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 June 30, 2000
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 August 14, 2000 there were 5,441,648 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 -
June 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 2000 and
June 30, 1999 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and
June 30, 1999 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 12
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
10 Amendment to Loan Agreement dated June 28, 2000 between 17
Metrologic Instruments, Inc. and PNC Bank, National Association
10.1 Amended and Restated Committed Line of Credit Note for 20
$17,500,000 dated June 28, 2000 between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.2 Amendment to Loan Agreement dated July 14, 2000 between 23
Metrologic Instruments, Inc. and PNC Bank, National Association
10.3 Acquisition Loan Note for $5,000,000 dated July 14, 2000 27
between Metrologic Instruments, Inc. and PNC Bank, National
Association
10.4 Convertible Line of Credit Note for $2,500,000 dated July 14, 30
2000 Between Metrologic Instruments, Inc. and PNC Bank,
National Association
10.5 Security Agreement dated July 14, 2000 between Metrologic 33
Instruments, Inc. and PNC Bank, National Association
27 Financial Data Schedule 39
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Metrologic Instruments, Inc.
Consolidated Balance Sheets
(amounts in thousands except share data)
June 30, December 31,
Assets 2000 1999
-------- --------
(Unaudited)
Current assets:
Cash and cash equivalents $ 6,032 $ 6,970
Accounts receivable, net of allowance 28,549 21,474
Inventory 19,056 11,231
Deferred income taxes 1,036 872
Other current assets 1,006 1,239
-------- --------
Total current assets 55,679 41,786
Property, plant and equipment, net 9,986 8,873
Patents and trademarks, net of amortization 2,648 2,469
Holographic technology, net of amortization 658 716
Advance license fee, net of amortization 1,588 1,647
Security deposits and other assets 2,317 1,182
-------- --------
Total assets $ 72,876 $ 56,673
======== ========
Liabilities and shareholders' equity
Current liabilities:
Line of credit $ 13,203 $ 3,050
Current portion of notes payable 1,312 1,282
Accounts payable 6,777 3,741
Accrued expenses 9,692 10,054
-------- --------
Total current liabilities 30,984 18,127
Notes payable, net of current portion 5,324 3,414
Deferred income taxes 568 588
Other liabilities 327 -
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; 5,436,104 and 5,410,125 shares
issued and outstanding in 2000 and 1999,
respectively 54 54
Additional paid-in capital 17,370 17,083
Retained earnings 20,376 17,966
Accumulated other comprehensive income (2,127) (559)
-------- --------
Total shareholders' equity 35,673 34,544
-------- --------
Total liabilities and shareholders' equity $ 72,876 $ 56,673
======== ========
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
Sales $23,128 $19,466 $45,460 $37,719
Cost of sales 13,903 11,638 27,118 22,601
------- ------- ------- -------
Gross profit 9,225 7,828 18,342 15,118
Selling, general and
administrative expenses 6,080 4,932 11,850 9,520
Research and development
expenses 1,338 1,023 2,670 1,983
------- ------- ------- -------
Operating income 1,807 1,873 3,822 3,615
Other (expenses) income
Interest income 74 83 145 214
Interest expense (226) (49) (365) (106)
Foreign currency transaction
(loss) gain 205 (128) 218 (342)
Other, net (101) - (168) -
------- ------- ------- -------
Total other (expenses) income (48) (94) (170) (234)
------- ------- ------- -------
Income before provision for
income taxes 1,759 1,779 3,652 3,381
Provision for income taxes 561 630 1,242 1,191
------- ------- ------- -------
Net income $ 1,198 $ 1,149 $ 2,410 $ 2,190
======= ======= ======= =======
Basic earnings per share
Weighted average shares
outstanding 5,436,104 5,411,577 5,428,212 5,410,068
Basic earnings per share $ 0.22 $0.21 $ 0.44 $ 0.40
Diluted earnings per share
Weighted average shares
outstanding 5,436,104 5,411,577 5,428,212 5,410,068
Net effect of dilutive
securities 250,425 3,126 205,908 47,898
Total shares outstanding
used in computing diluted
earnings per share 5,686,529 5,414,703 5,634,120 5,457,966
Diluted earnings per share $ 0.21 $0.21 $ 0.43 $ 0.40
See accompanying notes.
<PAGE>
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Six Months Ended
June 30,
2000 1999
(Unaudited)
Operating activities
Net cash used in operating
activities $ (9,200) $(3,564)
Investing activities
Purchase of property, plant and equipment (1,862) (2,220)
Patents and trademarks (277) (312)
Purchase of subsidiary, net (1,282) -
------- -------
Net cash used in investing activities (3,421) (2,532)
Financing activities
Proceeds from exercise of stock options and
employee stock purchase plan $ 251 $ 65
Proceeds from issuance of notes payable 2,498 1,169
Principal payments on notes payable (425) (268)
Net proceeds from line of credit 10,153 -
Capital lease payments (46) (74)
------- -------
Net cash provided by financing activities 12,431 892
Effect of exchange rates on cash (748) 198
------- -------
Net decrease in cash and cash equivalents (938) (5,006)
Cash and cash equivalents at beginning of period 6,970 10,684
------- -------
Cash and cash equivalents at end of period $ 6,032 $ 5,678
======== =======
Supplemental Disclosure
Cash paid for interest $ 285 $ 101
Cash paid for income taxes $ 540 $ 335
Tax benefit from stock options $ 36 $ 4
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, 1999, including the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements for the
year ended December 31, 1999 contained therein.
3. Inventory
Inventory consists of the following:
June 30, December 31,
2000 1999
Raw materials $ 7,183 $ 4,273
Work-in-process 5,613 4,020
Finished goods 6,260 2,938
------- -------
$19,056 $11,231
4. Comprehensive Income
The Company's total comprehensive earnings were as follows:
Six Months Ended
June 30,
2000 1999
(Unaudited)
Net earnings $ 2,410 $ 2,190
Other comprehensive losses:
Change in equity due to foreign
currency translation adjustments (1,568) (381)
------- -------
Comprehensive earnings $ 842 $ 1,809
<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 European
North Other Operations Total
America Europe Export Total Europe Consolidated
Three months ended
June 30, 2000:
Sales $12,486 $ 201 $ 1,918 $14,605 $ 8,523 $23,128
Income (loss)
before provision
for income taxes $ 1,607 $ 152 $ 1,759
Identifiable
assets $58,734 $14,142 $72,876
Three months ended
June 30, 1999:
Sales $ 8,195 $871 $ 3,107 $12,173 $ 7,293 $19,466
Income (loss)
before provision
for income taxes $ 2,256 $ (477) $ 1,779
Identifiable
assets $39,945 $ 9,475 $49,420
Six months ended
June 30, 2000:
Sales $24,129 $ 785 $ 3,992 $28,906 $16,554 $45,460
Income (loss)
before provision
for income taxes $ 3,847 $ (195) $ 3,652
Six months ended
June 30, 1999:
Sales $15,199 $1,822 $ 5,733 $22,754 $14,965 $37,719
Income (loss)
before provision
for income taxes $ 4,009 $ (628) $ 3,381
<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, 1999 appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. The
Condensed Consolidated Financial Statements for the three and six months ended
June 30, 2000 and June 30, 1999 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 six months ended June 30,
2000 and 1999, 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 June 30, 2000 Compared with Three Months Ended June 30, 1999
(amounts in thousands except per share information)
Sales increased 18.8% to $23,128 in the three months ended June 30,
2000 from $19,466 in the three months ended June 30, 1999, principally as a
result of the continued increase in sales of the Company's point-of-sale
("POS") products, and an increase in sales of the Company's industrial laser
scanners, which includes HoloTrak(R) industrial holographic laser scanners
and HoloTunnels. The increase in sales volume in 2000 was offset by lower
average unit selling prices on certain POS products compared to the
corresponding period in 1999 and reflected unfavorable foreign exchange
fluctuations. The reduction in the value of the euro against the U.S. dollar
negatively affected the recorded U.S. dollar value of quarterly European
operation sales by approximately 11.4% and quarterly consolidated sales by
approximately 5.2% compared to the corresponding period in 1999.
