven of the Company's patents are
infringed by a variety of point-of-sale bar code scanner products manufactured
and sold by PSC. The patents cited in the complaint cover a broad range of bar
code scanning technologies important to scanning in a retail environment
including the configuration and structure of various optical components,
scanner functionalities and shared decoding architecture. The complaint seeks
monetary damages as well as a permanent injunction to prevent future sales of
the infringing products. The complaint was served to PSC on October 21, 1999,
and, to date, no answer has been filed.
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
On November 1, 1999, the Company and Symbol Technologies, Inc. signed
an amendment to their existing 1996 cross-license agreement. Under the terms of
the amended agreement, the Company obtained a royalty-bearing license for
certain of its new products under Symbol's laser scanning patents, and Symbol
obtained a royalty-bearing license for its products under certain of the
Company's patents. Under the terms of the amendment, both parties will make
recurring periodic royalty payments to each other, effective immediately.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
10 Convertible Line of Credit Note dated August 26,
1999 between Metrologic Instruments, Inc. and
PNC Bank, National Association
10.1 Amendment To Loan and Security Agreement dated
August 26, 1999 between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.2 Security Agreement dated August 26, 1999
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 September 30, 1999.
<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: November 15, 1999 By:/s/ C. Harry Knowles
---------------- -----------------------
C. Harry Knowles
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 15, 1999 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 dated August 26, 1999
between Metrologic Instruments, Inc. and PNC Bank,
National Association
10.1 Amendment To Loan and Security Agreement dated
August 26, 1999 between Metrologic Instruments, Inc.
and PNC Bank, National Association
10.2 Security Agreement dated August 26, 1999 between
Metrologic Instruments, Inc. and PNC Bank,
National Association
27 Financial Data Schedule
<PAGE>
EXHIBIT 10
Convertible Line of Credit Note [OBJECT OMITTED]
$2,400,000.00 August 26, 1999
FOR VALUE RECEIVED, METROLOGIC INSTRUMENTS, INC. (the "Borrower"), with an
address at Coles Road at Route 42, Blackwood, NJ, 08012, promises to pay to the
order of PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of the
United States of America in immediately available funds at its offices located
at 1950 East Route 70, 3rd Floor, Cherry Hill, NJ 08003 or at such other
location as the Bank may designate from time to time, the principal sum of TWO
MILLION FOUR HUNDRED THOUSAND DOLLARS ($2,400,000.00) or such lesser amount as
may be advanced to or for the benefit of the Borrower under the Convertible
Line of Credit established pursuant to the Amendment (as hereinafter defined),
together with interest accruing on the outstanding principal balance from the
date hereof, as provided below:
1. Rate of Interest. Amounts outstanding under this Note will bear interest at
a rate per annum as set forth in the Amendment (as hereinafter defined).
2. Payment Terms. Commencing February 1, 2001, principal shall be due and
payable in sixty (60) equal consecutive monthly installments, each of which
shall be in an amount determined by dividing the outstanding principal amount
hereunder on December 31, 2000 by sixty (60). A final installment shall be
payable on January 1, 2006, in an amount equal to the remaining outstanding
principal balance hereunder. Interest shall be payable monthly on the first day
of each month commencing October 1, 1999.
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.
3. Prepayment. If this Note bears interest at the Prime Based Rate (as defined
in the Amendment), the portion of principal bearing interest at the Prime Based
Rate may be prepaid in whole or part at any time without penalty. If this Note
bears interest at the Euro Rate Based Rate (as defined in the Amendment), the
Loan may be prepaid in whole or in part at any time without penalty, subject to
the indemnity provision contained in Section 3 of the Amendment. If Borrower
elects the As Offered Rate (as defined in the Amendment), notwithstanding
anything contained herein to the contrary, upon any prepayment by or on behalf
of the Borrower (whether voluntary, on default or otherwise), the Bank may
require, if it so elects, the Borrower to pay the Bank as compensation for the
cost of being prepared to advance fixed rate funds hereunder an amount equal to
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
while an As Offered Rate is in effect.
