UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 14, 2000 there were 5,451,092 shares of Common Stock, $.01 par
value per share, outstanding.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
INDEX
Page
No.
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 2000 and
September 30, 1999 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000 and
September 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
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Metrologic Instruments, Inc.
Consolidated Balance Sheets
(amounts in thousands except share data)
September 30, December 31,
Assets 2000 1999
-------- --------
(Unaudited)
Current assets:
Cash and cash equivalents $ 4,433 $ 6,970
Accounts receivable, net of allowance 26,164 21,474
Inventory 25,632 11,231
Deferred income taxes 1,018 872
Other current assets 1,264 1,239
-------- --------
Total current assets 58,511 41,786
Property, plant and equipment, net 10,250 8,873
Patents and trademarks, net of amortization 2,797 2,469
Holographic technology, net of amortization 629 716
Advance license fee, net of amortization 1,559 1,647
Goodwill, net of amortization 4,155 643
Other assets 599 539
-------- --------
Total assets $ 78,500 $ 56,673
======== ========
Liabilities and shareholders' equity
Current liabilities:
Line of credit $ 15,475 $ 3,050
Current portion of notes payable 2,348 1,282
Accounts payable 6,859 3,741
Accrued expenses 9,601 10,054
-------- --------
Total current liabilities 34,283 18,127
Notes payable, net of current portion 7,727 3,414
Deferred income taxes 556 588
Other liabilities 577 -
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; 5,449,097 and 5,410,125 shares
issued and outstanding in 2000 and 1999,
respectively 54 54
Additional paid-in capital 17,501 17,083
Retained earnings 20,526 17,966
Accumulated other comprehensive loss (2,724) (559)
-------- --------
Total shareholders' equity 35,357 34,544
-------- --------
Total liabilities and shareholders' equity $ 78,500 $ 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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
Sales $22,453 $20,153 $67,913 $57,872
Cost of sales 13,671 11,538 40,789 34,139
------- ------- ------- -------
Gross profit 8,782 8,615 27,124 23,733
Selling, general and
administrative expenses 6,476 5,407 18,326 14,927
Research and development
expenses 1,246 1,066 3,916 3,049
Severance costs 160 - 160 -
------- ------- ------- -------
Operating income 900 2,142 4,722 5,757
Other (expenses) income
Interest income 56 99 201 313
Interest expense (481) (64) (846) (170)
Foreign currency transaction
(loss) gain (145) (280) 73 (622)
Other, net (96) - (264) -
------- ------- ------- -------
Total other (expenses) income (666) (245) (836) (479)
------- ------- ------- -------
Income before provision for
income taxes 234 1,897 3,886 5,278
Provision for income taxes 84 664 1,326 1,855
------- ------- ------- -------
Net income $ 150 $ 1,233 $ 2,560 $ 3,423
======= ======= ======= =======
Basic earnings per share
Weighted average shares
outstanding 5,446,802 5,413,894 5,434,409 5,411,417
Basic earnings per share $ 0.03 $0.23 $ 0.47 $ 0.63
Diluted earnings per share
Weighted average shares
outstanding 5,446,802 5,413,894 5,434,409 5,411,417
Net effect of dilutive
securities 65,698 710 159,171 32,095
Total shares outstanding
used in computing diluted
earnings per share 5,512,500 5,414,604 5,593,580 5,443,512
Diluted earnings per share $ 0.03 $0.23 $ 0.46 $ 0.63
See accompanying notes.
<PAGE>
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Nine Months Ended
September 30,
2000 1999
(Unaudited)
Operating activities
Net cash used in operating
activities $(13,380) $(4,620)
Investing activities
Purchase of property, plant and equipment (2,748) (3,250)
Patents and trademarks (480) (620)
Purchase of subsidiaries, net (3,677) -
------- -------
Net cash used in investing activities (6,905) (3,870)
Financing activities
Proceeds from exercise of stock options and
employee stock purchase plan $ 340 $ 88
Proceeds from issuance of notes payable 6,697 2,162
Principal payments on notes payable (905) (520)
Net proceeds from line of credit 12,425 2,525
Capital lease payments (82) (94)
------- -------
Net cash provided by financing activities 18,475 4,161
Effect of exchange rates on cash (727) 159
------- -------
Net decrease in cash and cash equivalents (2,537) (4,170)
Cash and cash equivalents at beginning of period 6,970 10,684
------- -------
Cash and cash equivalents at end of period $ 4,433 $ 6,514
======== =======
Supplemental Disclosure
Cash paid for interest $ 687 $ 186
Cash paid for income taxes $ 1,198 $ 900
Tax benefit from stock options $ 78 $ -
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:
September 30, December 31,
2000 1999
Raw materials $ 8,427 $ 4,273
Work-in-process 7,698 4,020
Finished goods 9,507 2,938
------- -------
$25,632 $11,231
4. Comprehensive Income
The Company's total comprehensive earnings were as follows:
Nine Months Ended
September 30,
2000 1999
(Unaudited)
Net earnings $ 2,560 $ 3,423
Other comprehensive losses:
Change in equity due to foreign
currency translation adjustments (2,165) (385)
------- -------
Comprehensive earnings $ 395 $ 3,038
<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 2000 or 1999.