International sales accounted for $13,016 (56.3% of total sales) in
the three months ended June 30, 2000 and $11,271 (57.9% of total sales) in the
three months ended June 30, 1999. Two customers accounted for 7.5% and 7.4%,
respectively of revenues in the three months ended June 30, 2000. No individual
customer accounted for 5% or more of revenues in the three months ended June
30, 1999.
Cost of sales increased 19.5% to $13,903 in the three months ended
June 30, 2000 from $11,638 in the three months ended June 30, 1999, while cost
of sales as a percentage of sales increased to 60.1% from 59.8%. The increase
in cost of sales as a percentage of sales was due primarily to lower average
unit selling prices resulting primarily from unfavorable foreign exchange
fluctuations as well as increased costs resulting from a limited supply of
electronic components purchased from vendors, partially offset by increased
sales of the Company's industrial laser scanners which yield higher gross
profit margins than the Company's POS products. If sales in the three months
ended June 30, 2000 are adjusted to negate the effect of the reduction in the
value of the euro against the U.S. dollar as compared to the corresponding
period in 1999, cost of sales as a percentage of sales would have been 57.2%
in the three months ended June 30, 2000.
Selling, general and administrative ("SG&A") expenses increased 23.3%
to $6,080 in the three months ended June 30, 2000 from $4,932 in the three
months ended June 30, 1999 and increased as a percentage of sales to 26.3% from
25.3%. The increase in SG&A expenses was due primarily to increased marketing
efforts, which include costs associated with the Company's Concert(SM) program,
a business partner program used to market and promote the Company's products.
Research and development ("R&D") expenses increased 30.8% to $1,338 in
the three months ended June 30, 2000 from $1,023 in the three months ended June
30, 1999, and increased as a percentage of sales to 5.8% from 5.3%. The
increase is due to increased research and development efforts of new POS and
industrial products and engineering enhancements to existing products.
Operating income decreased 3.5% to $1,807 in the three months ended
June 30, 2000 from $1,873 in the three months ended June 30, 1999, and
operating income as a percentage of sales decreased to 7.8% from 9.6%.
<PAGE>
Other income/expenses reflect net other expenses of $48 in the three
months ended June 30, 2000 compared to net other expenses of $94 in the
corresponding period in 1999. Net other expenses for the three months ended
June 30, 2000 reflect higher interest costs offset by net foreign currency
gains resulting from hedging activity.
Net income increased 4.3% to $1,198 in the three months ended June 30,
2000 from $1,149 in the three months ended June 30, 1999. Net income reflects a
32% effective income tax rate for the three months ended June 30, 2000 compared
to 35% for the corresponding period in 1999. 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 negatively affected
diluted earnings per share by approximately $.08 as compared to the
corresponding period in 1999.
Six Months Ended June 30, 2000 Compared with Six Months Ended June 30, 1999
(amounts in thousands except per share information)
Sales increased 20.5% to $45,460 in the six months ended June 30, 2000
from $37,719 in the six months ended June 30, 1999, principally as a result of
the continued increase in sales of the Company's POS products, and an increase
in sales of the Company's industrial laser scanners which include HoloTrak(R)
industrial holographic laser scanners and HoloTunnels. The increase in sales
volume in 2000 was offset by lower average unit selling prices on its POS
products, compared to the corresponding period in 1999, and reflected
unfavorable foreign exchange fluctuations. The reduction in the value of the
euro against the U.S. dollar negatively affected the recorded U.S. dollar value
of the year-to-date European operation sales by approximately 12.2% and
year-to-date consolidated sales by 4.4%.
International sales accounted for $25,692 (56.5% of total sales) in
the six months ended June 30, 2000 and $22,520 (59.7% of total sales) in the
six months ended June 30, 1999. Two customers accounted for 6.5% and 6.3%,
respectively of the Company's revenues in the six months ended June 30, 2000.
One customer accounted for 5.2% of the Company's revenues in the six months
ended June 30, 1999.
Cost of sales increased 20% to $27,118 in the six months ended June
30, 2000 from $22,601 in the six months ended June 30, 1999, and cost of sales
as a percentage of sales decreased to 59.7% 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 offset by lower average unit selling prices
resulting primarily from unfavorable foreign exchange fluctuations and
increased costs resulting from a limited supply of electronic components
purchased from vendors. If sales in the six months ended June 30, 1999 are
adjusted to negate the effect of the reduction in the value of the euro against
the U.S. dollar as compared to the corresponding period in 1999, cost of sales
as a percentage of sales would have been 57.2% for the six months ended
June 30, 2000.
SG&A expenses increased 24.5% to $11,850 in the six months ended June
30, 2000 from $9,520 in the six months ended June 30, 1999 and increased as a
percentage of sales to 26.1% from 25.2%. The increase in SG&A expenses was due
primarily to increased marketing efforts, which include costs associated with
the Company's Concert(SM) Program.
R&D expenses increased 34.6% to $2,670 in the six months ended June 30,
2000 from $1,983 in the six months ended June 30, 1999, and increased as a
percentage of sales to 5.9% from 5.3%. The increase is due to increased
research and development efforts of new POS and industrial products and
engineering enhancements to existing products.
Operating income increased 5.7% to $3,822 in the six months ended
June 30, 2000 from $3,615 in the six months ended June 30, 1999, and operating
income as a percentage of sales decreased to 8.4% from 9.6%.
Other income/expenses reflect net other expenses of $170 in the six
months ended June 30, 2000 compared to net other expenses of $234 in the
corresponding period in 1999. Net other expenses for the six months ended June
30, 2000 reflect higher interest costs offset by net foreign currency gains
resulting from hedging activity.