<PAGE>
4. Other Loan Documents. This Note is issued in connection with a certain
Amended and Restated Loan Agreement between Borrower and Bank dated November
10, 1995, as amended to date, including by Amendment (the "Amendment") dated
the date hereof (as amended, the "Loan Agreement"), the terms of which are
incorporated herein by reference (the Loan Agreement together with all related
documents, instruments and agreements shall be referred to collectively as the
"Loan Documents"), evidences the Convertible Line of Credit as defined in the
Amendment 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.
5. Events of Default. The occurrence of any Event of Default under the Loan
Agreement shall constitute an "Event of Default" under this Note.
6. [Intentionally Omitted].
7. 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, 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.
8. 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 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.
<PAGE>
9. WAIVER OF JURY TRIAL. EACH OF BORROWER AND BANK IRREVOCABLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF
ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENT EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER AND
BANK ACKNOWLEDGE 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 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.
By: C. H. Knowles
Name: C. H. Knowles
Title: President & CEO
<PAGE>
EXHIBIT 10.1
AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT (the "Amendment") made as of August 26, 1999
by and between METROLOGIC INSTRUMENTS, INC. ("Borrower") and PNC BANK, NATIONAL
ASSOCIATION, successor by merger to Midlantic Bank, N.A. ("Bank").
B A C K G R O U N D
Bank and Borrower are parties to that certain Amended and
Restated Loan Agreement dated as of November 10, 1995 (as amended to date, the
"Credit Agreement). Bank and Borrower desire to amend the Credit Agreement in
the manner hereinafter set forth. All capitalized terms used in this Amendment
but which are not defined herein shall have the respective meanings given
thereto in the Credit Agreement. Except to the extent otherwise set forth
herein to the contrary, all of the terms hereof are effective as of the date
hereof.
NOW, THEREFORE, the parties, INTENDING TO BE LEGALLY BOUND,
agree as follows:
1. Convertible Line of Credit. In addition to each other Loan established
by the Credit Agreement, Bank hereby establishes for Borrower a non-revolving
convertible line of credit (herein, the "Convertible Line") subject to the
following terms: From time to time through and including December 31, 2000,
upon Borrower's request and subject to the terms of the Credit Agreement, as
amended hereby, Bank will make advances to the Borrower, under the Convertible
Line, up to an aggregate amount of $2,400,000 for the purpose of financing
Eligible Capital Expenditures (as hereinafter defined). The Convertible Line is
a non-revolving facility and cannot be re-borrowed after repayment of any of
the principal thereof. Each advance will be in an amount not to exceed 90% of
the Eligible Capital Expenditure, and Borrower will, as a condition to each
advance, provide Bank with an invoice reflecting the amount of the Eligible
Capital Expenditure and that the same is due. On January 1, 2001 all advances
then outstanding will be converted to a term loan and shall be repaid in
accordance with the Convertible Line Note (as hereinafter defined).
a. As used herein, "Eligible Capital Expenditures" shall mean capital
expenditures made by Borrower during the period commencing on the date hereof
through December 31, 2000 for which no debt (other than the Convertible Line)
has been incurred and which are for the purchase of equipment, the majority of
which is for use in connection with its Chinese operations, including
associated "soft" costs such as installation charges, in the ordinary course of
Borrower's business.
b. The Convertible Line shall be deemed to be one of the "Loans" and
shall be part of the "Obligations" for all purposes of the Credit Agreement,
and the Convertible Line Note shall be deemed one of the "Notes" for all
purposes of the Credit Agreement.
c. Contemporaneously herewith, Borrower will execute and deliver to
Bank a promissory note (the "Convertible Line Note") to evidence Borrower's
obligation to repay to Bank, with interest, the principal amount of the
Convertible Line, all as more fully set forth in the Convertible Line Note, the
terms of which are incorporated herein by reference.