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 September 30, 2000:
Sales $ 9,909 $ 398 $ 3,718 $14,025 $ 8,428 $22,453
Income (loss)
before provision
for income taxes $ 302 $ (68) $ 234
Identifiable
assets $61,464 $17,036 $78,500
Three months ended September 30, 1999:
Sales $ 8,745 $297 $ 3,769 $12,811 $ 7,342 $20,153
Income (loss)
before provision
for income taxes $ 2,334 $ (437) $ 1,897
Identifiable
assets $43,114 $10,355 $53,469
Nine months ended September 30, 2000:
Sales $29,607 $1,183 $12,177 $42,967 $24,946 $67,913
Income (loss)
before provision
for income taxes $ 4,149 $ (263) $ 3,886
Nine months ended September 30, 1999:
Sales $23,944 $2,119 $ 9,502 $35,565 $22,307 $57,872
Income (loss)
before provision
for income taxes $ 6,343 $(1,065) $ 5,278
<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 nine months ended
September 30, 2000 and September 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 100 foreign countries.
Most of the Company's product sales in Western Europe, Singapore and
Brazil are billed in foreign currencies and are subject to currency exchange
rate fluctuations. Substantially all of the Company's products are manufactured
in the Company's U.S. facility, and therefore, sales and results of operations
are affected by fluctuations in the value of the U.S. dollar relative to
foreign currencies. Accordingly, in the three and nine months ended September
30, 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 September 30, 2000 Compared with Three Months Ended
September 30, 1999 (amounts in thousands except per share information)
Sales increased 11.4% to $22,453 in the three months ended September
30, 2000 from $20,153 in the three months ended September 30, 1999, principally
as a result of the continued increase in sales of the Company's point-of-sale
("POS") products. 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 12.5% and quarterly consolidated sales by
approximately 5.9% compared to the corresponding period in 1999.
International sales accounted for $12,544 (55.9% of total sales) in
the three months ended September 30, 2000 and $11,408 (56.6% of total sales) in
the three months ended September 30, 1999. Two customers accounted for 11.9%
and 5.5%, respectively of revenues in the three months ended September 30,
2000. Two customers accounted for 6.0% and 5.5%, respectively, of total
revenues in the three months ended September 30, 1999.
Cost of sales increased 18.5% to $13,671 in the three months ended
September 30, 2000 from $11,538 in the three months ended September 30, 1999,
while cost of sales as a percentage of sales increased to 60.9% from 57.3%. 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. If sales in the three
months ended September 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 57.5% in the three months ended September 30, 2000.
Selling, general and administrative ("SG&A") expenses increased 19.8%
to $6,476 in the three months ended September 30, 2000 from $5,407 in the three
months ended September 30, 1999 and increased as a percentage of sales to 28.8%
from 26.8%. 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 16.9% to $1,246 in
the three months ended September 30, 2000 from $1,066 in the three months ended
September 30, 1999, and increased as a percentage of sales to 5.5% 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.
Severence costs of $160 in the three months ended September 30, 2000
were due to the elimination of certain senior management positions resulting
from planned redundancies.
Operating income decreased 58.0% to $900 in the three months ended
September 30, 2000 from $2,142 in the three months ended September 30, 1999,
and operating income as a percentage of sales decreased to 4.0% from 10.6%.
<PAGE>
Other income/expenses reflect net other expenses of $666 in the three
months ended September 30, 2000 compared to net other expenses of $245 in the
corresponding period in 1999. Net other expenses for the three months ended
September 30, 2000 reflect higher interest costs and net foreign currency
transaction losses.