<PAGE>
Net income increased 10% to $2,410 in the six months ended June 30,
2000 from $2,190 in the six months ended June 30, 1999. Net income reflects a
34% effective income tax rate for the six months ended June 30, 2000 compared
to 35% for the corresponding period in 1999. 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 $0.15 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 its fourth quarter.
Liquidity and Capital Resources (amounts in thousands)
The Company's working capital increased to $24,695 as of June 30, 2000
from $23,659 as of December 31, 1999.
The Company's operating activities used net cash of $9,200 compared
with net cash used of $3,564 for the six months ended June 30, 2000 and 1999,
respectively. Net cash used by operating activities for the six months ended
June 30, 2000 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 entered into an Amended and Restated Loan and Security
Agreement, as amended, with its primary bank which provides for (i) an
unsecured line of credit in the amount of $17,500 for use in operations; (ii)
an unsecured line of credit for use in acquisitions in the amount of $5,000,
which will be drawn down in equivalent euro currency; and (iii) a line of
credit for $2,500 for use in acquiring fixed assets. As of June 30, 2000,
$14,403, $0, and $0 were outstanding under these lines of credit. These lines
of credit incur interest at a variable euro (libor) rate plus a margin of 1.25%
to 1.75% based on a calculation of debt ratio, as defined. The euro rate
exclusive of margin at June 30, 2000 was 6.6%. These lines of credit require
the Company to comply with certain financial covenants and other restrictions.
As of June 30, 2000, the Company was in compliance with these financial
covenants. The Amended and Restated Loan and Security Agreement expires on
June 30, 2001.
The Company also maintains unsecured lines of credit with European banks
totaling 1,100 Euros. As of June 30, 2000 no amounts were outstanding
under these lines of credit.
Property, plant and equipment expenditures were $1,862 and $2,220 for
the six months ended June 30, 2000 and 1999, respectively. During the six
months ended June 30, 2000, the Company 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; (iii) enhancements to, and additional
purchases of information systems; and (iv) additional manufacturing facilities.
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 euro and the Brazilian real. In an effort to
mitigate the financial implications of the volatility in the exchange rate
between the euro and the U.S. dollar, the Company has, from time to time,
selectively entered into derivative financial instruments to offset its
exposure to foreign currency risks. These 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 European subsidiaries and (ii) euro based loans, which act as a
partial hedge against outstanding intercompany receivables and the net assets
of its European subsidiaries, which are denominated in euro. Additionally, the
European subsidiaries invoice and receive payment in certain other non-euro
currencies, which result in an additional mitigating measure that reduces the
Company's exposure to the fluctuation between the 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
revolving credit facilities, will be adequate to fund the Company's operations
through at least the next twelve months.
<PAGE>
Forward Looking Statements; Certain Cautionary Language
Written and oral statements provided by the Company from time to time,
including the statements made above under Management's Discussion and Analysis,
may contain certain 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 written or oral 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 euro, Singapore dollar, Chinese renminbi, 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
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 Company invoices and accepts payment for
goods in the aforementioned currencies, however, 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; and
increased competition due to industry consolidation or new entrants into the
Company's existing markets.
Euro Conversion.
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and adopted the euro as their new common legal currency. As of that date, the
euro traded on currency exchanges and the legacy currencies remain legal tender
in the participating countries for a transition period between January 1, 1999
and January 1, 2002. The countries that adopted the euro on January 1, 1999 are
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, Portugal, and Spain. During the transition period, non-cash
payments can be made in the euro, and parties can elect to pay for goods and
services and transact business using either the euro or legacy currency.
Between January 1, 1999 and January 1, 2002 the participating countries will
introduce euro notes and coins and withdraw all legacy currencies so that they
will no longer be available. The euro conversion may affect cross-border
competition by creating cross-border transparency. The Company is assessing its
pricing/marketing strategy in order to insure that it remains competitive in a
broader European market. The Company is also assessing its information
technology systems to allow for transactions to take place in both legacy
currencies and the euro and the eventual elimination of the legacy currencies,
and is reviewing whether certain existing contracts will need to be modified.
The Company's currency risk and risk management for operations in participating
countries may be reduced as the legacy currencies are converted to the Euro.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The discussion under Item 7A in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 is incorporated herein by reference.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
A. Symbol Technologies, Inc. et. al. v. Lemelson Medical, Educational &
Research Foundation, Limited Partnerships
The Company is currently involved in matters of litigation arising
from the normal course of business including those 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 (the "Auto ID companies")
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, a 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 had 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 to the Company's knowledge, 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
Lemelson Partnership against Auto ID companies 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 stated that the primary
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 Lemelson
Partnership has never asserted claims of infringement against the Auto ID
companies.
<PAGE>
On March 15, 2000, Judge Pro of the U.S. District Court for the
District of Nevada issued a ruling denying the Lemelson Foundation's motion (a)
to dismiss the lawsuit for lack of a legally justifiable case or controversy
and (b) transfer the case to the U.S. District Court for the District of
Arizona. However the Court granted the Lemelson Partnership's motion to dismiss
our claim that the patents are invalid due to laches in prosecution of the
patents. The court also ordered the action consolidated with an action against
the Lemelson Partnership brought by Cognex Corp. pending in the same court.
On March 30, 2000, the Lemelson Partnership filed a motion (a) to
appoint a permanent magistrate judge to the case and remove Magistrate Judge
Atkins and (b) to transfer the case from the court in Reno, Nevada, where it is
currently assigned to a court in Las Vegas, Nevada. The Auto ID Companies filed
papers opposing both motions. On April 10, 2000, Judge Pro again ruled against
the Lemelson Partnership on both motions. The case is now in the early states
of discovery.
April 12, 2000, the Lemelson Partnership filed its Answer to the
Complaint in the Symbol et al. v. Lemelson Partnership case. In the Answer, the
Lemelson Partnership included a counterclaim against the Company and the other
plaintiffs seeking a dismissal of the case. Alternatively, the Lemelson
Partnership's counterclaim seeks a declaration that the Company and the other
plaintiffs have contributed to, or induced infringement of particular method
claims of the patents-in-suit by the plaintiffs' customers. The Company
believes there is no merit to the Lemelson Partnership's counterclaim.
On May 15, 2000, the Auto ID companies filed a motion seeking
permission to file an interlocutory appeal of the Court's decision to strike
the fourth count of the complaint (which alleged that the Lemelson
Partnership's delays in obtaining its patents rendered them unenforceable for
laches). The motion was granted by the Court on July 14, 2000.
On May 10,2000, the Lemelson Partnership filed a second motion with
the Court to stay the Auto ID action pending the resolution of United States
Metals Refining Co. ("US Metals") v. Lemelson Medical, Education & Research
Foundation, LP et al., an action in Nevada state court where in the plaintiff is
challenging the Lemelson Partnership's ownership of the patents at issue in the
Auto ID action. The Auto ID companies opposed the motion. Although the Court
has not yet ruled on this motion, the Nevada state court dismissed the
complaint of US Metals on July 5, 2000.