2. Interest Rate. Principal shall bear interest at a rate per annum (the
"Euro-Rate") (computed on the basis of a year of 360 days and the actual number
of days elapsed) equal to the sum of (a) the Euro-Rate plus (b) one hundred
fifty (150) basis points, for each Euro-Rate Interest Period; provided that
Borrower may elect, by written notice given to Bank prior to January 1, 2000 to
have the entire principal balance of the Convertible Line bear interest on and
after January 1, 2000 at the As Offered Rate (as hereinafter defined). For the
purpose hereof, the following terms shall have the following meanings:
<PAGE>
"As Offered Rate" shall mean a rate of interest per annum (computed on
the basis of a year of 360 days and the actual number of days
elapsed), determined in the Bank's sole discretion, as offered from
time to time by the Bank to the Borrower as the rate at which the Bank
would advance funds to the Borrower for the interest period requested
(the "As Offered Rate Interest Period") in the principal amount
requested.
"Euro-Rate" shall mean the interest rate per annum determined by Bank
by dividing (the resulting quotient rounded upward to the nearest
1/16th of 1% per annum) (i) the rate of interest determined by Bank in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the eurodollar rate two (2)
Business Days prior to the first day of such Euro-Rate Interest Period
for an amount comparable to the principal amount of the Convertible
Line Note 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 one month; provided, that if a
Euro-Rate Interest Period would end on a day which is not a business
day of Bank (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 after January 1, 2005.
"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").
"Prime Rate" shall mean the rate of interest announced from time to
time by the Bank at its principal office as its prime rate, which rate
may not be the lowest interest rate then being charged commercial
borrowers by the Bank.
"Prime Based Rate" shall mean the Prime Rate, as defined above, minus
75 basis points.
a. If Bank determines (which determination shall be final and
conclusive) that, by reason of circumstances affecting the interbank eurodollar
market generally, deposits in dollars (in the applicable amounts) are not being
offered to banks in the interbank eurodollar market for the selected term, or
adequate means do not exist for ascertaining the Euro-Rate, then Bank shall
give notice thereof to Borrower. Thereafter, until Bank notifies 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 at the Euro-Rate Based
Rate shall be converted to the Prime Based Rate at the expiration of the then
current Euro-Rate Interest Period.
b. In addition, if, after the date hereof, 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 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 Bank to make or maintain or fund loans at the Euro-Rate Based
Rate, Bank shall notify Borrower. Upon receipt of such notice, until Bank
notifies Borrower that the circumstances giving rise to such determination no
longer apply, (i) the availability of the Euro-Rate Based Rate shall be
suspended, and (ii) the interest rate on all principal then bearing interest at
the Euro-Rate Based Rate shall be converted to the Prime Based Rate either (a)
on the last day of the then current Euro-Pate Interest Period if Bank may
lawfully continue to maintain principal at the Euro-Rate Based Rate to such
day, or (b) immediately if Bank may not lawfully continue to maintain principal
at the Euro-Rate Based Rate.
3. Interest Rate Election. Subject to the Borrower's right to elect the As
Offered Rate as set forth in Section 2 above, at the end of each Euro-Rate
Interest Period, Borrower shall be deemed to have selected another one month
interest period, such that the entire principal balance of the Convertible Line
Note shall bear interest at the Euro-Rate Based Rate for consecutive one-month
Euro-Rate Interest Periods. Borrower shall indemnify Bank against all
<PAGE>
liabilities, losses or expenses (including loss of margin, any loss or expense
incurred in liquidating or employing deposits from third parties and any loss
or expense incurred in connection with funds acquired by Bank to fund or
maintain loans bearing interest at the Euro-Rate Based Rate) which Bank
sustains or incurs as a consequence of any attempt by Borrower to prepay prior
to the expiration of the applicable Euro-Rate Interest Period any principal
accruing interest at the Euro-Rate Based Rate, including by reason of any
scheduled payment of principal or by reason of Borrower's election to convert
to a As Offered Rate prior to the end of an Euro-Rate Interest Period. If Bank
sustains or incurs any such loss, it shall notify Borrower of the amount
determined by Bank to be necessary to indemnify Bank for such loss or expense
(which determination may include such assumptions, allocations of costs and
expenses and averaging or attribution methods as Bank deems appropriate). Such
amount shall be due and payable by the Borrower ten (10) days after such notice
is given.