Net income decreased 87.8% to $150 in the three months ended September
30, 2000 from $1,233 in the three months ended September 30, 1999. Net income
reflects a 36% effective income tax rate for the three months ended September
30, 2000 compared to 35% for the corresponding period in 1999. The increase in
the value of the U.S. dollar relative to other foreign currencies negatively
affected diluted earnings per share by approximately $0.14 as compared to the
corresponding period in 1999.
Nine Months Ended September 30, 2000 Compared with Nine Months Ended September
30, 1999 (amounts in thousands except per share information)
Sales increased 17.4% to $67,913 in the nine months ended September
30, 2000 from $57,872 in the nine months ended September 30, 1999, principally
as a result of the continued increase in sales of the Company's POS products.
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
12.3% and year-to-date consolidated sales by 4.9%.
International sales accounted for $38,306 (56.4% of total sales) in
the nine months ended September 30, 2000 and $33,928 (58.6% of total sales) in
the nine months ended September 30, 1999. One customer accounted for 8.3% of
the Company's revenues in the nine months ended September 30, 2000. One
customer accounted for 5.3% of the Company's revenues in the nine months ended
September 30, 1999.
Cost of sales increased 19.5% to $40,789 in the nine months ended
September 30, 2000 from $34,139 in the nine months ended September 30, 1999,
and cost of sales as a percentage of sales increased to 60.1% from 59.0%. 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 and increased costs resulting from a limited supply of
electronic components purchased from vendors. If sales in the nine months ended
September 30, 1999 are adjusted to negate the effect of the reduction in the
value of the euro against the U.S. dollar as compared to the corresponding
period in 1999, cost of sales as a percentage of sales would have been 57.3%
for the nine months ended September 30, 2000.
SG&A expenses increased 22.8% to $18,326 in the nine months ended
September 30, 2000 from $14,927 in the nine months ended September 30, 1999 and
increased as a percentage of sales to 27.0% from 25.8%. 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 28.4% to $3,916 in the nine months ended
September 30, 2000 from $3,049 in the nine months ended September 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.
Severence costs of $160 in the nine months ended September 30, 2000
were due to the elimination of certain senior management positions resulting
from planned redundancies.
Operating income decreased 18% to $4,722 in the nine months ended
September 30, 2000 from $5,757 in the nine months ended September 30, 1999, and
operating income as a percentage of sales decreased to 7.0% from 9.9%.
Other income/expenses reflect net other expenses of $836 in the nine
months ended September 30, 2000 compared to net other expenses of $479 in the
corresponding period in 1999. Net other expenses for the nine months ended
September 30, 2000 reflect higher interest costs offset by net foreign currency
gains resulting from hedging activity.
<PAGE>
Net income decreased 25.2% to $2,560 in the nine months ended
September 30, 2000 from $3,423 in the nine months ended September 30, 1999. Net
income reflects a 34% effective income tax rate for the nine months ended
September 30, 2000 compared to 35% for the corresponding period in 1999. 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 $0.29 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 $24,228 as of September 30,
2000 from $23,659 as of December 31, 1999.
The Company's operating activities used net cash of $13,380 compared
with net cash used of $4,620 for the nine months ended September 30, 2000 and
1999, respectively. Net cash used by operating activities for the nine months
ended September 30, 2000 resulted primarily from increases in accounts
receivable and inventory, offset by 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 $20,000 for use in operations; (ii)
an unsecured line of credit for use in acquisitions in the amount of $5,000,
which was drawn down in equivalent euro currency; and (iii) a line of credit
for $2,500 for use in acquiring fixed assets. As of September 30, 2000,
$15,475, $5,000, and $377 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 September 30, 2000 was 6.6%. These lines of credit
require the Company to comply with certain financial covenants and other
restrictions. As of September 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 September 30, 2000 no amounts were outstanding
under these lines of credit.
Property, plant and equipment expenditures were $2,748 and $3,250 for
the nine months ended September 30, 2000 and 1999, respectively. During the
nine months ended September 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
The Company is currently involved in matters of litigation arising from the
normal course of business including those matters described below.
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
Not applicable.