On July 24, 2000, the Auto ID companies filed a motion for partial
summary judgment arguing that almost all of the claims of the Lemelson
Partnership's patents are invalid for lack of written description.
B. Metrologic v. PSC
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.
On December 22, 1999, PSC filed an answer to the complaint citing a
variety of affirmative defenses to the allegations of infringement asserted by
the Company in its complaint. PSC additionally asserted a counterclaim under
the Lanham Act claiming that the Company made false and misleading statements
in its October 13, 1999 press release regarding the patent infringement suit
against PSC. The Company does not believe that this counterclaim has any merit
and has made a claim with its insurance carrier to pay for the defense of this
claim.
The court ordered the case to mediation, and discovery was stayed
pending the outcome of the mediation. The mediation was terminated by the
parties with no result having been reached and the stay on discovery has been
lifted by the court. The case is now in the early stages of discovery.
<PAGE>
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
The Company's Annual Meeting of Shareholders was held on June 22, 2000. At
such meeting, the following matters were voted upon by the shareholders,
receiving the number of affirmative, negative and withheld votes, as well as
abstentions and broker non-votes, set forth below each matter.
(1) The vote of the common shareholders for the election of C. Harry
Knowles and Stanton L. Meltzer as directors to serve a three-year term ending
in 2003 were as follows:
No. of Votes For Name
---------------- -----------------
4,625,156 C. Harry Knowles
4,625,706 Stanton L. Meltzer
(2) The vote of the common shareholders for the appointment of Ernst &
Young as the independent auditors for the Company for the fiscal year ending
December 31, 2000 was as follows:
4,625,479 For 127 Against 100 Abstain
--------- --- ---
The directors of the Company whose terms continue after the Annual
Meeting of Shareholders referenced above are Richard C. Close, Janet H.
Knowles, John H. Mathias, Thomas E. Mills IV, Hsu Jau Nan and William
Rulon-Miller.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
10 Amendment to Loan Agreement dated
June 28, 2000 between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.1 Amended and Restated Committed Line of
Credit Note for $17,500,000 dated
June 28, 2000 between Metrologic
Instruments, Inc. and PNC Bank, National
Association
10.2 Amendment to Loan Agreement dated
July 14, 2000 between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.3 Acquisition Loan Note for $5,000,000 dated
July 14, 2000 between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.4 Convertible Line of Credit Note for $2,500,000
dated July 14, 2000 Between Metrologic
Instruments, Inc. and PNC Bank, National
Association
10.5 Security Agreement dated July 14, 2000
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 June 30, 2000.
<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: August 14, 2000 By:/s/ C. Harry Knowles
---------------- -----------------------
C. Harry Knowles
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2000 By:/s/Thomas E. Mills IV
---------------- --------------------------
Thomas E. Mills IV
President, Chief Operating
Officer and Chief Financial
Officer (Principal
Financial and Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No.
10 Amendment to Loan Agreement dated June 28, 2000 between
Metrologic Instruments, Inc. and PNC Bank, National Association
10.1 Amended and Restated Committed Line of Credit Note for
$17,500,000 dated June 28, 2000 between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.2 Amendment to Loan Agreement dated July 14, 2000 between
Metrologic Instruments, Inc. and PNC Bank, National Association
10.3 Acquisition Loan Note for $5,000,000 dated July 14, 2000
between Metrologic Instruments, Inc. and PNC Bank, National
Association
10.4 Convertible Line of Credit Note for $2,500,000 dated July 14, 2000
Between Metrologic Instruments, Inc. and PNC Bank, National
Association
10.5 Security Agreement dated July 14, 2000 between Metrologic
Instruments, Inc. and PNC Bank, National Association
27 Financial Data Schedule
<PAGE>
Exhibit 10
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT (the "Amendment") made as of June 28, 2000 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. Revolving Loan Limit. Section 1.20 of the Loan Agreement is
amended to read in its entirety as follows:
"Revolving Loan Limit" shall mean $17,500,000."
2. Revolving Loan Termination Date. Section 1.22 of the Loan
Agreement is amended to read in its entirety as follows:
"Revolving Loan Termination Date" shall mean June 30, 2001 or
such other later date to which Bank and Borrower may (without any obligation to
do so) hereafter agree in writing in connection with any renewal or extension
of the Revolving Loan."
3. Interest Rate: (a) As used herein, the following terms have the
following meanings:
"Applicable Margin" shall mean, for any Quarterly Period and with
respect to the rate of interest for such Quarterly Period, the number of basis
points set forth in Annex I hereto which corresponds to Borrower's Debt Ratio
as reflected in Borrower's compliance certificate for the fiscal quarter
related to such Quarterly Period. On and after the date hereof and until the
Quarterly Period related to Borrower's fiscal quarter ending June 30, 2000, the
Applicable Margin will be as set forth in Annex I as Level II.
"Applicable Rate" shall mean, for any Quarterly Period and with
respect to the Commitment Fee set forth in subpart (d) hereof accruing for such
Quarterly Period, the per annum rate set forth in Annex I hereto which
corresponds to Borrower's Debt Ratio as reflected in Borrower's compliance
certificate for the fiscal quarter related to such Quarterly Period,
computed on the basis of a year of 360 days and the actual number of days
elapsed. On and after the date hereof and until the Quarterly Period related to
Borrower's fiscal quarter ending June 30, 2000, the Applicable Rate for the
Commitment Fee will be as set forth in Annex I as Level II.
"Debt Ratio" shall mean, as of the last day of any fiscal quarter,
Borrower's Funded Debt as of such date divided by Borrower's EBITDA for the
four fiscal quarters ending on such date.
"EBITDA" shall mean pre tax earnings (calculated without regard to
extraordinary loss or gain determined in accordance with GAAP) plus the sum of
depreciation and amortization expense and interest expense during the period
for which pre tax earnings was calculated.
"Funded Debt" shall mean all Indebtedness for borrowed money
(including but not limited to guaranties thereof and capitalized lease
obligations but excluding subordinated indebtedness) plus (without duplication)
the face amount of all letters of credit issued for Borrower's account and all
reimbursement obligations.
"Quarterly Period" shall mean the three (3) calendar month period
commencing on the first day of the month next following the month in which
Borrower provides Bank with a quarterly compliance certificate pursuant to
Section 6.01(A)(3) of the Credit Agreement.
<PAGE>
(b) Each advance outstanding under the
Revolving Loan shall bear interest at a per annum rate of interest equal to the
sum of (a) the euro Rate (as presently set forth in and subject to the existing
terms of the Credit Agreement) plus (b) the Applicable Margin.