4. One Tranche. Each Euro-Rate Interest Period will be applicable to the
entire principal balance, and not more than one tranche of principal accruing
interest at the Euro-Rate Based Rate shall be outstanding at any one time.
5. Default Rate. Should there occur an Event of Default under the Credit
Agreement, interest on the Convertible Line shall accrue as set forth in
Section 2.04(d) of the Credit Agreement.
6. Conditions. Concurrently herewith and as a condition to the
effectiveness hereof, Borrower shall deliver the following (all documents to be
in form and substance acceptable to the Bank):
(a) Borrower will execute and deliver to Bank the Convertible Line
Note; and
(b) Borrower shall deliver to Bank a certified copy of a resolution of
Borrower's board of directors authorizing the execution and delivery of this
Amendment and the other documents to be executed pursuant hereto.
7. Miscellaneous.
(a) Construction. The provisions of this Amendment shall be in addition
to those of the Credit Agreement, all of which shall be construed as integrated
and complementary to each other. In the event of any express inconsistency
between the terms hereof and those contained in the Credit Agreement, the terms
hereof shall control. Except as modified by the terms hereof, all terms and
provisions of the Credit Agreement remain unchanged and in full force and
effect.
(b) Binding Effect; Assignment and Entire Agreement. This Amendment
shall inure to the benefit of, and shall be binding upon, the respective
successors and permitted assigns of the parties hereto. This Amendment,
together with the Credit Agreement constitutes the entire agreement among the
parties relating to the subject matter thereof.
(c) Waiver of Jury Trial. BORROWER AND BANK IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF, THIS AMENDMENT, OR ANY INSTRUMENT OR DOCUMENT DELIVERED
PURSUANT TO THIS AMENDMENT, OR THE VALIDITY, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF.
(d) Expenses. In addition to all other expense reimbursement
obligations of the Borrower contained in the Credit Agreement, Borrower will
reimburse Bank for all costs and expenses, including reasonable attorneys'
fees, incurred by Bank in the negotiation, preparation and consummation of this
Amendment and the documents to be delivered pursuant thereto.
(e) Reaffirmation. Borrower ratifies and reaffirms all of its
obligations to Bank and agrees that the same are owing without set-off,
counterclaim or other defense of any nature. Borrower specifically ratifies and
reaffirms waiver of jury trial provisions set forth in the Credit Agreement.
8. Counterparts. This Amendment may be executed in counterparts, each
which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
PNC BANK, NATIONAL ASSOCIATION
By: Steve Prokop
METROLOGIC INSTRUMENTS, INC.
By: C. H. Knowles
Attest: G. Daulerio
<PAGE>
EXHIBIT 10.2
SECURITY AGREEMENT
(EQUIPMENT)
THIS SECURITY AGREEMENT (this "Agreement") is made this 26 day of
August, 1999 by and between METROLOGIC INSTRUMENTS, INC. (the "Grantor"), with
an address at 90 Coles Road, Blackwood, NJ 08012, and PNC BANK, NATIONAL
ASSOCIATION (the "Bank"), with an address at 1600 Market Street, Philadelphia,
Pennsylvania 19103.
Under the terms hereof, the Bank desires to obtain and the Grantor
desires to grant the Bank security for all of the Obligations (as hereinafter
defined).
NOW, THEREFORE, the Grantor and the Bank, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) "Collateral" shall include the Grantor's equipment from time to
time purchased by the Grantor in whole or in part with advances under the Loan
(defined below) (the "Equipment"); all cash and non-cash proceeds (including
without limitation, insurance proceeds) of the Equipment, all products thereof
and all additions and accessions thereto, substitutions therefor and
replacements thereof. From time to time Bank may supplement this Agreement by
attaching hereto schedules more specifically describing the Equipment purchased
with the Loan.