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 September
20, 2000 by and between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.1 Amendment to Loan Agreement dated November
8, 2000 by and between Metrologic Instruments,
Inc. and PNC Bank, National Association
10.2 Amended and Restated Committed Line of Credit
Note dated September 20, 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 September 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: November 14, 2000 By:/s/ C. Harry Knowles
---------------- -----------------------
C. Harry Knowles
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: November 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 September 20, 2000 by and
between Metrologic Instruments, Inc. and PNC Bank, National
Association 17
10.1 Amendment to Loan Agreement dated November 8, 2000 by and
between Metrologic Instruments, Inc. and PNC Bank, National
Association 18
10.2 Amended and Restated Committed Line of Credit Note dated
September 20, 2000 between Metrologic Instruments, Inc. and
PNC Bank, National Association 20
27 Financial Data Schedule 23
<PAGE>
Exhibit 10
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT (the "Amendment") made as of September 20,
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. Increase in Revolving Loan Limit. Section 1.20
of the Credit Agreement is hereby replaced in its entirety with the following:
"Revolving Loan Limit shall mean $20,000,000.00."
2. 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.
3. 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/Thomas E. Mills IV
Attest: /s/George J. Daulerio, Jr.
<PAGE>
Exhibit 10.1
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT (the "Amendment") made as of November 8, 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. Financial Covenants. Section 6.01(M) of the Loan
Agreement is deleted in its entirety and replaced with the following:
(M) Borrower will be in compliance with
the following financial covenants, effective as of June 30, 2000 (each
calculated in accordance with GAAP):
(i) Fixed Charge Ratio. As of the last
day of each fiscal quarter, the
Fixed Charge Ratio, as measured on
a rolling four (4) quarter basis as
of the four (4) most recent
quarters, shall not be less than
1.10 : 1.00.
(ii) Tangible Net Worth. Consolidated
Tangible Net Worth (including
Subordinated Debt) of not less
than $27,500,000 as of the end of
each fiscal quarter.
(iii) Funded Debt to EBITDA Ratio. As of
the last day of each fiscal
quarter, the Funded Debt to EBITDA
Ratio, as measured on a rolling
four (4) quarter basis of the four
(4) most recent quarters, shall not
exceed 3.00 : 1.00.
As used herein, the following terms have the following meanings:
"Current Maturities" means, as of any date for the twelve
(12) month period then ending, the current principal maturities of all
indebtedness for borrowed money (including but not limited to amortization of
capitalized lease obligations) having an original term of more than one year.
"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.
"Fixed Charged Ratio" shall mean, as of the last day of any
fiscal quarter for the four (4) fiscal quarters then ended, Borrower's EBITDA
to the sum of Current Maturities plus interest expense plus Unfunded Capital
Expenditures plus tax expense plus dividends.
"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.
"Funded Debt to EBITDA Ratio" shall mean, as of the last day
of any fiscal quarter for the four (4) fiscal quarters then ended, Borrower's
Funded Debt to EBITDA
<PAGE>
"Tangible Net Worth" shall mean stockholders' equity in the
Borrower less any advances to third parties, except those advances which the
Bank deems to have been satisfactorily subordinated, and less all items
properly classified as intangibles, in accordance with GAAP.
"Unfunded Capital Expenditures" means capital expenditures
made from the Borrower's funds other than borrowed funds. Capital Expenditures
made from Revolving Loan Advances are Unfunded Capital Expenditures.
2. Negative Covenants.
(a) Section 6.02(I) of the Loan Agreement is
hereby amended and restated as follows:
"(I) Obligor will not make Capital
Expenditures in excess of $3,000,000 per
fiscal year, on a non-cumulative basis."
(b) Section 6.02(H) of the Loan Agreement is
hereby confirmed to be:
"(H) Obligor will not acquire any stock in,
or all or substantially all of the assets
of, or any partnership or joint venture
interest in, or make any loan to or
investment in, or become an Affiliate of,
any other Person or entity, except to the
extent of acquisitions with a purchase
price, loans or investments with an
outstanding balance not exceeding
$1,500,000 in the aggregate at any time."
3. 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.
4. 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/Thomas E. Mills IV
Attest: /s/George J. Daulerio, Jr.
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED
COMMITTED LINE OF CREDIT NOTE
$20,000,000.00 September 20, 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 Twenty Million Dollars ($20,000,000) (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.
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.
<PAGE>
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: ___________________________________
/s/George J. Daulerio Jr. By: /s/Thomas E. Mills IV
(SEAL)
Print Name:George J. Daulerio Jr. Print Name: Thomas E. Mills IV
Title: Controller Title: President and COO
(Include title only if an officer of entity signing to the right)