(c) If Borrower's Debt Ratio ever equals or
exceeds 2.75 to 1, Borrower will upon Bank's demand grant to Bank, pursuant to
a written security agreement and UCC-1 financing statements satisfactory to
Bank, a first priority security interest in all of Borrower's then owned and
thereafter arising accounts receivable, inventory, equipment and all other
personnel property of any nature and all proceeds thereof, failing which shall
constitute an Event of Default for all purposes of the Credit Agreement. In
order to more fully effect the forgoing, Borrower will concurrently herewith
execute and deliver to Bank a Security Agreement and UCC-1 Financing Statements
in form acceptable to Bank, none of which, however, will be effective unless
and until Borrower's Debt Ratio equals or exceeds 2.75 to 1.0.
(d) Borrower will pay to Bank, quarterly in
arrears, a Commitment Fee equal to the Applicable Rate multiplied by the daily
average amount during such quarter by which the outstanding principal of the
Revolving Loan is less than the Revolving Loan Limit.
4. 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 an Amended and
Restated Revolving Loan 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.
5. 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.
6. 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:/s/Denise Viola-Monahan
METROLOGIC INSTRUMENTS, INC.
By:/s/C.H. Knowles
Attest: George J. Daulerio, Jr.
<PAGE>
ANNEX I
PRICING GRID
---------------- --------------------- ------------------- --------------------
LEVEL I LEVEL II LEVEL III
---------------- --------------------- ------------------- --------------------
---------------- --------------------- ------------------- --------------------
Basis for Pricing If the Borrower's If the Borrower's If the Borrower's
Debt Ratio is less Debt Ratio is equal Debt Ratio is
than 1.1 to 1. to or greater than greater than or
1.1 to 1 but less equal to 2.0 to 1 but
than 2.0 to 1. less than 3.0 to 1.
---------------- --------------------- ------------------- --------------------
---------------- --------------------- ------------------- --------------------
EURO/b.p. 125 150 175
---------------- --------------------- ------------------- --------------------
---------------- --------------------- ------------------- --------------------
Applicable Rate .25% .25% .30%
(commitment fee)
---------------- --------------------- ------------------- --------------------
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
COMMITTED LINE OF CREDIT NOTE
$17,500,000.00 June 28, 2000
FOR VALUE RECEIVED, METROLOGIC INSTRUMENTS, INC. (the "Borrower") 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, or at such
other location as the Bank may designate from time to time, the principal sum
of Seventeen Million Five Hundred Thousand Dollars ($17,500,000) (the
"Facility") or such lesser amount as may be advanced to or for the benefit of
the Borrower hereunder, 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 as
set forth in the Loan Agreement referred to below.
2. Advances. The Borrower may borrow, repay and reborrow hereunder as set
forth in the Loan Agreement.
3. Advance Procedures. 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.
4. Payment Terms. Accrued interest will be due and payable as set forth in
the Loan Agreement.
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.
5. 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 15 calendar days of the date due and payable, the Borrower
also shall pay to the Bank a late charge equal to the lesser of five percent
(5%) of the amount of such payment or $100 (the "Late Charge"). Such 15 day
period shall not be construed in any way to extend the due date of any such
payment. Upon maturity, whether by acceleration, demand or otherwise, and at
the Bank's option upon the occurrence of any Event of Default (as hereinafter
defined) and during the continuance thereof, this Note shall bear interest at
the Default Rate set forth in the Loan Agreement (the "Default Rate"). The
Default Rate shall continue to apply whether or not judgment shall be entered
on this Note. Both the Late Charge and the Default Rate are imposed as
liquidated damages for the purposes of defraying the Bank's expenses incident
to the handling of delinquent payments, but are in addition to, and not in lieu
of, the Bank's exercise of any rights and remedies hereunder, under the other
Loan Documents or under applicable law, and any fees and expenses of any agents
or attorneys which the Bank may employ. In addition, the Default Rate reflects
the increased credit risk to the Bank of carrying a loan that is in default.
The Borrower agrees that the Late Charge and Default Rate are reasonable
forecasts of just compensation for anticipated and actual harm incurred by the
Bank, and that the actual harm incurred by the Bank cannot be estimated with
certainty and without difficulty.
6. Prepayment. The indebtedness evidenced by this Note may be prepaid in
whole or in part at any time, subject to the terms of the Loan Agreement.
7. Other Loan Documents. This Note is issued in connection with an Amended and
Restated Loan Agreement between the Borrower and the Bank dated November 10,
1995 (as amended to date, the "Loan Agreement"), and the other agreements and
documents executed in connection therewith or referred to therein, the terms of
which are incorporated herein by reference (as amended, modified or renewed
from time to time, collectively the "Loan Documents").
<PAGE>
8. Events of Default. The occurrence of any Event of Default under the Loan
Agreement will be deemed to be an "Event of Default" under this Note.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in Sections 7.01 (E), (F) or (G) of the Loan Agreement shall occur,
the outstanding principal balance and accrued interest hereunder together with
any additional amounts payable hereunder shall be immediately due and payable
without demand or notice of any kind; (c) if any other Event of Default shall
occur, the outstanding principal balance and accrued interest hereunder
together with any additional amounts payable hereunder, at the Bank's option
and without demand or notice of any kind, may be accelerated and become
immediately due and payable; (d) at the Bank's option, this Note will bear
interest at the Default Rate from the date of the occurrence of the Event of
Default and during the continuance thereof; and (e) the Bank may exercise from
time to time any of the rights and remedies available under the Loan Documents
or under applicable law.
9. Right of Setoff. In addition to all liens upon and rights of setoff against
the Borrower's money, securities or other property 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 of the
Borrower's deposits, moneys, securities and other property now or hereafter in
the possession of or on deposit with, or in transit to, the Bank or any other
direct or indirect subsidiary of PNC Bank Corp., 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.
10. Miscellaneous. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in writing (except
as may be agreed otherwise above with respect to borrowing requests) and will
be effective upon receipt. Such notices and other communications may be
hand-delivered, sent by facsimile transmission with confirmation of delivery
and a copy sent by first-class mail, or sent by nationally recognized overnight
courier service, to the addresses for the Bank and the Borrower set forth above
or to such other address as either may give to the other in writing for such
purpose. No delay or omission on the Bank's part 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, nor will the Bank's action or inaction impair any
such right or power. No modification, amendment or waiver of any provision of
this Note nor consent to any departure by the Borrower therefrom will be
effective unless made in a writing signed by the Bank. 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; provided, however, that
the Borrower may not assign this Note in whole or in part without the Bank's
written consent and the Bank at any time may assign this Note in whole or in
part. This Note amends and restates, but does not extinguish the indebtedness
evidenced by, all notes previously executed in connection with the Revolving
Loan evidenced hereby.
<PAGE>
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 in the county or judicial district where the Bank's office
indicated above is located; 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.
11. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND 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 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.