(b) "Loan" means all advances now, heretofore or hereafter from
time to time made by Bank to or for the benefit of Grantor the proceeds of
which are or were used by Grantor in whole or in part to purchase or otherwise
acquire rights in Equipment, and shall specifically include, without
limitation, all advances made by Bank to Grantor pursuant to and as evidenced
by that certain Convertible Line of Credit Note dated 26 August, 1999, in the
face amount of $2,400,000, together with all amendments, renewals and increases
thereof and any other or further convertible line of credit note heretofore or
hereafter executed in connection with any such purchase money loan facility.
(c) "Loan Documents" means this Agreement, any and all notes
evidencing the Obligations and all related documents, instruments and
agreements.
(d) "Obligations" shall include, without limitation, all
liabilities, obligations, covenants and duties owing to the Bank from the
Grantor in connection with the Loan and the Loan Documents, whether on account
of principal, interest or otherwise, present or future, due or to become due,
now existing or hereafter arising, and any amendments, extensions, renewals or
increases and all costs and expenses of the Bank incurred in the documentation,
negotiation, modification, enforcement, collection or otherwise in connection
with any of the foregoing, including but not limited to reasonable attorneys'
fees and expenses.
2. Grant of Security Interest. To secure the Obligations, the Grantor, as
debtor, hereby assigns and grants to the Bank, as secured party, a continuing
lien on and security interest in the Collateral.
3. Change in Name or Locations. The Grantor hereby agrees that if the
location of the Collateral changes from the locations listed on Exhibit "A"
hereto and made part hereof, or if the Grantor changes its name or form of
organization, or establishes a name in which it may do business that is not
listed as a tradename on Exhibit "A" hereto, the Grantor will promptly notify
the Bank in writing of the additions or changes. The Grantor's chief executive
office is also shown on Exhibit "A" hereto.
4. Representations and Warranties. The Grantor represents, warrants and
covenants to the Bank that: (a) the Grantor has not made any prior sale,
pledge, encumbrance, assignment or other disposition of any of the Collateral
and the same are free from all encumbrances and rights of setoff of any kind;
(b) except as herein provided, the Grantor will not hereafter without the prior
written consent of the Bank sell, pledge, encumber, assign or otherwise dispose
of any of the Collateral or permit any right of setoff, lien or security
interest to exist thereon except to the Bank; and (c) the Grantor will defend
the Collateral against all claims and demands of all persons at any time
claiming the same or any interest therein.
<PAGE>
5. Grantor's Covenants. The Grantor covenants that it shall:
(a) from time to time and at all reasonable times during normal
business hours, but not more often than once per yearly period (measured from
the date hereof) unless an Event of Default shall have occurred and be
continuing, allow the Bank upon reasonable prior notice, by or through any of
its officers, agents, attorneys, or accountants, to examine or inspect the
Collateral, and obtain valuations and audits of the Collateral, at the
Grantor's expense, wherever located. The Grantor shall do, obtain, make,
execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as the Bank may reasonably require to vest in and
assure to the Bank its rights hereunder and in or to the Collateral, and the
proceeds thereof, including, but not limited to, waivers from landlords,
warehousemen and mortgagees;
(b) keep the Collateral in good order and repair at all times and
immediately notify the Bank of any event causing a material loss or decline in
value of the Collateral whether or not covered by insurance and the amount of
such loss or decline;
(c) only use or permit the Collateral to be used in accordance with
all applicable federal, state, county and municipal laws and regulations; and
(d) have and maintain insurance at all times with respect to all
Collateral against risks of fire (including so-called extended coverage),
theft, sprinkler leakage, and other risks (including risk of flood if any
Collateral is maintained at a location in a flood hazard zone) as the Bank may
require, in such form, in such amount, for such period and written by such
companies as may be satisfactory to the Bank in its reasonable discretion. The
policies of all such casualty insurance shall contain a standard Lender's Loss
Payable Clause issued in favor of the Bank under which all losses thereunder
shall be paid to the Bank as the Bank's interest may appear. Such policies
shall expressly provide that the requisite insurance cannot be altered or
canceled without at least thirty (30) days prior written notice to the Bank and
shall insure the Bank notwithstanding the act or neglect of the Grantor. Upon
demand of the Bank, the Grantor shall furnish the Bank with duplicate original
policies of insurance or such other evidence of insurance as the Bank may
require. In the event of failure to provide insurance as herein provided, the
Bank may, at its option, obtain such insurance and the Grantor shall pay to the
Bank, on demand, the cost thereof. Proceeds of insurance may be applied by the
Bank to reduce the Obligations or to repair or replace Collateral, all in the
Bank's sole discretion.
6. Negative Pledge; No Transfer. The Grantor will not sell or offer to
sell or otherwise transfer or grant or suffer the imposition of a lien or
security interest upon the Collateral or use any portion thereof in any manner
inconsistent with this Agreement or with the terms and conditions of any policy
of insurance thereon.
7. Further Assurances. At the request of the Bank, the Grantor will join
with the Bank in executing one or more financing, continuation or amendment
statements pursuant to the Uniform Commercial Code in form satisfactory to the
Bank and will pay the cost of preparing and filing the same in all
jurisdictions in which such filing is deemed by the Bank to be necessary or
desirable. A carbon, photographic or other copy of this Agreement or of a UCC-1
financing statement may be filed as and in lieu of a UCC-1 financing statement.
8. Events of Default. The Grantor shall, at the option of the Bank, be in
default under this Agreement upon the happening of any of the following events
or conditions (each, an "Event of Default"): (a) any Event of Default (as
defined in any of the Obligations); (b) any default under any of the
Obligations that does not have a defined set of "Events of Default" and the
lapse of any notice or cure period provided in such Obligations with respect to
such default; (c) [INTENTIONALLY OMITTED] (d) the failure by the Grantor to
perform any of its obligations under this Agreement; (e) falsity, inaccuracy or
material breach by the Grantor of any written warranty, representation or
statement made or furnished to the Bank by or on behalf of the Grantor; (f) an
uninsured material loss, theft, damage, or destruction to any of the
Collateral, or the entry of any judgment against the Grantor or any lien
against or the making of any levy, seizure or attachment of or on the
Collateral which is not discharged within thirty (30) days of the entry
thereof; and (g) the failure of the Bank to have a perfected first priority
security interest in the Collateral unless such failure is caused by the gross
negligence or willful misconduct of the Bank.
<PAGE>
9. Remedies. Upon the occurrence of any such Event of Default and at any
time thereafter, the Bank may declare all Obligations secured hereby
immediately due and payable and shall have, in addition to any remedies
provided herein or by any applicable law or in equity, all the remedies of a
secured party under the Uniform Commercial Code. As permitted by such Code, the
Bank may (a) peaceably by its own means or with judicial assistance enter the
Grantor's premises and take possession of the Collateral, (b) render the
Collateral unusable, (c) dispose of the Collateral on the Grantor's premises,
and (d) require the Grantor to assemble the Collateral and make it available to
the Bank at a place designated by the Bank. The Bank will give the Grantor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made. The requirements of commercially reasonable notice shall be met if
such notice is sent to the Grantor at least five (5) days before the time of
the intended sale or disposition. Expenses of retaking, holding, preparing for
sale, selling or the like shall include the Bank's reasonable attorney's fees
and legal expenses, incurred or expended by the Bank to enforce any payment due
it under this Agreement either as against the Grantor, or in the prosecution or
defense of any action, or concerning any matter growing out of or connection
with the subject matter of this Agreement and the Collateral pledged hereunder
but such expenses shall not include those expenses arising out of the gross
negligence or willful misconduct of the Bank.
10. Power of Attorney. The Grantor does hereby make, constitute and
appoint any officer or agent of the Bank as the Grantor's true and lawful
attorney-in-fact as long as this Agreement is in effect and for such period as
the Grantor shall be in default under the Agreement, with power to endorse the
name of the Grantor or any of the Grantor's officers or agents upon any notes,
checks, drafts, money orders, or other instruments of payment or Collateral
that may come into the possession of the Bank in full or part payment of any
amounts owing to the Bank; granting to the Grantor's said attorney full power
to do any and all things necessary to be done in and about the premises as
fully and effectually as the Grantor might or could do, including the right to
sign, for the Grantor, UCC-1 financing statements and UCC-3 Statements of
Change and to sue for, compromise, settle and release all claims and disputes
with respect to, the Collateral. The Grantor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest, and is irrevocable.
11. Payment of Expenses. At its option, the Bank may discharge taxes,
liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for
the maintenance, appraisal or reappraisal, and preservation of the Collateral,
as determined by the Bank to be reasonably necessary. The Grantor will
reimburse the Bank on demand for any payment so made or any expense incurred by
the Bank pursuant to the foregoing authorization, and the Collateral also will
secure any advances or payments so made or expenses so incurred by the Bank.
12. Notices. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in writing and
will be effective upon receipt if delivered personally to such party, or if
sent by facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the address set forth above or to such
other address as any party may give to the other in writing for such purpose.
13. Preservation of Rights. No delay or omission on the part of the Bank
to exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power or any acquiescence
therein, nor will the action or inaction of the Bank impair any right or power
arising hereunder. The Bank's rights and remedies hereunder are cumulative and
not exclusive of any other rights or remedies which the Bank may have under
other agreements, at law or in equity.
14. Illegality. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
15. Changes in Writing. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
therefrom, will in any event be effective unless the same is in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Grantor in any case will entitle the Grantor to any other or
further notice or demand in the same, similar or other circumstance.
16. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
<PAGE>
17. Counterparts. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
18. Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the Grantor and the Bank and their respective heirs,
executors, administrators, successors and assigns; provided, however, that the
Grantor may not assign this Agreement in whole or in part without the prior
written consent of the Bank and the Bank at any time may assign this Agreement
in whole or in part.
19. Interpretation. In this Agreement, unless the Bank and the Grantor
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated. Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose. If this Agreement is
executed by more than one Grantor, the obligations of such persons or entities
will be joint and several.
20. Indemnity. The Grantor agrees to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any, who controls
the Bank (the "Indemnified Parties") and to hold each Indemnified Party
harmless from and against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, all reasonable fees of counsel with
whom any Indemnified Party may consult and all expenses of litigation or
preparation therefor) which any Indemnified Party may incur or which may be
asserted against any Indemnified Party as a result of the execution of or
performance under this Agreement; provided, however, that the foregoing
indemnity agreement shall not apply to claims, damages, losses, liabilities and
expenses solely attributable to an Indemnified Party's gross negligence or
willful misconduct. The indemnity agreement contained in this Section shall
survive the termination of this Agreement. The Grantor may participate at its
expense in the defense of any such claim.
21. Governing Law and Jurisdiction. This Agreement 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 AGREEMENT WILL BE INTERPRETED
AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE WHERE THE BANK'S OFFICE INDICATED ABOVE IS LOCATED,
EXCEPT THAT THE LAWS OF THE STATE WHERE ANY COLLATERAL IS LOCATED (IF DIFFERENT
FROM THE STATE WHERE SUCH OFFICE OF THE BANK IS LOCATED) SHALL GOVERN THE
CREATION, PERFECTION AND FORECLOSURE OF THE LIENS CREATED HEREUNDER ON SUCH
PROPERTY OR ANY INTEREST THEREIN. The Grantor 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 Grantor at the Grantor'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
Agreement will prevent the Bank from bringing any action, enforcing any award
or judgment or exercising any rights against the Grantor individually, against
any security or against any property of the Grantor within any other county,
state or other foreign or domestic jurisdiction. The Bank and the Grantor agree
that the venue provided above is the most convenient forum for both the Bank
and the Grantor. The Grantor waives any objection to venue and any objection
based on a more convenient forum in any action instituted under this Agreement.