WITNESS / ATTEST: ___________________________________
George J. Daulerio, Jr. By:/s/C. Harry Knowles
(SEAL)
Print Name: George J. Daulerio, Jr. Print Name: C. Harry Knowles
Title: Controller Title: CEO
<PAGE>
Exhibit 10.2
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT (the "Amendment") made as of July 14, 2000
by and between METROLOGIC INSTRUMENTS, INC. ("Borrower") and PNC BANK, NATIONAL
ASSOCIATION ("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 July 31, 2001, 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 $2,500,000 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 July 31, 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) provided,
that at Borrower's option, the principal outstanding as of July 31, 2001 can
instead be converted to a lease with PNC Leasing Corp., subject to such terms,
including amount of lease payments and effective rate of interest, and
conditioned on execution of lease documents, as shall be acceptable to Bank and
PNC Leasing Corp.
a. As used herein, "Eligible Capital Expenditures" shall mean capital
expenditures made by Borrower during the period commencing on the date hereof
through July 31, 2001 for which no debt (other than the Convertible Line) has
been incurred and which are for the purchase of equipment, 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. Acquisition Facility. In addition to each other Loan established by the
Credit Agreement, Bank hereby establishes for Borrower a non-revolving line of
credit (herein, the "Acquisition Loan") subject to the following terms: From
time to time through and including August 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 Acquisition Loan, up to an aggregate amount
of $5,000,000 for the purpose of financing Eligible Acquisitions (as
hereinafter defined). The Acquisition Loan 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 100% of the purchase price payable
by the Borrower (or MIG, as defined below) in connection with such Eligible
Acquisition, and Borrower will, as a condition to each advance, provide Bank
with copies of all documents, including agreements of sale, joint venture
agreements, charter documents, and the like, executed or to be executed in
connection with or otherwise related to such Eligible Acquisition. On September
1, 2000 all advances then outstanding will be converted to a term loan and
shall be repaid in accordance with the Acquisition Loan Note (as hereinafter
defined).
<PAGE>
a. As used herein, "Eligible Acquisitions" shall mean:
(i) the acquisition previously made through Borrower's German
subsidiary, Metrologic Instruments GmbH ("MIG"), of a 51% controlling joint
venture interest in a Spanish company, Metrologic Eria Iberica SL, pursuant to
that certain purchase agreement attached hereto as Exhibit A; and
(ii) the acquisition currently contemplated to be made through MIG of
a controlling joint venture interest in a French company, Metrologic Eria SA,
pursuant to a certain purchase agreement acceptable to Bank in its reasonable
discretion.
b. The Acquisition Loan 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 Acquisition Loan 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 "Acquisition Loan Note") to evidence Borrower's obligation
to repay to Bank, with interest, the principal amount of the Acquisition Loan,
all as more fully set forth in the Acquisition Loan Note, the terms of which
are incorporated herein by reference.
3. Interest Rate: (a) The following shall be added to the Credit Agreement by
inserting in Section 1 thereof the following in the appropriate alphabetical
order:
"Applicable Margin" shall mean, for any Quarterly Period and with
respect to the rate of interest for such Quarterly Period, the number of basis
points set forth in Annex I hereto which corresponds to Borrower's Debt Ratio
as reflected in Borrower's compliance certificate for the fiscal quarter
related to such Quarterly Period. On and after the date hereof and until the
Quarterly Period related to Borrower's fiscal quarter ending June 30, 2000, the
Applicable Margin will be as set forth in Annex I as Level II.
"Debt Ratio" shall mean, as of the last day of any fiscal quarter,
Borrower's Funded Debt as of such date divided by Borrower's EBITDA for the
four fiscal quarters ending on such date.
"EBITDA" shall mean pre tax earnings (calculated without regard to
extraordinary loss or gain determined in accordance with GAAP) plus the sum of
depreciation and amortization expense and interest expense during the period
for which pre tax earnings was calculated.
"Funded Debt" shall mean all Indebtedness for borrowed money
(including but not limited to guaranties thereof and capitalized lease
obligations but excluding subordinated indebtedness) plus (without duplication)
the face amount of all letters of credit issued for Borrower's account and all
reimbursement obligations.
"Quarterly Period" shall mean the three (3) calendar month period
commencing on the first day of the month next following the month in which
Borrower provides Bank with a quarterly compliance certificate pursuant to
Section 6.01(A)(3) of the Credit Agreement.
(b) Each advance outstanding under the Revolving Loan shall
bear interest at a per annum rate of interest equal to the sum of (a) the euro
Rate (as presently set forth in and subject to the existing terms of the Credit
Agreement) plus (b) the Applicable Margin.
(c) If Borrower's Debt Ratio ever equals or exceeds 2.75
to 1, Borrower will upon Bank's demand grant to Bank, pursuant to a written
security agreement and UCC-1 financing statements satisfactory to Bank, a first
priority security interest in all of Borrower's then owned and thereafter
arising accounts receivable, inventory, equipment and all other personnel
property of any nature and all proceeds thereof, failing which shall constitute
an Event of Default for all purposes of the Credit Agreement. In order to more
fully effect the forgoing, Borrower will concurrently herewith execute and
deliver to Bank a Security Agreement and UCC-1 Financing Statements in form
acceptable to Bank, none of which, however, will be effective unless and until
Borrower's Debt Ratio equals or exceeds 2.75 to 1.0.
<PAGE>
4. 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 the Acquisition Loan Note;
(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.
5. 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.
6. 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:/s/Denise Viola-Monahan
METROLOGIC INSTRUMENTS, INC.
By: /s/C. H. Knowles
Attest: /s/George J. Daulerio, Jr.
<PAGE>
ANNEX I
PRICING GRID
---------------- --------------------- ------------------- --------------------
LEVEL I LEVEL II LEVEL III
---------------- --------------------- ------------------- --------------------
---------------- --------------------- ------------------- --------------------
Basis for Pricing If the Borrower's If the Borrower's If the Borrower's
Debt Ratio is less Debt Ratio is equal Debt Ratio is
than 1.1 to 1. to or greater than greater than or
1.1 to 1 but less equal to 2.0 to 1 but
than 2.0 to 1. less than 3.0 to 1.
---------------- --------------------- ------------------- --------------------
---------------- --------------------- ------------------- --------------------
EURO/b.p. 125 150 175
---------------- --------------------- ------------------- --------------------
---------------- --------------------- ------------------- --------------------
Applicable Rate .25% .25% .30%
(commitment fee)
---------------- --------------------- ------------------- --------------------
<PAGE>
Exhibit 10.3
[OBJECT OMITTED]
Acquisition Loan Note
$5,000,000.00 July 14, 2000
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 FIVE
MILLION DOLLARS ($5,000,000.00) or such lesser amount as may be advanced to or
for the benefit of the Borrower under the Acquisition Loan 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. Principal shall be due and payable in fifty-nine consecutive
monthly installments each in an amount equal to 1/60th of the principal hereof
outstanding on August 31, 2000, commencing September 1, 2000 and continuing on
the first (1st) day of each month thereafter. Interest is payable monthly on
the first (1st) day of each consecutive month commencing on August 1, 2000. Any
outstanding principal and accrued but unpaid interest shall be due and payable
in full on August 1, 2005.
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 the Borrower prepays (whether voluntary, on default or
otherwise) all or any part of the principal hereof on other than the last day
of the Euro-Rate Interest Period, the Borrower shall pay to the Bank, on demand
therefor, all amounts due pursuant as hereinafter set forth, including the Cost
of Prepayment, if any. The Borrower shall pay to the Bank, on written demand
therefor, together with the written evidence of the justification therefor, all
direct costs incurred, losses suffered or payments made by Bank by reason of
any change in law or regulation or its interpretation imposing any reserve,
deposit, allocation of capital, or similar requirement (including without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) on the Bank, its holding company or any of their respective assets. In
addition, the Borrower agrees to indemnify the Bank against any liabilities,
losses or expenses (including loss of margin, any loss or expense sustained or
incurred in liquidating or employing deposits from third parties, and any loss
or expense incurred in connection with funds acquired to effect, fund or
maintain any of the Borrower's indebtedness (or any part thereof) bearing
interest at a Euro-Rate based rate) which the Bank sustains or incurs as a
consequence of either (i) the Borrower's failure to make a payment on the due
date thereof, (ii) the Borrower's revocation (expressly, by later inconsistent
notices or otherwise) in whole or in part of any notice given to Bank to
request, convert, renew or prepay any advance, or (iii) the Borrower's payment,
prepayment or conversion of any advance on a day other than the last day of the
applicable Euro-Rate Interest Period, including but not limited 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. The Bank's
determination of an amount payable under this paragraph shall, in the absence
of manifest error, be conclusive and shall be payable on demand.
<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 Acquisition Loan 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:/s/C. H. Knowles
Name:C. H. Knowles
Title:CEO
<PAGE>
Exhibit 10.4
[OBJECT OMITTED]
Convertible Line of Credit Note
$2,500,000.00 July 14, 2000
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 FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00) 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 August 1, 2001 and continuing on the first (1st)
day of each month thereafter, principal shall be due and payable over a term
mutually agreeable to both parties, but in no event to exceed five (5) years
(the "Term"), in equal consecutive monthly installments, each of which shall be
in an amount determined by dividing the outstanding principal amount hereunder
on July 31, 2001 by the number of months constituting the Term. Interest is
payable monthly on the first (1st) day of each consecutive month commencing on
August 1, 2000. Any outstanding principal and accrued but unpaid interest shall
be due and payable in full on the first (1st) day of the last month of the
Term.
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 the Borrower prepays (whether voluntary, on default or
otherwise) all or any part of the principal hereof on other than the last day
of the Euro-Rate Interest Period, the Borrower shall pay to the Bank, on demand
therefor, all amounts due pursuant as hereinafter set forth, including the Cost
of Prepayment, if any. The Borrower shall pay to the Bank, on written demand
therefor, together with the written evidence of the justification therefor, all
direct costs incurred, losses suffered or payments made by Bank by reason of
any change in law or regulation or its interpretation imposing any reserve,
deposit, allocation of capital, or similar requirement (including without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) on the Bank, its holding company or any of their respective assets. In
addition, the Borrower agrees to indemnify the Bank against any liabilities,
losses or expenses (including loss of margin, any loss or expense sustained or
incurred in liquidating or employing deposits from third parties, and any loss
or expense incurred in connection with funds acquired to effect, fund or
maintain any of the Borrower's indebtedness (or any part thereof) bearing
interest at a Euro-Rate based rate) which the Bank sustains or incurs as a
consequence of either (i) the Borrower's failure to make a payment on the due
date thereof, (ii) the Borrower's revocation (expressly, by later inconsistent
notices or otherwise) in whole or in part of any notice given to Bank to
request, convert, renew or prepay any advance, or (iii) the Borrower's payment,
prepayment or conversion of any advance on a day other than the last day of the
applicable Euro-Rate Interest Period, including but not limited 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. The Bank's
determination of an amount payable under this paragraph shall, in the absence
of manifest error, be conclusive and shall be payable on demand.
<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: /s/C. H. Knowles
Name: C. H. Knowles
Title: CEO
<PAGE>
Exhibit 10.5
THIS AGREEMENT IS SUBJECT TO THE TERMS OF SECTION 3(C)
OF THE AMENDMENTS TO LOAN AGREEMENT
DATED JUNE 28, 2000 AND JULY 14, 2000, RESPECTIVELY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of this 14
day of July, 2000, by and between METROLOGIC INSTRUMENTS, INC.
(the "Grantor"), with an address at Coles Road at Route 42, Blackwood, New
Jersey and PNC BANK, NATIONAL ASSOCIATION (the "Bank"), with an address at 1950
East Route 70, Cherry Hill, NJ 08003.
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 all personal property of the
Grantor, including the following, all whether now owned or hereafter acquired
or arising and wherever located: (i) accounts, accounts receivable, contract
rights, chattel paper, notes receivable, securities entitlements, securities
accounts, investment property, depository accounts, instruments and documents
(including warehouse receipts); (ii) goods of every nature, including
inventory, stock-in-trade, raw materials, work in process, items held for sale
or lease or furnished or to be furnished under contracts of sale or lease,
goods that are returned, reclaimed or repossessed, together with materials used
or consumed in the Grantor's business; (iii) equipment, including machinery,
vehicles, furniture and fixtures; (iv) general intangibles, of every kind and
description, including all existing and future customer lists, choses in
action, claims (including claims for indemnification or breach of warranty),
books, records, patents and patent applications, copyrights, trademarks,
tradenames, tradestyles, trademark applications, goodwill, blueprints,
drawings, designs and plans, trade secrets, contracts, licenses, license
agreements, formulae, tax and any other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies, and computer
information, software, source codes, object codes, records and data; (v) all
property of the Grantor now or hereafter in the Bank's possession or in transit
to or from, under the custody or control of or on deposit with, the Bank or any
affiliate thereof, including deposit and other accounts; (vi) all cash and cash
equivalents; and (vii) all cash and non-cash proceeds (including insurance
proceeds) of all of the foregoing property, all products thereof and all
additions and accessions thereto, substitutions therefor and replacements
thereof.
(b) "Loan Documents" means this Agreement, any and all notes
evidencing the Obligations and all related documents, instruments and
agreements.
(c) "Obligations" shall include all loans, advances, debts,
liabilities, obligations, covenants and duties owing from the Grantor to the
Bank or to any other direct or indirect subsidiary of PNC Bank Corp., of any
kind or nature, present or future (including any interest accruing thereon
after maturity, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding relating to
the Grantor, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether or not evidenced by any note, guaranty
or other instrument, whether arising under any agreement, instrument or
document, whether or not for the payment of money, whether arising by reason of
an extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or other
interest rate protection or similar agreement, or in any other manner, whether
arising out of overdrafts on deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or otherwise) or out of
the Bank's non-receipt of or inability to collect funds or otherwise not being
made whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by
assignment or participation), absolute or contingent, joint or several, 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
reasonable attorneys' fees and expenses.