22. SELF HELP REMEDIES. THE GRANTOR BEING FULLY AWARE OF THE RIGHT TO
NOTICE AND A HEARING ON THE QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE
ASSERTED AGAINST THE GRANTOR BY THE BANK UNDER THIS AGREEMENT, AND RELATED
AGREEMENTS AND DOCUMENTS, BEFORE THE GRANTOR CAN BE DEPRIVED OF ANY PROPERTY IN
THE GRANTOR'S POSSESSION, HEREBY WAIVES THESE RIGHTS AND AGREES THAT THE BANK
MAY EMPLOY SELF-HELP OR ANY LEGAL OR EQUITABLE PROCESS PROVIDED BY LAW TO TAKE
POSSESSION OF ANY SUCH PROPERTY WITHOUT FIRST OBTAINING A FINAL JUDGMENT OR
WITHOUT FIRST GIVING THE GRANTOR NOTICE AND THE OPPORTUNITY TO BE HEARD ON THE
VALIDITY OF THE CLAIM UPON WHICH SUCH TAKING IS MADE. THE GRANTOR WAIVES ALL
RELIEF FROM ALL APPRAISEMENT OR EXEMPTION LAWS NOW IN FORCE OR HEREAFTER
ENACTED.
<PAGE>
23. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE BANK IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. THE GRANTOR AND THE BANK ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
24. Confidentiality of Information. The Bank shall use reasonable efforts
to assure that information about the obligors and their respective operations,
affairs and financial condition, not generally disclosed to the public or to
trade and other creditors and which is furnished to the Bank pursuant to the
provisions hereof, is used only for the purposes of this Agreement and the
other Loan Documents and any other relationship between the Bank and shall not
be divulged to any person other than the Bank and its officers, directors,
employees and agents, except to the extent such information (i) was or
generally becomes available to the general public other than as a result of
disclosure by the Bank or any of its subsidiaries or affiliates, or (ii) was or
becomes available on a non-confidential basis from a source other than the
obligors; provided, that insofar as known to the Bank, such source is not
prohibited from providing such information by any contractual, legal or
fiduciary obligation to any obligor. Notwithstanding the forgoing, the Bank may
disclose such information about any obligor (a) to its attorneys, accountants
and other professional advisors, (b) in connection with the enforcement of the
rights of the Bank hereunder and under the other Loan Documents or otherwise in
connection with applicable litigation and (c0 as may otherwise be required or
requested by any regulatory authority having jurisdiction over the Bank or by
any applicable law, rule, regulation or judicial process.
WITNESS the due execution hereof as a document under seal, as of the date
first written above.
METROLOGIC INSTRUMENTS, INC.
By: C. H. Knowles
Print Name: C. H. Knowles
Title: President
PNC BANK, NATIONAL ASSOCIATION
By: Steven Prokop
Print Name: Steven Prokop
Title: Vice President
<PAGE>
EXHIBIT "A"
TO SECURITY AGREEMENT
Address of Grantor's chief executive office, including the County:
90 Coles Road
Blackwood, New Jersey 08012
_______________ County
Addresses of other Equipment locations, including Counties and name and address
of landlord or owner if location is not owned by the Grantor:
NONE
Other names or tradenames now or formerly used by the Grantor:
NONE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<PERIOD-START> JAN-01-1999 JAN-01-1998
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 6,529,000 9,692,000
<SECURITIES> 0 0
<RECEIVABLES> 19,892,000 14,685,000
<ALLOWANCES> 0 0
<INVENTORY> 9,832,000 7,023,000
<CURRENT-ASSETS> 38,962,000 33,703,000
<PP&E> 8,716,000 5,756,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 53,469,000 44,907,000
<CURRENT-LIABILITIES> 16,176,000 13,453,000
<BONDS> 0 0
0 0
0 0
<COMMON> 54,000 54,000
<OTHER-SE> 33,073,000 28,563,000
<TOTAL-LIABILITY-AND-EQUITY> 53,469,000 44,907,000
<SALES> 57,872,000 48,297,000
<TOTAL-REVENUES> 57,872,000 48,297,000
<CGS> 34,139,000 29,166,000
<TOTAL-COSTS> 52,115,000 43,601,000
<OTHER-EXPENSES> 622,000 (140,000)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 143,000 263,000
<INCOME-PRETAX> 5,278,000 5,099,000
<INCOME-TAX> 1,855,000 1,835,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,423,000 3,264,000
<EPS-BASIC> .63 .61
<EPS-DILUTED> .63 .59
</TABLE>