<PAGE>
(d) "UCC" means the Uniform Commercial Code, as adopted and
enacted and as in effect from time to time in the State whose law governs
pursuant to the Section of this Agreement entitled "Governing Law and
Jurisdiction." Terms used herein which are defined in the UCC and not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
UCC.
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 or
jurisdiction 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
immediately notify the Bank in writing of the additions or changes. The
Grantor's chief executive office, form of organization and jurisdiction of
organization are also shown on Exhibit "A" hereto.
4. Representations and Warranties. The Grantor represents, warrants
and covenants to the Bank that: (a) the Grantor has good, marketable and
indefeasible title to the Collateral, has not made any prior sale, pledge,
encumbrance, assignment or other disposition of any of the Collateral, and the
Collateral is free from all encumbrances and rights of setoff of any kind
except the lien in favor of the Bank created by this Agreement; (b) except as
herein provided, the Grantor will not hereafter without the Bank's prior
written consent 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; (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; (d) each account and general intangible, if included in
the definition of Collateral, is genuine and enforceable in accordance with its
terms and the Grantor will defend the same against all claims, demands, setoffs
and counterclaims at any time asserted; and (e) at the time any account or
general intangible becomes subject to this Agreement, such account or general
intangible will be a good and valid account representing a bona fide sale of
goods or services by the Grantor and such goods will have been shipped to the
respective account debtors or the services will have been performed for the
respective account debtors, and no such account or general intangible will be
subject to any claim for credit, allowance or adjustment by any account debtor
or any setoff, defense or counterclaim.
5. Grantor's Covenants. The Grantor covenants that it shall:
(a) from time to time and at all reasonable times allow the
Bank, by or through any of its officers, agents, attorneys, or accountants, to
examine or inspect the Collateral, notify account debtors of the Bank's
security interest in accounts (if included in the definition of 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 require to vest in and assure to the Bank its rights hereunder and
in or to the Collateral, and the proceeds thereof, including 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 depreciation;
(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 sole discretion. Each such
casualty insurance policy 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 the Bank's demand,
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.
<PAGE>
6. Negative Pledge; No Transfer. The Grantor will not sell or offer to
sell or otherwise transfer or grant or allow the imposition of a lien or
security interest upon the Collateral (except for sales of inventory and
collections of accounts in the Grantor's ordinary course of business) 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. INTENTIONALLY OMITTED
8. Further Assurances. At the Bank's request, the Grantor will join
with the Bank in executing one or more financing, continuation or amendment
statements pursuant to the UCC 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 in order to perfect,
preserve and protect its security interests. The Grantor authorizes the Bank to
file financing, continuation or amendment statements pursuant to the UCC with
respect to all or any part of the Collateral without the Grantor's signature,
where permitted by law. A carbon, photographic or other copy of this Agreement
or of a UCC financing statement may be filed as and in lieu of a UCC financing
statement. At the Bank's request, the Grantor will execute, in form
satisfactory to the Bank, a Rider to Security Agreement - Copyrights (if any
Collateral consists of registered or unregistered copyrights), a Rider to
Security Agreement - Patents (if any Collateral consists of patents or patent
applications), a Rider to Security Agreement - Trademarks (if any Collateral
consists of trademarks, tradenames, tradestyles or trademark applications). If
any Collateral consists of depository accounts not maintained with the Bank or
one of its affiliates, or any securities entitlement, securities account or
other investment property, then at the Bank's request the Grantor will execute,
and will cause the depository institution or securities intermediary upon whose
books and records the ownership interest of the Grantor in such Collateral
appears, such Pledge Agreements, Notification and Control Agreements or other
agreements as the Bank deems necessary in order to perfect and protect its
security interest in such Collateral, in each case in a form satisfactory to
the Bank.
9. Events of Default. The Grantor shall, at the Bank's option, 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 Loan Documents); (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) demand by the Bank under any of the Obligations that have a
demand feature; (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; or (g) the failure of the Bank
to have a perfected first priority security interest in the Collateral.
10. 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 UCC. The Bank's remedies include, but are not limited
to, the right to (a) peaceably by its own means or with judicial assistance
enter the Grantor's premises and take possession of the Collateral without
prior notice to the Grantor or the opportunity for a hearing, (b) render the
Collateral unusable, (c) dispose of the Collateral on the Grantor's premises,
(d) require the Grantor to assemble the Collateral and make it available to the
Bank at a place designated by the Bank, and (e) notify the United States Postal
Service to send the Grantor's mail to the Bank. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, 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.
The Grantor waives all relief from all appraisement or exemption laws now in
force or hereafter enacted.
<PAGE>
11. 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, with power to, upon and during the continuance of an Event of
Default (a) 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 Bank's possession in full or part
payment of any Obligations; (b) sue for, compromise, settle and release all
claims and disputes with respect to, the Collateral; and (c) sign, for the
Grantor, financing, continuation or amendment statements pursuant to the UCC,
or supplemental intellectual property security agreements; 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. 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.
12. 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 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.
13. Notices. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in writing and
will be effective upon receipt. Such notices and other communications may be
hand delivered, sent by facsimile transmission with confirmation of delivery
and a copy sent by first-class mail, or sent by nationally recognized overnight
courier service, to a party's address set forth above or to such other address
as any party may give to the other in writing for such purpose.
14. Preservation of Rights. No delay or omission on the Bank's part 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, nor will the Bank's
action or inaction impair any such right or power. 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.
15. 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.
16. Changes in Writing. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
therefrom will be effective unless made in a writing 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.
17. 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.
18. 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. Delivery of an
executed counterpart of signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart.
Any party so executing this Agreement by facsimile transmission shall promptly
deliver a manually executed counterpart, provided that any failure to do so
shall not affect the validity of the counterpart executed by facsimile
transmission.
19. 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 Bank's
prior written consent and the Bank at any time may assign this Agreement in
whole or in part.
<PAGE>
20. 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.
21. 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 all fees and charges of internal or external 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.
22. 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 in the
county or judicial district where the Bank's office indicated above is located;
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.
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.
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
WITNESS / ATTEST: METROLOGIC INSTRUMENTS, INC.
(Corporation, Partnership or other Entity)
/s/George J. Daulerio, Jr. By:/s/C. H. Knowles
(SEAL)
Print Name:George J. Daulerio, Jr. Print Name:C. H. Knowles
Title: Controller Title: CEO
PNC BANK, NATIONAL ASSOCIATION
By: /s/Denise Viola-Monahan
(SEAL)
Print Name:Denise Viola-Monahan
Title:Vice President
<PAGE>
EXHIBIT "A"
TO SECURITY AGREEMENT
Grantor's form of organization and jurisdiction of organization, if not a
natural person:
Address of Grantor's chief executive office, including the County:
Address for books and records, if different:
Addresses of other Collateral locations, including Counties and name and
address of landlord or owner if location is not owned by the Grantor:
Other names or tradenames now or formerly used by the Grantor:
