UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
x	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12

METROLOGIC INSTRUMENTS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
o	No fee required.
x	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
		Common Stock, par value $0.01 per share, of Metrologic Instruments, Inc. (“Metrologic common stock”)
	(2)	Aggregate number of securities to which transaction applies:
		22,770,094 shares of Metrologic common stock, options to purchase 1,748,130 shares of Metrologic common stock and warrants to purchase 195,000 shares of Metrologic common stock(1)
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
		$18.50 per share of Metrologic common stock
		$18.50 minus weighted average exercise price of outstanding options of $4.00 per share subject to an option with an exercise price that is less than $18.50
		$1.00 per award for options with an exercise price that is greater than or equal to $18.50
		$18.50 minus exercise price of warrants of $3.47 per share subject to a warrant
	(4)	Proposed maximum aggregate value of transaction:
		$369,128,879(1)
	(5)	Total fee paid:
		$39,497(1)
o	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)	Amount Previously Paid:

	(2)	Form, Schedule or Registration Statement No.:

	(3)	Filing Party:

	(4)	Date Filed:

(1) Pursuant to an Agreement and Plan of Merger by and between Meteor Holding Corporation, Meteor Merger Corporation and the Registrant dated as of September 12, 2006, Meteor Merger Corporation will merge with and into the Registrant and each outstanding share of common stock of the Registrant shall be converted into the right to receive $18.50, without interest, except for shares that are owned by the Registrant as treasury stock or owned by Meteor Holding Corporation or any wholly owned subsidiary of Meteor Holding Corporation or the Registrant, which will be cancelled without any payment therefor. Pursuant to Contribution and Voting Agreements between Meteor Merger Corporation and certain shareholders of the Registrant dated as of September 12, 2006, such shareholders will contribute an aggregate of 3,384,463 shares of common stock of the Registrant to Meteor Holding Corporation immediately prior to the merger in exchange for shares of Meteor Holding Corporation. Each holder of options to acquire the Registrant’s common stock with an exercise price that is less than $18.50 per share shall be entitled to receive, in consideration of the cancellation of such stock options, an amount (net of applicable taxes) equal to the product of (i) the excess of $18.50 per share of common stock over the exercise price per share of common stock subject to such stock option, multiplied by (ii) the total number of shares subject to such stock option. Each holder of options with an exercise price that is greater than or equal to $18.50 per share will receive $1.00 per award. Each holder of warrants to acquire the Registrant’s common stock shall be entitled to receive upon exercise an amount (net of applicable taxes) equal to the product of (i) the excess of $18.50 per share of common stock over the exercise price per share of common stock subject to such warrant, multiplied by (ii) the total number of shares subject to such warrant. As of October 2, 2006, there were 22,770,094 shares of common stock of the Registrant issued and outstanding, 521,630 shares of common stock of the Registrant subject to outstanding stock options with an exercise price that is less than $18.50 per share, with a weighted-average exercise price of $4.00 per share, 220 option awards covering 1,226,500 shares of common stock of the Registrant with an exercise price that is greater than or equal to $18.50 per share, and 195,000 shares of common stock of the Registrant subject to outstanding warrants, with an exercise price of $3.47 per share. The filing fee was determined by adding (w) the product of (i) the number of shares of Common Stock that are proposed to be acquired in the transactions (calculated by subtracting 3,384,463 from 22,770,094) and (ii) the transaction consideration of $18.50 per share of common stock, plus (x) the product of (1) the total number of shares of Metrologic common stock subject to outstanding stock options with an exercise price that is less than $18.50 per share multiplied by (2) the excess of $18.50 over the weighted average exercise price for such stock options, plus (y) the product of (1) the total number of option awards with an exercise price that is greater than or equal to $18.50 multiplied by (2) $1.00 plus (z) the product of (1) the total number of shares of Metrologic common stock subject to outstanding warrants multiplied by (2) the excess of $18.50 over the exercise price for such warrants ((w), (x), (y) and (z) together, the “Merger Consideration”). The filing fee was calculated in accordance with Regulation 240.0-11 under the Exchange Act, by multiplying the Merger Consideration by 0.000107.

SUMMARY TERM SHEET

The following summary term sheet highlights selected information from this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement. In this proxy statement, the terms “Metrologic,” the “Company,” “we,” “our,” “ours,” and “us” refer to Metrologic Instruments, Inc. and its subsidiaries, taken together.

The Merger and Related Matters

· The Merger. You are being asked to vote to approve an agreement and plan of merger by and between Meteor Holding Corporation, Meteor Merger Corporation and Metrologic, which provides for the merger of Meteor Merger Corporation with and into Metrologic. Upon the completion of the merger, Metrologic will be the surviving corporation and a wholly owned subsidiary of Meteor Holding Corporation, and the separate existence of Meteor Merger Corporation will cease. We refer to the agreement and plan of merger in this proxy statement as the “merger agreement.” See “The Merger Agreement (Proposal No. 1)” beginning on page 65. A copy of the merger agreement is attached as Annex A to this proxy statement.

· Parties to the Merger. Metrologic is a New Jersey corporation that was incorporated in New Jersey on May 19, 1969. Metrologic is an expert in optical image capture and processing solutions. Metrologic utilizes its expertise to design, manufacture and market sophisticated imaging and scanning solutions serving a variety of point-of-sale, commercial and industrial applications. Metrologic’s solutions utilize a broad array of laser, holographic and vision-based technologies designed to provide superior functionality and a compelling value proposition for our customers.

Meteor Holding Corporation is a Delaware corporation that was incorporated on September 1, 2006. As of the date of this proxy statement, FP-Metrologic, LLC, an entity affiliated with Francisco Partners II, L.P., a private equity firm, is the sole stockholder of Meteor Holding Corporation. References in this proxy statement to Francisco Partners shall mean Francisco Partners II, L.P. and its affiliated funds. At the time of the merger, Meteor Holding Corporation will be owned by entities and individuals we refer to as the Investor Group. The Investor Group will consist of:

· FP-Metrologic, LLC, which we refer to as the Francisco Partners Investor;

· C. Harry Knowles, our founder, Chairman of our board of directors and our interim Chief Executive Officer; and

· Elliott Associates, L.P. and Elliott International, L.P., multi-strategy hedge funds under common management that are current shareholders of Metrologic, which we collectively refer to as the Elliott Investors.

Meteor Merger Corporation is a New Jersey corporation that was incorporated on August 31, 2006. Meteor Holding Corporation is the sole shareholder of Meteor Merger Corporation.

Neither Meteor Holding Corporation nor Meteor Merger Corporation have participated in any activities to date other than activities incident to their formation and the transactions contemplated by the merger agreement.

See “The Parties to the Merger” beginning on page 58.

· Rollover Investors. C. Harry Knowles and the Elliott Investors, who we collectively refer to as the Rollover Investors, have agreed, severally and not jointly, to contribute a portion of the shares of Metrologic common stock held by them to Meteor Holding Corporation immediately prior to the completion of the merger in exchange for shares of junior preferred stock and common stock of Meteor Holding Corporation. The number of shares of junior preferred stock and common stock that will be issued in exchange for the shares of Metrologic common stock contributed to Meteor Holding Corporation by the Rollover Investors will be equal to the aggregate value of the shares of

Metrologic common stock they contribute to Meteor Holding Corporation, based on the $18.50 per share merger price, divided by the price per share being paid by the Francisco Partners Investor for shares of junior preferred stock and common stock of Meteor Holding Corporation in connection with the financing of the merger. As a result of these contributions, immediately following the closing, Mr. Knowles will own 15% of the junior preferred stock and 15% of the common stock of Meteor Holding Corporation and the Elliott Investors will collectively own approximately 15.2% of the junior preferred stock and approximately 15.2% of the common stock of Meteor Holding Corporation. The shares of our common stock contributed by Mr. Knowles and the Elliott Investors will be cancelled and cease to exist at the effective time of the merger and no payment of the merger consideration shall be made in respect of those shares. See “Special Factors—Financing of the Merger” beginning on page 42, “Special Factors—Interests of Certain Persons in the Merger” beginning on page 46 and “Other Agreements Relating to our Securities—Contribution and Voting Agreements” beginning on page 82.

· Payment for Common Stock. If the merger is completed, each share of Metrologic common stock issued and outstanding at the effective time of the merger will be converted into the right to receive $18.50 in cash, without interest, other than shares held by us as treasury stock or owned by Meteor Holding Corporation or any wholly owned subsidiary of Meteor Holding Corporation or Metrologic, which will be cancelled. See “The Merger Agreement (Proposal No. 1)—Treatment of Stock, Options and Warrants” beginning on page 65.

· Treatment of Options. In connection with the merger, holders of stock options granted under our 2004 Equity Incentive Plan with an exercise price that is less than $18.50 per share will receive cash, without interest, in an amount equal to the product of (1) the total number of shares of Metrologic common stock subject to the option multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, less any applicable taxes. Each holder of stock options granted under our 2004 Equity Incentive Plan with an exercise price that is greater than or equal to $18.50 per share will receive $1.00 per award. Metrologic expects to make an offer to holders of options granted under our 1994 Incentive Plan to cancel all of their options in exchange for a cash payment, without interest, equal to the product of (1) the total number of shares of Metrologic common stock subject to the option multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, less any applicable taxes. All of the options held by employees who will be eligible to participate in the offer have exercise prices that are less than $18.50 per share. See “The Merger Agreement (Proposal No. 1)—Treatment of Stock, Options and Warrants” beginning on page 65.

· Treatment of Warrants. In connection with the merger, each warrant exercisable for Metrologic common stock will become exercisable for an amount of cash per share of Metrologic common stock issuable upon exercise of the warrant, without interest, equal to $18.50. See “The Merger Agreement (Proposal No. 1)—Treatment of Stock, Options and Warrants” beginning on page 65.

· Purposes of the Merger. The purpose of the merger for Metrologic is to enable Metrologic’s shareholders (other than the Rollover Investors to the extent of their contributions to Meteor Holding Corporation) to immediately realize the value of their investment in Metrologic through their receipt of the per share merger price of $18.50 in cash, without interest. For Meteor Holding Corporation and Meteor Merger Corporation, the primary purpose of the merger is to benefit from any future earnings and growth of Metrologic after Metrologic’s common stock ceases to be publicly traded. The principal purpose of the merger for Mr. Knowles is to enable him to realize the value of a substantial majority of his investment. A secondary purpose of the merger for Mr. Knowles is to allow him, through his commitment to make an equity investment in Meteor Holding Corporation, to benefit from any future earnings and growth of Metrologic after its stock ceases to be publicly

traded. See “Special Factors—Purposes, Reasons and Plans for Metrologic After the Merger” beginning on page 38.

· Effect of the Merger on Metrologic. If the merger is completed, Metrologic will continue its operations as a privately-held company owned by Meteor Holding Corporation, which in turn will be owned by the Investor Group. After the merger, Metrologic’s shares will no longer be quoted on The NASDAQ Global Select Market. In addition, the registration of Metrologic common stock under the Securities Exchange Act of 1934 will be terminated. As a result, Metrologic will no longer be required to file periodic or other reports with the Securities and Exchange Commission with respect to its common stock or to deliver proxy statements or information statements in connection with shareholders’ meetings. In addition, this termination will result in Metrologic no longer being subject to the provisions of the Sarbanes-Oxley Act of 2002 or the liability provisions of the Securities Exchange Act of 1934 immediately following the merger and officers of Metrologic will no longer be required to publicly certify the accuracy and completeness of the financial statements and other information relating to Metrologic. See “Special Factors—Certain Effects of the Merger” beginning on page 39.

· Special Committee. Our board of directors formed a special committee, consisting entirely of directors who are not officers or employees of Metrologic and who will not have an economic interest in Metrologic following the merger. The special committee was charged with representing the interests of our unaffiliated shareholders and was actively involved in extended and numerous deliberations and negotiations regarding the merger on behalf of the unaffiliated shareholders. In this capacity, the special committee retained and received advice from Needham & Company, LLC, as financial advisor, and Ballard Spahr Andrews & Ingersoll, LLP, as legal advisor. The members of the special committee acted solely on behalf of the unaffiliated shareholders and did not retain an unaffiliated representative to act solely on behalf of the unaffiliated shareholders for purposes of negotiating the terms of the merger or to prepare a report concerning the fairness of the transaction. See “Special Factors—Background of Merger” beginning on page 16 and “Special Factors—Reasons for the Special Committee’s Recommendation” beginning on page 26.

· Special Committee Recommendation. The special committee unanimously recommends that Metrologic’s shareholders vote “FOR” the approval of the merger agreement. See “Special Factors—Recommendations of the Special Committee and the Board of Directors” beginning on page 25.

· Board of Directors Recommendation. Our board of directors unanimously recommends that Metrologic’s shareholders vote “FOR” the approval of the merger agreement. See “Special Factors—Recommendations of the Special Committee and the Board of Directors” beginning on page 25.

· Opinion of Financial Advisor. The special committee received an opinion on September 11, 2006, from Needham & Company, LLC, the financial advisor to the special committee, or Needham & Company, to the effect that, as of that date and based upon and subject to the assumptions and other matters set forth in its opinion, the merger consideration of $18.50 in cash per share to be received by holders of our common stock (other than the Rollover Investors) pursuant to the merger agreement was fair to those holders from a financial point of view. Metrologic has agreed to pay Needham & Company a maximum fee for its services of $1 million, none of which is contingent on the consummation of the merger. See “Special Factors—Opinion of Needham & Company, LLC” beginning on page 30. A copy of Needham & Company’s opinion is attached as Annex B to this proxy statement.

· Interests of Certain Persons in the Merger. In considering the proposed transactions, you should be aware that some Metrologic shareholders, directors, officers and employees have interests in the

merger that may be different from, or in addition to, your interests as a Metrologic shareholder generally, including the following:

· the Rollover Investors will hold equity interests in, and have certain governance and economic rights with respect to, Meteor Holding Corporation;

· the Rollover Investors will have rights to certain fees payable in connection with, and/or following, the merger;

· C. Harry Knowles will serve as the Initial Chief Executive Officer of Meteor Holding Corporation and will enter into an employment agreement;

· in-the-money stock options held by directors, officers and employees of Metrologic will be cashed out in the merger;

· certain of our current executive officers and members of management are expected to continue in their current positions after the merger, and to receive grants of stock options and participate in a cash retention program; and

· current and former directors and officers of Metrologic will be entitled to continued indemnification and directors’ and officers’ liability insurance.

See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 46.

· Financing of the Merger. Meteor Holding Corporation estimates that approximately $ million will be the total amount of funds required to pay the merger consideration in connection with the merger and to pay related fees and expenses. Meteor Holding Corporation expects this amount, together with the related working capital requirements of Metrologic following the completion of the merger, to be provided through a combination of the proceeds of the following:

· an aggregate cash equity investment by the Francisco Partners Investor of $128.0;

· approximately $62.6 million in rollover equity financing from the Rollover Investors;

· a new $160.0 million senior secured first loan facility, consisting of a $125.0 million term loan facility and a $35.0 million revolving credit facility;

· a new $75.0 million senior secured second lien loan facility; and

· cash and fully liquid cash equivalents held by Metrologic.

See “Special Factors—Financing of the Merger” beginning on page 42.

· Other Offers. The merger agreement restricts Metrologic’s ability to, among other things, solicit or engage in discussions or negotiations with a third party regarding specified transactions involving Metrologic. However, under specified circumstances, the board of directors of Metrologic may respond to unsolicited acquisition proposals and may terminate the merger agreement if Metrologic desires to accept an unsolicited superior proposal, as defined in the merger agreement, subject to the prior or concurrent payment of an $18.25 million termination fee to Meteor Holding Corporation or its designee. In the event that the merger agreement is terminated under certain circumstances, Mr. Knowles and certain related parties have agreed, with respect to shares of our common stock owned by Mr. Knowles and the related parties amounting to 35% of the total outstanding shares, to vote such shares against any alternative proposal to acquire us and to be subject to certain restrictions on transfer of such shares, in each case for a period of up to 10 months. In addition, in the event that the Elliott Investors fail to vote the shares of our common stock that they beneficially own against an alternative proposal to acquire Metrologic during the three-month period after the termination of the merger agreement, under certain circumstances the

right of Elliott Associates, L.P. to receive a portion of any termination fee received by Meteor Holding Corporation in the merger, as described more fully elsewhere in this proxy statement, will be forfeited in whole or in part. See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 46, “The Merger Agreement (Proposal No. 1)—No Solicitation of Transactions” beginning on page 72, “The Merger Agreement (Proposal No. 1)—Termination” beginning on page 78 and “Other Agreements—Contribution and Voting Agreements—Voting and Exclusivity” beginning on page 83.

· Tax Consequences. Generally, the consideration received in the merger will be taxable for U.S. federal income tax purposes. You will recognize taxable gain or loss in the amount of the difference between $18.50 and your adjusted tax basis for each share of Metrologic common stock that you own. However, special tax consequences may apply to the Rollover Investors who acquire an equity interest in Meteor Holding Corporation. See “Special Factors—Material U.S. Federal Income Tax Consequences” beginning on page 51.

· Conditions. The completion of the merger pursuant to the merger agreement is subject to (1) approval of the merger agreement by the affirmative vote of a majority of the votes cast by the holders of our common stock present in person or represented by proxy at the special meeting and entitled to vote thereon, (2) the receipt of debt financing by Meteor Holding Corporation, and (3) specified other conditions. See “The Merger Agreement (Proposal No. 1)—Conditions to Completion of the Merger” beginning on page 76.

The Special Meeting and Related Matters

· Date, Time and Place. The special meeting of Metrologic’s shareholders will be held on , beginning at .m., local time, at Metrologic’s principal executive offices at 90 Coles Road, Blackwood, New Jersey 08012.

· Record Date and Voting. You are entitled to vote at the special meeting if you owned shares of Metrologic common stock at the close of business on , 2006, the record date for the special meeting. Each outstanding share of our common stock on the record date entitles the holder to one vote on each matter submitted to shareholders for approval at the special meeting. As of the close of business on the record date, there were shares of common stock of Metrologic entitled to be voted at the special meeting. See “The Special Meeting—Record Date, Quorum and Voting Power” beginning on page 62.

· Shareholder Vote Required to Approve the Merger Agreement. For Metrologic to complete the merger, a majority of votes cast by holders of our common stock present in person or represented by proxy at the special meeting and entitled to vote thereon must vote “FOR” the approval of the merger agreement. See “The Special Meeting—Required Vote” beginning on page 62.

· Share Ownership of Directors and Executive Officers and Certain Shareholders. As of the close of business on the record date for the special meeting, the directors and executive officers of Metrologic held and are entitled to vote, in the aggregate, shares of our common stock, representing approximately % of the outstanding shares of our common stock, including shares beneficially owned by Mr. Knowles and certain related parties. Pursuant to the terms of the contribution and voting agreement described elsewhere in this proxy statement, Mr. Knowles and certain related parties have agreed to vote or consent, or cause to be voted or consented, all shares of our common stock that he or they beneficially own or control in favor of approving the merger agreement. As of the record date for the special meeting, Mr. Knowles and certain related parties collectively may be deemed to beneficially own [9,407,133] shares of our outstanding common stock, representing approximately [41.3]% of the outstanding shares of our common stock. In addition, the Elliott Investors, which collectively beneficially own [1,703,885] shares of our outstanding

common stock as of the record date, representing approximately [7.5]% of the outstanding common stock, also entered into a contribution and voting agreement with Meteor Holding Corporation pursuant to which they agreed to vote all of the shares that they beneficially own in favor of the merger agreement. Our other directors and executive officers have informed us that they intend to vote all of their shares of our common stock “FOR” the approval of the merger agreement. The approval of the merger agreement does not require the affirmative vote of a majority of the shares of common stock held by Metrologic’s unaffiliated shareholders. See “The Special Meeting—Voting by Directors and Executive Officers” beginning on page 63. A copy of the contribution and voting agreements are attached as Annex C-1 and Annex C-2 to this proxy statement.

· Appraisal or Dissenter’s Rights. Under New Jersey law, holders of Metrologic common stock are not entitled to appraisal or dissenter’s rights in connection with the merger because Metrologic common stock is listed on the NASDAQ Global Select Market and because cash consideration is being paid for their shares in the merger.

· Litigation Related to the Merger. On September 13, 2006, an action, titled Savarese v. Close, et. al., was filed in the Superior Court of New Jersey Law Division: Camden County against Metrologic and all of the members of Metrologic’s board of directors as defendants. On September 14, 2006, an action, titled Wilkenfeld v. Knowles, et. al., was filed in the Superior Court of New Jersey Chancery Division: Camden County against Metrologic and all members of Metrologic’s board of directors as defendants and another action, titled Marcin v. Metrologic Instruments, Inc., et. al., was filed in the Superior Court of New Jersey Chancery Division: Gloucester County against Metrologic, all of the members of Metrologic’s board of directors, Francisco Partners and Elliott Associates, L.P., as defendants. On September 15, 2006, an action, titled Gerber v. Metrologic Instruments, Inc., et. al., was filed in the Superior Court of New Jersey Law Division: Camden County against Metrologic, all of the members of Metrologic’s board of directors and Elliott Associates L.P., as defendants. In these actions, plaintiffs purport to represent shareholders of Metrologic who are similarly situated with the plaintiffs. See “Special Factors—Litigation Related to the Merger” beginning on page 52.

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

Our board of directors is soliciting proxies for a special meeting of shareholders. The following questions and answers briefly address some commonly asked questions about the merger and the special meeting. They may not include all of the information that may be important to you. We urge you to read carefully this entire proxy statement, including the annexed documents and the other documents we refer to and incorporate by reference in this proxy statement.

Q: What matters will I be asked to vote on at the special meeting?

A: You will be asked to vote on the following proposals:

· the approval of the merger agreement, which provides for the merger of Meteor Merger Corporation with and into Metrologic;

· the approval of the adjournment of the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement; and

· action on other matters and transaction of other business as may properly come before the special meeting.

If the merger is completed, you will no longer own shares of Metrologic common stock.

Q: What will happen to Metrologic as a result of the merger?

A: Metrologic will continue its operations as a privately-held company owned by Meteor Holding Corporation, which will be owned by FP-Metrologic, LLC, an entity affiliated with Francisco Partners II, L.P., a private equity firm; C. Harry Knowles, our founder, Chairman of our board of directors and our interim Chief Executive Officer; and Elliott Associates, L.P. and Elliott International, L.P., two of our current shareholders. We refer to these parties as the Investor Group. In addition, Metrologic’s shares will no longer be publicly traded, and Metrologic will not be required to file periodic and other reports with the Securities and Exchange Commission with respect to its common stock or proxy or information statements with respect to shareholders’ meetings.

Q: What will I receive for my Metrologic common stock if the merger is completed?

A: If the merger is completed, each share of your Metrologic common stock will be converted into the right to receive $18.50 in cash, without interest.

Q: What will happen to my stock options in the merger?

A: All options granted under Metrologic’s 2004 Equity Incentive Plan will automatically be cancelled immediately prior to the effective time of the merger. Options with an exercise price that is less than $18.50 will be converted into a right to receive an amount in cash (without interest), less applicable taxes, equal to the product of (1) the number of shares of our common stock subject to each option, as of the effective time of the merger, multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option. Holders of options granted under the 2004 Equity Incentive Plan with an exercise price that is equal to or greater than $18.50 per share will receive $1.00 per award in exchange for the cancelled options. Metrologic expects to make an offer to holders of options granted under our 1994 Incentive Plan to cancel all of their options in exchange for a cash payment, without interest, equal to the product of (1) the total number of shares of Metrologic common stock subject to the option multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, less any applicable taxes. All of the options held by employees who will be eligible to participate in the offer have exercise prices that are less than

$18.50 per share. In the event that any options granted under the 1994 Incentive Plan are not cancelled prior to the merger, then such outstanding options will be subject to adjustment upon completion of the merger pursuant to the terms set forth in the 1994 Incentive Plan.

Q: How does the sale affect the Metrologic Employee Stock Purchase Plan?

A: Holders of shares previously issued under the Company’s Employee Stock Purchase Plan will be eligible to receive $18.50 per share in the merger. No further deductions will be made from employee paychecks and any contributions made during the third quarter of 2006 will be refunded.

Q: What will happen to warrants in the merger?

A. Warrants will become exercisable for an amount of cash per share of Metrologic common stock issuable upon exercise of the warrant, without interest, equal to $18.50.

Q: How do Metrologic’s board of directors and the special committee recommend that I vote on the merger?

A: The special committee of our board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement and determined the merger, on the terms and conditions set forth in the merger agreement, to be advisable and to be fair to and in the best interests of our unaffiliated shareholders. Our board of directors, acting upon the recommendation of the special committee, has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and determined the merger, on the terms and conditions set forth in the merger agreement, to be advisable and fair to, and in the best interests of, our unaffiliated shareholders. The special committee and the board of directors both recommend that you vote “FOR” the approval of the merger agreement.

Q: Why did the board of directors form a special committee?

A: Because certain members of our board of directors and management will have interests in Metrologic following the merger, our board of directors formed a special committee to represent the interests of our unaffiliated shareholders. The special committee consists entirely of directors who are not officers or employees of Metrologic and who will not have an economic interest in Metrologic following the merger. No limitations were placed on the authority of the special committee to act on behalf of our unaffiliated shareholders. The chair of the special committee will receive standard meeting fees of $1,500 per meeting and a retainer of $40,000 and the other members of the special committee will receive standard meeting fees of $1,500 per meeting and a retainer of $35,000.

Q: Do any members of the board of directors or management of Metrologic or any other Metrologic shareholders have interests in the merger that may be different from my interests as a shareholder?

A: Yes, some of our directors and officers and other shareholders have interests in the merger that are different from, or in addition to, the interests that apply to our shareholders generally, including the following:

· following completion of the merger, C. Harry Knowles, our founder, the Chairman of our board of directors and our interim Chief Executive Officer, and the Elliott Investors will each be entitled to designate a member to the board of Meteor Holding Corporation;

· Meteor Holding Corporation and the members of the Investor Group will enter into a stockholders agreement in connection with the completion of the merger, which will provide Mr. Knowles and the Elliott Investors with certain rights, including rights to participate in future sales of shares of

Meteor Holding Corporation by the Francisco Partners Investor and future issuances of shares by Meteor Holding Corporation and to require Meteor Holding Corporation to register Mr. Knowles’s and the Elliott Investors’ shares;

· Mr. Knowles and the Elliott Investors will be entitled to receive a portion of certain fees paid to Meteor Holding Corporation and/or entities affiliated with Francisco Partners in connection with, and/or following the completion of, the merger;

· Mr. Knowles will serve as the initial chief executive officer of Meteor Holding Corporation and will enter into an employment agreement;

· certain of our other executives officers and other members of management are expected to continue in their current positions after the merger, although we do not anticipate that they will enter into new employment agreements in connection with the merger;

· certain of our executive officers and other members of our management are expected to receive grants of stock options and participate in a cash retention program after completion of the merger;

· each of our directors and executive officers will be entitled to receive the same consideration for their shares of common stock, options to acquire common stock and warrants to purchase common stock as our unaffiliated stockholders and optionholders; and

· we are required after completion of the merger to maintain certain indemnification and insurance policies applicable to our directors and executive officers.

See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 46.

Q: Who are the Rollover Investors?

A: C. Harry Knowles, our founder, Chairman of our board of directors and our interim Chief Executive Officer, and Elliott Associates, L.P. and Elliott International, L.P., multi-strategy hedge funds under common management that are current shareholders of Metrologic, are referred to in this proxy statement as the Rollover Investors. The Rollover Investors have agreed, severally and not jointly, to contribute a portion of the shares of Metrologic common stock held by them to Meteor Holding Corporation immediately prior to the completion of the merger in exchange for shares of junior preferred stock and common stock of Meteor Holding Corporation. The number of shares of junior preferred stock and common stock of Meteor Holding Corporation that will be issued in exchange for the shares of Metrologic common stock contributed to Meteor Holding Corporation by the Rollover Investors will be equal to the aggregate value of the shares of Metrologic common stock they contribute to Meteor Holding Corporation, based on the $18.50 per share merger price, divided by the price per share being paid by the Francisco Partners Investor for shares of junior preferred stock and common stock of Meteor Holding Corporation in connection with the financing of the merger. As a result of these contributions, immediately following the closing, Mr. Knowles will own 15% of the junior preferred stock and 15% of the common stock of Meteor Holding Corporation and the Elliott Investors will collectively own approximately 15.2% of the junior preferred stock and approximately 15.2% of the common stock of Meteor Holding Corporation. The shares of our common stock contributed by Mr. Knowles and the Elliott Investors will be cancelled and cease to exist at the effective time of the merger and no payment of merger consideration shall be made in respect of those shares. See “Special Factors—Financing of the Merger” beginning on page 42, “Special Factors—Interests of Certain Persons in the Merger” beginning on page 46 and “Other Agreements Relating to our Securities—Contribution and Voting Agreements” beginning on page 82.

Q: What will happen to the Metrologic shares, options and warrants currently held by the management of Metrologic?

A: The Metrologic shares, options and warrants currently held by the management of Metrologic, other than the shares contributed to Meteor Holding Corporation by Mr. Knowles, will be treated the same in the merger as the shares and options held by our unaffiliated shareholders and optionholders.

Q: What is Meteor Holding Corporation?

A: Meteor Holding Corporation is a Delaware corporation that was incorporated on September 1, 2006, solely for the purpose of completing the merger and the related financings and transactions. As of the date of this proxy statement, FP-Metrologic, LLC, an entity affiliated with Francisco Partners II, L.P., a private equity firm, is the sole stockholder of Meteor Holding Corporation. At the time of the merger, Meteor Holding Corporation will be owned by FP-Metrologic, LLC, C. Harry Knowles and the Elliott Investors.

Q: What is Meteor Merger Corporation?

A: Meteor Merger Corporation is a New Jersey corporation that was incorporated on August 31, 2006, solely for the purpose of completing the merger and the related financings and transactions. As of the date of this proxy statement, Meteor Holding Corporation is the sole shareholder of Meteor Merger Corporation.

Q: How will Meteor Holding Corporation pay the merger consideration?

A: Meteor Holding Corporation has obtained conditional equity and debt financing commitments for the transactions contemplated by the merger agreement, the aggregate proceeds of which, together with Metrologic’s available cash and fully liquid cash equivalents and the amounts contributed by the Rollover Investors, will be used to pay the aggregate merger consideration and all related fees and expenses. For more information about the financing of the merger, see “Special Factors—Financing of the Merger” beginning on page 42.

Q: When do you expect the merger to be completed?

A: We are working to complete the merger as quickly as possible, and we anticipate that it will be completed in the fourth quarter of calendar year 2006. In order to complete the merger, we must obtain shareholder approval and the other closing conditions under the merger agreement must be satisfied or waived. See “The Merger Agreement (Proposal No. 1)—Conditions to Completion of the Merger” beginning on page 76 and “The Merger Agreement (Proposal No. 1)—Effective Time” beginning on page 65.

Q: What are the conditions to the completion of the merger?

A: The completion of the merger is subject to a number of conditions, including:

· approval of the merger agreement by the affirmative vote of a majority of the votes cast by the holders of our common stock present in person or represented by proxy at the special meeting and entitled to vote thereon;

· the expiration or termination of the waiting periods under applicable antitrust laws;

· receipt of all material authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, governmental authorities;

· the absence of any governmental orders, executive orders, stays, decrees, judgments or injunctions, or statutes, rules or regulations, that have the effect of making the consummation of the merger illegal or that would prohibit the merger and other transactions contemplated by the merger agreement;

· the absence of certain actions or legal proceedings relating to the merger, Meteor Holding Corporation or Metrologic;

· the accuracy of the representations and warranties made by Meteor Holding Corporation, Meteor Merger Corporation and us in the merger agreement, subject to specified materiality thresholds;

· the performance, in all material respects, by Meteor Holding Corporation, Meteor Merger Corporation and us of our respective obligations in the merger agreement;

· the absence of any fact, change, event, effect, condition, circumstance or occurrence that, individually or in the aggregate, has had or is reasonably likely to result in a material adverse effect on Metrologic;

· the consummation of the contributions of Metrologic common stock by the Rollover Investors to Meteor Holding Corporation in exchange for shares of junior preferred stock and common stock of Meteor Holding Corporation;

· the receipt by Meteor Holding Corporation of a specified amount of debt financing proceeds on certain terms;

· the availability to Metrologic of a specified amount of unrestricted cash and fully liquid cash equivalents; and

· the delivery of specified certificates.

If all of these conditions are not either satisfied or waived, the merger will not be completed even if our shareholders vote to approve the merger agreement. See “The Merger Agreement (Proposal No. 1)—Conditions to Completion of the Merger” beginning on page 76.

Q: Will I owe any U.S. federal income tax as a result of the merger?

A: Generally, the consideration received in the merger will be taxable for U.S. federal income tax purposes. You will recognize taxable gain or loss in the amount of the difference between $18.50 and your adjusted tax basis for each share of Metrologic common stock that you own. However, special tax consequences may apply to the Rollover Investors who acquire an equity interest in Meteor Holding Corporation. For further information about the U.S. federal income tax consequences of the merger, see “Special Factors—Material U.S. Federal Income Tax Consequences” beginning on page 51.

Q: When and where is the special meeting?

A: The special meeting will be held on , , 2006 beginning at .m., local time, at Metrologic’s principal executive offices at 90 Coles Road, Blackwood, New Jersey 08012.

Q: Who can vote on the merger agreement?

A: Holders of our common stock at the close of business on , 2006, the record date for the special meeting, may vote in person or by proxy on the merger agreement at the special meeting. Each outstanding share of our common stock on the record date entitles the holder to one vote on each matter submitted to shareholders for approval at the special meeting. As of the close of business on the record date, there were shares of common stock of Metrologic entitled to be voted at the special meeting.

Q: What vote of shareholders is required to approve the merger agreement?

A: For Metrologic to complete the merger, a majority of the votes cast by the holders of our common stock present in person or represented by proxy at the special meeting and entitled to vote thereon must vote “FOR” the approval of the merger agreement.

Q: What vote of shareholders is required for the proposal to adjourn the special meeting?

A: The proposal to adjourn the special meeting, if necessary, to solicit additional proxies requires the affirmative vote of a majority of the votes cast by the holders of our common stock present in person or represented by proxy at the special meeting and entitled to vote at the special meeting.

Q: Have any shareholders agreed to vote in favor of approving the merger agreement?

A: Yes. Under the terms of contribution and voting agreements entered into in connection with the merger, Mr. Knowles, certain related parties and the Elliott Investors each have agreed to vote all shares they beneficially own in favor of approving the merger agreement. As of the record date for the special meeting, Mr. Knowles, certain related parties and the Elliott Investors may be deemed to beneficially own in the aggregate a total of [11,111,018] shares of our outstanding common stock, which represents approximately [48.8]% of the outstanding shares of our common stock. In addition, in the event that the merger agreement is terminated under certain circumstances, Mr. Knowles and certain related parties have agreed, with respect to shares of our common stock owned by them amounting to 35% of the total outstanding shares, to vote such shares against any alternative proposal to acquire us and to be subject to certain restrictions on transfer of such shares, in each case for a period of up to 10 months. In addition, in the event that the Elliott Investors fail to vote the shares of our common stock that they beneficially own against an alternative proposal to acquire Metrologic during the three-month period after the termination of the merger agreement, under certain circumstances the right of Elliott Associates, L.P. to receive a portion of any termination fee received by Meteor Holding Corporation in the merger, as described more fully elsewhere in this proxy statement, will be forfeited in whole or in part.

Q: What does it mean if I receive more than one proxy card?

A: If you have shares of our common stock that are registered differently and are in more than one account, you will receive more than one proxy card. Please follow the directions for voting on each of the proxy cards you receive to ensure that all of your shares are voted.

Q: How do I vote without attending the special meeting?

A: If you hold shares in your name as the shareholder of record, then you received this proxy statement and a proxy card from us. If you hold shares in street name through a broker, bank or other nominee, then you received this proxy statement from the nominee, along with the nominee’s form of proxy card which includes voting instructions. In either case, you may submit a proxy for your shares by mail without attending the special meeting. To submit a proxy by mail, mark, sign and date the proxy card and return it in the postage-paid envelope provided.

Q: How do I vote in person at the special meeting?

A: If you hold shares in your name as the shareholder of record, you may vote those shares in person at the special meeting by giving us a signed proxy card or ballot before voting is closed. If you want to do that, please bring proof of identification with you. Even if you plan to attend the special meeting, we recommend that you submit a proxy for your shares in advance as described above, so your vote will be counted even if you later decide not to attend.

If you hold shares in street name through a broker, bank or other nominee, you may vote those shares in person at the special meeting only if you obtain and bring with you a signed proxy from the necessary nominee giving you the right to vote the shares. To do this, you should contact your nominee.

Q: Can I change my vote?

A: After you submit a proxy for your shares, you may change your vote at any time before voting is closed at the special meeting. If you hold shares in your name as the shareholder of record, you should write to our Corporate Secretary at our principal offices, 90 Coles Road, Blackwood, New Jersey 08012, stating that you want to revoke your proxy and that you need another proxy card. If you attend the special meeting, you may vote by ballot as described above, which will cancel your previous vote. Your last vote before voting is closed at the special meeting is the vote that will be counted. If you hold your shares in street name through a broker, bank or other nominee, you should contact the nominee and ask for a new proxy card.

Q: What happens if I do not respond?

A: For purposes of the proposal to approve the merger agreement, the failure to respond by returning your proxy card will not count as a vote cast on the proposal unless you vote for the merger agreement in person at the special meeting. For purposes of any proposal to adjourn the special meeting, if necessary, to solicit proxies, the failure to respond by returning your proxy card will not count as a vote cast on the proposal but if the failure to respond causes your shares to be deemed to be a broker non-vote, your shares will count for determining whether a quorum is present.

Q: What is a quorum?

A: A quorum of the holders of the outstanding shares of our common stock must be present for the special meeting to be held. A quorum is present if the holders of outstanding shares of our common stock entitled to cast a majority of the votes are present at the special meeting, either in person or represented by proxy. Abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present.

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?

A: Yes, but only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without those instructions, your shares will not be voted.

Q: How are votes counted?

A: For the proposal relating to the approval of the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not count as votes cast on the proposal relating to approval of the merger agreement, but will count for the purpose of determining whether a quorum is present.

For the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not count as votes cast on the proposal to adjourn the special meeting, if necessary, to solicit additional proxies, but will count for the purpose of determining whether a quorum is present.

If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the approval of the merger agreement, “FOR” adjournment of the special meeting, if necessary, to solicit

additional proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the special meeting for a vote.

A broker non-vote generally occurs when a broker, bank or other nominee holding shares on your behalf does not vote on a proposal because the nominee has not received your voting instructions and lacks discretionary power to vote the shares. Broker non-votes will not count as votes cast on a proposal, but will count for the purpose of determining whether a quorum is present.

Q: Who will bear the cost of this solicitation?

A: We will pay the cost of this solicitation, which will be made primarily by mail. Proxies also may be solicited in person, or by telephone, facsimile, Internet or similar means, by our directors, officers or employees without additional compensation. We will, on request, reimburse shareholders who are brokers, banks or other nominees for their reasonable expenses in sending proxy materials to the beneficial owners of the shares they hold of record.

Q: Should I send in my stock certificates now?

A: No. If the merger is completed, you will receive a letter of transmittal with instructions informing you how to send your stock certificates to the paying agent in order to receive the merger consideration. You should use the letter of transmittal to exchange Metrologic stock certificates for the merger consideration to which you are entitled as a result of the merger. If your shares are held in “street name” by your broker, you will receive instructions from your broker as to how to effect the surrender of your “street name” shares and receive cash for those shares. DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY.

Q: Am I entitled to appraisal or dissenter’s rights?

A: No. Under New Jersey law, holders of Metrologic common stock are not entitled to appraisal or dissenter’s rights in connection with the merger because Metrologic common stock is listed on the NASDAQ Global Select Market and because cash consideration is being paid for their shares in the merger.

Q: Who can help answer my other questions?

A: The information provided above in the summary term sheet and in the “question and answer” format is for your convenience only and is merely a summary of the information contained in this proxy statement. You should carefully read this entire proxy statement, including the documents annexed to this proxy statement and the documents we refer to or incorporate by reference in this proxy statement. If you have more questions about the special meeting or the merger, you should contact Metrologic’s Investor Relations Department at investor.relations@metrologic.com or 1-800-667-8400.

SPECIAL FACTORS

Background of the Merger

Over the last several years our board of directors and management have considered and discussed strategic alternatives for us, including potential business combinations and our sale to financial or strategic buyers.

In early 2004, our board of directors determined that it was in the best interest of our shareholders to consider a sale of the Company to a strategic buyer. Following that decision, on April 12, 2004, we hired UBS Securities LLC (“UBS”) to serve as our financial advisor. As part of this engagement, UBS prepared a confidential memorandum and contacted potential strategic partners to assess their interest in us. Ultimately, only two companies expressed an interest in us, both at prices that our board of directors deemed to be inadequate at the time. As a result, we terminated all sale discussions and our engagement of UBS.

On August 9, 2005, C. Harry Knowles, our Chairman of the board of directors, informed the board of directors that he and his wife, Janet H. Knowles, also one of our directors, had concluded, in their individual capacities, that they wanted to dispose of all or a substantial portion of their shares of our common stock in an orderly manner. They advised the board of directors that they were willing to consider a variety of alternatives to accomplish this goal in a manner determined by the board of directors to be in our and the other shareholders’ best interests and wanted to proceed expeditiously. In response to this decision of Mr. and Mrs. Knowles, our board of directors and management determined to pursue the sale of the Company to a financial or strategic buyer. A special committee of the board of directors comprised of four independent directors was formed to explore the alternatives available to us.

On August 12, 2005, the special committee met and decided to retain Ballard Spahr Andrews & Ingersoll, LLP (“Ballard Spahr”) as its counsel. Prior to that time, Ballard Spahr had served as our regular outside counsel. At that meeting, a representative from Ballard Spahr led a discussion with the special committee members regarding their fiduciary duties in transactions of this nature. The special committee determined to contact UBS and to seek to negotiate an incentive payment arrangement with UBS designed to encourage consummating a transaction expeditiously. In addition, the special committee discussed the advantages of obtaining a fairness opinion from an independent investment bank whose compensation would not be tied to consummation of a transaction and decided to contact two investment banks to determine if they were independent and to interview them regarding a potential engagement.

On August 19, 2005, the special committee met with representatives from Ballard Spahr and decided to meet with UBS to discuss a number of issues related to the sale process and review the list of potential buyers UBS intended to contact.

On August 23, 2005, the special committee met with representatives from UBS and Ballard Spahr. The UBS representatives informed the special committee that they were currently updating the confidential information memorandum utilized in connection with the 2004 process to distribute to potential buyers who entered into confidentiality agreements. The UBS representatives then discussed a list of approximately 80 potential buyers, both financial and strategic, that would be contacted and share with the committee their view of the likelihood and level of interest from each party on the list.

Representatives of UBS worked with our management to update the confidential information memorandum, which was finalized on September 28, 2005. Prior to finalizing the confidential information memorandum, representatives of UBS contacted a number of potential buyers to ascertain their interest in a transaction with us.

On August 26, 2005, the special committee met to determine dates to meet with the potential independent investment banks regarding a possible engagement as financial advisor to the special

committee and the delivery of a fairness opinion in connection with a potential transaction. Also present were representatives from Ballard Spahr.

On September 2, 2005, the special committee met and approved its charter. Also present were representatives from Ballard Spahr.

On September 6, 2005, we entered into an engagement letter with UBS to serve as our financial advisor in connection with exploring a possible sale of the Company, subject to the finalization of the terms of the incentive compensation that might be paid to UBS in connection with the engagement.

On September 9, 2005, the special committee met and discussed possible incentives for UBS. Also present were representatives from Ballard Spahr. The special committee also decided to meet with our management to review the financial forecasts that were prepared for the potential buyers and the assumptions underlying such forecasts.

On September 14, 2005, representatives of UBS began to initiate calls to potential buyers. From this point until the termination of the negotiations regarding a potential transaction, we entered into confidentiality agreements with approximately 26 parties who expressed an interest in a transaction with us.

On September 23, 2005, the special committee met with representatives of two independent investment banks to discuss their possible engagement to serve as financial advisor to the special committee and to render a fairness opinion on a potential transaction. Also present were representatives from Ballard Spahr.

On September 30, 2005, the special committee met with representatives from UBS to receive an update on UBS’s progress. Also present were representatives from Ballard Spahr. Representatives of UBS advised the special committee that, to date, more than 70 potential buyers had been contacted and initial indications of interest were due on October 20, 2005.

On October 3, 2005, the special committee met to discuss the attributes of the two independent investment banks it was considering. Also present were representatives from Ballard Spahr. The special committee decided to negotiate fee arrangements with both investment banks.

On October 5, 2005, Needham & Company was engaged by the special committee to serve as its independent financial advisor. The special committee believed that Needham & Company had significant expertise in advising technology companies and special committees and in rendering fairness opinions.

On that same date, UBS contacted Francisco Partners to determine whether it would be interested in evaluating a potential transaction with us. UBS provided Francisco Partners with a confidentiality agreement, which it subsequently executed, and preliminary due diligence materials.

On October 7, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. Based on discussions with UBS, Needham & Company informed the special committee that seven potential buyers had signed confidentiality agreements and eleven others were being negotiated.

From the time the potential buyers signed confidentiality agreements and continuing through the termination of the process, the potential buyers conducted legal, financial and business due diligence on us.

On October 14, 2005, the special committee met to discuss the status of the process and representatives from Needham & Company and Ballard Spahr were present.

On October 21, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. The special committee discussed litigation that had been filed against us by

one of our competitors and any potential impact it could have on the sale process. In that litigation, the competitor filed suit against us in the U.S. District Court in the Eastern District of Texas and before the International Trade Commission alleging patent infringement.

On October 27, 2005, our management engaged in a trial run of its presentation to potential buyers. Members of the special committee and representatives of UBS, Needham & Company and Ballard Spahr were present. After the presentation, representatives of UBS reported to those present that, as of that date, 25 confidential information memoranda had been sent out to potential buyers, each of whom had entered into confidentiality agreements.

On October 28, 2005, after its review of publicly available documents and preliminary due diligence materials provided by UBS, Francisco Partners provided UBS with a preliminary non-binding indication of interest at $20 per share, which was subject to the completion of detailed business, financial and accounting due diligence and other conditions.

On October 31, 2005, the special committee met and representatives from Needham & Company, UBS and Ballard Spahr were present. According to the UBS representatives, 94 potential buyers had been contacted, 26 confidential information memoranda had been distributed and two parties, one of which was Francisco Partners, had submitted initial indications of interest and would be continuing on to the next round of due diligence. The other party’s indication of interest was at $20 to $21.50 per share.

On November 3, 2005, representatives of UBS contacted Francisco Partners to coordinate further due diligence and to schedule a meeting with our management. UBS also coordinated further due diligence and a management meeting with the other potential buyer.

On November 4, 2005, the special committee met and representatives from Needham & Company, UBS and Ballard Spahr were present. The UBS representatives informed the special committee that one additional potential buyer might submit an indication of interest. In addition, our valuation and the impact of the lawsuit that had been filed against us were discussed in broad terms.

On November 11, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. The special committee discussed the initial indications of interest it had received and decided to permit the third potential buyer to participate in the process provided it was informed that its indication was at the low end of the range as compared to the other two participants. The third potential buyer submitted an indication of interest at $19.75 to $20.50 per share. All of the indications of interest were subject to additional due diligence.

On November 15, 16 and 17, 2005, management presentations were held for the three potential buyers, including Francisco Partners. UBS informed the potential buyers that second round bids were due by December 15, 2005.

From November 15, 2005 through December 15, 2005, representatives of the three potential buyers, including Francisco Partners, and their respective advisors conducted preliminary business, financial and accounting due diligence, which included several due diligence calls with members of our management.

On November 18, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. The next steps in the process were discussed, including refining the bids based on continuing due diligence and providing the potential buyers with a draft definitive merger agreement for their review and comment.

On December 1, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. At that meeting Needham & Company reviewed the preliminary valuation models and financial analyses it would use to evaluate the indications of interest.

On December 9, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. One of the special committee members recounted a conversation earlier in the day with UBS where UBS had confirmed that all three potential buyers were still immersed in the due diligence process and that bids and a mark up of the agreement were still due on December 15, 2005.

On December 14, 2005, the special committee met and representatives from Needham & Company and Ballard Spahr were present. Discussions with UBS were recounted by representatives of Needham & Company who noted that all three of the potential buyers, including Francisco Partners, had expressed concerns about valuation. One of the potential buyers had decided to drop out of the process, one indicated that it would need at least four more weeks for due diligence to be able to submit a second round bid but provided a preliminary verbal estimate of $18.50 to $19.25 per share and Francisco Partners’ verbal indication of interest was $18.00 per share, which was less than the then current market price. On this date, the Company’s common stock closed at $18.91 per share. The representatives from Needham & Company presented its preliminary financial analyses of the indications of interest and noted that the consideration in one indication of interest was at a price below the then current market price of our common stock. The Needham & Company representatives discussed with the special committee the advisability of entering into a transaction at a price below the then current market price of our common stock.

On December 15, 2005, Francisco Partners submitted a written non-binding indication of interest of $18.00 per share to UBS, which was conditioned upon additional confirmatory due diligence and the joint development, with our management, of a revised operating and financial plan for the business.

On December 22, 2005, the special committee met and representatives from Ballard Spahr were present. Due to the failure of the sale process to produce a viable proposal to date, the special committee discussed other alternatives, including a recapitalization or the repurchase of the shares held by Mr. Knowles. The special committee decided to allow the sale process to continue while discussing other options internally in the event that a sale did not occur.

On January 10, 2006, the special committee met and representatives from Ballard Spahr were present. The special committee discussed the prospects of a potential transaction and determined to recommend to the board of directors’ that the sale process be halted since the process did not result in the receipt of any definitive offer or an indication of interest with respect to which the special committee, based in part on advice from Needham & Company, believed should be pursued.

On January 11, 2006, representatives of UBS contacted representatives of Francisco Partners and informed them that the indication of interest at $18.00 per share submitted by Francisco Partners was not acceptable to us, as it was both below our board of directors’ expectations and the prevailing stock price at the time.

On January 13, 2006, the special committee met and Mr. and Mrs. Knowles, their legal counsel and representatives from Ballard Spahr were present. The special committee unanimously decided to terminate the UBS and Needham & Company engagements.

On January 18, 2006, the board of directors determined to end the sale process, based on the recommendation of the special committee and Mr. and Mrs. Knowles, in their individual capacities.

On January 22, 2006, the UBS engagement was terminated. On January 23, 2006, the Needham & Company engagement was terminated.

On June 15, 2006, at our annual shareholder meeting, Jesse A. Cohn from the Elliott Investors first approached Mr. Knowles and requested the opportunity to speak privately. At that time, Mr. Cohn suggested that Mr. Knowles consider pursuing a going-private transaction together with an appropriate equity sponsor and a contribution of the Elliott Investors’ existing holdings in the company. Mr. Cohn explained that the Elliott Investors believed numerous reasons existed why it could be beneficial to

consider taking us private, including Mr. Knowles’ age, our trading discount to market, our long-term strategic vision, and the costs of being a public company. Mr. Cohn further stated that the Elliott Investors could assist us in finding an equity sponsor.

On June 20, 2006, Mr. Knowles called Mr. Cohn and expressed a desire to learn more about what Mr. Cohn had expressed at the Annual Meeting. A meeting was arranged at the Elliott Investors’ offices for Friday, June 23, 2006.

On June 23, 2006, representatives of Deutsche Bank, an advisor to Francisco Partners, coordinated an introductory conference call between Francisco Partners and Mr. Cohn. During the call, the participants discussed the possibility of exploring a transaction involving us.

After the Francisco call, Mr. Knowles, Mr. Cohn and Brian Miller of the Elliott Investors held a meeting in Elliott’s offices. Mr. Miller provided to Mr. Knowles a description of Elliott’s operations and history. Mr. Knowles described his personal objectives relating to our company.

On June 27, 2006, representatives of Francisco Partners and the Elliott Investors had a conference call. During the call, the representatives of the Elliott Investors and Francisco Partners further discussed the possibility of a potential transaction involving us. Subsequent to the call, Francisco Partners provided the Elliott Investors with additional information about Francisco Partners and a possible transaction involving us.

From June 29, 2006 through July 5, 2006, Mr. Cohn and Mr. Knowles spoke several times regarding the possibility of Mr. Knowles pursuing a going-private transaction with an appropriate equity sponsor and an equity contribution by the Elliott Investors.

On July 3, 2006, the Elliott Investors and an associated entity filed a Schedule 13D with the Securities and Exchange Commission reporting their aggregate ownership of our common stock as of such date.

On July 6, 2006, Mr. Cohn and Chuck MacDonald of the Elliott Investors met with Mr. and Mrs. Knowles in their individual capacities, at the Knowles’ home. The parties discussed the benefits to our becoming a private company. Mr. Cohn introduced the idea of having Francisco Partners serve as the equity sponsor for the transaction and explained some of Francisco Partners’ history and expertise in the technology sector.

On July 11, 2006, our board of directors met at a regularly scheduled meeting and Mr. Knowles informed the board of directors of his discussion with Mr. Cohn and confirmed that no agreements, arrangements or understandings had been entered into with any parties in connection with any potential transaction. The board of directors authorized Mr. Knowles to continue the discussion in his individual capacity with the Elliott Investors and, if it were included, Francisco Partners, and also authorized a non-disclosure agreement between us and the Elliott Investors.

On July 12, 2006, we entered into a non-disclosure agreement with the Elliott Investors.

On July 13, 2006, Mr. Knowles, in his individual capacity, met with representatives from the Elliott Investors and representatives from Francisco Partners at the offices of Pepper Hamilton LLP (“Pepper Hamilton”), personal counsel to Mr. and Mrs. Knowles, to discuss preliminarily the potential requirements associated with his ongoing role and ownership if the Elliott Investors and Francisco Partners were to propose an acquisition of the Company. No agreements or understandings were reached on these matters, and Mr. Knowles was informed that there were no understandings or agreements between the Elliott Investors and Francisco Partners. The representatives of Francisco Partners indicated that they would need to update the due diligence review that had been conducted in 2005 before deciding whether to proceed with a potential transaction.

On July 19, 2006, the board of directors met and Mr. Knowles advised the board of directors of his July 13, 2006 meeting with the Elliott Investors and Francisco Partners. Mr. Knowles also informed the board of directors that he would be engaging Morgan Stanley and utilizing Pepper Hamilton as advisors with respect to his interests and those of his wife, Janet H. Knowles, and their related parties. The board of directors then adopted a resolution to form a special committee consisting of four independent directors and approved a charter for such special committee. The special committee was given the authority to, among other things, engage its own advisors.

On July 20, 2006, the special committee met and determined to retain Ballard Spahr, our regular outside counsel, which had advised it in connection with the sale process during 2005. In addition, it discussed hiring a financial advisor to provide guidance and ultimately issue a fairness opinion, if needed. The special committee decided to approach Needham & Company, which had represented it in the 2005 process.

On July 24, 2006, the special committee met and representatives from Ballard Spahr were present. It was decided that, for efficiency, Needham & Company, the Elliott Investors and Francisco Partners would be permitted to simultaneously conduct their due diligence of us. On that same date, representatives of Francisco Partners and members of our management had a conference call to coordinate the due diligence review process, and scheduled a due diligence meeting at our headquarters to be held on August 1, 2006.

Beginning on July 24, 2006 and continuing through the announcement of the signing of the merger agreement, the Elliott Investors and Francisco Partners each conducted additional due diligence of us, including participating in meetings with various members of our senior management. During this same period, legal, tax and accounting advisors for Francisco Partners also conducted a due diligence review of us.

On August 1, 2006, representatives of Francisco Partners and the Elliott Investors met with Mr. Knowles and members of our management team at our headquarters for management presentations regarding our operations and strategy. Representatives of Needham & Company, Deutsche Bank and Morgan Stanley were also present at the meetings.

On August 4, 2006, the special committee formally engaged Needham & Company as its financial advisor.

On August 7, 2006, Mr. Knowles met, in his individual capacity, with another potential investor concerning the possibility of that investor acquiring us. Based on the tentative and preliminary expression of interest from that investor at that meeting, and the stage of our negotiations with Francisco Partners, further discussions with this potential investor were not pursued.

On August 7, 2006, we had a conference call with representatives of Francisco Partners and its counsel, Wilson Sonsini Goodrich and Rosati, Professional Corporation (“WSGR”), to review existing patent infringement litigation involving us. Periodic calls and meetings regarding continuing patent due diligence occurred from this date through the signing of the merger agreement.

On August 9, 2006, members of our management held a conference call to review the historical and projected operating results of our product lines. Participants in the call included representatives of Francisco Partners, the Elliott Investors, Deutsche Bank, Morgan Stanley and Needham & Company.

On August 16, 2006, Mr. Knowles, in his individual capacity, along with his advisors Morgan Stanley and Pepper Hamilton, met again with representatives from the Elliott Investors and Francisco Partners, at which time the respective representives of the Elliott Investors and Francisco Partners discussed with Mr. Knowles the results of their due diligence to date, as well as a potential transaction involving us. They also discussed the requirement that Mr. Knowles participate in a transaction through the rollover of a portion of his equity interests into the new privately held company that would result from a going-private transaction. While Mr. Knowles indicated that he would consider participating in such a transaction under acceptable terms and conditions if a transaction acceptable to the special committee and the board of directors were achieved, no agreement was reached regarding any party’s participation in such a transaction. The representatives of Francisco Partners communicated that they would like to begin negotiations with the special committee and anticipated that they would be able to provide a price proposal in approximately two weeks, but that based on a preliminary review, they anticipated an initial all cash proposal of $18.00 per share. The Francisco Partners representatives indicated that, depending on the results of its due diligence review and negotiations with the special committee, a price of $18.50 might be possible.

On August 17, 2006, the special committee met and concluded that it would move forward with negotiations with Francisco Partners. It also gave us permission to send certain members of management to meet with Francisco Partners in Menlo Park, California. The special committee then discussed with representatives of Needham & Company the timing of the potential transaction. Later that day, the chairman of the special committee and representatives of Needham & Company and Ballard Spahr spoke with representatives of Francisco Partners on the timing of the potential transaction and the importance of having a binding proposal from Francisco Partners with few conditions. The representatives of Francisco Partners suggested to the special committee that they anticipated an all cash proposal of $18.00 per share, subject to continued due diligence and negotiation of an acceptable merger agreement. The chairman of the special committee and representatives of Francisco Partners agreed to have periodic telephone meetings to discuss progress and open items.

On August 18, 2006, the special committee met to review the discussion the day before with Francisco Partners. Also present were representatives from Ballard Spahr and Needham & Company. The Needham & Company representatives stated that they would begin preparing valuation models and financial analyses to evaluate the fairness, from a financial point of view, of a range of potential consideration. The special committee also discussed with the Needham & Company representatives the factors it might consider in assessing the fairness of the proposal. The Needham & Company representatives noted that one significant factor was that we had completed a full market check seven months earlier involving almost 100 potential bidders without receiving any definitive bids or proposals.

On August 22, 2006, WSGR, counsel to Francisco Partners, sent an initial draft of the merger agreement to Ballard Spahr. From August 22, 2006 to September 12, 2006, the date of execution of the merger agreement, WSGR and Ballard Spahr negotiated the terms of the merger agreement through comments and telephone conversations. In addition, on August 23, 2006, WSGR sent an initial draft of the contribution and voting agreement for Mr. Knowles and his related parties, along with a summary of stockholders agreement terms, to Pepper Hamilton and an initial draft of the contribution and voting agreement for the Elliott Investors and the stockholders agreement term sheet to their counsel, Paul Weiss, Rifkind, Wharton & Garrison LLP. From that date until September 12, 2006, the terms of those agreements were negotiated through both the exchange of written comments and telephone conversations. Each of Mr. Knowles, on the one hand, and the Elliott Investors, on the other, negotiated their agreements separately with Francisco Partners.

On August 23, 2006, the special committee met with representatives of Needham & Company for an informal preliminary valuation discussion. Also present were representatives from Ballard Spahr. Representatives of Needham & Company stated that, at that time, they believed that Needham &

Company would be in a position, based on its analysis to date, to render an opinion as to the fairness, from a financial point of view, of consideration at $18.00 per share, but that this amount would be at the low end of the range of fairness. The Needham & Company representatives advised the special committee that their financial analyses assumed that Adaptive Optics Associates, Inc. (“AOA”), one of our subsidiaries, would be sold prior to closing.

On August 24, 2006, the special committee met to review a telephone conversation earlier in the day among representatives of Needham & Company, the chairman of the special committee and representatives of Francisco Partners. Representatives from Ballard Spahr were present at the meeting. The Francisco Partners’ representatives indicated that they were still involved in due diligence and that WSGR had sent out a draft merger agreement to Ballard Spahr and a draft contribution and voting agreement for Mr. Knowles and his related parties to Pepper Hamilton. The Francisco Partners’ representatives also indicated that they would need to negotiate a contribution and voting agreement with the Elliott Investors as well.

On August 24, 2006, we entered into a new non-disclosure agreement with Francisco Partners to permit Deloitte & Touche, Francisco Partners’ auditors, to perform additional due diligence.

On August 28, 2006, following distribution to its members of the draft merger agreement, the special committee met with representatives from Ballard Spahr and discussed the main provisions in the draft merger agreement, in addition to the mechanics of the proposed contribution and voting agreements and their impact on the merger agreement. The special committee stressed the importance that it have a meaningful termination right in the event that a more favorable acquisition proposal was made and that it be able to effectively exercise its fiduciary duties, especially in light of the voting obligations of Mr. Knowles and his related parties proposed by Francisco Partners in the draft contribution and voting agreement, as discussed below.

On that same date, Mr. Knowles and members of our management made a presentation to the investment committee of Francisco Partners at the offices of Francisco Partners. In addition, various sessions were held between members of our management and representatives of Francisco Partners, which included reviews of our sales, customers and distributors and our ongoing litigation.

On August 30, 2006, the special committee met to discuss our financial condition, and on August 31, 2006, the board of directors met to review our third and fourth quarter projected financial information. Also present at these meetings were representatives from Ballard Spahr.

On September 4, 2006, the special committee met and discussed the mechanics of the proposed Knowles contribution and voting agreement and the potential impact it could have on the ability of the special committee to exercise its fiduciary duties. Representatives from Ballard Spahr were present at the meeting. In the original draft of the contribution and voting agreement, all shares owned by Mr. Knowles and his related parties, which amounted to approximately 41.5% of our then outstanding common stock, could not be transferred and would be required to be voted against any alternative proposal for one year following a termination of the merger agreement. The special committee expressed concern that it might not be able to effectively exercise its fiduciary duties and terminate the merger agreement for a superior proposal if such a substantial percentage of our common stock were locked up for such a long period of time. Following this discussion, Ballard Spahr contacted Mr. Knowles’ counsel to discuss seeking the agreement of Francisco Partners’ counsel to a decrease in the number of Mr. Knowles’ shares that would be locked up subject to certain exceptions following a termination of the merger agreement and in the length of the lock-up period. The committee members then further discussed the terms of the merger agreement. The parties negotiated such terms over the following days and ultimately, it was agreed that, the shares held by Mr. Knowles and his related parties amounting to 35% of the total outstanding shares would be subject to voting and transfer restrictions for up to 10 months (subject to certain exceptions), rather than the entire 41.5% for one year. We were informed that the Elliott Investors’ shares would not

be locked up if the merger agreement was terminated. In addition, a reverse break-up fee was negotiated whereby if Francisco Partners terminated the merger agreement or was unable to close the transaction due to an inability to obtain financing, subject to certain exceptions, Meteor Holding Corporation would pay us a fee of $9,125,000.

On September 5, 2006, Francisco Partners indicated to us and the special committee that it had received formal approval from its partnership to move forward with the proposed merger at $18.00 per share. On that date, the special committee met with representatives from Ballard Spahr and Needham & Company to discuss the price.

On September 6, 2006, the special committee met to discuss the status of negotiations and next steps in the negotiation process with Francisco Partners. Also present were representatives from Ballard Spahr and Needham & Company. Needham & Company reviewed with the special committee its financial analyses, which had been updated to reflect the then current market data and valuation ranges. Needham & Company also advised the special committee that their analyses assumed that AOA would be sold prior to closing. Later on September 6, 2006, the special committee, after discussing the topic with Mr. Knowles, communicated to Francisco Partners his and the special committee’s belief that the $18.00 price was too low and Francisco Partners stated that it would go back to the partnership to determine if it could increase the price.

On September 7, 2006, members of the special committee met with representatives of Francisco Partners. The special committee members again advised the Francisco Partners’ representatives that the proposed $18.00 per share price was inadequate. After discussion and negotiation, the Francisco Partners’ representatives offered $18.50 per share. The representatives from Francisco Partners also advised the special committee members that they would not increase the offer beyond $18.50 per share and that it must be acted upon promptly.

On September 7, 2006, the special committee met and discussed the new proposed price of $18.50 per share. Also present were representatives from Needham & Company and Ballard Spahr. The recent increase in the market price of our stock was discussed and the special committee expressed the belief that there had not been any change in our business or prospects and that the stock price increase was likely the result of market speculation about a potential transaction. Representatives of Needham & Company discussed with the special committee their preliminary analyses indicating that they would be in a position to render an opinion as to the fairness, from a financial point of view, of the proposed consideration. A representative from Ballard Spahr reviewed with the special committee its fiduciary obligations in transactions of this nature. The special committee discussed the steps that had been taken to assess the consideration, including efforts previously undertaken to explore alternative transactions, the rights negotiated by the special committee to terminate the proposed transaction with Francisco Partners to accept an alternative superior transaction under certain circumstances, the reverse break-up fee, and the efforts of the board of directors and the special committee to be informed and to analyze the fairness of the consideration to be received by our shareholders. The special committee resolved that, assuming the merger agreement was negotiated as discussed, the schedules to the merger agreement were finalized and Needham & Company delivered its fairness opinion, the proposed transaction was fair to and in the best interest of our shareholders and it would recommend the transaction to the board of directors. Needham & Company also noted that a full and complete market check had been completed within the past eight months, and noted our ability to terminate the merger agreement to accept a superior proposal. The special committee also discussed with Needham & Company that the price offered was in the best interests of shareholders at the time and that if we did not accept the proposal at the time, and instead sought to check the market, it was likely that Francisco Partners would abandon the transaction.

On September 11, 2006, the board of directors met. Also present were representatives from Needham & Company and Ballard Spahr. A representative from Ballard Spahr reviewed with the board its

fiduciary obligations as the board of directors in transactions of this nature. The board of directors then discussed a number of factors, including: its fiduciary duties, the merits of the proposed transaction with Francisco Partners, the risks and merits of not pursuing the transaction or not entering into the proposed transaction and the intention of Francisco Partners to not make any substantial changes in our operations, including allowing our principal location to remain the same. A representative from Ballard Spahr reviewed with the board of directors the main provisions of the merger agreement, as finally negotiated based on the last draft the board of directors had reviewed. The representatives from Needham & Company then discussed the financial analyses Needham & Company had prepared and distributed in connection with the meeting. They reviewed with the board of directors the work completed to assess the fairness, from a financial point of view, of the consideration to be received in the proposed transaction and the assumptions made in the course of its financial analyses. Needham & Company then rendered its opinion to the special committee and the board of directors, that, as of September 11, 2006, and based on and subject to the assumptions and other matters described in its written opinion, the consideration of $18.50 per share to be received by the holders of our common stock, other than the Rollover Investors, pursuant to the proposed transaction with Francisco Partners is fair from a financial point of view to those holders. The members of the special committee began by noting that their conditions from the September 7, 2006 meeting were met, so they recommended the transaction to the board of directors. The members of the board of directors accepted the financial analyses and conclusion of Needham & Company set forth in its opinion, and unanimously approved the terms of the merger agreement and the transactions contemplated by the merger agreement and determined the merger, on the terms and conditions set forth in the merger agreement, advisable and to be fair to and in the best interest of our shareholders. The members of the board of directors based their conclusions as to the fairness of the merger to our shareholders in part on the criteria, valuations, methodologies and conclusions that were employed by Needham & Company in rendering its opinion. Other factors that were considered by the special committee and the board of directors in reaching their conclusions as to the fairness of the merger are described in “Special Factors—Reasons for the Special Committee’s Recommendation” and “Special Factors—Reasons for the Board of Directors’ Recommendation.”

On September 12, 2006, we executed the merger agreement with the entities formed by Francisco Partners, Meteor Holding Corporation and Meteor Merger Corporation, and issued a press release announcing the merger. Concurrent with the execution of the merger agreement, Mr. Knowles, on the one hand, and the Elliott Investors, on the other, each separately entered into their respective contribution and voting agreements with Meteor Holdings Corporation and the fee sharing letters discussed under “Special Factors—Interests or Certain Persons in the Merger” and “Other Agreements Related To Our Securities—Contribution and Voting Agreements.”

On September 12, 2006, at a regularly scheduled board of directors meeting, the board of directors determined to pay each member of the special committee a retainer of $35,000 and $40,000 for the Chairman, in addition to regular fees for meetings and out of pocket expenses.

Recommendations of the Special Committee and the Board of Directors

The special committee of our board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement and determined the merger, on the terms and conditions set forth in the merger agreement, to be advisable and fair to and in the best interests of our unaffiliated shareholders. The special committee unanimously recommended that the board of directors approve and declare advisable the merger and the merger agreement, submit the merger agreement to our shareholders and recommend that our shareholders approve the merger agreement. The special committee considered a number of factors, as more fully described above under “Special Factors—Background of the Merger” and below under “Special Factors—Reasons for the Special Committee’s Recommendation,” in determining to recommend that the board of directors and shareholders approve

the merger agreement. The special committee unanimously recommends that you vote “FOR” the approval of the merger agreement.

Our board of directors, acting upon the recommendation of the special committee, has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and determined the merger, on the terms and conditions set forth in the merger agreement, to be advisable and fair to and in the best interests of our unaffiliated shareholders. The board of directors considered a number of factors, as more fully described above under “Special Factors—Background of the Merger” and below under “Special Factors—Reasons for the Board’s Recommendation,” in determining to recommend that the shareholders approve the merger agreement. Our board of directors recommends that you vote FOR the approval of the merger agreement.

Reasons for the Special Committee’s Recommendation

In reaching its conclusion regarding the fairness of the merger to the unaffiliated shareholders and its decision to approve the merger agreement and recommend its approval to the board of directors and our shareholders, the special committee considered the following factors, each of which the special committee believes supported its conclusion but which are not listed in any relative order of importance:

· the special committee’s belief that we face several challenges in our efforts to increase shareholder value as an independent publicly-traded company, including:

· competition from companies with substantially greater scale;

· declining operating margins; and

· long-term efforts to address these and other concerns are made more difficult by the short-term focus of the public equity markets on quarterly financial results;

· the special committee’s knowledge of our business, financial condition, results of operations and prospects, including our recent financial performance, and the special committee’s belief that the merger is more favorable to our shareholders at this time than any other alternative reasonably available to the company and our shareholders, including remaining as a standalone public company;

· the consideration to be received by our shareholders in the merger and a comparison to similar merger transactions;

· the belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable and were the product of extensive negotiations between the special committee and its advisors and the Francisco Partners Investor and its advisors;

· financial analyses and other information with respect to Metrologic presented by Needham & Company to the special committee as discussed below under “Special Factors—Opinion of Needham & Company, LLC,” including Needham & Company’s opinion that as of September 11, 2006 and subject to the assumptions and other matters set forth in the opinion, the merger consideration to be received by the holders of our common stock (other than the Rollover Investors) pursuant to the merger agreement was fair to those holders from a financial point of view;

· the commitments for debt financing and equity financing represented by the commitment letters described below under “Special Factors—Financing of the Merger”, each of which the special committee believed reduced the risk that the merger would not be consummated;

· the fact that the merger consideration is all cash, so that the transaction allows our unaffiliated shareholders to immediately realize a fair value, in cash, for their investment and provides such shareholders certainty of value for their shares;

· the fact that the $18.50 per share price to be paid in the merger represented a 23% premium to the average closing prices of our common stock over the 30 trading day period prior to and including the date of the special committee’s approval of the merger and, a 24% premium to the average closing prices of our common stock over the 60 trading day period prior to and including that date, and a 22% premium to the average closing prices of our common stock over the 90 day trading period prior to and including that date;

· the 22% increase in our stock price in the 12 trading days prior to the announcement of the transaction and the belief of the special committee that the increase may have resulted from rumors about a potential transaction;

· the fact that, despite efforts conducted during the last year by us or on our behalf to determine the interest of other potential financial buyers and strategic parties, during which 94 parties were contacted to explore a potential transaction with Metrologic, we only received three initial non-binding indications of interest and only one subsequent indication of interest that was at a price less than the then current market price of our common stock. Moreover, neither the special committee, the board of directors nor the executive officers of Metrologic were aware of any firm offers made by any other person during the prior two years for the merger or consolidation of us with or into another person, the sale or transfer of all or substantially all of our assets or the acquisition of a controlling interest of our common stock;

· the fact that, subject to compliance with the terms and conditions of the merger agreement, we are permitted to terminate the merger agreement prior to the completion of the merger in order to approve any alternative transaction proposed by a third party that is a “superior proposal,” as defined in the merger agreement, upon the prior or concurrent payment to Meteor Holding Corporation or its designee of an $18.25 million termination fee;

· the fact that, subject to the terms and conditions of the merger agreement, Meteor Holding Corporation is obligated to pay Metrologic a $9.125 million termination fee if the merger agreement is terminated as a result of Meteor Holding Corporation’s failure to obtain debt financing under certain circumstances;

· the failure of our succession plan to successfully indentify and engage a candidate to succeed our 78 year old founder and the fact that we have experienced significant turnover at the senior management level; and

· the fact that the Francisco Partners Investor indicated that its current intention was to continue to conduct the operations of Metrologic substantially as they are currently conducted, to retain our current management and employees and to allow the principal location of the business to remain the same.

In addition, the special committee believed that sufficient procedural safeguards were and are present to ensure the fairness of the merger to the unaffiliated shareholders and to permit the special committee to represent effectively the interests of our unaffiliated shareholders. These procedural safeguards include the following:

· the special committee, which consisted entirely of directors who are not officers or employees of Metrologic and who will not have an economic interest in Metrologic following the merger, acted to represent solely the interests of the unaffiliated shareholders and to negotiate with the Francisco Partners Investor on behalf of such shareholders;

· the members of the special committee were adequately compensated for their services and that their compensation was in no way contingent on their approving the merger agreement and taking the other actions described in this proxy statement;

· the members of the special committee will not personally benefit from the completion of the merger in a manner different from our other shareholders (other than the Rollover Investors), except with respect to their right to receive customary indemnification and officer and director liability insurance coverage under the terms of the merger agreement;

· the special committee retained and received advice from Needham & Company, as financial advisor, and Ballard Spahr Andrews & Ingersoll, LLP, as legal advisor, each of which has extensive experience in transactions similar to the proposed merger;

· the special committee requested and received from Needham & Company an opinion that the consideration to be received by the holders of our common stock, other than the Rollover Investors, pursuant to the merger agreement was fair to those holders from a financial point of view;

· the special committee, with the assistance of its legal and financial advisors, conducted negotiations with the Francisco Partners Investor, which led to an increase in the merger consideration to be received by the unaffiliated shareholders from a price of $18.00 per share initially proposed by the Francisco Partners Investor to $18.50 per share. As a result of these negotiations, the special committee believed that $18.50 per share was the highest price the Francisco Partners Investor was willing to pay in the merger;

· the special committee was aware that it had no obligation to recommend any transaction, including the proposal put forth by the Investor Group; and

· our ability, subject to compliance with the terms and conditions of the merger agreement, to respond to unsolicited inquiries regarding alternative acquisition proposals and to terminate the merger agreement prior to the effectiveness of the merger in order to approve any alternative transaction proposed by a third party that is a “superior proposal,” as defined in the merger agreement, upon the prior or concurrent payment to Meteor Holding Corporation or its designee of an $18.25 million termination fee.

The special committee believes that the merger is procedurally fair to the unaffiliated shareholders. Also, the special committee believes that it was not necessary to retain an unaffiliated representative to act solely on behalf of the unaffiliated shareholders or to require a separate vote of the unaffiliated shareholders because the special committee was charged with representing the interests of such unaffiliated shareholders, it engaged financial and legal advisors to act on its behalf and it was actively involved in extended and numerous deliberations and negotiations regarding the merger on behalf of the unaffiliated shareholders.

The special committee also considered a variety of potentially negative factors concerning the merger agreement and the merger, including the following factors, which are not listed in any relative order of importance:

· the possibility that the Francisco Partners Investor will be unable to obtain the debt financing necessary to consummate the merger;

· the possibility that we will not have sufficient cash on hand and fully liquid cash equivalents at the time of closing to satisfy a condition to the consummation of the merger;

· the risks and costs to us if the merger does not close, including the diversion of management and employee attention, employee attrition and the effect on business and customer relationships;

· the fact that our shareholders, other than the Rollover Investors, will have no ongoing equity participation in Metrologic following the merger, and that such shareholders will cease to participate in Metrologic’s future earnings or growth, if any, or to benefit from increases, if any, in

the value of Metrologic’s common stock, and will not participate in any potential future sale of Metrologic to a third party;

· the fact that certain of our directors and executive officers and the Elliott Investors have interests in the transaction that are different from, or in addition to, those of other shareholders of the company;

· the merger agreement’s limitations on our ability to solicit other offers;

· the fact that Meteor Holding Corporation’s obligation to consummate the merger is subject to conditions outside of our control;

· the fact that, pursuant to the terms of the contribution and voting agreements, Mr. Knowles, certain related parties and the Elliott Investors agreed to vote all of the shares of our common stock that they beneficially own, which represent approximately 49% of our outstanding common stock, (a) in favor of the merger agreement and the related transactions and any matter required to effect those transactions and (b) against alternative acquisition proposals;

· the fact that if the merger agreement is terminated under certain circumstances, the voting obligations of Mr. Knowles and certain related parties with respect to 35% of our outstanding common stock will survive the termination of the agreement for a period of up to 10 months;

· the fact that our shareholders are not entitled to dissenter’s or appraisal rights under New Jersey law;

· the restrictions on the conduct of our business prior to the completion of the merger, requiring us to conduct our business in the ordinary course, subject to specific limitations, may delay or prevent us from undertaking business opportunities that may arise pending completion of the merger; and

· the fact that Metrologic is entering into a merger agreement with newly formed corporations with essentially no assets and, accordingly, that any remedy in connection with a breach of the merger agreement by Meteor Holding Corporation or Meteor Merger Corporation could be limited.

In the course of reaching its conclusion regarding the fairness of the merger to the unaffiliated shareholders and its decision to approve the merger, the special committee considered analyses presented by Needham & Company relating to the going concern value of Metrologic. These analyses are summarized below under “Special Factors—Opinion of Needham & Company, LLC.” The special committee did not consider the liquidation value of our assets because it considers us to be a viable going concern business and views the trading history of our common stock as an indication of our value as such. The special committee believes that, due to the fact that we are being sold as a going concern, the liquidation value is irrelevant to a determination as to whether the merger is fair to the unaffiliated shareholders. Further, the special committee did not consider net book value as a factor because it believed that net book value, which is an accounting concept, is not a material indicator of the value of Metrologic as a going concern but rather is indicative of historical costs. Our net book value per share as of June 30, 2006 was $7.76. This value is substantially below the $18.50 per share cash merger consideration.

The foregoing discussion of the information and factors considered by the special committee is not intended to be exhaustive, but includes a number of the factors considered by the special committee. In view of the wide variety of factors considered by the special committee, the special committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its conclusion. In addition, individual members of the special committee may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The special committee approved and recommends the merger agreement and recommends that our

shareholders vote to approve the merger agreement based upon the totality of the information presented to and considered by it.

Reasons for the Board’s Recommendation

In reaching its conclusion regarding the fairness of the merger to our unaffiliated shareholders and its decision to approve the merger agreement and recommend the approval of the merger agreement by our shareholders, the board of directors relied on the special committee’s recommendations and the factors examined by the special committee as described above. In view of the wide variety of factors considered in connection with its evaluation of the proposed merger, the board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its conclusion. In addition, individual members of the board of directors may have given different weights to different factors and may have viewed some factors more positively or negatively than others. Rather, the board of directors viewed its position as being based on the totality of the information presented to and considered by it. As part of its determination with respect to the merger, the board of directors adopted the conclusion of the special committee and the analysis underlying the conclusion, based upon its view as to the reasonableness of that conclusion and analysis.

Opinion of Needham & Company, LLC

We retained Needham & Company to act as financial advisor to the special committee of our board of directors in connection with the exploration of sale alternatives for us and to render an opinion as to the fairness, from a financial point of view, to the holders of our common stock (other than the Rollover Investors) of the merger consideration to be received by those holders pursuant to the merger agreement. The merger consideration was determined through negotiations between the special committee and the Francisco Partners Investor, and not by Needham & Company, although Needham & Company provided advice to the special committee during these negotiations.

On September 11, 2006, Needham & Company delivered to the special committee of our board of directors and to our board of directors its written opinion, dated September 11, 2006, that, as of that date and based upon and subject to the assumptions and other matters described in the opinion, the merger consideration of $18.50 in cash per share to be received by the holders of our common stock (other than the Rollover Investors) pursuant to the merger agreement was fair to those holders from a financial point of view. The Needham & Company opinion is addressed to the special committee of our board of directors and our board of directors, relates only to the fairness, from a financial point of view, of the merger consideration to the holders of our common stock (other than the Rollover Investors) as of the date of the opinion, and does not constitute a recommendation to any shareholder as to how that shareholder should vote or act on any matter relating to the merger.

The complete text of the Needham & Company opinion, which sets forth the assumptions made, matters considered, and limitations on and scope of the review undertaken by Needham & Company, is attached to this proxy statement as Annex B. The summary of the Needham & Company opinion set forth in this proxy statement is qualified in its entirety by reference to the Needham & Company opinion. You should read the Needham & Company opinion carefully and in its entirety for a description of the procedures followed, the factors considered, and the assumptions made by Needham & Company.

In arriving at its opinion, Needham & Company, among other things:

· reviewed a draft of the merger agreement dated September 10, 2006;

· reviewed certain publicly available information concerning us and certain other relevant financial and operating data concerning us furnished to Needham & Company by us;

· reviewed the historical stock prices and trading volumes of our common stock;

· held discussions with members of our management concerning our current operations and our future business prospects;

· reviewed certain financial forecasts with respect to our company prepared by our management and held discussions with members of our management concerning those forecasts;

· reviewed certain research analyst projections with respect to our company and held discussions with members of our management concerning those projections;

· compared certain publicly available financial data of companies whose securities are traded in the public markets and that Needham & Company deemed relevant to similar data for our company;

· reviewed the financial terms of certain other business combinations that Needham & Company deemed generally relevant; and

· performed and considered such other studies, analyses, inquiries and investigations as Needham & Company deemed appropriate.

In connection with its review and in arriving at its opinion, Needham & Company did not independently verify, nor did Needham & Company assume responsibility for independent verification of, any of the information reviewed by or discussed with it and assumed and relied on the accuracy and completeness of that information. Needham & Company assumed that the financial forecasts for our company provided to it by our management were reasonably prepared on bases reflecting the best currently available estimates and judgments of our management, at the time of preparation, of our future operating and financial performance. Needham & Company assumed, based upon discussions with our management, that the research analyst projections with respect to our company represent reasonable estimates as to our future financial performance. Needham & Company did not assume any responsibility for or make or obtain any independent evaluation, appraisal or physical inspection of our assets or liabilities. Needham & Company’s opinion states that it was based on economic, monetary and market conditions existing as of its date. Needham & Company expressed no opinion as to the price at which our common stock will actually trade at any time. In addition, Needham & Company was not asked to consider, and the Needham & Company opinion does not address, our underlying business decision to engage in the merger or the relative merits of the merger as compared to other business strategies that might be available for us.

We imposed no limitations on Needham & Company with respect to the investigations made or procedures followed by Needham & Company in rendering its opinion.

In preparing its opinion, Needham & Company performed a variety of financial and comparative analyses. The following paragraphs summarize the material financial analyses performed by Needham & Company in arriving at its opinion. The order of analyses described does not represent relative importance or weight given to those analyses by Needham & Company. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Needham & Company, the tables must be read together with the full text of each summary. The following quantitative information, to the extent it is based on market data, is, except as otherwise indicated, based on market data as it existed on or prior to September 11, 2006, and is not necessarily indicative of current or future market conditions.

Selected Company Analysis. Using publicly available information, Needham & Company compared selected historical and projected financial and market data ratios for us to the corresponding data and ratios of publicly traded companies that Needham & Company deemed relevant because their businesses may be considered similar to our business. These companies, referred to as the selected companies, consisted of the following:

Datalogic SpA
Intermec, Inc.
NCR Corporation
Symbol Technologies, Inc.
Zebra Technologies Corporation

The following table sets forth information concerning the following multiples for the selected companies and for us:

· enterprise value as a multiple of last 12 months, or LTM, revenues;

· enterprise value as a multiple of projected calendar year 2006 revenues;

· enterprise value as a multiple of projected calendar year 2007 revenues;

· enterprise value as a multiple of LTM earnings before interest, taxes, depreciation and amortization, or EBITDA;

· enterprise value as a multiple of projected calendar year 2006 EBITDA;

· enterprise value as a multiple of projected calendar year 2007 EBITDA;

· enterprise value as a multiple of LTM earnings before interest and taxes, or EBIT;

· price as a multiple of LTM earnings per share, or EPS;

· price as a multiple of projected calendar year 2006 EPS; and

· price as a multiple of projected calendar year 2007 EPS.

Needham & Company calculated multiples for the selected companies based on the closing stock prices of those companies on September 8, 2006 and calculated multiples for us based on the merger consideration of $18.50 per share. The columns in the table below under the heading “Metrologic Merger Consideration” represent multiples calculated based on the merger consideration and research analyst projections and multiples calculated based on the merger consideration and forecasts by our management, and assumed the receipt of estimated net cash proceeds from the sale of Adaptive Optics Associates, Inc. (“AOA”). LTM multiples for our company were based on financial forecasts provided by our management for the 12 months ending September 30, 2006.

Selected Companies

Metrologic Merger Consideration

High

Low

Mean

Median

Using
Analysts
Estimates

Using
Management
Estimates

Enterprise value to LTM revenues

2.5x

1.0x

1.7x

Enterprise value to projected calendar year 2006 revenues

2.4x

1.0x

1.5x

1.6x

Enterprise value to projected calendar year 2007 revenues

2.2x

0.9x

1.5x

1.4x

1.3x

Enterprise value to LTM EBITDA

19.5x

8.7x

13.3x

11.4x

Enterprise value to projected calendar year 2006 EBITDA

19.5x

8.6x

12.8x

11.5x

N/A

11.2x

Enterprise value to projected calendar year 2007 EBITDA

14.3x

7.6x

10.5x

10.1x

N/A

6.8x

Enterprise value to LTM EBIT

22.3x

11.7x

16.6x

16.1x

14.4x

Price to LTM EPS

33.0x

13.2x

22.2x

21.2x

19.5x

Price to projected calendar year 2006 EPS

36.9x

18.0x

26.5x

26.4x

24.5x

25.0x

Price to projected calendar year 2007 EPS

26.1x

15.2x

20.2x

19.7x

19.0x

14.5x

Stock Price Premium Analysis. Needham & Company analyzed publicly available financial information for 55 merger and acquisition transactions that represent transactions involving publicly-traded technology and technology-enabled services companies completed since September 8, 2005 with transaction values of between $100 million and $1 billion. In examining these transactions, Needham & Company analyzed the premium of consideration offered to the acquired company’s stock price one day, five days, 30 days, 60 days and 90 days prior to the announcement of the transaction.

Needham & Company calculated premiums for our company as of September 8, 2006 based on the merger consideration of $18.50 for each share of our common stock. The following table sets forth information concerning the stock price premiums in the selected transactions and the stock price premium implied by the merger.

	Selected Transactions						Metrologic Merger
	Mean			Median			at $18.50
One day stock price premium		20	%		17	%		13	%
Five day stock price premium		23	%		18	%		15	%
30 day stock price premium		31	%		27	%		31	%
60 day stock price premium		34	%		32	%		29	%
90 day stock price premium		35	%		33	%		12	%

Selected Transaction Analysis. Needham & Company analyzed publicly available financial information for the following selected merger and acquisition transactions, which represent transactions completed since January 1, 2000 that involved target companies that were involved in the display, vision and imaging business and with transaction values between $10 million and $500 million:

Acquirer				Target
Singulus Technologies AG				Rag AG
Datalogic SpA				PSC Inc.
Cognex Corporation				DVT Corp.
Axsys Technologies, Inc.				Diversified Optical Products, Inc.
Datalogic SpA				Informatics Inc.
Cypress Semiconductor Corporation				SMal Camera Technologies, Inc.
Metrologic Instruments, Inc.				Omniplanar, Inc.
Danaher Corporation				Accu-Sort Systems, Inc.
Danaher Corporation				Willett International
Littlejohn & Co., LLC				PSC Inc.
Metrologic Instruments, Inc.				Adaptive Optics Associates
Zebra Technologies Corporation				Comtec Information

In examining the selected transactions, Needham & Company analyzed, for the selected transactions and for the merger,

· enterprise value as a multiple of LTM sales;

· enterprise value as a multiple of LTM EBITDA;

· enterprise value as a multiple of LTM EBIT; and

· equity value to LTM net income.

Needham & Company calculated multiples for our company based on the merger consideration of $18.50 for each share of our common stock, and assumed the receipt of estimated net cash proceeds from the sale of AOA. LTM multiples for our company were based on financial forecasts provided by our management for the 12 months ending September 30, 2006.

The following table sets forth information concerning the multiples described above for the selected transactions and the same multiples implied by the merger.

Selected Transactions

Metrologic

High

Low

Mean

Median

Merger

Enterprise value to LTM sales

6.4x

0.1x

2.1x

1.0x

1.7x

Enterprise value to LTM EBITDA

16.2x

5.9x

11.1x

9.0x

11.4x

Enterprise value to LTM EBIT

22.2x

8.9x

16.6x

17.7x

14.4x

Equity value to LTM net income

28.0x

9.2x

20.7x

25.0x

19.6x

Discounted Cash Flow Analysis. Needham & Company performed illustrative discounted cash flow analyses to determine indicators of illustrative implied equity values for Metrologic and illustrative implied equity values per share of our common stock based on our management’s forecasts, including approximately $35 million of net cash generated from the sale of AOA. Needham & Company calculated ranges of estimated terminal values by multiplying calendar year 2010 estimated EBITDA of approximately $124 million by selected multiples ranging from 8.0x to 10.0x, and adding to that net cash.

The amounts were discounted to present value using discount rates of 10% to 20%. This analysis indicated the following implied per share equity reference range for Metrologic, as compared to the per share merger consideration:

Illustrative Implied Per Share Equity Reference Range for Metrologic	Per Share Merger Consideration
$27.74 - $44.56		$	18.50

Needham & Company also performed illustrative sensitivity analyses which applied a 10% long term revenue growth rate to determine indicators of illustrative implied equity values and illustrative implied equity values per share to those forecasts. The 10% long term revenue growth rate was chosen because it approximated the 2006 to 2007 revenue growth rate estimated by consensus research analyst projections. Needham & Company then calculated ranges of estimated terminal values by multiplying adjusted calendar year 2010 EBITDA of approximately $46 million by the same multiples ranging from 8.0x to 10.0x, and adding to that net cash . The amounts were discounted to present value using discount rates of 10% to 20%. Based on the foregoing, the analysis indicated the following implied per share equity reference range for Metrologic, as compared to the per share merger consideration:

Illustrative Sensitivity Case Implied Per Share Equity Reference Range	Per Share Merger Consideration
$12.09 - $18.18		$	18.50

No company, transaction or business used in the “Selected Company Analysis,” “Stock Price Premium Analysis,” or “Selected Transaction Analysis” as a comparison is identical to our company or the merger. Accordingly, an evaluation of the results of these analyses is not entirely mathematical; rather, it involves complex considerations and judgments concerning differences in the financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the selected companies or selected transactions or the business segment, company or transaction to which they are being compared.

The summary set forth above does not purport to be a complete description of the analyses performed by Needham & Company in connection with the rendering of its opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analyses and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. Accordingly, Needham & Company believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying its analyses and opinion. Needham & Company did not attribute any specific weight to any factor or analysis considered by it. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis.

In performing its analyses, Needham & Company made numerous assumptions with respect to industry performance, general business and economic and other matters, many of which are beyond the control of our company. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable. Additionally, analyses relating to the values of businesses or assets do not purport to be appraisals or necessarily reflect the prices at which businesses or assets may actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. Needham & Company’s opinion and its related analyses were only one of many factors considered by the special committee of our board of directors in their evaluation

of the proposed merger and should not be viewed as determinative of the views of the special committee, our board of directors or management with respect to the merger consideration or the merger.

Under the terms of the special committee’s engagement letter with Needham & Company, we have paid or agreed to pay Needham & Company a $25,000 retainer, a monthly advisory fee of $25,000 until the termination or closing of the merger, and a nonrefundable fee of $450,000 for rendering its opinion, up to a maximum total amount of $1,000,000. Whether or not the merger is consummated, we have agreed to reimburse Needham & Company for its out-of-pocket expenses and to indemnify Needham & Company against certain liabilities relating to or arising out of services performed by Needham & Company as financial advisor to the special committee.

Needham & Company is a nationally recognized investment banking firm. As part of its investment banking services, Needham & Company is regularly engaged in the evaluation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements and other purposes. Needham & Company was retained by the special committee of our board of directors to act as its financial advisor in connection with the merger based on Needham & Company’s experience as a financial advisor in mergers and acquisitions as well as Needham & Company’s familiarity with us and the technology industry generally. Needham & Company provided financial advisory services to us in connection with the sale of AOA, for which services Needham & Company has received and will receive customary fees. Needham & Company also provided financial advisory services to the special committee from October 2005 through January 2006 and received a customary fee for those services. Needham & Company has had no other investment banking relationship with us during the past two years. In the normal course of its business, Needham & Company may actively trade our equity securities for its own account or for the account of its customers and, therefore, may at any time hold a long or short position in our securities.

Position of C. Harry Knowles as to Fairness

Under the rules of the Securities and Exchange Commission, C. Harry Knowles is required to provide certain information regarding his position as to the fairness of the merger to the unaffiliated shareholders of Metrologic. Mr. Knowles is making the statements included in this section solely for purposes of complying with such requirements. Mr. Knowles’s views as to the fairness of the merger should not be construed as a recommendation to any shareholder as to how that shareholder should vote on the proposal to approve the merger agreement.

Mr. Knowles has interests in the merger different from, and in addition to, the other shareholders of Metrologic. These interests are described under “Special Factors—Interests of Certain Persons in the Merger.”

Mr. Knowles engaged Morgan Stanley & Co. Incorporated to advise him in connection with the merger, but did not undertake a formal evaluation of the fairness of the merger to him or receive advice from the special committee’s legal or financial advisors in his individual capacity as to the fairness of the merger to him. Mr. Knowles believes that the merger agreement and the merger are substantively and procedurally fair to the unaffiliated shareholders of Metrologic and has adopted the analyses of the special committee based upon the reasonableness of the special committee’s analyses and conclusions and Mr. Knowles’ knowledge of Metrologic, as well as the factors considered by, and the findings of, the special committee with respect to the fairness of the merger to such shareholders (see “Special Factors—Recommendation of the Special Committee and Board of Directors” and “Special Factors—Reasons for the Special Committee’s Recommendation”).

Although Mr. Knowles is a director of Metrologic, because of his differing interests in the merger, he was not appointed to the special committee, did not participate in the negotiation of the merger agreement and did not participate in the special committee’s deliberations and evaluation of the merger agreement

and the merger. For these reasons, Mr. Knowles does not believe that his interests in the merger influenced the decision of the special committee with respect to the merger agreement or the merger. Mr. Knowles believes the merger agreement and the merger are substantively and procedurally fair to the unaffiliated shareholders of Metrologic due in part to the establishment of the special committee and the authorization of the special committee to negotiate, deliberate and evaluate, and seek independent legal and financial advice with respect to, the merger agreement and the merger.

The foregoing discussion of the information and factors considered and given weight by Mr. Knowles in connection with the fairness of the merger agreement and the merger is not intended to be exhaustive but is believed to include all material factors considered by Mr. Knowles. Mr. Knowles did not find it practicable to, and did not, quantify or otherwise assign relative weights to the individual factors considered in reaching his position as to the fairness of the merger agreement and the merger. Rather, Mr. Knowles’ fairness determination was made after consideration of all of the foregoing factors as a whole, and after such consideration, Mr. Knowles believes that these factors as a whole provide a reasonable basis for his belief that the merger is fair to the unaffiliated shareholders of Metrologic.

Position of Meteor Holding Corporation and Meteor Merger Corporation as to Fairness

Under a potential interpretation of the rules governing “going private” transactions under Rule 13e-3 of the Exchange Act, Meteor Holding Corporation and Meteor Merger Corporation may be deemed to be engaged in a “going private” transaction and required to express their beliefs as to the fairness of the merger to our public shareholders. Meteor Holding Corporation and Meteor Merger Corporation are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. Meteor Holding Corporation and Meteor Merger Corporation’s views as to fairness of the proposed merger should not be construed as a recommendation to any shareholder as to how such shareholder should vote on the proposal to approve the merger agreement.

Meteor Holding Corporation and Meteor Merger Corporation attempted to negotiate the terms of a transaction that would be most favorable to themselves, and not to shareholders of Metrologic, and, accordingly, did not negotiate the merger agreement with the goal of obtaining terms that were fair to Metrologic’s public shareholders. Meteor Holding Corporation and Meteor Merger Corporation did not participate in the deliberations of Metrologic’s board of directors or the special committee regarding, or receive advice from Metrologic’s or the special committee’s legal or financial advisors as to, the substantive and procedural fairness of the proposed merger, nor did Meteor Holding Corporation or Meteor Merger Corporation undertake any independent evaluation of the fairness of the proposed merger or engage a financial advisor for such purposes. Meteor Holding Corporation and Meteor Merger Corporation believe, however, that the proposed merger is substantively and procedurally fair to Metrologic’s public shareholders based upon the same factors considered by the special committee with respect to the fairness of the proposed merger to such shareholders. See “Special Factors—Reasons for the Special Committee’s Recommendation”.

The factors considered and given weight by Meteor Holding Corporation and Meteor Merger Corporation in connection with the fairness of the merger are not intended to be exhaustive but are believed to include all material factors considered by Meteor Holding Corporation and Meteor Merger Corporation. Meteor Holding Corporation and Meteor Merger Corporation did not find it practicable to assign, and did not assign, relative weights to the individual factors considered in reaching their conclusions as to the fairness of the proposed merger. Rather, their fairness determinations were made after consideration of all of the foregoing factors as a whole.

Purposes, Reasons and Plans for Metrologic After the Merger

The purpose of the merger for Metrologic is to enable its shareholders (other than the Rollover Investors, to the extent of their contributions under the contribution and voting agreements) to immediately realize the value of their investment in Metrologic through their receipt of the per share merger price of $18.50 in cash, without interest. In this respect, the special committee and the board of directors believed that the merger was more favorable to such shareholders than any other alternative reasonably available to Metrologic and its shareholders because of the uncertain returns to such shareholders in light of the company’s business, operations, financial condition, strategy and prospects, as well as the risks involved in achieving those prospects, and general industry, economic and market conditions, both on a historical and on a prospective basis. In particular, the special committee and the board believe that we face several challenges in our efforts to increase shareholder value as an independent publicly-traded company, including:

· competition from companies with substantially greater scale;

· declining operating margins; and

· long-term efforts to address these and other concerns are made more difficult by the short-term focus of the public equity markets on quarterly financial results.

For these reasons, and the other reasons discussed under “Special Factors—Reasons for the Special Committee’s Recommendation,” and “Special Factors—Reasons for the Board’s Recommendation,” the special committee and the board of directors each have determined that the merger agreement and the merger, upon the terms and conditions set forth in the merger agreement, are advisable and fair to and in the best interests of our unaffiliated shareholders.

For Meteor Holding Corporation and Meteor Merger Corporation, the primary purpose of the merger is to benefit from any future earnings and growth of Metrologic after the merger of Meteor Merger Corporation with and into Metrologic, making Metrologic a privately held company wholly owned by Meteor Holding Corporation.

For Mr. Knowles, the principal purpose of the merger as it relates to him in his individual capacity is to immediately realize in cash the value of the substantial majority of his investment in Metrologic through his receipt of the per share merger price of $18.50 in cash, without interest. A secondary purpose of the merger for Mr. Knowles as it relates to him in his individual capacity is to allow him, through his commitment to make an equity investment in Meteor Holding Corporation, to benefit from any future earnings and growth of Metrologic after its stock ceases to be publicly traded. Mr. Knowles also believes that the merger will provide Metrologic with flexibility to pursue to enhance value for the Rollover Investors and new equity holders that it would not have as a public company, including the ability to pursue transactions meeting the collective risk-profiles of the Investor Group without focusing on the reaction of the market or of Metrologic’s public shareholders to such transactions or the collective risk tolerance of such public shareholders as it relates to such transactions.

The transaction has been structured as a cash merger in order to provide the unaffiliated shareholders of Metrologic (and Mr. Knowles to the extent that he receives cash in the merger) with cash for all of their shares and to provide a prompt and orderly transfer of ownership of Metrologic in a single step, without the necessity of financing separate purchases of Metrologic’s common stock in a tender offer or implementing a second-step merger to acquire any shares of common stock not tendered into any such tender offer, and without incurring any additional transaction costs associated with such activities.

Metrologic decided to proceed with the merger and going private transaction at this time because we believe that the merger is more favorable to the unaffiliated shareholders of Metrologic than any other alternative reasonably available to Metrologic and its shareholders at this time, including remaining as a

standalone public company. Another factor that led to our decision to pursue the transaction at this time is the recent significant increase in the costs and burdens associated with being a public company.

It is expected that, upon consummation of the merger, the operations of Metrologic will be conducted substantially as they currently are being conducted, except that Metrologic will not be subject to the obligations and constraints, and the related direct and indirect costs and personnel requirements, associated with having publicly-traded equity securities. In addition, on September 19, 2006, Metrologic and certain of its subsidiaries entered into a stock purchase agreement with Essex Corporation, which provides for the sale 100% of the shares of Adaptive Optics Associates, Inc. (“AOA”), an indirect subsidiary of Metrologic, to Essex Corporation for $40,250,000 in cash, as adjusted to reflect changes in working capital as of the closing date of the transaction. AOA designs, develops and manufactures a wide variety of standard and custom electro-optic and opto-mechanical products. This transaction closed as of October 1, 2006. As a result, the operations of AOA will no longer be consolidated with those of Metrologic.

The Francisco Partners Investor has advised Metrologic that it does not have any current plans or proposals that relate to or would result in an extraordinary corporate transaction following completion of the merger involving Metrologic’s corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations or sale or transfer of a material amount of assets. We expect, however, that following the merger, Metrologic’s management and the Francisco Partners Investor will continuously evaluate and review Metrologic’s business and operations and may develop new plans and proposals that they consider appropriate for Metrologic.

Certain Effects of the Merger

If the merger agreement is approved by our shareholders and the other conditions to the closing of the merger are either satisfied or waived, Meteor Merger Corporation will be merged with and into Metrologic, with Metrologic being the surviving corporation and a wholly owned subsidiary of Meteor Holding Corporation. Upon the effectiveness of the merger, each share of Metrologic common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held in the treasury of Metrologic, owned by Meteor Holding Corporation or any wholly owned subsidiary of Meteor Holding Corporation or Metrologic, which will be cancelled) will be converted into the right to receive $18.50 in cash, without interest.

Following the merger, the entire equity interest in Metrologic will be owned by Meteor Holding Corporation, which in turn will be owned by the Investor Group. If the merger is completed, Metrologic’s current shareholders, other than the Rollover Investors, will cease to have any direct or indirect ownership interest in Metrologic or rights as shareholders of Metrologic. As a result, those shareholders of Metrologic will not participate in any future earnings or growth of Metrologic and will not benefit from any appreciation in value of Metrologic.

Following the merger, the entire interest in Metrologic’s net book value and net earnings will be held by Meteor Holding Corporation. The beneficial ownership of each member of the Investor Group of the capital stock of Meteor Holding Corporation is expected to be the following after the completion of the merger:

	Expected Beneficial Ownership of Meteor Holding Corporation Capital Stock Post-Merger (%)
	Junior Preferred			Common
FP-Metrologic, LLC		69.8	%		69.8	%
C. Harry Knowles		15			15
Elliott Associates, L.P.		6.1			6.1
Elliott International, L.P.		9.1			9.1

The table below sets forth the direct and indirect interests of the Rollover Investors in Metrologic’s net book value and net earnings as of and for the six months ended June 30, 2006, respectively, prior to and immediately after the merger.

	Ownership Prior to the Merger(1)											Ownership After the Merger(2)
	Net Book Value					Earnings						Net Book Value									Earnings
	$			%		$				%		$				%		$			%
C. Harry Knowles	$	70,702,356	40.2		$		3,524,047		40.2		$		26,392,650		15.0		$		1,315,500			15.0
Elliott Associates, L.P.	$	5,266,554		3.0		$		262,503		3.0		$		10,703,452		6.1		$		533,497			6.1
Elliott International, L.P.	$	7,899,850		4.5		$		393,756		4.5		$		16,055,217		9.1		$		800,247			9.1

(1) Based upon beneficial ownership of Meteor Holding Corporation common stock as of September 30, 2006.

(2) Based upon the expected beneficial ownership of Meteor Holding Corporation junior preferred stock and common stock immediately after completion of the merger.

The merger agreement provides that all outstanding options to acquire Metrologic common stock issued pursuant to the 2004 Equity Incentive Plan will automatically be cancelled immediately prior to the effective time of the merger. Options with an exercise price that is less than $18.50 per share will be converted into the right to receive an amount in cash (without interest), less applicable taxes, equal to the product of (1) the number of shares of our common stock subject to each option, as of the effective time of the merger, multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option. Holders of options granted under the 2004 Equity Incentive Plan with an exercise price that is equal to or greater than $18.50 per share will receive $1.00 per award in exchange for the cancelled options. Metrologic expects to make an offer to holders of options granted under our 1994 Incentive Plan to cancel all of their options in exchange for a cash payment, without interest, equal to the product of (1) the total number of shares of Metrologic common stock subject to the option multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, less any applicable taxes. All of the options held by employees who will be eligible to participate in the offer have exercise prices that are less than $18.50 per share. In the event that any of the options under the 1994 Incentive Plan are not cancelled prior to the merger, then such outstanding options will be subject to adjustment upon completion of the merger pursuant to the terms set forth in the 1994 Incentive Plan.

Metrologic’s common stock is currently registered under the Securities Exchange Act of 1934 and is quoted on The NASDAQ Global Select Market under the symbol “MTLG.” As a result of the merger, Metrologic will become a privately held corporation, and there will be no public market for its common stock. After the merger, the common stock will cease to be quoted on The NASDAQ Global Select Market, and price quotations with respect to sales of shares of common stock in the public market will no longer be available. In addition, the registration of our common stock under the Securities Exchange Act of 1934 will be terminated. This termination will make certain provisions of the Exchange Act, such as the requirement of filing periodic and other reports with the Securities and Exchange Commission and furnishing a proxy or information statement in connection with shareholders’ meetings, no longer applicable to Metrologic on account of its common stock. In addition, this termination will result in Metrologic no longer being subject to the provisions of the Sarbanes-Oxley Act of 2002 or the liability provisions of the Securities Exchange Act of 1934 immediately following the merger and officers of Metrologic will no longer be required to publicly certify the accuracy and completeness of the financial statements and other information relating to Metrologic.

The directors and officers of Meteor Merger Corporation immediately prior to the effective time of the merger will be the initial directors and officers of the surviving corporation. The certificate of incorporation of Metrologic will be amended as set forth in an exhibit to the merger agreement. The

bylaws of Meteor Merger Corporation in effect immediately prior to the effective time of the merger will become the bylaws of the surviving corporation.

In connection with the merger, the Rollover Investors will receive benefits and be subject to obligations in connection with the merger that are different from, or in addition to, the benefits and obligations of Metrologic shareholders generally. These incremental benefits and additional obligations include the right and obligation of the Rollover Investors to exchange of a portion of their Metrologic shares for shares of junior preferred stock and common stock of Meteor Holding Corporation and certain additional economic and governance rights with respect to Meteor Holding Corporation after the merger. In addition, certain members of Metrologic’s management, other than Mr. Knowles, are currently expected to continue in their current positions after the merger, to receive grants of stock options pursuant to a new equity incentive plan that will be adopted by Meteor Holding Corporation and to be eligible to participate in a cash retention program. For a description of the interests of the Rollover Investors and management, see “—Interests of Certain Persons in the Merger.”

The principal benefit of the merger to the Investor Group is that our future earnings and growth will be for their benefit and not for the benefit of our other current shareholders. The detriments of the merger to the Investor Group are the lack of liquidity for Metrologic’s capital stock following the merger, the fact that equity interests of Metrologic following the merger will be subject to a stockholders agreement that impose restrictions on those equity interests, the risk that Metrologic will decrease in value following the merger, the incurrence by Metrologic of significant additional debt as described below under “Special Factors—Financing of the Merger” and the payment by it of approximately $ million in estimated fees and expenses related to the merger and financing transactions. See “Special Factors—Financing of the Merger” and “Special Factors—Fees and Expenses of the Merger.”

The benefit of the merger to our shareholders (other than the Rollover Investors, to the extent of their contributions under the contribution and voting agreements) is the right to receive $18.50 in cash per share, without interest, for all of their shares of Metrologic common stock. The detriments of the merger to our shareholders, other than the Rollover Investors, are that they will cease to participate in our future earnings and growth, if any, and that the receipt of the payment for their shares will be a taxable transaction for federal income tax purposes. See “Special Factors—Material U.S. Federal Income Tax Consequences.”

Effects on the Company if the Merger is Not Completed

In the event that the merger agreement is not approved by Metrologic’s shareholders or if the merger is not completed for any other reason, our shareholders will not receive the payment for their shares contemplated by the merger agreement. Instead, Metrologic will remain an independent public company and its common stock will continue to be listed and traded on The NASDAQ Global Select Market. In addition, if the merger is not completed, we expect that management will continue to operate Metrologic’s business in a manner similar to that in which it is being operated today, with the exception of changes to the operations that will result from the divestiture of AOA discussed elsewhere in this proxy statement. As a result, Metrologic shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic and market conditions. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your Metrologic shares. From time to time, Metrologic’s board of directors will evaluate and review, among other things, the business operations, properties, dividend policy and capitalization of Metrologic, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to maximize shareholder value. If the merger agreement is not approved by Metrologic’s shareholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to Metrologic will be offered or occur or that the business, prospects or results of operations of Metrologic will not be adversely affected.

If the merger agreement is terminated under certain circumstances, Metrologic will be obligated to pay a termination fee of $18.25 million to Meteor Holding Corporation or its designee. Under other circumstances, Meteor Holding Corporation will be obligated to pay a termination fee of $9.125 million to Metrologic. See “The Merger Agreement—Fees and Expenses.”

Financing of the Merger

The obligation of Meteor Holding Corporation and Meteor Merger Corporation to complete the merger is subject to a debt financing condition, which is described in “The Merger Agreement (Proposal No. 1)—Conditions to Completion of the Merger.” Meteor Holding Corporation estimates that approximately $ million will be the total amount of funds required to pay the merger consideration in connection with the merger and to pay related fees and expenses. Meteor Merger Corporation expects this amount, together with the related working capital requirements of Metrologic following the completion of the merger, to be provided through a combination of the proceeds of the following:

· an aggregate cash equity investment by the Francisco Partners Investor of $128.0 million;

· approximately $62.6 million in rollover equity financing from the Rollover Investors;

· a new $160.0 million senior secured first loan facility, consisting of a $125.0 million term loan facility and a $35.0 million revolving credit facility;

· a new $75.0 million senior secured second lien loan facility; and

· cash and fully liquid cash equivalents held by Metrologic.

Meteor Merger Corporation has received the equity and debt commitments described below.

Equity Financing

Meteor Merger Corporation received an equity commitment letter from the Francisco Partners Investor, pursuant to which the Francisco Partners Investor agreed to contribute, or cause to be contributed, not less than $128.0 million in immediately available funds. The obligations of the Francisco Partners Investor under the equity commitment letter are conditioned upon the satisfaction or waiver of each of the conditions to the obligations of Meteor Holding Corporation and Meteor Merger Corporation to consummate the merger, except the debt financing condition and the condition that the Rollover Investors make their contributions pursuant to the contribution and voting agreements.

Under the terms of the contribution and voting agreement entered into with C. Harry Knowles and certain of his related and family trusts and charitable entities, Mr. Knowles agreed to contribute 1,680,578 shares of our common stock that he beneficially owns to Meteor Holding Corporation immediately prior to the closing of the merger in exchange for approximately 15% of the junior preferred stock and approximately 15% of the common stock of Meteor Holding Corporation. The number of shares of our common stock contributed by Mr. Knowles, and the number of shares of junior preferred stock and common stock of Meteor Holding Corporation issued in exchange therefor, will be adjusted as appropriate to allow Mr. Knowles to own 15% of the outstanding shares of junior preferred stock and 15% of the outstanding shares of common stock of Meteor Holding Corporation immediately following the closing of the merger. Similarly, pursuant to the contribution and voting agreement entered into with the Elliott Investors, the Elliott Investors have agreed to contribute an aggregate of 1,703,885 shares of our common stock that they beneficially own to Meteor Holding Corporation immediately prior to the closing of the merger in exchange for approximately 15.2% of the junior preferred stock and approximately 15.2% of the common stock of Meteor Holding Corporation. The shares of our common stock contributed by Mr. Knowles and the Elliott Investors pursuant to the contribution and voting agreements will be cancelled

and cease to exist at the effective time of the merger and no payment of merger consideration shall be made in respect thereof.

Debt Commitment Letter

Meteor Holding Corporation has entered into a commitment letter, dated as of September 11, 2006, which we refer to in this proxy statement as the “debt commitment letter,” with Morgan Stanley Senior Funding, Inc. Pursuant to, and subject to the terms and conditions of, the debt commitment letter, Morgan Stanley Senior Funding, Inc. has committed to provide to Metrologic (x) senior secured first lien loan facilities of up to $160.0 million, consisting of a seven-year $125.0 million term B loan facility and a five-year $35.0 million revolving credit facility and (y) a senior secured second lien loan facility, consisting of an eight-year $75.0 million term loan facility.

The commitments to provide the senior secured first lien loan facilities and the senior secured second lien loan facility are subject to customary conditions for financings of these types, including the absence of a material adverse effect as contemplated by the merger agreement; the reasonable satisfaction of Morgan Stanley Senior Funding, Inc. with the final structure of the merger, the sources and uses of proceeds used to consummate the merger and the terms and provisions of the documents related to the merger; the reasonable satisfaction of the lenders with the documents related to the senior secured loan facilities; completion of the equity financing and the proceeds received therefrom constituting at least 30% of the total cost of the merger, including all related costs and expenses; and receipt of reasonably satisfactory evidence that the ratio of (x) total consolidated debt to (y) consolidated earnings before interest, taxes, depreciation and amortization (calculated in a manner reasonably satisfactory to Morgan Stanley Senior Funding, Inc. and Metrologic and including customary adjustments) is not greater than 5.2:1.0.

The commitments under the debt commitment letter will terminate on March 31, 2007 if the closing of the financing transactions has not occurred by such date.

Senior Secured First Lien Loan Facilities

General. The borrower under the senior secured first lien loan facilities will be Metrologic. The senior secured term B loan facility will provide for a loan in the amount of $125.0 million, and is expected to have a term of seven years from the closing of the merger and amortize at a rate of 1.00% per year on a quarterly basis for the first six and three-quarters years after the closing date, with the balance paid at maturity. The senior secured revolving loan facility will provide for loans in an aggregate amount of up to $35.0 million, which will include a letter of credit subfacility and a swing line subfacility, and is expected to have a term of five years from the closing of the merger. Proceeds of the senior secured term B loan facility will be used, together with the other sources of funds described in this proxy statement, to finance the merger, to refinance indebtedness of Metrologic and to pay fees and expenses incurred in connection with the merger. Proceeds of the senior secured revolving credit facility will be used for working capital and general corporate purposes of the borrower.

Interest Rates and Fees. The loans under the senior secured term B loan facility are expected, at the option of the borrower, to bear interest at the following rates:

· a rate equal to the Eurodollar Rate (adjusted for maximum reserves) as determined by the Agent, plus an applicable margin of 3.00%, if the senior secured credit facilities receive ratings of B2

(stable) or higher from Moody’s Investors Service, Inc. and B (stable) or higher from Standard & Poor’s Rating Services, respectively, and otherwise, 3.50%.

The loans under the senior secured revolving loan facility are expected, at the option of the borrower, to bear interest at the following:

· the base rate, which will be the higher of (a) the prime rate of interest and (b) the federal funds rate plus 0.50%, in each case plus an applicable margin of 2.00%, if the senior secured credit facilities receive ratings of B2 (stable) or higher from Moody’s Investors Service, Inc. and B (stable) or higher from Standard & Poor’s Rating Services, respectively, and otherwise, 2.50%, for the first two full fiscal quarters after the closing of the facilities, and thereafter in accordance with step-downs to be based on the borrower’s leverage ratio; or

· a rate equal to the Eurodollar Rate (adjusted for maximum reserves) as determined by the Agent, plus an applicable margin of 3.00%, if the senior secured credit facilities receive ratings of B2 (stable) or higher from Moody’s Investors Service, Inc. and B (stable) or higher from Standard & Poor’s Rating Services, respectively, and otherwise, 3.50%, for the first two full fiscal quarters after the closing of the facilities, and thereafter in accordance with step-downs to be based on the borrower’s leverage ratio.

The senior secured revolving loan facility is expected to bear an annual commitment fee of 0.50% on the undrawn portion of that facility commencing on the date of execution and delivery of the credit agreement.

Prepayments. At the option of the borrower (1) amounts outstanding under the senior secured term B loan facility may be voluntarily prepaid and (2) the unutilized portion of the commitments under the senior secured revolving loan facility may be reduced and loans under such facility may be voluntarily repaid, subject to requirements as to minimum amounts and multiples, at any time in whole or in part without premium or penalty, except that any prepayment of Eurodollar rate loans other than at the end of the applicable interest periods will be made with reimbursement for any funding losses of the lenders resulting from the prepayment. Loans under the senior secured first lien loan facilities are expected to be subject to mandatory prepayment with (a) 50% of annual excess cash flow with certain step-downs based on the borrower’s leverage ratio, (b) 100% of proceeds of permitted, non-ordinary course asset sales and casualty or condemnation proceeds, subject to various reinvestment rights of borrower and certain other exceptions, and (c) 100% of proceeds of the sale or issuance of debt securities subject to certain exceptions, and (d) 50% of proceeds of the sale or issuance of equity securities, subject to certain exceptions.

Guarantors. All obligations under the senior secured first lien loan facilities are expected to be guaranteed by Meteor Holding Corporation, which is required to be the direct or indirect holder, after giving effect to the merger, of at least 96% of the equity interest of the borrower, and by each direct and indirect wholly-owned material U.S. subsidiary of Meteor Holding Corporation, other than the borrower.

Security. All obligations of the borrower and each guarantor under the senior secured first lien loan facilities are expected to be secured by the following:

· a first priority lien on, and pledge of, (a) the capital stock and intercompany debt of each present and future direct and indirect U.S. subsidiary of Meteor Holding Corporation and (b) 662¤3% of the capital stock of each present and future direct and indirect first-tier foreign subsidiary owned by the borrower, subject to certain exceptions; and

· a first priority lien on, and security interest in, substantially all of the tangible and intangible property and assets of the borrower and each guarantor, subject to agreed upon exceptions.

Covenants, Representations and Warranties. The senior secured first lien loan facilities are expected to contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on liens, indebtedness, mergers and consolidations, sales of assets, investments, dividends and other distributions, repurchases of capital stock and capital expenditures. The senior secured first lien loan facilities are expected to contain financial covenants, including a maximum leverage ratio and a minimum interest coverage ratio.

Events of Default. Events of default under the senior secured first lien loan facilities are expected to include, among others, nonpayment of principal or interest, a material inaccuracy of representations or warranties, covenant defaults, cross-defaults to other indebtedness, bankruptcy and insolvency events and a change of control.

Senior Secured Second Lien Loan Facility

General. The borrower under the senior secured second lien loan facility will be Metrologic. The senior secured second lien loan facility will provide for a term loan in the amount of $75.0 million, and is expected to have a term of eight years from the closing of the merger and will be payable in full at maturity. Proceeds of the senior secured second lien loan facility will be used, together with the other sources of funds described in this proxy statement, to finance the merger, to refinance indebtedness of Metrologic and to pay fees and expenses incurred in connection with the merger.

Interest Rates and Fees. The loans under the senior secured second lien loan facility are expected, at the option of the borrower, to bear interest at the following rates:

· the base rate, which will be the higher of (a) the prime rate of interest and (b) the federal funds rate plus 0.50%, in each case plus an applicable margin of 6.00%; or

· a rate equal to the Eurodollar Rate (adjusted for maximum reserves) as determined by the Agent, plus an applicable margin of 7.00%.

Prepayments. At the option of the borrower, and after repayment of the senior secured first lien term B loan facility, amounts outstanding under the senior secured second lien loan facility may be voluntarily prepaid, subject to requirements as to minimum amounts and multiples, at any time in whole or in part without premium or penalty, except that any prepayment of Eurodollar rate loans other than at the end of the applicable interest periods will be made with reimbursement for any funding losses of the lenders resulting from the prepayment. Loans under the senior secured second lien loan facility are expected to be subject to mandatory prepayment, after repayment of the senior secured first lien term B loan facility, with (a) 50% of annual excess cash flow with certain step downs based on the borrower’s leverage ratio, (b) 100% of proceeds of permitted, non-ordinary course asset sales and casualty or condemnation proceeds, subject to various reinvestment rights of borrower and certain other exceptions, (c) 100% of proceeds of the sale or issuance of debt securities subject to certain exceptions, and (d) 50% of proceeds of the sale or issuance of equity securities, subject to certain exceptions.

Guarantors. All obligations under the senior secured second lien loan facility are expected to be guaranteed by Meteor Holding Corporation, which is required to be the direct or indirect holder, after giving effect to the merger, of at least 96% of the equity interest of the borrower, and by each direct and indirect wholly-owned material U.S. subsidiary of Meteor Holding Corporation, other than the borrower.

Security. All obligations of the borrower and each guarantor under the senior secured second lien loan facility are expected to be secured by the following:

· a second priority lien on, and pledge of, (a) the capital stock and intercompany debt of each present and future direct and indirect U.S. subsidiary of Meteor Holding Corporation and (b) 662¤3% of the

capital stock of each present and future direct and indirect first-tier foreign subsidiary owned by the borrower, subject to certain exceptions; and

· a second priority lien on, and security interest in, substantially all of the tangible and intangible property and assets of the borrower and each guarantor, subject to agreed upon exceptions.

Covenants, Representations and Warranties. The senior secured second lien loan facility is expected to contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on liens, indebtedness, mergers and consolidations, sales of assets, investments, dividends and other distributions, repurchases of capital stock and capital expenditures. The senior secured second lien loan facility is expected to contain financial covenants, including a maximum leverage ratio and a minimum interest coverage ratio.

Events of Default. Events of default under the senior secured second lien loan facility are expected to include, among others, nonpayment of principal or interest, a material inaccuracy of representations or warranties, covenant defaults, cross-acceleration to the senior secured first lien loan facilities and cross-defaults to other indebtedness, bankruptcy and insolvency events and a change of control.

Interests of Certain Persons in the Merger

In considering the recommendations of the special committee and the board of directors, you should be aware that certain of our directors, executive officers and shareholders have interests in the transaction that are different from, and/or in addition to, the interests of Metrologic shareholders generally. The members of the special committee and the board of directors were aware of these differing interests and considered them, among other matters, in evaluating and negotiating the merger agreement and the merger and in recommending to the shareholders that the merger agreement be approved.

Knowles Interests

Equity Rollover; Put Right. Pursuant to the terms of the contribution and voting agreement among Meteor Holding Corporation, C. Harry Knowles and related family trusts and charitable entities, which we refer to collectively as the Knowles Parties, Mr. Knowles agreed to contribute 1,680,578 shares of our common stock that he beneficially owns, which represents approximately 17.9% of the shares beneficially owned by the Knowles Parties, to Meteor Holding Corporation immediately prior to the closing of the merger in exchange for approximately 15% of the junior preferred stock and approximately 15% of the common stock of Meteor Holding Corporation. The number of shares of our common stock contributed by Mr. Knowles, and the number of shares of junior preferred stock and common stock of Meteor Holding Corporation issued in exchange therefor, will be adjusted as appropriate to allow Mr. Knowles to own 15% of the outstanding shares of junior preferred stock and 15% of the outstanding shares of common stock of Meteor Holding Corporation immediately following the closing of the merger. All other shares of our common stock beneficially owned by the Knowles Parties will be converted into the right to receive the $18.50 per share cash consideration payable to our shareholders in the merger.

In connection with the closing of the merger, Mr. Knowles will enter into an agreement with Meteor Holding Corporation and the Francisco Partners Investor pursuant to which Mr. Knowles will have the one-time right to cause Meteor Holding Corporation to repurchase all of the shares of junior preferred stock and common stock issued to him pursuant to the contribution and voting agreement upon the first to occur of the following, which we refer to as the trigger event: Mr. Knowles’ removal as the chief executive officer or a director of Meteor Holding Corporation by the board of directors; the appointment of a new chief executive officer if Mr. Knowles votes against the appointment; the appointment or election of an independent director if Mr. Knowles, or any transferee of his shares, votes against the appointment; and Mr. Knowles’ death. The purchase price for such shares will be the cost of the shares if the trigger event occurs during the first year following the closing, or the lesser of cost or fair market value of the shares if

the trigger event occurs thereafter. The foregoing put right can only be exercised once and will expire if unexercised by Mr. Knowles upon the earliest to occur of (i) 90 days following the trigger event, (ii) the closing of an initial public offering involving the common stock of Meteor Holding Corporation, (iii) a sale of Meteor Holding Corporation and (iv) the third anniversary of the closing date of the merger. In the event Mr. Knowles exercises the put right, the Francisco Partners Investor has agreed to repurchase Mr. Knowles’ shares in the event Meteor Holding Corporation is unable to fulfill its repurchase obligations for a period of 90 days for certain reasons, including if the purchase would violate applicable law or the terms of its outstanding indebtedness.

Voting Arrangements. Pursuant to the terms of the contribution and voting agreement among Meteor Holding Corporation and the Knowles Parties, the Knowles Parties agreed to vote or cause to be voted all shares of our common stock beneficially owned by them in favor of the approval of the merger agreement and against any alternative proposal to acquire us and not to sell, transfer, grant any proxies, enter into any voting agreement or otherwise dispose of such shares. The Knowles Parties beneficially own approximately 41.3% of the outstanding shares of our common stock. In the event that the merger agreement is terminated under certain circumstances, the Knowles Parties have agreed, with respect to shares of our common stock owned by the Knowles Parties amounting to 35% of the total outstanding shares, to vote such shares against any alternative proposal to acquire us and to be subject to certain restrictions on transfer of such shares, in each case for a period of up to 10 months.

Expense Reimbursement. Pursuant to the terms of the contribution and voting agreement among Meteor Holding Corporation and the Knowles Parties, Meteor Holding Corporation agreed to reimburse the Knowles Parties for their reasonable out-of-pocket expenses in connection with the transactions contemplated by the agreement, unless Mr. Knowles fails to contribute his shares of Metrologic common stock as required by the terms of the agreement.

Stockholders Agreement and Post-Closing Governance. Meteor Holding Corporation and the Investor Group will enter into a stockholders agreement in connection with the closing of the merger, which we refer to in this proxy statement as the stockholders agreement. Pursuant to the terms of the stockholders agreement, Mr. Knowles and his permitted transferees will have the right to:

· designate one member of the board of directors of Meteor Holding Corporation following the closing of the merger;

· acquire their pro rata share of additional shares of equity securities issued by Meteor Holding Corporation, subject to certain exceptions;

· participate on a pro rata basis in sales of equity securities of Meteor Holding Corporation by the Francisco Partners Investor and its permitted transferees; and

· cause Meteor Holding Corporation to register shares of common stock held by them under certain circumstances.

In addition, Mr. Knowles and his permitted transferees will be subject to certain restrictions on the transfer of shares of capital stock of Meteor Holding Corporation, and may be compelled to sell the shares of capital stock of Meteor Holding Corporation held by them in certain sales effected by the Francisco Partners Investor and its permitted transferees. The rights of Mr. Knowles and his permitted transferees to elect directors, participate in subsequent equity issuances and sales, and cause Meteor Holding Corporation to effect the registration of their shares will generally expire at such time as their ownership of capital stock of Meteor Holding Corporation, calculated on an as-converted to common stock basis, is less than five percent.

Employment Arrangements. Pursuant to a letter agreement by and between Meteor Holding Corporation and C. Harry Knowles, Mr. Knowles will serve as the initial Chief Executive Officer of Meteor Holding Corporation following the merger. Mr. Knowles will receive an annual base salary of $350,000 together with certain fringe benefits, and he will be eligible to participate in all employee benefit plans, policies and arrangements. In addition, Meteor Holding Corporation will provide Mr. Knowles and his wife, Janet H. Knowles, with medical insurance coverage commensurate with the medical insurance coverage provided to each of them as of September 12, 2006 for the remainder of each of their lives whether or not Mr. or Mrs. Knowles remains employed by Meteor Holding Corporation.

Advisory Fee Arrangements. Francisco Partners Management, LLC will enter into an advisory agreement with Meteor Holding Corporation in connection with the consummation of the merger pursuant to which Meteor Holding Corporation will agree to pay Francisco Partners Management, LLC a $12.0 million fee upon the successful consummation of the merger, and a quarterly fee equal to the greater of (i) $375,000 or (ii) 0.1625% of the consolidated revenue of Meteor Holding Corporation and its subsidiaries for the last twelve months preceding the quarterly payment, as consideration for ongoing advisory services to be provided to Meteor Holding Corporation following the consummation of the merger. In connection with the entry into the contribution and voting agreement by the Knowles Parties, Francisco Partners Management, LLC entered into a letter agreement with Mr. Knowles that provides for the payment to Mr. Knowles of a portion of the quarterly advisory fee paid to Francisco Partners Management, LLC or its assignee, any similar fees payable to Francisco Partners Management, LLC or its affiliates and any fees payable to Francisco Partners Management, LLC or its affiliate in connection with a merger, asset sale, recapitalization, sale of securities or similar transaction involving Meteor Holding Corporation or its subsidiaries (other than in connection with an acquisition of another company), in each case based on his proportionate ownership of Meteor Holding Corporation relative to the Francisco Partners Investor and the Elliott Investors.

Elliott Interests

Equity Rollover. Pursuant to the terms of the contribution and voting agreement among Meteor Holding Corporation and the Elliott Investors, the Elliott Investors have agreed to contribute an aggregate of 1,703,885 shares of our common stock that they beneficially own to Meteor Holding Corporation immediately prior to the closing of the merger in exchange for approximately 15.2% of the junior preferred stock and approximately 15.2% of the common stock of Meteor Holding Corporation.

Voting Arrangements. Pursuant to the terms of the contribution and voting agreement among Meteor Holding Corporation and the Elliott Investors, the Elliott Investors agreed to vote or cause to be voted all shares of our common stock beneficially owned by them in favor of the approval of the merger agreement and against any alternative proposal to acquire us and not to sell, transfer, grant any proxies, enter into any voting agreement or otherwise dispose of such shares. The Elliott Investors beneficially own approximately 7.5% of the outstanding shares of our common stock as of the date of this proxy statement.

Expense Reimbursement. Pursuant to the terms of the contribution and voting agreement among Meteor Holding Corporation and the Elliott Investors, Meteor Holding Corporation agreed to reimburse the Elliott Investors for their reasonable out-of-pocket expenses in connection with the transactions contemplated by the agreement or any related agreement, unless the Elliott Investors fail to contribute their shares of Metrologic common stock as required by the terms of the agreement.

Stockholders Agreement and Post-Closing Governance. Pursuant to the terms of the stockholders agreement, the Elliott Investors and their permitted transferees will have the right to:

· designate one member of the board of directors of Meteor Holding Corporation following the closing of the merger;

· acquire their pro rata share of additional shares of equity securities issued by Meteor Holding Corporation, subject to certain exceptions;

· participate on a pro rata basis in sales of equity securities of Meteor Holding Corporation by the Francisco Partners Investor and its permitted transferees; and

· cause Meteor Holding Corporation to register shares of common stock held by them under certain circumstances.

In addition, the Elliott Investors and their permitted transferees will be subject to certain restrictions on the transfer of shares of capital stock of Meteor Holding Corporation, and may be compelled to sell the shares of capital stock of Meteor Holding Corporation held by them in certain sales effected by the Francisco Partners Investor and its permitted transferees. The rights of the Elliott Investors and their permitted transferees to elect directors, participate in subsequent equity issuances and sales, and cause Meteor Holding Corporation to effect the registration of their shares will generally expire at such time as their ownership of capital stock, calculated on an as-converted to common stock basis, is less than five percent.

Fee Arrangements. In connection with the execution of the contribution and voting agreement by the Elliott Investors, Meteor Holding Corporation entered into a letter agreement with Elliott Associates, L.P. pursuant to which Elliott Associates, L.P. or its assignee will, subject to the terms of the letter agreement, be entitled to receive a portion of any termination fee received by Meteor Merger Corporation in connection with a termination of the merger agreement, a portion of which will be forfeited under certain circumstances in the event that the Elliott Investors fail to vote their shares of our common stock against an alternative proposal to acquire us during the three-month period after a termination of the merger agreement.

In connection with the execution of the contribution and voting agreement by the Elliott Investors, Francisco Partners Management, LLC entered into a letter agreement with Elliott Associates, L.P. pursuant to which Elliott Associates, L.P. or its assignees will be entitled to receive a portion of the $12.0 million fee payable to Francisco Partners Management, LLC from Meteor Holding Corporation upon the consummation of the merger, based on the Elliott Investors proportionate ownership of Meteor Holding Corporation relative to the Francisco Partners Investor. The letter agreement further provides for the payment to Elliott Associates, L.P. of a portion of the quarterly advisory fee paid to Francisco Partners Management, LLC or its assignee, any similar fees payable to Francisco Partners Management, LLC or its affiliates and any fees payable to Francisco Partners Management, LLC or its affiliate in connection with a merger, asset sale, recapitalization, sale of securities or similar transaction involving Meteor Holding Corporation or its subsidiaries (other than in connection with an acquisition of another company), in each case based on the Elliott Investors’ proportionate ownership of Meteor Holding Corporation relative to the Francisco Partners Investor and Mr. Knowles.

Metrologic Stock Options

All options granted under Metrologic’s 2004 Equity Incentive Plan will automatically be cancelled immediately prior to the effective time of the merger. Options with an exercise price that is less than $18.50 per share will be converted into a right to receive an amount in cash, without interest, less applicable taxes, equal to the product of the number of shares of our common stock subject to each option, as of the effective time of the merger, multiplied by the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option. Holders of options granted under the 2004 Equity Incentive Plan with an exercise price that is equal to or greater than $18.50 per share will receive $1.00 per award in exchange for the cancelled options. With respect to options granted under Metrologic’s 1994 Incentive Plan, Metrologic expects to make an offer to holders of options granted under our 1994 Incentive Plan to cancel all of their options in exchange for a cash payment, without interest, equal to the product of

(1) the total number of shares of Metrologic common stock subject to the option multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, less any applicable taxes. All of the options held by employees who will be eligible to participate in the offer have exercise prices that are less than $18.50 per share.

The table below sets forth, as of September 30, 2006, for any person who has been a director or executive officer of Metrologic at any time since January 1, 2006, (a) the number of shares subject to vested options for Metrologic common stock and (b) the value of such vested options, calculated by multiplying (1) the excess of $18.50 over the per share exercise price of the option by (2) the number of shares subject to the option, and without regard to deductions for income taxes and other withholding.

Executive Officers and Directors	Vested Options
Name	Shares	Value
Benny A. Noens(1)	272,000	$	406,442
Kevin Bratton	39,000	$	153,182
Richard C. Close	50,204	$	417,886
Gregory DiNoia	30,300	$	102,122
Dale M. Fischer	31,500	$	122,546
Bruce Harrison	—	—
C. Harry Knowles	25,200	$	2
Janet H. Knowles	25,200	$	2
John H. Mathias	45,200	$	340,402
Stanton L. Meltzer	31,200	$	102,122
Hsu Jau Nan	81,200	$	906,822
William Rulon-Miller	33,950	$	146,392
Joseph Sawitsky	60,000	$	2
Mark Schmidt	72,000	$	204,242
Jeffrey Yorsz(2)	55,000	$	2
Frank C. Zirnkilton, Jr.(3)	—	—

(1) Mr. Noens resigned effective June 30, 2006. As a result of his resignation, unexercised options held by Mr. Noens will terminate prior to the anticipated date of the consummation of the merger.

(2) Mr. Yorsz ceased to be an executive officer of Metrologic effective October 1, 2006 due to the sale of AOA.

(3) Mr. Zirnkilton resigned as an executive officer of Metrologic effective August 31, 2006.

All directors and executive officers will receive cash in respect of their options in the amounts set forth above, less applicable taxes.

Indemnification and Insurance

For a period of six years following the effective time of the merger, Metrologic will indemnify and hold harmless all past and present officers and directors of the company for acts or omissions occurring at or prior to the effective time of the merger to the fullest extent provided by New Jersey or other applicable law or provided under our certificate of incorporation or bylaws, subject to applicable law.

The merger agreement requires that the surviving corporation maintain in effect, for a period of six years after the effective time of the merger, “tail” directors’ and officers’ insurance policies in an amount and scope at least as favorable as our existing policies for claims arising from acts or omissions existing or occurring at or prior to the effective time of the merger, subject to a maximum annual premium of 200% of our current annual premium. If a tail policy with such terms is not available at a cost not greater than 200%

of our current annual premium, the surviving corporation must obtain a policy with the greatest coverage available for a cost not exceeding 200% of the current annual premium paid by us.

The obligations described above regarding directors’ and officers’ indemnification and insurance must be assumed by any successor entity or assign Metrologic as a result of any consolidation, merger or transfer of all or substantially all properties and assets.

Management Arrangements

As of the date of this proxy statement, except for the arrangements with Mr. Knowles described above, no member of our management has entered into any amendments or modifications to existing employment agreements or arrangements with us or our subsidiaries in connection with the merger. In addition, as of the date of this proxy statement, except for the arrangements with Mr. Knowles described above, no member of our management has entered into any agreement, arrangement or understanding with Meteor Holding Corporation or its affiliates regarding employment with, or the right to purchase or participate in the equity of, Meteor Holding Corporation. Meteor Holding Corporation has informed us that it is its intention to retain members of our existing management team after the merger is completed, but that it does not expect that new employment agreements will be entered into with them. In addition, Meteor Holding Corporation has informed us of its intention to implement a management retention program, which will provide for the aggregate payment of up to $2.0 million to certain members of management following the consummation of the merger, subject to their continued employment for specified periods of time and other terms and conditions of the program.

In connection with the proposed merger, Meteor Holding Corporation also intends to adopt an equity incentive plan under which certain employees, including executive officers, will be eligible to receive options to acquire the common stock of Meteor Holding Corporation. The new option plan will permit the grant of options covering approximately 10% of the common equity of Meteor Holding Corporation as of immediately following the merger. The employees who will receive grants, and the terms of the grants, have not yet been determined.

Special Committee Compensation

The chair of the special committee will receive standard meeting fees of $1,500 per meeting and a retainer of $40,000 and the other members of the special committee will receive standard meeting fees of $1,500 per meeting and a retainer of $35,000. In recommending and approving the compensation package for the special committee, the compensation committee and the board of directors considered, among other things, the complexities added to the transaction by the involvement of Mr. Knowles and the Elliott Investors, the time expected to be required by the special committee members and chairman and the publicly-reported compensation of the special committees of the boards of other companies.

Material U.S. Federal Income Tax Consequences

The following discusses, subject to the limitations stated below, the material U.S. federal income tax consequences of the merger to U.S. holders of our common stock whose shares of our common stock are converted into the right to receive cash in the merger, as well as the material U.S. federal income tax consequences of the merger to Metrologic and (to the extent described below) the Rollover Investors who acquire an equity interest in Meteor Holding Corporation. Non-U.S. holders of our common stock may have different tax consequences than those described below and are urged to consult their tax advisors regarding the tax treatment to them under U.S. and non-U.S. tax laws. We base this summary on the provisions of the Internal Revenue Code of 1986, or the “Code,” applicable current and proposed U.S. Treasury Regulations, judicial authority, and administrative rulings and practice, all of which are subject to change, possibly on a retroactive basis.

U.S. Holders

For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of Metrologic common stock that is:

· a citizen or individual resident of the U.S. for U.S. federal income tax purposes;

· a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S. or any State or the District of Columbia;

· a trust if it (1) is subject to the primary supervision of a court within the U.S. and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

· an estate the income of which is subject to U.S. federal income tax regardless of its source.

The U.S. federal income taxes of a partner in a partnership or a shareholder of an S corporation holding our common stock will depend on the status of the partner and the activities of the partnership or the shareholder and the activities of the S corporation. Partners in a partnership and shareholders in an S corporation holding shares of our common stock should consult their own tax advisors.

This discussion assumes that you hold the shares of our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income tax that may be relevant to you in light of your particular circumstances, or that may apply to you if you are subject to special treatment under the U.S. federal income tax laws (including, for example, insurance companies, dealers in securities or foreign currencies, tax-exempt organizations, financial institutions, mutual funds, partnerships or other pass through entities for U.S. federal income tax purposes, non-U.S. persons, shareholders who hold shares of our common stock as part of a hedge, straddle, constructive sale or conversion transaction, shareholders who acquired their shares of our common stock through the exercise of employee stock options or other compensation arrangements or shareholders who hold (actually or constructively) an equity interest in the surviving corporation after the merger). In addition, the discussion does not address any tax considerations under state, local or non-U.S. laws or U.S. federal laws other than those pertaining to the U.S. federal income tax that may apply to you. We urge you to consult your own tax advisor to determine the particular tax consequences to you, including the application and effect of any state, local or non-U.S. income and other tax laws, of the receipt of cash in exchange for our common stock pursuant to the merger.

The receipt of cash in the merger by U.S. holders of our common stock will be a taxable transaction for U.S. federal income tax purposes (and may also be a taxable transaction under applicable state, local and foreign tax laws). In general, for U.S. federal income tax purposes, a U.S. holder of our common stock will recognize gain or loss equal to the difference between:

· the amount of cash received in exchange for such common stock and

· the U.S. holder’s adjusted tax basis in such common stock.

Such gain or loss will be capital gain or loss. If the holding period in our common stock surrendered in the merger is greater than one year as of the date of the merger, the gain or loss will be long-term capital gain or loss. The deductibility of a capital loss recognized on the exchange is subject to limitations under the Code. Certain U.S. holders, including individuals, are eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. If you acquired different blocks of our common stock at different times and different prices, you must calculate your gain or loss and determine your adjusted tax basis and holding period separately with respect to each block of our common stock.

Under the Code, as a U.S. holder of our common stock, you may be subject to information reporting on the cash received in the merger unless an exemption applies. Backup withholding may also apply

(currently at a rate of 28%) with respect to the amount of cash received in the merger, unless you provide proof of an applicable exemption or a correct taxpayer identification number, and otherwise comply with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against your U.S. federal income tax liability, if any, provided that you furnish the required information to the Internal Revenue Service in a timely manner. Each U.S. holder should consult its own tax advisor as to the qualifications for exemption from backup withholding and the procedures for obtaining such exemption.

Metrologic and Rollover Investors

Under general U.S. federal income tax principles, the merger should not be a taxable event in which gain is recognized by Metrologic for U.S. federal income tax purposes. The merger will cause an “ownership change” of Metrologic for purposes of Section 382 of the Code. As a result, Metrologic’s use of pre-merger tax net operating losses, credits and certain other tax attributes, if any, will be subject to limitations following the merger. As described above in “Special Factors—Interests of Certain Persons in the Merger”, the Rollover Investors will acquire equity interests in Meteor Holding Corporation by contributing shares of Metrologic common stock to Meteor Holding Corporation. The U.S. federal tax treatment of these transactions may depend on the particular facts relating to the Rollover Investor, and therefore Rollover Investors are urged to discuss their tax treatment with their own tax advisors.

Accounting Treatment

The merger is intended to be accounted for as a purchase under U.S. generally accepted accounting principles. Accordingly, it is expected that the basis of Metrologic in its assets and liabilities will be adjusted to fair market value on completion of the merger, including the establishment of goodwill.

Regulatory Approvals

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 and related rules, or the HSR Act, provide that transactions such as the merger may not be completed until certain information has been submitted to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and specified waiting period requirements have been satisfied. Metrologic, Meteor Holding Corporation and Meteor Merger Corporation are required to make filings with the Antitrust Division and the Federal Trade Commission.

The merger may also be subject to review under the antitrust laws of foreign jurisdictions. To the extent applicable, the parties intend to file any required notifications under such foreign antitrust laws and observe any applicable waiting periods.

At any time before or after the merger, the Antitrust Division of the Department of Justice or the Federal Trade Commission, or the competition authorities of foreign governments, may challenge the merger on antitrust grounds. Private parties could take antitrust action under the antitrust laws, including seeking an injunction prohibiting or delaying the merger, divestiture or damages under certain circumstances. Additionally, at any time before or after the merger, notwithstanding the expiration or termination of the applicable waiting period, any state could take action under its antitrust laws as it deems necessary or desirable in the public interest. There can be no assurance that a challenge to the merger will not be made or that, if a challenge is made, Metrologic, Meteor Holding Corporation and Meteor Merger Corporation will prevail.

Under the merger agreement, we and Meteor Holding Corporation and Meteor Merger Corporation have each agreed to use commercially reasonable efforts to obtain all required governmental approvals in connection with the execution of the merger agreement and completion of the merger.

Except as noted above with respect to the required filings under the HSR Act and the antitrust laws of any applicable foreign jurisdiction and the filing of a certificate of merger in New Jersey at or before the effective date of the merger, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or completion of the merger.

Fees and Expenses of the Merger

The estimated fees and expenses to be incurred in connection with the consummation of the merger and related financings and other transactions contemplated by the merger agreement are as follows:

Description				Amount
Financial advisory fees and expenses				$
Legal, accounting, tax and consulting fees and expenses
HSR Act filing fees				125,000
SEC filing fees				39,497
Financing fees and expenses
Directors and officers insurance
Rating agency fees
Printing and mailing costs
Miscellaneous
Total				$

Metrologic, as the surviving corporation, will be responsible for all of the fees and expenses described above if the merger is consummated. If the merger is not consummated, we would pay our own fees and expenses, which we estimate to be approximately $ million. In addition, if the merger agreement is terminated under certain circumstances, we will be obligated to pay a termination fee of $18.25 million to Meteor Holding Corporation or its designee. Under other circumstances, Meteor Holding Corporation will be obligated to pay a termination fee of $9.125 million to Metrologic. See “Merger Agreement—Fees and Expenses.”

Litigation Related to the Merger

On September 13, 2006, an action, titled Savarese v. Close, et. al., was filed in the Superior Court of New Jersey Law Division: Camden County against Metrologic and all of the members of Metrologic’s board of directors as defendants. On September 14, 2006, an action, titled Wilkenfeld v. Knowles, et. al., was filed in the Superior Court of New Jersey Chancery Division: Camden County against Metrologic and all members of Metrologic’s board of directors as defendants and another action, titled Marcin v. Metrologic Instruments, Inc., et. al., was filed in the Superior Court of New Jersey Chancery Division: Gloucester County against Metrologic, all of the members of Metrologic’s board of directors, Francisco Partners and Elliott Associates, L.P., as defendants. On September 15, 2006, an action, titled Gerber v. Metrologic Instruments, Inc., et. al., was filed in the Superior Court of New Jersey Law Division: Camden County against Metrologic, all of the members of Metrologic’s board of directors and Elliott Associates L.P., as defendants. In these actions, plaintiffs purport to represent shareholders of Metrologic who are similarly situated with the plaintiffs.

The Savarese complaint alleges, among other things, that the merger consideration is inadequate, that certain defendants have timed and structured the transaction to allow themselves to capture the benefits of the Company’s future potential without paying fair consideration to Metrologic’s public shareholders, and that the directors breached their fiduciary duties by not making the requisite effort to obtain the best transaction available.

The Wilkenfeld complaint alleges, among other things, that the defendants failed to maximize value on a change in control of Metrologic and that the merger consideration deprives plaintiffs of the true and full value of the shares, that the proposed merger is an attempt to engage in a self-dealing transaction and to deny the plaintiffs an opportunity to share in the future success of Metrologic and that the directors breached their fiduciary duties because the terms of the merger were determined without an adequate investigation of strategic alternatives.

The Marcin complaint alleges, among other things, that the shareholders have been denied a fair process and arm’s length negotiated transaction, that the directors have structured a preferential deal to the detriment of the shareholders, thus denying the shareholders any participation in the future potential of Metrologic, and have failed to maximize shareholder value. The complaint further alleges that certain defendants have used their positions of power and control to engage in self-dealing and have breached their fiduciary duties of loyalty and good faith owed to the plaintiff. Finally, the complaint alleges that other defendants have knowingly participated in these breaches of fiduciary duties.

The Gerber complaint alleges, among other things, that the share price of Metrologic’s stock had been artificially depressed since the removal of Mr. Benny Noens, the Company’s former Chief Executive Officer and President, on April 20, 2006 and subsequent appointment of C. Harry Knowles as the interim Chief Executive Officer and President and that the board of directors has been slow in searching for a replacement. According to the complaint, these actions have created a management vacuum that resulted in a drop in the stock price and enabled certain defendants to engage in self dealing. The complaint further alleges that the merger agreement places an artificial lid on the stock price, allowing certain defendants to capture the benefits of Metrologic’s future potential without paying fair consideration to Metrologic’s public shareholders, and that the directors breached their fiduciary duties to the plaintiff.

The complaints seek class certification and certain forms of equitable relief, including enjoining the consummation of the merger, and damages. In addition, the plaintiff in the Savarese action has filed a motion seeking to expedite discovery and other pretrial proceedings and the plaintiffs in the Marcin and Gerber actions seek recissionary damages and an accounting by the defendants of all profits and special benefits. The defendants believe that the allegations of both complaints are without merit and intend to vigorously contest the actions. There can be no assurance, however, that the defendants will be successful in the defense of these actions.

Certain Financial Projections

On July 31, 2006, Metrologic provided Needham & Company with financial projections for 2006 through 2011 for use by Needham & Company in Needham & Company’s financial analyses as summarized under “Special Factors – Opinion of Needham & Company, LLC.” These financial projections, as well as revised projections dated August 16, 2006 and August 23, 2006, were also provided to Francisco Partners as described in “Special Factors – Background of the Merger.” The projections do not give effect to the merger or the financing of the merger.

The following is a summary of the projections prepared by Metrologic on July 31, 2006

	ESTIMATE		PROJECTION
	Dec-06		Dec-07	Dec-08	Dec-09	Dec-10	Dec-11
SALES		222,583	272,263	335,879	409,547	494,237	601,917
NET INCOME		24,757	29,658	44,553	60,233	81,267	104,437
EBITDA		30,563	50,714	72,888	95,376	124,390	157,588

The following is a summary of the projections prepared by Metrologic on August 16, 2006.

	ESTIMATE		PROJECTION
	Dec-06		Dec-07	Dec-08	Dec-09	Dec-10	Dec-11
SALES		222,583	267,086	326,893	391,851	478,438	571,344
NET INCOME		24,757	28,627	43,386	58,181	80,120	98,338
EBITDA		30,563	49,154	71,248	92,457	122,955	148,409

The following is a summary of the projections prepared by Metrologic on August 23, 2006.

	ESTIMATE		PROJECTION
	Dec-06		Dec-07	Dec-08	Dec-09	Dec-10	Dec-11
SALES		222,583	254,538	301,826	359,834	426,281	501,923
NET INCOME		24,757	22,229	30,405	41,271	54,285	65,874
EBITDA		30,563	39,539	52,376	68,348	86,179	103,017

Other than periodically giving guidance to Wall Street, Metrologic does not, as a matter of course, publicly disclose projections of future revenues or earnings. The projections were not prepared with a view to public disclosure and are included in this proxy statement only because such information was made available to Francisco Partners and other potential acquirors in connection with their due diligence investigations of Metrologic and some of the projections were provided to Needham & Company for use by it in its financial analyses. The projections were not prepared with a view to compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

Metrologic’s management developed the projections from financial and other information which was based in part on revenue assumptions and estimates. The projections also incorporate assumptions regarding expenses (based in part on detailed employee cost analyses) and capital expenditures. In compiling the budget information to develop the projections, Metrologic’s management took into account growth rate and margin assumptions that were consistent with recent actual results and with current expectations in light of market conditions. These revenue assumptions and the assumptions made by Metrologic’s management regarding growth rates and margins represent all of the material assumptions and estimates made in connection with the preparation of the projections.

THE PARTIES TO THE MERGER

Metrologic Instruments, Inc.

Metrologic Instruments, Inc.
90 Coles Road
Blackwood, New Jersey 08012
(856) 228-8100

We are a New Jersey corporation with our principal executive offices at 90 Coles Road, Blackwood, New Jersey 08012-2539. Our telephone number is (856) 228-8100. We were incorporated in New Jersey in 1969.

We are experts in optical image capture and processing solutions. We utilize our expertise to design, manufacture and market sophisticated imaging and scanning solutions serving a variety of point-of-sale, commercial and industrial applications. Our solutions utilize a broad array of laser, holographic and vision-based technologies designed to provide superior functionality and a compelling value proposition for our customers. We are a vertically integrated manufacturer, producing most of our own optics, coatings and components in our manufacturing and design facilities in the United States and China. We have developed a broad portfolio of intellectual property that includes over 365 patents that we aggressively protect. We employ a direct sales force and have a broad network of distributors and value added resellers, or VARs, to serve our worldwide customers through offices in 18 countries.

Meteor Holding Corporation

Meteor Holding Corporation
c/o Francisco Partners
2882 Sand Hill Road, Suite 280
Menlo Park, California 94025

Meteor Holding Corporation is a Delaware corporation that was incorporated on September 1, 2006 on behalf of Francisco Partners solely for the purpose of completing the merger and the relating financings and transactions. As of the date of this proxy statement, FP-Metrologic, LLC is the sole stockholder of Meteor Holding Corporation.

Meteor Merger Corporation

Meteor Merger Corporation
c/o Francisco Partners
2882 Sand Hill Road, Suite 280
Menlo Park, California 94025

Meteor Merger Corporation is a New Jersey corporation that was incorporated on August 31, 2006 on behalf of Francisco Partners solely for the purpose of completing the merger and the relating financings and transactions. Meteor Merger Corporation has not participated in any activities to date other than activities incident to its formation and the transactions contemplated by the merger agreement. In connection with the merger, Meteor Merger Corporation will be merged with and into Metrologic Instruments, Inc. and its separate existence will cease. As of the date of this proxy statement, Meteor Holding Corporation is the sole shareholder of Meteor Merger Corporation.

CURRENT EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY

Each of the directors and executive officers of Metrologic is a citizen of the United States, except Mr. Hsu, who is a citizen of Singapore, and, except as provided below, has his or her principal business address and telephone at c/o Metrologic Instruments, Inc., 90 Coles Road, Blackwood, New Jersey 08012, (856) 228-8100.

The directors and executive officers of Metrologic, the date they became director or executive officer, their current occupation and their material employment during the last five years, as of October 3, 2006, are as follows:

Name				Occupation or Employment
C. Harry Knowles				Mr. Knowles is the founder of the Company and has been Chairman of the board of directors since the Company’s inception and the Company’s interim Chief Executive Officer since May 2006. Mr. Knowles served as Chief Executive Officer from 1985 until June 2004. Mr. Knowles served as President of the Company from its inception through 1982 and from 1985 until February 2000. In addition, Mr. Knowles served as Chief Technical Officer with responsibility for all of the Company’s research and development activities from 1982 to 1985. From 1988 until June 2004, Mr. Knowles also served as a Managing Director of Metrologic Instruments GmbH. Prior to founding the Company, Mr. Knowles was the general manager of Westinghouse Electric Corporation’s integrated circuits division in Elkridge, Maryland. Mr. Knowles is married to Janet H. Knowles, the Vice President, Administration, Treasurer, Secretary and a director of the Company.
Richard C. Close				Mr. Close became a director of the Company in September 1999. Mr. Close was appointed Chairman of the board of directors of Adaptive Optics Associates, Inc., a former subsidiary of the Company, in April 2006. He is a private investor and also provides consulting and transition management services for companies in connection with merger and acquisition activities. From January 1997 until August 2000, Mr. Close served as President and General Manager of Polaroid Graphics Imaging LLC. Polaroid Graphics Imaging LLC was formerly a division of Polaroid Corporation, and is now a privately owned independent company. Mr. Close served as President and Chief Executive Officer of Computer Identics Corporation from 1993 until 1997.
Hsu Jau Nan				Mr. Hsu became a director of the Company in September 1999. Mr. Hsu is an owner and managing director of several manufacturing companies in Taiwan, Singapore, and China which, in the aggregate, employ over 5,000 people. From 1973 to 1983, Mr. Hsu was an Engineering Manager for General Electric’s television operations.
Janet H. Knowles				Mrs. Knowles was a director of the Company from 1972 to 1984 and has served as a director since 1986. Mrs. Knowles served as Vice President, Administration from 1976 to 1983 and has served in that capacity since 1984, as Treasurer since 1994 and as Secretary since March 2006. Mrs. Knowles also served as Secretary from 1984 until July 2004. Mrs. Knowles is married to C. Harry Knowles, the Chairman of the board of directors and interim Chief Executive Officer of the Company.

John H. Mathias		Mr. Mathias became a director of the Company in September 1999. Mr. Mathias currently is President of Asia Technologies, LLC, a supplier of components to high tech industries in Southeast Asia and the United States. From 1981 to 2002, he was Chairman and Chief Executive Officer of The JPM Company, a publicly traded company that manufactured wire and cable assemblies at various locations throughout the world. The JPM Company filed a chapter 11 petition in the United States Bankruptcy Court for the District of Delaware on March 1, 2002.
Stanton L. Meltzer		Mr. Meltzer has been a director of the Company since 1987. Mr. Meltzer is a certified public accountant and since 1964 has been a principal in the firm of Gold, Meltzer, Plasky & Wise, a professional corporation of certified public accountants, located in Moorestown, New Jersey. He has chaired conferences, lectured and taught courses to accountants throughout the United States for the American Institute of Certified Public Accountants and other professional organizations.
William Rulon-Miller		Mr. Rulon-Miller became a director of the Company in December 1997. Mr. Rulon-Miller joined Janney Montgomery Scott LLC in 1979 and currently serves as Senior Vice President and Director of Investment Banking. He is a director of The Penn Janney Fund, Inc., and on the Investment Committee of the Co-Investment Fund 2000 and Liberty Venture Partners, all of which are private venture capital organizations.
Kevin J. Bratton		Mr. Bratton has served as the Company’s Chief Financial Officer since July 1, 2002. Mr. Bratton was employed as the Chief Financial Officer of The JPM Company, a company that manufactured wire and cable assemblies at various locations throughout the world, from June 2000 through June 2002. The JPM Company filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware on March 1, 2002. From July 1999 to May 2000, Mr. Bratton was the Director of External Reporting at The JPM Company. Prior to joining JPM, Mr. Bratton was a Vice President and Treasurer of IGI, Inc., a manufacturer of poultry biologics and veterinary pharmaceuticals.
Gregory DiNoia		Mr. DiNoia has served as the Company’s Vice President, North American Sales since March 2004. In January 2005, he took over responsibility for South America becoming Vice President, The Americas. Mr. DiNoia joined us in 1997 as the Midwest Account Manager and has served as a Strategic Account Manager and was promoted to Director of Strategic Retail & OEM Accounts in January 2001. Prior to joining Metrologic, he held several positions in sales and contract management.
Dale M. Fischer		Mr. Fischer has served as the Company’s Director of International Marketing and Sales from 1990 to 1993 and has served as Vice President, International Sales since 1994. From 1989 to 1990, Mr. Fischer was Chairman of Great Valley Corporation, a worldwide marketing and product development company. From 1967 until 1988, Mr. Fischer held several positions with TRW Electronics Component Group (“TRW”), most recently as International Marketing, Sales and Licensing Director. Mr. Fischer was responsible for marketing and sales of TRW products in more than 50 countries and was responsible for the implementation of a joint venture in Japan and the establishment of seven technology and manufacturing licenses throughout the world.

Bruce L. Harrison		Mr. Harrison has served as the Company’s Vice President and General Counsel since April 2006. Prior to joining the Company, Mr. Harrison was Senior Shareholder at the law firm of Capehart & Scatchard and was Capehart’s Managing Shareholder from 1997 through 2000. While a shareholder of Capehart, Mr. Harrison served as outside New Jersey and employment counsel for Metrologic for almost 17 years.
Joseph Sawitsky		Mr. Sawitsky has served as the Company’s Executive Vice President, Operations since April 2006. Mr. Sawitsky served as Vice President, Manufacturing from November 1999 until March 2004 and was then promoted to Senior Vice President, Manufacturing and Operations until April 2006. He joined Metrologic in 1998 as the Production Manager. After serving in the Nuclear Submarine Force, he worked at ICI Composites from 1990 to 1994 and manufactured specialty polymer materials for the aerospace and industrial markets. From 1994 to 1998 he held several positions with Zenith Electronic Corporation making consumer electronic equipment.
Mark C. Schmidt		Mr. Schmidt has served as the Company’s Executive Vice President, Strategic Initiatives since April 2006. Mr. Schmidt served as Vice President, Marketing from November 1999 until March 2004 and was then promoted to Senior Vice President, Marketing until April 2006. He has been employed by Metrologic since 1992. During his tenure, Mr. Schmidt has progressed from Optical Engineer to the position of POS Product Manager in 1995, and Marketing Manager in 1997.

During the past five years, none of Metrologic or our executive officers, directors or controlling persons have been convicted in a criminal proceeding (other than traffic violations or similar misdemeanors) or been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining that person or entity from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on , , 2006 beginning at .m., local time, at Metrologic’s principal executive offices at 90 Coles Road, Blackwood, New Jersey 08012. The purpose of the special meeting is for our shareholders to consider and vote on a proposal to approve the merger agreement, a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement and to act on such other business as may properly come before the special meeting. A copy of the merger agreement is attached to this proxy statement as Annex A. This proxy statement, the notice of the special meeting and the enclosed form of proxy are first being mailed to our shareholders on or about , 2006.

Record Date, Quorum and Voting Power

The holders of record of Metrologic’s common stock at the close of business on , 2006, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. As of the record date, there were shares of our common stock issued and outstanding, all of which are entitled to be voted at the special meeting.

Each outstanding share of our common stock on the record date entitles the holder to one vote on each matter submitted to shareholders for a vote at the special meeting.

The holders of outstanding shares of our common stock on the record date, represented in person or by proxy at the special meeting and entitled to cast a majority of the votes, will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. Once a share is represented at the special meeting, it will be counted for the purpose of determining whether there is a quorum at the special meeting and any adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then we will provide notice of the adjourned meeting to each shareholder of record on the new record date and a new quorum will have to be established.

Required Vote

For us to complete the merger, a majority of the votes cast by the holders of our common stock present in person or represented by proxy at the special meeting and entitled to vote thereon must vote “FOR” the approval of the merger agreement. The approval of the merger agreement does not require the affirmative vote of a majority of the shares of our common stock held by our unaffiliated shareholders. The proposal to adjourn the special meeting, if necessary, to solicit additional proxies requires the affirmative vote of a majority of the votes cast by holders of our common stock present in person or represented by proxy and entitled to vote at the special meeting.

In order for your shares of our common stock to be included in the vote, if you are a shareholder of record, you must cause your shares to be voted by returning the enclosed proxy or by voting in person at the special meeting.

If your shares are held in “street name” by your broker, bank or other nominee you should instruct your nominee how to vote your shares using the instructions provided by such nominee. If you have not received such voting instructions or require further information regarding such voting instructions, contact your nominee and it can give you directions on how to vote your shares. A broker non-vote generally occurs when a broker, bank or other nominee holding shares on your behalf does not vote on a proposal because the nominee has not received your voting instructions and lacks discretionary power to vote the shares. Broker non-votes and abstentions will not count as votes cast on a proposal, but will count for the purpose of determining whether a quorum is present.

THE MERGER AGREEMENT (PROPOSAL NO. 1)

The summary of the material terms of the merger agreement below and elsewhere in this proxy statement may not contain all of the information about the merger agreement that is important to you. We encourage you to read carefully the merger agreement in its entirety, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference.

Effective Time

The effective time of the merger will occur at the time that we file a certificate of merger with the Secretary of State of New Jersey (or at such later time as is specified in the certificate of merger) at or prior to the closing of the merger. The closing will occur (1) no later than the second business day after the conditions to the parties’ respective obligations pursuant to the merger agreement have been satisfied or waived, or (2) such other date as the parties may agree in writing.

Structure

At the effective time of the merger, Meteor Merger Corporation will merge with and into Metrologic. Upon completion of the merger, Meteor Merger Corporation will cease to exist as a separate entity and Metrologic will continue as the surviving corporation. All of Metrologic’s and Meteor Merger Corporation’s properties, interests, rights, privileges, powers and franchises, and all of their restrictions, disabilities, duties, debts and liabilities, will become those of the surviving corporation. Following the completion of the merger, Metrologic common stock will be delisted from the NASDAQ Global Select Market, will be deregistered under the Securities Exchange Act of 1934 and will no longer be publicly traded.

Treatment of Stock, Options and Warrants

Metrologic Common Stock

At the effective time of the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will automatically be cancelled and converted into the right to receive $18.50 in cash, without interest and less applicable withholding taxes, other than Metrologic common stock:

· owned by Metrologic as treasury stock immediately prior to the effective time of the merger, all of which will be cancelled without any payment; and

· held by Meteor Holding Corporation or any direct or indirect wholly owned subsidiary of Meteor Holding Corporation or Metrologic immediately prior to the effective time of the merger, all of which will be cancelled without any payment.

Metrologic Stock Options

All options granted under Metrologic’s 2004 Equity Incentive Plan will be automatically cancelled immediately prior to the effective time of the merger and will be converted into the right to receive an amount in cash, without interest and less applicable withholding taxes, equal to the product of:

· the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, multiplied by

· the total number of shares of Metrologic common stock subject to each option, as of the effective time of the merger.

For options with exercise prices per share that are equal to or greater than $18.50, Metrologic will pay the holder $1.00 per award to effectuate the cancellation of such options.

Metrologic expects to make an offer to holders of options granted under our 1994 Incentive Plan to cancel all of their options in exchange for a cash payment, without interest, equal to the product of (1) the total number of shares of Metrologic common stock subject to the option multiplied by (2) the excess of $18.50 over the exercise price per share of Metrologic common stock subject to such option, less any applicable taxes. All of the options held by employees who will be eligible to participate in the offer have exercise prices that are less than $18.50 per share. To the extent an option holder under Metrologic’s 1994 Incentive Plan does not consent to the cancellation of his or her outstanding options, Metrologic will adjust all of such option holder’s options prior to the effective time of the merger in a manner acceptable to Meteor Holding Corporation to the extent permitted under the terms of the plan.

Metrologic Warrants

All warrants to acquire Metrologic common stock will, as of the effective time of the merger, become exercisable for an amount in cash per share of Metrologic common stock issuable upon exercise of the warrant, without interest, equal to $18.50.

No Further Ownership Rights

From and after the effective time of the merger, the holders of certificates representing shares of Metrologic common stock immediately prior to the effective time will no longer have any rights as holders of our common stock. The merger consideration paid upon surrender of each certificate will be paid in full satisfaction of all rights pertaining to the shares of our common stock represented by that certificate.

Exchange and Payment Procedures

As of the effective time of the merger, Meteor Holding Corporation will make available to a bank or trust company, which we refer to as the “paying agent,” an amount of cash sufficient to pay the merger consideration to each holder of shares of our common stock. Promptly after the effective time of the merger, the paying agent will mail a letter of transmittal and instructions to you and the other Metrologic shareholders. The letter of transmittal and instructions will tell you how to surrender your Metrologic common stock certificates in exchange for the merger consideration.

You will not be entitled to receive the merger consideration until you surrender your Metrologic common stock certificate or certificates to the paying agent, together with a duly completed and executed letter of transmittal and any other documents as the paying agent may require. The merger consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is presented to the paying agent, accompanied by documents evidencing such transfer of ownership and the payment of transfer taxes.

No interest will be paid or will accrue on the cash payable upon surrender of the certificates. Each of Meteor Holding Corporation and the surviving corporation will be entitled to deduct and withhold any applicable taxes from the merger consideration and any payment made in connection with the cancellation of options and pay such withholding amount over to the applicable government entity.

At the effective time of the merger, our stock transfer books will be closed, and there will be no further registration of transfers of outstanding shares of our common stock. If, after the effective time of the merger, certificates are presented to Meteor Holding Corporation, the surviving corporation or the paying agent for transfer or any other reason, they will be cancelled and exchanged for the merger consideration.

None of Meteor Holding Corporation, Metrologic, the surviving corporation or the paying agent will be liable to any person for any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Any portion of the merger consideration deposited with the paying agent that remains undistributed to the holders of certificates evidencing shares of our common stock for 180 days after the effective time of the merger, will be delivered, upon demand, to Meteor Holding Corporation. Holders of certificates who have not surrendered their certificates within 180 days after the effective time of the merger may only look to Meteor Holding Corporation for the payment of the merger consideration.

If you have lost a certificate, or if it has been stolen or destroyed, you will be required to make an affidavit of that fact and possibly post a bond before you will be entitled to receive the merger consideration.

Certificate of Incorporation and Bylaws

The certificate of incorporation of the surviving corporation will be amended in its entirety as of the effective time of the merger, to read as set forth in an exhibit to the merger agreement. In addition, the bylaws of Meteor Merger Corporation, as in effect immediately prior to the effective date of the merger, will be the bylaws of the surviving corporation.

Directors and Officers

The directors of Meteor Merger Corporation immediately prior to the effective time of the merger will be the initial directors of the surviving corporation. The officers of Meteor Merger Corporation immediately prior to the effective time of the merger will be the initial officers of the surviving corporation.

Representations and Warranties

The merger agreement contains representations and warranties of Metrologic, Meteor Holding Corporation and Meteor Merger Corporation regarding aspects of their respective businesses, financial condition, subsidiaries and structure, as well as other facts pertinent to the merger. The assertions embodied in those representations and warranties were made for purposes of the merger agreement among Metrologic, Meteor Holding Corporation and Meteor Merger Corporation, a copy of which is attached hereto as Annex A and which is incorporated by reference into this proxy statement. The representations and warranties in the merger agreement are complicated and not easily summarized. You are urged to read carefully and in their entirety the sections of the merger agreement entitled “Representations and Warranties of the Company” and “Representations and Warranties of the Parent and Merger Sub” in Annex A to this proxy statement. The assertions embodied in the representations and warranties of the Company are qualified by information in a confidential disclosure letter that we provided to Meteor Holding Corporation in connection with the signing of the merger agreement. While Metrologic does not believe that the confidential disclosure letter contains information that securities laws require it to publicly disclose, other than information that has already been so disclosed, the disclosure letter does contain information that modifies, qualifies and creates exceptions to the representations and warranties of the Company set forth in the attached merger agreement. Accordingly, you should not rely on the representations and warranties of the Company as characterizations of the actual state of facts, since they are modified in important part by the underlying disclosure letter. Moreover, certain representations and warranties are subject to a contractual standard of materiality different from those generally applicable to shareholders or were used for the purpose of allocating risk between Metrologic, on the one hand, and Meteor Holding Corporation and Meteor Merger Corporation, on the other hand, rather than establishing matters as facts.

Our representations and warranties in the merger agreement relate to, among other things:

· our certificate of incorporation and bylaws and those of our significant subsidiaries;

· our and our subsidiaries’ proper organization, good standing and corporate power to operate our businesses;

· our capitalization, including in particular the number of shares of our common stock, preferred stock, stock options and warrants outstanding and the amount of our debt outstanding;

· our corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement;

· the absence of any conflict with or violation of our organizational documents, certain contracts or applicable law as a result of entering into the merger agreement and consummating the merger;

· required consents and approvals of governmental entities in connection with the merger;

· the vote required by our shareholders in connection with the approval of the merger agreement and merger;

· our SEC filings since December 31, 2002, the financial statements contained therein and our internal and disclosure controls;

· the absence of liabilities, other than as set forth on our December 31, 2005 balance sheet, liabilities incurred in connection with the merger, ordinary course liabilities and liabilities that would not have a material adverse effect;

· the absence of certain changes and events since June 30, 2006, including the absence of a material adverse effect;

· taxes;

· real property owned and leased by us and our subsidiaries and title to assets;

· our intellectual property;

· our material contracts;

· employment matters affecting us, including matters relating to our employee benefit plans;

· the absence of litigation or outstanding court orders against us;

· environmental matters;

· our compliance with applicable statutes, laws, settlements, rules, orders, regulations and corporate policies;

· our possession of all permits and licenses necessary to carry on our business;

· labor matters;

· our insurance policies;

· receipt by the special committee of the board of directors of an opinion from Needham & Company, LLC;

· inapplicability of state anti-takeover laws to the merger;

· the absence of undisclosed broker’s fees;

· transactions with affiliates;

· the accuracy and completeness of information about us included in this proxy statement; and

· the availability and completeness of any document referenced in the Company disclosure letter.

The merger agreement also contains customary representations and warranties made by Meteor Holding Corporation and Meteor Merger Corporation that are subject, in some cases, to specified exceptions and qualifications. The representations and warranties relate to, among other things:

· their proper organization, good standing and valid existence;

· their corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement;

· the absence of any conflict with or violation or breach of their organizational documents, certain agreements or applicable law as a result of entering into the merger agreement and consummating the merger;

· required consents and approvals of governmental entities as a result of the merger;

· the accuracy and completeness of information they have supplied for inclusion in this proxy statement;

· the operations of Meteor Merger Corporation;

· the absence of litigation or outstanding court orders against them;

· the debt commitment letter and the equity commitment letter delivered by Meteor Holding Corporation, including that the debt commitment letter and the equity commitment letter are in full force and effect, all commitment fees thereunder will be paid when due, the letters have not been amended or terminated and there is no breach thereunder; and

· the delivery by Meteor Holding Corporation of the contribution and voting agreements.

The representations and warranties of each of the parties to the merger agreement will expire upon completion of the merger.

Conduct of Our Business Pending the Merger

Under the merger agreement, we have agreed that, subject to certain exceptions, between September 12, 2006 and the completion of the merger, we and our subsidiaries will:

· maintain our existence in good standing under applicable law;

· act and carry on our business in the ordinary and usual course of business consistent with past practice;

· pay or perform all material obligations when due;

· use commercially reasonable efforts to maintain and preserve our and our subsidiaries’ business organization, assets and properties, to keep available the services of our current officers and employees and to preserve our business relationships with customers, strategic partners, suppliers, distributors and others with which we have business dealings and to maintain in full force and effect substantially the same levels of insurance coverage with respect to our and our subsidiaries’ assets, operations and activities.

We have also agreed that during the same time period, and again subject to certain exceptions or unless Meteor Holding Corporation gives its prior written consent, we and our subsidiaries will not:

· declare, set aside or pay dividends or make any other distributions in respect of our stock or that of our subsidiaries;

· adjust, split, combine or reclassify our stock or that of our subsidiaries or issue any other securities in respect of shares of our capital stock or that of our subsidiaries;

· purchase, redeem or otherwise acquire any of our securities or those of our subsidiaries, other than as instructed by Meteor Holding Corporation;

· issue, deliver, sell, grant, pledge or amend the terms of any of our securities or those of our subsidiaries, other than issuance of shares pursuant to the exercise of stock options or warrants outstanding on the date of the merger agreement;

· amend or otherwise change our organizational documents or those of our subsidiaries;

· propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of our subsidiaries;

· sell, license, mortgage, transfer, lease, assign, pledge, subject to any lien or otherwise dispose of or encumber any of our properties or assets or those of our subsidiaries, other than:

· dispositions of obsolete inventory and sales of inventory in the ordinary course of business consistent with past practice, or

· the execution and performance of a binding agreement for the sale of all of the issued and outstanding shares of capital stock of AOA;

· acquire any business, assets or securities, other than acquisitions of inventory and components in the ordinary course of business consistent with past practice, acquisitions of certain securities and acquisitions of assets with a purchase price that does not exceed $500,000 individually or $4,000,000 in the aggregate;

· sell, license, mortgage, transfer, lease, assign, pledge, subject to any lien or otherwise dispose of or encumber any of our intellectual property or that of our subsidiaries, except pursuant to certain existing contracts or non-exclusive licenses extended to customers in the ordinary course of business consistent with past practice;

· adopt, propose or implement any shareholder rights plan;

· incur or assume any indebtedness or issue any debt securities except under existing lines of credit to fund operations in the ordinary course of business consistent with past practice;

· assume, guarantee, endorse or otherwise become liable or responsible for obligations of any other person;

· make any loans, advances or capital contributions to or investments in any other person except for advances for travel and other miscellaneous expenses to employees or capital contributions to or investments in our subsidiaries, in each case in the ordinary course of business consistent with past practice;

· make any changes in accounting methods, procedures, principles or practices or change any assumption underlying, or method of calculating, any bad debt, contingency or other reserve, except in each case as required by a change in generally accepted accounting principles in the United States;

· alter, amend or create any obligations with respect to compensation, severance, benefits, change of control payments or any other payments to present or former employees, directors or affiliates of us, other than alterations or amendments with respect to non-officers and non-directors in the ordinary course of business consistent with past practice that do not involve severance or change of control payments or benefits and that, in the aggregate, do not result in a material increase in our benefits or compensation expense;

· increase benefits payable under any existing severance or termination pay policies or employment agreements;

· enter into or amend any collective bargaining agreement, employment, deferred compensation or other similar agreement with any of our directors, officers or employees or those of our subsidiaries;

· increase compensation, bonus or other benefits payable to any of our directors, officers or employees or those of our subsidiaries, other than annual increases to non-officer employees in the ordinary course of business consistent with past practices and as contemplated by the merger agreement;

· establish, adopt or amend any benefit plan or arrangement covering any of our directors, officers or employees or those of our subsidiaries;

· hire any new employees other than non-officer employees in the ordinary course of business consistent with past practice;

· make or change any material tax election, settle or compromise any material tax liability, amend any material tax return, change any method of tax accounting, enter into any material closing agreement with respect to any tax, surrender any right to claim a material tax refund, consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of any material taxes, file any material tax return without the consent of Meteor Holding Corporation or take any other similar action relating to the filing of any tax return or the payment of any tax;

· initiate, compromise or settle any material litigation or arbitration proceeding;

· enter into any joint venture, partnership or other similar arrangement;

· enter into any material contract, except for contracts for the sale of inventory in the ordinary course of business consistent with past practice, or terminate, amend, supplement or modify in any material respect any of our material contracts or those of our subsidiaries;

· cancel any debts or waive any claims or rights of substantial value, except for cancellations made or waivers granted with respect to claims other than indebtedness in the ordinary course of business consistent with past practice which do not exceed $250,000, in the aggregate;

· fail to manage and retain cash and cash equivalents and investments in marketable securities, accounts payable or accounts receivable in a manner consistent with past practice;

· take any action that would reasonably be expected to result in any of our representations or warranties in the merger agreement becoming false or inaccurate; and

· take any action or enter into any transaction, including any merger, acquisition, joint venture, disposition, lease, contract or debt or equity financing that could reasonably be expected to impair, delay or prevent Meteor Holding Corporation’s ability to obtain financing.

Financing

Meteor Holding Corporation has agreed to use commercially reasonable efforts to fully satisfy, on a timely basis, all terms, conditions, representations and warranties contained in the debt commitment letter and the equity commitment letter relating to the financing for the merger. At our request, Meteor Holding Corporation will keep us informed with respect to all material activity concerning the status of financings contemplated by the commitment letters. Meteor Holding Corporation will notify us promptly, and in any event within 2 business days, if the debt commitment letter or the equity commitment letter with respect to the financing of the merger should expire or be terminated or any financing source notifies Meteor Holding Corporation that such source no longer intends to provide financing to Meteor Holding Corporation on the material terms set forth in the debt commitment letter or the equity commitment letter. We have agreed to provide Meteor Holding Corporation with cooperation reasonably requested by Meteor Holding Corporation in connection with its financing activities including, to the extent reasonable, participation in meetings, drafting and due diligence sessions, management presentations, “road shows” and meetings with rating agencies, preparing business projections and financial statements (including pro forma financial statements) and assisting with the preparation of materials for rating agency presentations, offering memoranda, private placement memoranda, bank information memoranda, prospectuses and similar documents, executing and delivering agreements and other documents in connection with such financings, including, among other things, pledge and security documents, credit agreement guarantees and other financing documents, taking all corporate actions reasonably requested by Meteor Holding Corporation to permit the consummation of the financings and obtaining customary comfort letters and consents of accountants.

For additional information regarding the expected financing of the merger, see “Special Factors—Financing of the Merger” and “Special Factors—Interests of Certain Persons in the Merger.”

No Solicitation of Transactions

We have agreed that neither we, our subsidiaries nor our representatives will, directly or indirectly:

· solicit, initiate, encourage or induce the making, submission or announcement of, any inquiry, proposal or offer with respect to, or that could reasonably be expected to lead to, an acquisition proposal;

· furnish any non-public information relating to the Company or any of our subsidiaries or afford access to the business, properties, assets, books or records of the Company or our subsidiaries or take any other action knowingly intended to assist or facilitate any inquiries or the making of any proposal or offer that constitutes, or that could reasonably be expected to lead to, an acquisition proposal;

· participate or engage in discussions or negotiations with respect to, or that could reasonably be expected to lead to, an acquisition proposal;

· approve, endorse or recommend an acquisition proposal;

· enter into any letter of intent, memorandum of understanding, agreement in principle or contract contemplating or otherwise relating to an acquisition proposal; or

· terminate, amend or waive any rights under any standstill or other similar agreement.

For purposes of the merger agreement, “acquisition proposal” means any inquiry, proposal or offer:

· relating to a merger, reorganization, consolidation, dissolution, sale of substantial assets, tender offer, exchange offer, recapitalization, liquidation, joint venture, share exchange or other business combination involving us or any subsidiaries,

· relating to the issuance of 20% or more of our outstanding voting securities, or

· to acquire in any manner, directly or indirectly, 20% or more of our outstanding capital stock or assets or that of our subsidiaries.

However, we are permitted to furnish information and participate in discussions or negotiations with a third party in connection with a bona fide written acquisition proposal received by our board of directors or special committee after the date of the merger agreement but prior to approval of the merger agreement by our shareholders, if and only to the extent that:

· we and our subsidiaries have complied with the provisions of the merger agreement relating to the non-solicitation of other transactions;

· the proposal was not solicited, initiated, encouraged, induced, participated in or otherwise facilitated by Metrologic, any of our subsidiaries or any of our representatives since May 31, 2006; and

· our board of directors or the special committee reasonably determines in good faith that the acquisition proposal is, or would reasonably be expected to lead to, a superior proposal;

· the board of directors or the special committee determines in good faith, after consultation with its outside legal counsel and financial advisor, that we are required by the fiduciary obligations of the board of directors or the special committee to do so;

· the Company provides written notice to Meteor Holding Corporation of its decision to take such action; and

· the information provided and any negotiations or discussions must be subject to a confidentiality agreement not less favorable to us than the confidentiality agreement signed with Francisco Partners II, L.P., which is an affiliate of Meteor Holding Corporation and Meteor Merger Corporation.

For purposes of the merger agreement, “superior proposal” means any unsolicited bona fide written proposal from a third party to acquire, directly or indirectly, more than 50% of the total outstanding voting securities of the Company or all of the assets of the Company, pursuant to a tender or exchange offer, a merger, a consolidation or a sale of our assets, which:

· the special committee or the board of directors determines in its good faith reasonable judgment (after consultation with its legal and financial advisors) to be (A) more favorable to the holders of Metrologic common stock from a financial point of view than the transactions contemplated by the merger agreement (including any proposal by Meteor Holding Corporation to amend the terms of the merger agreement), taking into account all the terms and conditions of such proposal and the merger agreement and (B) reasonably capable of being completed on the terms proposed within a reasonable time period, in each case taking into account all financial, regulatory, legal and other aspects of such proposal, and

· either has no financing condition or has a debt financing condition (and no other financing condition) and is accompanied by commitment letters no less favorable to the Company than the debt and equity commitment letters.

We have agreed to provide oral and written notice to Meteor Holding Corporation of receipt of any acquisition proposal, any inquiry with respect to or any request for nonpublic information in connection with any acquisition proposal as promptly as possible (but in any event within 24 hours) and the material terms and conditions of the acquisition proposal, inquiry or request and the identity of the person making the acquisition proposal, inquiry or request and to keep Meteor Holding Corporation informed on a

current basis of the status of the acquisition proposal, inquiry or request and any material modifications or developments, including copies of written acquisition proposals, inquiries or requests and written information relating thereto.

We have also agreed that neither the board of directors, the special committee nor any other committee of the board of directors will:

· withhold, withdraw or modify, or resolve or publicly propose to withhold, withdraw or modify, in a manner adverse to Meteor Holding Corporation or Meteor Merger Corporation, the recommendation of the board of directors or its special committee that shareholders vote in favor of the approval of the merger agreement;

· approve or recommend, or resolve or publicly propose to approve or recommend, any acquisition proposal;

· approve or recommend, or resolve or publicly propose to approve or recommend, or execute or enter into, any alternative acquisition agreement;

· approve or recommend, or resolve or publicly propose to approve or recommend, or execute or enter into, any agreement requiring it to abandon, terminate or fail to consummate the merger or the merger agreement or the transactions contemplated thereby;

· take any action necessary to render the provisions of any anti-takeover law inapplicable to any acquisition proposal; or

· approve or recommend, or resolve or publicly propose to approve or recommend, any position other than to recommend rejection of any acquisition proposal.

For purposes of the merger agreement, “alternative acquisition agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, stock purchase agreement, asset purchase agreement, option agreement or other similar agreement with respect to any acquisition proposal.

Notwithstanding our obligations under the merger agreement, in response to a superior proposal received by the special committee or our board of directors after the date of the merger agreement but prior to approval of the merger agreement by our shareholders, Metrologic, the board of directors or its special committee may (1) withhold, withdraw or modify in a manner adverse to Meteor Holding Corporation or Meteor Merger Corporation and, in the case of a superior offer that is a tender or exchange offer, the recommendation of the board of directors or its special committee that shareholders vote in favor of the approval of the merger agreement or (2) take certain other actions with respect to such change of recommendation immediately prior to or concurrent with the termination of the merger agreement in accordance with its terms, only if:

· such superior proposal did not result from a breach of our non-solicitation and related obligations under the merger agreement and we have complied with such obligations;

· our board of directors or its special committee reasonably determines in good faith, after consultation with outside counsel, that failure to do so would be a violation of the fiduciary obligations of the board of directors under applicable law; and

· in the event we terminate the merger agreement and enter into an alternative acquisition agreement, Metrologic pays a termination fee of $18,250,000 to Meteor Holding Corporation or its designee concurrently with the termination of the merger agreement.

Under the merger agreement, however, our board of directors, including the special committee, may not withhold, withdraw or modify its recommendation in response to the receipt of a superior proposal unless we have observed certain notice and negotiation provisions. In addition, our board of directors,

including the special committee, may not withhold, withdraw or modify its approval or recommendation other than in connection with a superior proposal to comply with its fiduciary duties unless we provide written notice to Meteor Holding Corporation at least three business days prior to such withdrawal or modification and negotiate with Meteor Holding Corporation in good faith during such three-day period.

Indemnification

For a period of six years following the effective time of the merger, the surviving corporation will indemnify and hold harmless all past and present officers and directors of the company for acts or omissions occurring at or prior to the effective time of the merger to the fullest extent permitted by the New Jersey Business Corporation Act or any other applicable law or provided under our certificate of incorporation or bylaws, subject to applicable law.

The merger agreement requires that the surviving corporation maintain in effect, for a period of six years after the effective time of the merger, “tail” directors’ and officers’ liability insurance in an amount and scope at least as favorable as our existing policies or other insurance policies with respect to acts or omissions existing or occurring at or prior to the effective time. If a tail policy with such terms is not available at an annual cost not greater than 200% of our current annual premium, the surviving corporation must obtain a policy with as much comparable coverage available for a cost not exceeding 200% of the current annual premium paid by us.

The obligations described above regarding directors’ and officers’ indemnification and insurance must be assumed by any successor entity or assign of the surviving corporation as a result of any consolidation, merger or transfer of all or substantially all properties and assets.

Resignations

We will use our reasonable best efforts to obtain and deliver to Meteor Holding Corporation the resignations of our directors and the directors of our subsidiaries, effective as of the effective time of the merger, except for those directors which Meteor Holding Corporation designates.

Employee Benefits

Following the effective time of the merger, Meteor Holding Corporation has agreed that it will, or will cause the surviving corporation to:

· honor and provide for payment of all accrued obligations and benefits under all employee benefit plans identified by the Company in the Company’s disclosure letter; and

· provide Metrologic employees as of the effective time of the merger with credit for past service with Metrologic for purposes of accrual of vacation time and, to the extent practicable and permitted under applicable benefit plans, for purposes of eligibility for participation and vesting under any employee benefit plan, program or arrangement established or maintained by Meteor Holding Corporation, the surviving corporation or any of their respective subsidiaries under which continuing employees may be eligible to participate on or after the effective time.

On and after September 13, 2006, no new offering periods commenced under our employee stock purchase plan. As of the close of business on the last business day prior to the effective time of the merger, the employee stock purchase plan will terminate and on such date all accumulated payroll deductions allocated to each participant’s account will be returned to them.

From and after the effective time, the surviving corporation will have sole discretion over the hiring, promotion, retention, firing and other terms and conditions of employment of the continuing employees. The merger agreement will not prevent Meteor Holding Corporation or the surviving corporation from amending or terminating any employee benefit plan in accordance with its terms.

Agreement to Take Further Action and to Use Commercially Reasonable Efforts

Subject to the terms and conditions of the merger agreement, each party has agreed to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the merger and other transactions contemplated by the merger agreement as promptly as practicable. Among other things, each party has committed to use such efforts to cooperate with each other to:

· as promptly as practicable, obtain any consents, licenses, permits, waivers, approvals, authorizations and orders required to be obtained or made in connection with the authorization, execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby;

· as promptly as practicable, make all necessary filings, notifications, and thereafter make any other required submissions with respect to the merger agreement and the merger required under applicable securities laws, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any related government request, and other applicable law and to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law in connection with the transactions contemplated by the merger agreement;

· execute or deliver any additional documents necessary to consummate the transactions contemplated by the merger agreement and to carry out the purposes of the merger agreement; and

· to use commercially reasonable efforts to obtain any government clearances or approvals required to complete the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any other federal, state or foreign law, regulation or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade, to respond to any government requests for information under any such antitrust law, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order that restricts, prevents or prohibits the consummation of the merger or any other transactions contemplated by the merger agreement under any such antitrust law.

With respect to any proceeding under or relating to any antitrust law, the parties have agreed to consult and cooperate with one another, and consider in good faith the views of one another, and provide to the other parties in advance, any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with such proceeding.

In the event that the United States Department of Justice or the United States Federal Trade Commission authorizes its staff to seek a preliminary injunction or restraining order to enjoin consummation of the merger, Meteor Holding Corporation will not be under any obligation to take any action described above.

Conditions to Completion of the Merger

The obligations of Meteor Holding Corporation, Meteor Merger Corporation and Metrologic to complete the merger are subject to the following conditions:

· approval of the merger agreement by the holders of a majority of the votes cast by the holders of the outstanding shares of our common stock on the record date at the special meeting at which a quorum is present;

· the expiration or termination of all waiting periods under applicable United States and foreign antitrust laws;

· receipt from all governmental authorities of all material authorizations, consents, orders and approvals and authorizations legally required to be obtained to consummate the merger; and

· absence of any order, executive order, stay, decree, judgment or injunction or statute, rule or regulation which would make the merger illegal or prohibit the consummation of the other transactions contemplated by the merger agreement.

The obligations of Meteor Holding Corporation and Meteor Merger Corporation to complete the merger are subject to the following additional conditions:

· the truth and correctness of our representations and warranties as of the date of the closing (or as of the date made in the case of representations and warranties made as of a specific date) without giving effect to any materiality qualification unless the failure, individually or in the aggregate, has not had and is not reasonably likely to have a material adverse effect on us or any of our subsidiaries or adversely affect our capitalization;

· the performance, in all material respects, by us of our obligations under the merger agreement;

· our delivery to Meteor Holding Corporation at closing of a certificate with respect to the satisfaction of the foregoing conditions relating to representations, warranties, covenants and agreements;

· the absence of any pending action or proceeding seeking to make the merger illegal or otherwise challenge, restrain or prohibit the consummation of the merger or the other transactions contemplated by the merger agreement, prohibit or limit the ability of Meteor Holding Corporation to vote, control, receive dividends with respect to or otherwise exercise ownership rights with respect to the stock of the surviving corporation or control or otherwise exercise ownership rights with respect to the business or operations of Metrologic or its subsidiaries, obtain material damages from Meteor Holding Corporation, rescind the transactions contemplated by the merger agreement following consummation, or compel Metrologic, Meteor Holding Corporation or any of their subsidiaries to dispose of or hold any significant portion of the business or assets of Metrologic, Meteor Holding Corporation or any or their respective subsidiaries as a result of the merger or any of the other transactions contemplated by the merger agreement;

· the absence of any state of facts, change, event, effect, condition, circumstance, occurrence or development that, individually or in the aggregate, has had or is reasonably likely to result in a material adverse effect;

· the contributions of common stock by the Rollover Investors to Meteor Holding Corporation pursuant to the contribution and voting agreements;

· the satisfaction of the financing condition described below; and

· the availability to Metrologic of unrestricted cash on hand and fully liquid cash equivalents of at least $90 million.

For purposes of the merger agreement, the financing condition is satisfied if Meteor Holding Corporation shall have obtained an amount of financing not less than the amount set forth in the debt commitment letter on terms and conditions as set forth therein (and as described elsewhere herein) or upon terms and conditions which are, in the reasonable judgment of Meteor Holding Corporation, at least as favorable to Meteor Holding Corporation as the terms and conditions set forth in the debt commitment letter.

Our obligation to complete the merger is subject to the following additional conditions:

· the truth and correctness of Meteor Holding Corporation and Meteor Merger Corporation’s representations and warranties, unless the failure, individually or in the aggregate, has not had, and is not reasonably likely to result in, a material adverse effect on the ability of Meteor Holding Corporation or Meteor Merger Corporation to consummate the transactions contemplated by the merger agreement;

· the performance, in all material respects, by Meteor Holding Corporation and Meteor Merger Corporation of their obligations under the merger agreement; and

· the delivery at closing by Meteor Holding Corporation of a certificate with respect to Meteor Holding Corporation’s representations, warranties, covenants and agreements.

Termination

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger, whether before or after shareholder approval has been obtained, as follows:

· by mutual consent of Meteor Holding Corporation and Metrologic;

· by either Meteor Holding Corporation or Metrologic if:

· the merger has not been consummated by March 31, 2007, so long as the failure of the terminating party to fulfill any obligation under the merger agreement is not the principal cause of the failure of the merger to be consummated by such date;

· a governmental authority issues a nonappealable final order, decree or ruling or taken any other nonappealable final action that has the effect of permanently restraining, enjoining or otherwise prohibiting the merger or any other transaction contemplated by the merger agreement;

· our shareholders do not vote to approve the merger agreement at the special meeting, provided that this right to terminate will not be available to us if we are in material breach of our obligations under the merger agreement related to other acquisition proposals, this proxy statement or the special meeting;

· the terminating party is not in material breach of its obligations under the merger agreement and there is a breach of or failure to perform any representations, warranties, covenants or agreements in the merger agreement by the non-terminating party such that the closing conditions would not be satisfied, which breach has not been, or cannot be, cured within 30 days or which cannot reasonably be cured by March 31, 2007;

· by Meteor Holding Corporation, if:

· we fail to include the recommendation of our board of directors that the shareholders vote in favor of approving the merger agreement in the proxy statement, or our board of directors or the special committee withdraws or modifies its recommendation for approval of the merger agreement or the merger or recommends or approves another acquisition proposal;

· our board of directors authorizes, approves or recommends to our shareholders an acquisition proposal;

· we are in breach of our obligations under the merger agreement related to the non-solicitation provisions of the merger agreement discussed elsewhere in this proxy statement;

· a tender offer or exchange offer for our outstanding shares by a third party commences and our board of directors or the special committee recommends that our shareholders tender their shares in such tender or exchange offer or within ten (10) business days after the commencement of such tender or exchange offer, our board of directors and the special committee fails to recommend rejection, or subsequently withdraws or modifies in any manner adverse to Meteor Holding Corporation or Meteor Merger Corporation a recommendation of rejection, of such offer;

· Metrologic enters into an alternative acquisition agreement with respect to an acquisition proposal; or

· any person or group, other than Meteor Holding Corporation or its affiliates, shall have acquired beneficial ownership of 40% or more of our outstanding common stock; or

· by Metrologic, prior to the special meeting, in connection with the withdrawal or modification by the board of directors or the special committee of their recommendation in order to enter into a definitive agreement with respect to an alternative acquisition proposal, provided that we have complied with the non-solicitation, notice and other applicable terms set forth in the merger agreement, including the payment of the termination fee.

Fees and Expenses

We have agreed to pay Meteor Holding Corporation or its designee a termination fee of $18,250,000 if:

· Meteor Holding Corporation terminates the merger agreement because:

· we fail to include the recommendation of our board of directors that the shareholders vote in favor of approving the merger agreement in the proxy statement, or our board of directors or the special committee withdraws or modifies or changes its recommendation for approval of the merger agreement or the merger or recommends or approves another acquisition proposal;

· our board of directors authorizes, approves or recommends to our shareholders an acquisition proposal;

· we are in material breach of our obligations under the merger agreement related to the non-solicitation of other transactions discussed elsewhere in this proxy statement;

· Metrologic enters into an alternative acquisition agreement with respect to an acquisition proposal; or

· any person or group, other than Meteor Holding Corporation or its affiliates, shall have acquired beneficial ownership of 40% or more of our outstanding stock; or

· we terminate the merger agreement prior to the special meeting in connection with the withdrawal or modification by the board of directors or the special committee of their recommendation in order to enter into a definitive agreement with respect to an alternative acquisition proposal,

provided that we have complied with the non-solicitation, notice and certain other terms set forth in the merger agreement, including the payment of the termination fee;

· we or Meteor Holding Corporation terminate the merger agreement because (i) the merger has not been consummated by March 31, 2007, (ii) we or Meteor Holding Corporation terminate the merger agreement because the shareholders do not approve the merger agreement at the special meeting or (iii) Meteor Holding Corporation terminates the agreement because we have breached the agreement and fail to cure within 30 days of receiving notice of breach or if such breach can not be cured by March 31, 2007 and, in each of the previous cases, prior to such termination, an acquisition proposal has been made known to us or been publicly announced and within 12 months after the termination, Metrologic shall have entered into an alternative acquisition agreement with respect to an acquisition of Metrologic (which need not be the same acquisition proposal known or publicly announced prior to the termination).

For purposes of the merger agreement, “acquisition of Metrologic” means (1) a merger, reorganization, consolidation, dissolution, sale of substantial assets, tender offer, exchange offer, recapitalization, liquidation, dissolution, joint venture, share exchange or other business combination involving Metrologic or any of its subsidiaries, the issuance by Metrologic of 50% or more of its voting securities or the acquisition by any person or group of 50% or more of the capital stock or assets of Metrologic or any of its subsidiaries, other than the sale of AOA.

Meteor Holding Corporation has agreed to pay us a termination fee of $9,125,000 if the merger agreement is terminated on or after March 31, 2007 if all conditions to the Closing have been met other than the financing condition, provided that no fee shall be payable if the failure to satisfy the financing condition is due to certain market conditions or material adverse developments with respect to certain litigation.

Material Adverse Effect

For purposes of the merger agreement, the term “material adverse effect” shall mean, with respect to the Company, any state of facts, change, event, violation, inaccuracy, effect, condition, circumstance, occurrence or development (any such item, an “effect”) that, individually or taken together with all other effects that have occurred prior to the date of determination of the occurrence of the material adverse effect, is or is reasonably likely to (i) be materially adverse to the business, operations, properties, condition (financial or otherwise), results of operations, assets or liabilities of the Company and its subsidiaries, taken as a whole or (ii) prevent or materially delay the performance by the Company of any of its obligations under the merger agreement or the consummation of the merger or the other transactions contemplated hereby; provided, however, that in no event shall any of the following occurring after the date of the merger agreement, in and of itself, be deemed to constitute a material adverse effect:

· a decline in the price of Metrologic common stock on the NASDAQ Global Select Market (it being understood that the facts and circumstances giving rise to such decline may be deemed to constitute and shall be taken into account in determining whether there has been a material adverse effect);

· any failure by the Company to meet published third party financial projections, in and of itself (it being understood that the facts and circumstances giving rise to such failure to meet published financial projections may be considered and shall be taken into account in determining whether there has been a material adverse effect);

· any effect resulting from general national or world economic conditions and any acts of war or terrorism, except to the extent that such effects disproportionately affect the Company and its subsidiaries in any significant respect relative to other participants in the industries or markets in which they operate;

· any effect resulting from any action outside the ordinary course of business of the Company and its subsidiaries required to be taken pursuant to the merger agreement (other than consummation of the merger);

· any stockholder class action litigation arising from allegations of a breach of fiduciary duty relating to the merger agreement; or

· any effect resulting from a change in generally accepted accounting principles.

Amendment and Waiver

The merger agreement may be amended prior to the effective time of the merger by mutual agreement of the parties. However, after the merger agreement has been approved by our shareholders, no amendment will be made to the merger agreement except as allowed under applicable law. The merger agreement also provides that, at any time prior to the effective time of the merger, to the extent legally allowed, either party may extend the time for the performance of any obligations or other acts of the other party, waive any inaccuracies in the representations and warranties of the other party or waive compliance with any agreement of the other party or any condition to its own obligations contained in the merger agreement.

OTHER AGREEMENTS RELATING TO OUR SECURITIES

Contribution and Voting Agreements

Set forth below is a summary of the material terms of the contribution and voting agreement, dated as of September 12, 2006, between Meteor Holding Corporation, on the one hand, and each of C. Harry Knowles, Janet H. Knowles, certain related family trusts and charitable entities, on the other hand and the contribution and voting agreement, dated as of September 12, 2006, between Meteor Holding Corporation, on the one hand, and Elliott Associates, L.P. and Elliott International, L.P., on the other hand. We refer to these agreements in the proxy statement as the “contribution and voting agreements.” The summary of the material terms of the contribution and voting agreements below and elsewhere in this proxy statement may not contain all of the information about the contribution and voting agreements that is important to you. We encourage you to read carefully the contribution and voting agreements in their entirety, copies of which are attached to this proxy statement as Annex C-1 and Annex C-2, which are incorporated by reference into this document.

Contributions

Pursuant to the contribution and voting agreements, immediately prior to the consummation of the merger:

· Mr. Knowles will contribute 1,680,578 shares of our common stock to Meteor Holding Corporation in exchange for 12,436,280 shares of Meteor Holding Corporation common stock, representing approximately 15% of the common stock, and 27,982 shares of Meteor Holding Corporation junior preferred stock, representing approximately 15% of the junior preferred stock. The number of shares of our common stock contributed by Mr. Knowles, and the number of shares of junior preferred stock and common stock of Meteor Holding Corporation issued in exchange therefor, will be adjusted as appropriate to allow Mr. Knowles to own 15% of the outstanding shares of junior preferred stock and 15% of the outstanding shares of common stock of Meteor Holding Corporation immediately following the closing of the merger;

· Elliott Associates, L.P. will contribute 681,553 shares of our common stock to Meteor Holding Corporation in exchange for 5,043,492 shares of Meteor Holding Corporation common stock, representing approximately 6.1% of the common stock, and 11,348 shares of Meteor Holding Corporation junior preferred stock, representing approximately 6.1% of the junior preferred stock; and

· Elliott International, L.P. will contribute 1,022,332 shares of our common stock to Meteor Holding Corporation in exchange for 7,565,257 shares of Meteor Holding Corporation common stock, representing approximately 9.1% of the common stock, and 17,022 shares of Meteor Holding Corporation junior preferred stock, representing approximately 9.1% of the junior preferred stock.

The consummation of the transactions contemplated by the contribution and voting agreements is conditioned on:

· the representations and warranties of Meteor Holding Corporation being true and correct in all material respects as of the closing;

· Meteor Holding Corporation’s compliance in all material respects with its obligations under the contribution and voting agreements;

· the absence of any prohibition against the consummation of the transactions contemplated by the contribution and voting agreements by any applicable law, statute, rule, regulation, judgment or order of any governmental authority of competent jurisdiction;

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The selected historical data presented below are derived from our consolidated financial statements. The selected consolidated financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2005 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, which are incorporated by reference in this proxy statement.

Historical results are not necessarily indicative of the results to be expected in the future.

	Year Ended December 31,												Six Months Ended June 30,
	2001(1)(2)			2002(3)			2003(4)		2004(5)		2005(6)		2006
													(Unaudited)
	(in thousands, except per share data)
Statement of Operations Data:
Sales	$	112,011		$	115,806		$	138,011	$	177,955	$	210,453		$	122,786
Cost of sales	83,527			74,385			79,654		96,227		119,638			73,746
Gross profit	28,484			41,421			58,357		81,728		90,815			49,040
Selling, general and administrative expenses	30,877			28,873			31,449		42,518		61,362			30,819
Research and development expenses	6,563			6,929			6,764		7,521		8,521			5,249
Operating income (loss)	(8,956		)	5,619			20,144		31,689		20,932			12,972
Other income (expense), net	(3,596		)	(2,917		)	897		2,159		1,895			731
Income (loss) before income taxes	(12,552		)	2,702			21,041		33,848		22,827			13,703
Provision (benefit) for income taxes	(4,775		)	1,027			7,160		11,168		5,014			4,933
Net income (loss)	$	(7,777	)	$	1,675		$	13,881	$	22,680	$	17,813		$	8,770
Add back: Goodwill amortization	818			—			—		—		—			—
Adjusted net income (loss)	$	(6,959	)	$	1,675		$	13,881	$	22,680	$	17,813		$	8,770
Net income (loss) per common share(7)
Basic	$	(0.47	)	$	0.10		$	0.79	$	1.06	$	0.80		$	0.39
Diluted	$	(0.47	)	$	0.10		$	0.72	$	0.99	$	0.77		$	0.38
Weighted average number of outstanding common shares and equivalents(7)
Basic	16,373			16,400			17,597		21,472		22,129			22,550
Diluted	16,373			16,471			19,383		22,974		23,113			23,221

	As of December 31,										As of June 30,
	2001		2002		2003		2004		2005		2006
											(Unaudited)
	(in thousands, except per share data)
Balance Sheet Data:
Cash and cash equivalents	$	557	$	1,202	$	16,242	$	36,340	$	49,463		$	40,138
Marketable securities					$	32,575	$	28,375	$	24,475		$	25,599
Working capital	$	20,606	$	13,407	$	74,112	$	83,318	$	92,283		$	112,697
Total assets	$	85,773	$	74,579	$	139,900	$	192,527	$	226,182		$	222,106
Long-term debt	$	27,465	$	14,431	$	320	$	2,015	$	3		$	4
Total debt	$	40,731	$	21,486	$	5,527	$	18,280	$	18,436		$	16,576
Total shareholders’ equity	$	26,261	$	29,471	$	107,608	$	138,016	$	160,290		$	175,951
Book value per share(8)	$	1.60	$	1.80	$	5.17	$	6.34	$	7.18		$	7.76

(1) On January 8, 2001, we completed the acquisition of AOA and our results of operations include the results of operations of AOA from that date forward.

(2) During the year ended December 31, 2001, cost of sales included special charges and other costs of $10.0 million that are not expected to recur in subsequent periods.

(3) On January 1, 2002, we adopted FAS 142 and discontinued the amortization of goodwill.

(4) During the year ended December 31, 2003, we recorded a gain of $2.2 million on the early extinguishment of debt and expenses of $463 incurred in connection with our efforts to refinance our bank debt.

(5) On September 24, 2004, we acquired Omniplanar, Inc. and our results of operations include the results of operations of Omniplanar, Inc. from that date forward.

(6) During the year ended December 31, 2005, selling, general and administrative costs includes a charge of $12.6 million related to the symbol litigation contingency.

(7) Weighted average number of common shares and per share amounts for 2001 and 2002 have been restated to reflect the 2003 stock splits.

(8) The number of common shares for 2001 and 2002 used in the book value per share calculation have been restated to reflect the 2003 stock splits.

MARKET PRICES OF THE COMPANY’S COMMON STOCK

Our common stock is traded on the NASDAQ Global Select Market and trades under the symbol “MTLG.” As of September 30, 2006, 22,770,094 shares of Metrologic common stock were outstanding. The following table sets forth, for the periods indicated, the high and low sales prices per share for our common stock on the NASDAQ Global Select Market.

	High		Low
Year Ended December 31, 2004:
First Quarter	$	33.50	$	20.68
Second Quarter	25.75		13.81
Third Quarter	20.15		13.00
Fourth Quarter	21.84		14.50
Year Ended December 31, 2005:
First Quarter	24.12		18.22
Second Quarter	23.65		12.27
Third Quarter	18.77		12.33
Fourth Quarter	20.65		15.50
Year Ended December 31, 2006:
First Quarter	$	24.49	$	19.16
Second Quarter	23.23		14.07
Third Quarter	18.31		13.57
Fourth Quarter through October , 2006

The closing sale price of our common stock on the NASDAQ Global Select Market on September 11, 2006, the last trading day before we announced that we had entered into the merger agreement, was $17.67 per share. On , 2006, the last trading day before the date of this proxy statement, the closing price for our common stock on the NASDAQ Global Select Market was $ per share. You are encouraged to obtain current market quotations for Metrologic common stock in connection with voting your shares.

DIVIDEND POLICY

We have not paid cash dividends on our common stock since becoming a public company, and we do not intend to pay cash dividends in the foreseeable future. We currently intend to retain any earnings to further develop and grow our business. While this dividend policy is subject to periodic review by our board of directors, there can be no assurance that we will declare and pay dividends in the future.

TRANSACTIONS IN THE COMPANY’S STOCK

On October 6, 2003, Metrologic made an underwritten public offering of 1,725,000 shares of common stock for $34.50 per share and received aggregate net proceeds of $56,166,000. We have not made any other underwritten public offerings of our common stock which would be required to be registered under the Securities Act of 1933 or exempt from registration under Regulation A during the past three years.

On September 5, 2006, C. Harry Knowles, Chairman and interim Chief Executive Officer of the Company sold 4,591 shares and the Janet H. and C. Harry Knowles Foundation, Inc., a related charitable entity, sold 4,590 shares at $16.9415 per share pursuant to a Rule 10b5-1 trading plan. On September 11, 2006, Jeffrey Yorsz, Senior Vice President, sold 10,000 shares and Joseph M. Sawitsky, Senior Vice President, sold 18,000 shares at $17.1006 per share pursuant to a stock trading plan under Rule 10b-5. On September 12, 2006, Elliott Associates, L.P. purchased and sold 3,080 shares and Elliott International, L.P. purchased and sold 4,620 shares in each case at a purchase price and sale price of $18.10 per share. On September 15, 2006, Dale Fischer, Vice President, exercised an option to purchase 7,200 shares of common stock at $1.48 per share. Except for these transactions, there have not been any transactions in the common stock in the last 60 days by any of the following:

· us or any of our majority owned subsidiaries,

· any of our directors or officers,

· any person known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock,

· Meteor Holding Corporation, or

· Meteor Merger Corporation.

None of the Company, C. Harry Knowles, Janet H. Knowles or their related family trusts and charitable entities, Meteor Holding Corporation or Meteor Merger Corporation have purchased the Company’s common stock during the last two years.The officers and directors have not purchased any shares of common stock during the past two years. All common stock acquired by the officers and directors has been through the exercise of options.

PERSONS OWNING MORE THAN FIVE PERCENT OF STOCK

The following table describes persons known to have beneficial ownership of more than 5% of Metrologic’s common stock at September 30, 2006. Our knowledge (except as noted below) is based on reports filed with the Securities and Exchange Commission by each person or entity listed below. Beneficial ownership refers to shares that are held directly or indirectly by the owner. No other classes of stock are outstanding.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)			Percent of Class(1)
C. Harry Knowles 425 E. Linden Street Moorestown, NJ 08057		9,232,411	(2)		40.2	%
Janet H. Knowles 425 E. Linden Street Moorestown, NJ 08057		9,232,411	(3)		40.2	%
Knowles Science Teaching Foundation 1000 North Church Street Moorestown, NJ 08057		4,049,460	(4)		17.8	%
Burgundy Asset Management Ltd. 181 Bay Street Suite 4510 Bay Wellington Tower Toronto, Ontario Canada M5J 2T3		1,973,900	(5)		8.7	%
Elliott Associates, L.P. 712 Fifth Avenue New York, NY 10019		681,553	(6)		3.0	%
Elliott International, L.P. 712 Fifth Avenue New York, NY 10019		1,022,332	(6)		4.5	%
Reich & Tang Asset Management, LLC 600 Fifth Avenue New York, NY 10020		1,145,000	(7)		5.0	%

(1) For purposes of calculating the number and percentage of shares beneficially owned, the number of shares of common stock deemed outstanding consists of 22,770,094, including restricted stock and stock purchased pursuant to our Employee Stock Purchase Plan, plus the number of shares underlying options and warrants held by the named person that are exercisable within 60 days of September 30, 2006. Unless otherwise indicated, each person has sole voting power with respect to shares shown as beneficially owned by such person.

(2) Includes 195,000 shares of common stock subject to a warrant held by Mr. Knowles that is currently fully exercisable, 10,830 shares of common stock subject to options held by Mr. Knowles that are exercisable or will become exercisable within 60 days of September 30, 2006, and 5,550,651 shares of common stock held by several charitable entities and trusts for which Mr. or Mrs. Knowles, or both, serve as officers or trustees and, as such, have or share voting power and investment power over such shares and may accordingly be deemed to beneficially own such shares.

(3) Includes 5,550,651 shares of common stock held by several charitable entities and trusts for which Mr. or Mrs. Knowles, or both, serve as officers or trustees and, as such, have or share voting power and investment power over such shares and may accordingly be deemed to beneficially own such shares. Mrs. Knowles, Vice President, Administration and Treasurer of the Company, is the wife of C. Harry Knowles, and therefore, may be deemed to have shared voting and investment power with respect to all other shares beneficially owned by Mr. Knowles.

(4) Mr. and Mrs. Knowles share voting power and investment power over these shares. The information provided for the Knowles Science Teaching Foundation is based in part on a Form 4 filed by it on March 31, 2006.

(5) Burgundy Asset Management has sole voting power and sole dispositive power over all shares reported as beneficially owned by it. The information provided for Burgundy Asset Management is based on a Schedule 13G filed by it on February 1, 2006.

(6) Elliott Associates, L.P. has the power to vote or direct the vote of, and to dispose or direct the disposition of, the shares of Common Stock beneficially owned by it. Elliott International, L.P. has the shared power with Elliott International Capital Advisors, Inc. to vote or direct the vote of, and to dispose or direct the disposition of, the shares of Common Stock owned by Elliott International, L.P. The information provided for Elliott Associates, L.P. and Elliott International, L.P. is based on an Amendment No. 1 to a Schedule 13D filed by it on September 13, 2006. Elliott Associates, L.P. and Elliott International, L.P. are under common management and may be deemed to be acting as a group (as such term is defined in the Exchange Act) with respect to shares of our common stock.

(7) Reich & Tang Asset Management, LLC has shared voting power and shared dispositive power over all shares reported as beneficially owned by it. The information provided for Reich & Tang Asset Management, LLC is based on a Scheduled 13G filed by it on August 24, 2006.

None of Meteor Holding Corporation, Meteor Merger Corporation nor the directors and officers of such entities own shares of Metrologic as of the date hereof. However, as a result of the voting provisions set forth in the contribution and voting agreements, which are described in “Other Agreements Relating to our Securities—Contribution and Voting Agreements” and attached as Annex C-1 and Annex C-2 to this proxy statement, Meteor Holding Corporation and Meteor Merger Corporation may be deemed to beneficially own each of the shares indicated as beneficially owned by C. Harry Knowles, Elliott Associates, L.P. and Elliott International, L.P. in the above table. Meteor Holding Corporation and Meteor Merger Corporation are not entitled to any rights as a shareholder of Metrologic, and Meteor Holding Corporation, Meteor Merger Corporation and their officers, directors and stockholders disclaim beneficial ownership of the shares of common stock which are beneficially owned by C. Harry Knowles, Elliott Associates, L.P. and Elliott International, L.P.

SECURITY OWNERSHIP BY MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of Metrologic’s common stock as of September 30, 2006 by (i) each of Metrologic’s directors; (ii) each named executive officer of Metrologic; and (iii) all executive officers and directors of Metrologic as a group. The address of each of the named executive officers and directors in the table below is set forth in the section entitled “Current Executive Officers and Directors of the Company.”

Name of Beneficial Owner	Shares Beneficially Owned(1)			Percent of Class(1)
Benny A. Noens(2)		177,609	(3)		*
Richard C. Close		30,419	(4)		*
Gregory DiNoia		14,460	(5)		*
Dale M. Fischer		21,039	(6)		*
C. Harry Knowles		9,232,411	(7)		40.2	%
Janet H. Knowles		9,232,411	(8)		40.2	%
John H. Mathias		26,915	(9)		*
Stanton L. Meltzer		17,916	(10)		*
Hsu Jau Nan		85,415	(11)		*
William Rulon-Miller		22,265	(12)		*
Joseph Sawitsky		13,750	(13)		*
Mark Schmidt		28,935	(14)		*
Jeffrey Yorsz(15)		12,750	(16)		*
Frank C. Zirnkilton, Jr.(17)		—			—
All executive officers and directors as a group (16 persons)		9,685,834	(18)		41.5	%

* Less than 1%.

(2) Mr. Noens resigned from the Company effective July 1, 2006.

(3) Includes 152,001 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(4) Includes 30,419 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(5) Includes 11,860 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(6) Includes 5,860 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(7) Includes 195,000 shares of common stock subject to a warrant held by Mr. Knowles that is currently fully exercisable, 10,830 shares of common stock subject to options held by Mr. Knowles that are exercisable or will become exercisable within 60 days of September 30, 2006, and 5,550,651 shares of common stock held by several charitable entities and trusts for which Mr. or Mrs. Knowles, or both,

serve as officers or trustees and, as such, have or share voting power and investment power over such shares and may accordingly be deemed to beneficially own such shares.

(8) Includes 5,550,651 shares of common stock held by several charitable entities and trusts for which Mr. or Mrs. Knowles, or both, serve as officers or trustees and, as such, have or share voting power and investment power over such shares and may accordingly be deemed to beneficially own such shares. Mrs. Knowles, Vice President, Administration and Treasurer of the Company, is the wife of C. Harry Knowles, and therefore, may be deemed to have shared voting and investment power with respect to all other shares beneficially owned by Mr. Knowles.

(9) Includes 25,415 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(10) Includes 11,415 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(11) Includes 61,415 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(12) Includes 14,165 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(13) Includes 13,750 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(14) Includes 25,750 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(15) Mr. Yorsz ceased to be an executive officer of Metrologic effective October 1, 2006 due to the sale of AOA.

(16) Includes 12,750 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006.

(17) Mr. Zirnkilton resigned as an executive officer of Metrologic effective August 31, 2006.

(18) Includes 586,380 shares of common stock subject to options that are exercisable or will become exercisable within 60 days of September 30, 2006 and 195,000 shares of common stock subject to a warrant that is currently exercisable.

TABLE OF DEFINED TERMS

	Page
Acquisition Proposal		A-
Actions		A-
Affiliate		A-
Agreement		A-
Alternative Acquisition Agreement		A-
Antitrust Laws		A-
Antitrust Order		A-
AOA		A-
Business Day		A-
Business Facility		A-
Certificate		A-
Certificate of Merger		A-
Change in the Company Recommendation		A-
Closing Date		A-
Closing		A-
Code		A-
Collective Bargaining Agreements		A-
Company		A-
Company Acquisition		A-
Company Balance Sheet		A-
Company Board		A-
Company Charter Documents		A-
Company Common Stock		A-
Company Disclosure Letter		A-
Company Employees		A-
Company Intellectual Property		A-
Company Material Adverse Effect		A-
Company Material Contract		A-
Company Meeting		A-
Company Permits		A-
Company Plans		A-
Company Preferred Stock		A-
Company Product		A-
Company Recommendation		A-
Company Registered Intellectual Property		A-
Company SEC Reports		A-
Company Voting Proposal		A-
Company Warrant		A-
Confidentiality Agreement		A-
Contract		A-
HK Contribution Agreements		A-
Controlled Group		A-
Copyrights		A-
Disposal Site		A-
EA		A-
EA Contribution Agreement		A-
Effective Time		A-

TABLE OF DEFINED TERMS (Continued)

Environmental Law			A-
Environmental Permit			A-
ERISA			A-
Exchange Act			A-
Exchange Fund			A-
Foreign Benefit Plans			A-
GAAP			A-
Governmental Entity			A-
Hazardous Material			A-
Hazardous Materials Activity			A-
HK Contribution Agreement			A-
HSR Act			A-
Indebtedness			A-
In-Licenses			A-
Insurance Cap			A-
Intellectual Property Rights			A-
internal controls			A-
IP Licenses			A-
IRS			A-
Knowles			A-
Leased Real Property			A-
Leases			A-
Liens			A-
Merger			C-
Merger Consideration			B-
Merger Sub			C-
NJBCA			A-
Open Source License			A-
Open Source Materials			A-
Out-Licenses			A-
Outside Date			A-
Owned Real Property			A-
Parent			A-
Parent Material Adverse Effect			A-
Patent Contract			A-
Patents			A-
Paying Agent			A-
Person			A-
Pre-Closing Period			A-
Proxy Statement			A-
Real Property			A-
Registered Intellectual Property			A-
Representatives			A-
Required Company Shareholder Vote			A-
Schedule 13E-3			A-
SEC			A-

TABLE OF DEFINED TERMS (Continued)

Securities Act			A-
Source Code			A-
Special Committee			A-
Subsidiary			A-
Subsidiary Charter Documents			A-
Superior Proposal			A-
Surviving Corporation			A-
Taxes			A-
Tax Returns			A-
Termination Fee			A-
Trademarks			A-
Trade Secrets			A-
Voting Debt			A-

iii

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of September 11, 2006, by and between Meteor Holding Corporation, a Delaware corporation (“Parent”), Meteor Merger Corporation, a New Jersey corporation and direct wholly owned subsidiary of Parent (“Merger Sub”), and Metrologic Instruments, Inc., a New Jersey corporation (the “Company”).

WHEREAS, the Company and Merger Sub each have determined that it is fair to and in the best interests of its shareholders to effect a merger (the “Merger”) of Merger Sub with and into the Company pursuant to the New Jersey Business Corporation Act (the “NJBCA”) upon the terms and subject to the conditions set forth in this Agreement, pursuant to which each outstanding share of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”), shall be converted into the right to receive the Merger Consideration (as defined herein), as set forth herein, all upon the terms and subject to the conditions of this Agreement.

WHEREAS, a special committee of the Board of Directors of the Company (the “Special Committee”) has (i) determined that the Merger on the terms and subject to the conditions set forth in this Agreement is fair to and in the best interest of the Company’s shareholders, and (ii) approved this Agreement and recommended approval of this Agreement by the Board of Directors and shareholders of the Company;

WHEREAS, the Board of Directors of the Company (the “Company Board”) has (i) determined that the Merger on the terms and subject to the conditions set forth in this Agreement is fair to and in the best interest of the Company’s shareholders, and (ii) approved this Agreement and recommended approval of this Agreement by the shareholders of the Company;

WHEREAS, the Board of Directors of Merger Sub has (i) determined that the Merger on the terms and subject to the conditions set forth in this Agreement is fair to and in the best interest of its shareholder, and (ii) approved this Agreement;

WHEREAS, Parent, as sole shareholder of Merger Sub, has approved this Agreement; and

WHEREAS, simultaneously with the execution of this Agreement, C. Harry Knowles (“Knowles”) and the other Shareholder Parties named therein have entered into a contribution and voting agreement with Parent (the “HK Contribution Agreement”), which is in the form attached hereto as Exhibit A, pursuant to which, among other things, Knowles has agreed to contribute certain shares of Company Common Stock to Parent in exchange for shares of capital stock of Parent and Knowles and the other Shareholder Parties named therein have agreed to vote the shares of Company Common Stock held by such parties in favor of approving this Agreement.

WHEREAS, simultaneously with the execution of this Agreement, Elliott Associates, L.P., and Elliott International, L.P. (together, “EA,” and collectively with Knowles, the “Rollover Investors”) have entered into a contribution and voting agreement with Parent (the “EA Contribution Agreements”, and together with the HK Contribution Agreement, the “Contribution Agreements”), which is in the form attached hereto as Exhibit B, pursuant to which, among other things, EA has agreed to contribute certain shares of Company Common Stock to Parent in exchange for shares of capital stock of Parent and to vote the shares of Company Common Stock held by EA in favor of approving this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
THE MERGER

1.1 Effective Time of the Merger. Subject to the provisions of this Agreement, at or prior to the Closing, the Company and Merger Sub shall prepare and cause to be filed with the Secretary of State of New Jersey a certificate of merger to effect the Merger upon the terms hereof (the “Certificate of Merger”) in such form as is required by, and executed by the Company in accordance with, the relevant provisions of the NJBCA and shall make all other filings or recordings required under the NJBCA. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of New Jersey or at such later time as is established by the Company and Merger Sub and set forth in the Certificate of Merger (the “Effective Time”).

1.2 Closing. The closing of the Merger (the “Closing”) shall take place at 10:00 a.m., Pacific time, on a date to be specified by Parent and the Company (the “Closing Date”), which shall be no later than the second Business Day after satisfaction or waiver of the conditions set forth in Article VII (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, unless another date, place or time is agreed to in writing by Parent and the Company. For purposes of this Agreement, a “Business Day” shall be any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions located in New York, New York or San Francisco, California are permitted or required by law, executive order or governmental decree to remain closed.

1.3 Effects of the Merger; Structure.

(a) At the Effective Time, Merger Sub shall be merged with and into the Company, at which time the separate corporate existence of Merger Sub shall cease and the Company shall continue its existence as the surviving corporation. In its capacity as the corporation surviving the Merger, the Company is sometimes referred to herein as the “Surviving Corporation.” From and after the Effective Time, the Merger shall have the effects set forth in Section 14A:10-6 of the NJBCA.

(b) At its election, Parent may change the structure or method of effecting the combination with the Company, including to provide for a merger of the Company into Parent or any Subsidiary of Parent, provided, however, that no such change shall (i) alter or change the amount or kind of consideration to be issued to holders of shares of Company Common Stock as provided for in this Agreement or (ii) impede or delay consummation of the transactions contemplated by this Agreement. Any such structural change shall not affect the accuracy (whether as of the date hereof or as of the Closing Date) of the Company’s representations and warranties hereunder, which are made under the assumption that the transaction is structured as a reverse triangular merger as set forth in Section 1.3(a), if such representations and warranties, but for the structural change, would have been accurate as of the date hereof and as of the Closing Date.

1.4 Certificate of Incorporation. The Certificate of Merger shall provide that, at the Effective Time, the certificate of incorporation of the Surviving Corporation, as in effect immediately prior to the Effective Time, shall be amended in its entirety as of the Effective Time to read as set forth in Exhibit C hereto (with such additional changes required to reflect the then current directors of Surviving Corporation, in accordance with New Jersey law), and as so amended shall be the certificate of

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incorporation of the Surviving Corporation, until thereafter amended in accordance with the provisions thereof and as provided by applicable law.

1.5 Bylaws. At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall become the bylaws of the Surviving Corporation until thereafter amended as provided by applicable law, the certificate of incorporation of the Surviving Corporation and such bylaws.

1.6 Directors and Officers of the Surviving Corporation.

(a) The directors of the Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

(b) The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

ARTICLE II
CONVERSION OF SECURITIES

2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of the capital stock of the Company or capital stock of Merger Sub:

(a) Capital Stock of Merger Sub. Each share of the common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock, $0.0001 par value per share, of the Surviving Corporation.

(b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of Company Common Stock that are owned by the Company as treasury stock and any shares of Company Common Stock owned by Parent or any direct or indirect wholly owned Subsidiary of Parent or the Company immediately prior to the Effective Time shall be cancelled and shall cease to exist and no payment shall be made or consideration delivered in respect thereof.

(c) Merger Consideration for Company Common Stock. Each share of Company Common Stock (other than shares to be cancelled in accordance with Section 2.1(b)) issued and outstanding immediately prior to the Effective Time shall be automatically converted as of the Effective Time into the right to receive $18.50 in cash per share, without interest (the “Merger Consideration”). As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate which as of immediately prior to the Effective Time represented outstanding shares of Company Common Stock (each a “Certificate”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration pursuant to this Section 2.1(c) upon the surrender of such Certificate in accordance with Section 2.2.

(d) Adjustments to Merger Consideration. The Merger Consideration shall be adjusted to reflect fully the effect of any reclassification, stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization or other like change with respect to Company Common Stock occurring (or for which a record date is established) after the date hereof and prior to the Effective Time in order to provide holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to each such event.

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2.2 Exchange of Certificates. The procedures for exchanging Certificates for the Merger Consideration pursuant to the Merger are as follows:

(a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company to act as agent for the payment of the Merger Consideration (the “Paying Agent”) upon surrender of the Certificates pursuant to this Article II and, as of the Effective Time, Parent shall make available to the Paying Agent sufficient funds for the benefit of the holders of Certificates for the payment of the Merger Consideration to such holders pursuant to Section 2.1(c) upon surrender of such Certificates (such funds, the “Exchange Fund”). Any income from investment of the Exchange Fund, which shall be invested in accordance with the instructions of Parent, will be payable solely to Parent.

(b) Exchange Procedures. Promptly after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate (i) a letter of transmittal, which shall be in customary form and specify that delivery shall be effected, and risk of loss and title shall pass, only upon delivery of the Certificates to the Paying Agent and (ii) instructions for effecting the surrender of the Certificates in exchange for the Merger Consideration payable with respect thereto. Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration that such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall immediately be cancelled. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, the Merger Consideration may be paid to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.2 each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration as contemplated by this Article II. For purposes of this Agreement, the term “Person” shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity.

(c) No Further Ownership Rights in Company Common Stock; Stock Transfer Books. All Merger Consideration paid upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificates, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time. From and after the Effective Time, the holders of Certificates representing shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares, except as otherwise provided in this Agreement, including the payment of the Merger Consideration, or by applicable law. If, after the Effective Time, Certificates are presented to Parent, the Surviving Corporation or the Paying Agent for any reason, they shall be cancelled and exchanged as provided in this Article II.

(d) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the holders of Certificates on the date that is 180 days after the Effective Time shall be delivered to Parent, upon demand, and after the 180 days, any holder of a Certificate who has not previously complied with this Section 2.2 shall look only to Parent (subject to abandoned property, escheat and similar laws) for payment of its claim for Merger Consideration without interest.

(e) No Liability. To the extent permitted by applicable law, none of Parent, the Company, the Surviving Corporation or the Paying Agent shall be liable to any Person for any amount of Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

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(f) Withholding Rights. Each of Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock or Company Stock Options, as the case may be, such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any other applicable state, local or foreign tax law. To the extent that amounts are so withheld by Parent or the Surviving Corporation, such withheld amounts (i) shall be remitted by Parent or the Surviving Corporation to the applicable Governmental Entity, and (ii) shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or Company Stock Options, as the case may be, in respect of which such deduction and withholding was made by Parent or the Surviving Corporation, as the case may be.

(g) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, and if requested by and at the discretion of Parent, the posting of a bond, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

2.3 Company Stock Options.

(a) At or prior to the Effective Time, the Company shall take the following actions with respect to all options to purchase Company Common Stock (“Company Stock Options”) granted under any stock option plans or other equity-related plans of the Company or any of its Subsidiaries (the “Company Stock Plans”) outstanding immediately prior to the Effective Time (without regard to the vesting or exercise price of such Company Stock Options):

(i) With respect to Company Stock Options granted under the Company’s 2004 Equity Incentive Plan (the “2004 Plan Options”), the Company shall, pursuant to the terms of such plan, automatically cancel all 2004 Plan Options outstanding under such plan immediately prior to the Effective Time, without regard to the exercise price of such 2004 Plan Options. For each cancelled 2004 Plan Option with an exercise price that is less than the Merger Consideration, the Company will cause the holders of such cancelled 2004 Plan Option to receive an amount (net of applicable taxes) equal to the product of (i) the excess of (A) the Merger Consideration per share of Company Common Stock over (B) the exercise price per share of Company Common Stock subject to such Company Stock Option, multiplied by (ii) the total number of shares of Company Common Stock subject to such Company Stock Option, without any interest thereon (the “Option Consideration”). For each cancelled 2004 Plan Option with an exercise price that is equal to or higher than the per share Merger Consideration, the Company shall pay to the holder thereof as consideration for each such 2004 Plan Option award $1.00 per award to effectuate the cancellation of such 2004 Plan Options.

(ii) With respect to Company Stock Options granted under the Company’s 1994 Incentive Plan (the “1994 Plan Options”), the Company shall make an offer to all holders of such 1994 Plan Options outstanding under such plan immediately prior to the Effective Time, pursuant to which the holder affirmatively would agree in writing to the cancellation of all (but not less than all) of his or her 1994 Plan Options in consideration for the receipt of the Option Consideration, if any. In the event one or more 1994 Plan Options are not cancelled pursuant to this Section 2.3(a)(ii), each such 1994 Plan Option shall instead be adjusted pursuant to the terms and conditions of such plan in a manner acceptable to Parent.

(iii) The Parties agree that the Company shall perform its obligations under this Section 2.3 in compliance with applicable law, including the tender offer rules under the Exchange Act and applicable state securities laws. The terms and conditions of such a tender offer shall be subject to the advance review and approval of the Parent, which approval shall not be unreasonably withheld.

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(b) As soon as practicable following the execution of this Agreement, the Company shall mail to each holder of Company Stock Options a letter describing the treatment of and payment for such Company Stock Options pursuant to this Section 2.3 and providing instructions for use in obtaining payment for such Company Stock Options, if applicable.

(c) Prior to the Effective Time, the Company shall take such actions (including without limitation, terminating or amending the terms of any Company Stock Option or Company Stock Plan and preparing and providing the applicable tender offer documents in compliance with applicable securities laws), necessary to give effect to the transactions contemplated by Section 2.3.

(d) No later than the first Business Day following the date of this Agreement, the Company shall take all action, including providing notice to plan participants and adoption of any plan amendments, that may be necessary to freeze participation in, and purchases under, all stock purchase plans of the Company or any of its Subsidiaries relating to Company Common Stock, including the Company Employee Stock Purchase Plan (the “Company Purchase Plans”), so that no new offerings are made and no purchases occur under the Company Purchase Plans after the execution of this Agreement. Prior to the Effective Time, the Company shall take all actions as may be necessary to cause all participants’ rights under the Company Purchase Plans to terminate on or prior to the Business Day immediately preceding the Closing Date, and on such date all accumulated payroll deductions allocated to each participant’s account under the Company Purchase Plans shall thereupon be returned to each participant as provided by the terms of the Company Purchase Plans. As of the close of business on the Business Day immediately prior to the Closing Date, the Company shall have terminated the Company Purchase Plans and provided such notice of termination as may be required by the terms of the Company Purchase Plans. The form and substance of any such notice regarding the termination of the Company Purchase Plans shall be subject to the review and approval of Parent, which shall not be unreasonably withheld.

2.4 Warrants. Each warrant to acquire Company Common Stock (a “Company Warrant”) that is issued and outstanding as of immediately prior the Effective Time will, as of the Effective Time and by virtue of the Merger, become exercisable for an amount of cash per share of Company Common Stock issuable upon exercise of the Company Warrant, without interest, equal to the Merger Consideration.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure letter delivered by the Company to Parent on the date of this Agreement (the “Company Disclosure Letter”) (which Company Disclosure Letter shall be arranged in sections and paragraphs corresponding to the numbered and lettered sections and paragraphs contained in this Article III, and the disclosure in any section or paragraph of the Company Disclosure Letter shall qualify the corresponding section or paragraph in this Article III), the Company represents and warrants to Parent and Merger Sub as follows:

3.1 Organization, Standing and Power.

(a) The Company and each of its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted and (iii) is duly qualified to do business and, where applicable as a legal concept, is in good standing as a foreign corporation in each jurisdiction in which the character of the properties it owns, operates or leases or the nature of its activities makes such qualification necessary, except (with respect to clause (iii) only) for such failures to be so qualified or in good standing, individually or in the aggregate, that are not reasonably likely to result in a Company Material Adverse Effect. For purposes of this Agreement, the term “Company Material Adverse Effect” shall mean, with respect to the Company, any state of facts, change, event, violation, inaccuracy, effect, condition, circumstance, occurrence or

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development (any such item, an “Effect”) that, individually or taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect, is or is reasonably likely to (i) be materially adverse to the business, operations, properties, condition (financial or otherwise), results of operations, assets or liabilities of the Company and its Subsidiaries, taken as a whole or (ii) prevent or materially delay the performance by the Company of any of its obligations under this Agreement or the consummation of the Merger or the other transactions contemplated hereby; provided, however, that in no event shall any of the following occurring after the date hereof, in and of itself, be deemed to constitute a Company Material Adverse Effect: (A) a decline in the price of the Company Common Stock on The Nasdaq Stock Market (it being understood that the facts and circumstances giving rise to such decline may be deemed to constitute and shall be taken into account in determining whether there has been a Company Material Adverse Effect); (B) any failure by the Company to meet published third party financial projections, in and of itself (it being understood that the facts and circumstances giving rise to such failure to meet published financial projections may be considered and shall be taken into account in determining whether there has been a Company Material Adverse Effect); (C) any Effect resulting from general national or world economic conditions and any acts of war or terrorism, except to the extent that such Effects disproportionately affect the Company and its Subsidiaries in any significant respect relative to other participants in the industries or markets in which they operate; (D) any Effect resulting from any action outside the ordinary course of business of the Company and its Subsidiaries required to be taken pursuant to this Agreement (other than consummation of the Merger); (E) any stockholder class action litigation arising from allegations of a breach of fiduciary duty relating to this Agreement; or (F) any Effect resulting from a change in GAAP.

(b) The Company has delivered or made available to Parent: (i) a complete and correct copy of the certificate of incorporation and bylaws of the Company, each as amended to date (together, the “Company Charter Documents”), and each such instrument is in full force and effect and no other organizational documents are applicable to or binding upon the Company; and (ii) complete and correct copies of the minutes (or, in the case of draft minutes, the most recent drafts thereof) of all meetings of the shareholders, the Company Board and each committee of the Company Board. The Company is not in violation of any of the provisions of the Company Charter Documents.

3.2 Capitalization.

(a) The authorized capital stock of the Company as of the date of this Agreement consists of 30,000,000 shares of Company Common Stock and 500,000 shares of preferred stock, $0.01 par value per share (“Company Preferred Stock”). As of September 11, 2006, (i) 22,690,994 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Common Stock were held in the treasury of the Company, (iii) no shares of Company Preferred Stock were issued or outstanding, (iv) no shares of Company Common Stock were held by any Subsidiaries of the Company, (v) 1,725,969 shares of Company Common Stock were reserved for issuance under the Company Stock Plans, and (vi) 195,000 shares of Company Common Stock were reserved for issuance upon the exercise of any Warrant.

(b) Section 3.2(b) of the Company Disclosure Letter sets forth a complete and accurate list, as of the date hereof, of: (i) all Company Stock Plans, indicating for each Company Stock Plan, as of such date, the number of shares of Company Common Stock issued under such Plan, the number of shares of Company Common Stock subject to outstanding options under such Plan and the number of shares of Company Common Stock reserved for future issuance under such Plan; and (ii) all outstanding Company Stock Options, indicating with respect to each such Company Stock Option the name of the holder thereof, the Company Stock Plan under which it was granted, the number of shares of Company Common Stock subject thereto, the exercise price, the date of grant, and the vesting schedule thereof, including the extent vested to date and whether and to what extent the vesting will be accelerated as a result of the transactions contemplated hereby (indicating the circumstances that may cause such acceleration).

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(c) No outstanding shares of Company Common Stock are subject to vesting, forfeiture or rights of repurchase by the Company or any of its Subsidiaries.

(d) Section 3.2(d) of the Company Disclosure Letter sets forth a complete and accurate list, as of the date hereof, of all outstanding Company Warrants, indicating with respect to each such Company Warrant the name of the holder thereof, the number of shares of Company Common Stock subject to such Company Warrant, the exercise price, and, if applicable, the vesting schedule thereof, including the extent vested to date and whether and to what extent the vesting of such Company Warrant will be accelerated as a result of the transactions contemplated hereby (indicating the circumstances that may cause such acceleration).

(e) Except for (i) the currently outstanding Company Common Stock as set forth in Section 3.2(a), (ii) the Company Stock Options as set forth on Section 3.2(b) of the Company Disclosure Letter, (iii) the Company Common Stock reserved for future grants under Company Stock Plans, as of the date of this Agreement, and (iv) the Company Warrants as set forth on Section 3.2(d) of the Company Disclosure Letter, (A) there are no equity securities of any class of the Company, or any security convertible or exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding and (B) there are no options, warrants, equity securities, calls, rights, commitments or Contracts of any character to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound obligating the Company or any of its Subsidiaries to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged, transferred, delivered or sold, additional shares of capital stock or other equity interests or Voting Debt of the Company or any of its Subsidiaries or any security or rights convertible into or exchangeable or exercisable for any such shares, other equity interests or Voting Debt, or obligating the Company or any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security, call, right, commitment or agreement. Neither the Company nor any of its Subsidiaries has any outstanding stock appreciation rights, phantom stock, performance based rights or similar rights or obligations. Other than the HK Contribution Agreement, neither the Company nor any of its Affiliates is a party to or is bound by any agreements or understandings with respect to the voting (including voting trusts and proxies) or sale or transfer (including agreements imposing transfer restrictions) of any shares of capital stock or other equity interests of the Company. For purposes of this Agreement, the term “Affiliate” when used with respect to any party shall mean any Person who is an “affiliate” of that party within the meaning of Rule 405 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Except as set forth on Section 3.2(e) of the Company Disclosure Letter, there are no registration rights, and there is no rights agreement, “poison pill,” anti-takeover plan or other similar Contract or understanding to which the Company or any of its Subsidiaries is a party or by which it or they are bound with respect to any equity security of the Company or any of its Subsidiaries.

(f) All outstanding shares of Company Common Stock are, and all shares of Company Common Stock subject to issuance upon exercise of Company Stock Options, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be, duly authorized, validly issued, fully paid and nonassessable, free of any Liens other than Liens imposed upon the holder thereof by reason of the acts or omissions of such holder and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the NJBCA, the Company Charter Documents or any agreement to which the Company is a party or is otherwise bound.

(g) There are no obligations, commitments or arrangements, contingent or otherwise, of the Company, any of its Subsidiaries or any of its Affiliates to repurchase, redeem or otherwise acquire any shares of Company Common Stock or the capital stock of any of its Subsidiaries or any of its Affiliates or to provide funds or make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or Person.

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(h) Section 3.2(h) of the Company Disclosure Letter sets forth a complete and correct list, as of the date of this Agreement, of each Contract pursuant to which any Indebtedness of the Company or its Subsidiaries is outstanding or may be incurred or guaranteed in an amount in excess of $500,000, together with the amount outstanding thereunder as of the date of this Agreement. “Indebtedness” means (i) indebtedness for borrowed money, whether secured or unsecured, (ii) obligations under conditional or installment sale or other title retention Contracts relating to purchased property, (iii) capitalized lease obligations and (iv) guarantees of any of the foregoing of another Person, excluding inter-company guarantees. Except as set forth on Section 3.2(h) of the Company Disclosure Letter, no event has occurred which either entitles, or could entitle (with or without notice or lapse of time or both) the holder of any Indebtedness described in Section 3.2(h) of the Company Disclosure Letter to accelerate, or which does accelerate, the maturity of any such Indebtedness.

3.3 Subsidiaries.

(a) Section 3.3(a) of the Company Disclosure Letter sets forth, as of the date of this Agreement, each Subsidiary of the Company and all other Persons in which the Company or any of its Subsidiaries owns, directly or indirectly, any shares of capital stock or equity interests or otherwise controls, directly or indirectly, and such list sets forth the name, the jurisdiction of organization, the authorized and outstanding capital stock and the record and beneficial ownership of the shares of capital stock of each Subsidiary and other entity as of the date hereof. For purposes of this Agreement, (i) the term “Subsidiary” means, with respect to any party, any corporation, partnership, trust, limited liability company or other non-corporate business enterprise in which such party (or another Subsidiary of such party) holds stock or other ownership interests representing (A) more that 50% of the voting power of all outstanding stock or ownership interests of such entity, (B) the right to receive more than 50% of the net assets of such entity available for distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution of such entity or (C) a general or managing partnership interest in such entity. Except as set forth on Section 3.3(a) of the Company Disclosure Letter, the Company does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity which is not a Subsidiary of the Company.

(b) All of the outstanding shares of capital stock and other equity securities or interests of each Subsidiary of the Company are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and all such shares (other than directors’ qualifying shares in the case of non-U.S. Subsidiaries, all of which the Company has the power to cause to be transferred for no or nominal consideration to the Company or the Company’s designee) are owned, of record and beneficially, by the Company or another of its Subsidiaries free and clear of all security interests, liens, claims, pledges, agreements, limitations in the Company’s voting rights, charges or other encumbrances. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company or any of its Subsidiaries is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of any Subsidiary of the Company. There are no outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary of the Company. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary of the Company.

(c) The Company has made available to Parent complete and accurate copies of the charter, bylaws or other organizational documents of each Subsidiary of the Company (the “Subsidiary Charter Documents”), and each such instrument is in full force and effect and no other organizational documents are applicable to or binding upon such Subsidiaries. Except as set forth on Section 3.3(c) of the Company Disclosure Letter, none of the Subsidiaries is in violation in any material respect of any of the provisions of its Subsidiary Charter Documents.

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3.4 Authority; No Conflict; Required Filings and Consents.

(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no additional corporate proceedings on the part of the Company are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby other than in the case of the consummation of the Merger, obtaining the Required Company Shareholder Vote. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (a) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating to creditors’ rights generally and (b) is subject to general principles of equity.

(b) The Special Committee, at a meeting duly called and held, unanimously determined that the Merger is fair and in the best interests of the Company and its shareholders, approved this Agreement in accordance with the provisions of the NJBCA, and directed that this Agreement be submitted to the Company Board for its approval and recommendation that the shareholders of the Company vote in favor of the approval of this Agreement. The Company Board, at a meeting duly called and held, unanimously determined that the Merger is fair and in the best interests of the Company and its shareholders, approved this Agreement in accordance with the provisions of the NJBCA, and directed that this Agreement be submitted to the shareholders of the Company for their approval and resolved to recommend that the shareholders of the Company vote in favor of the approval of this Agreement.

(c) The execution and delivery of this Agreement by the Company do not, and the consummation of the transactions contemplated by this Agreement shall not, (i) conflict with, or result in any violation or breach of, any provision of the Company Charter Documents or the Subsidiary Charter Documents, (ii) except as set forth on Section 3.4(c)(ii) of the Company Disclosure Letter conflict with, or result in any material violation or breach of, or constitute (with or without notice or lapse of time, or both) a material default (or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit) under, require a consent or waiver under, require the payment of a penalty or increased liabilities or fees or the loss of a benefit under or result in the imposition of any mortgage, right of first refusal, claim, license, limitation in voting rights, security interest, pledge, lien, charge or encumbrance (“Liens”) on the Company’s or any of its Subsidiaries’ assets under, any of the terms, conditions or provisions of any Company Material Contract to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to obtaining the Required Company Shareholder Vote and compliance with the requirements specified in clauses (i) through (v) of Section 3.4(d), conflict with or violate any permit, concession, franchise, license, judgment, injunction, order, writ, decree, statute, law, ordinance, rule, determination, award or regulation applicable to the Company or any of its Subsidiaries or any of its or their respective properties or assets, except in the case of clause (iii) of this Section 3.4(c) for any such conflicts or violations that, individually or in the aggregate, are not reasonably likely to result in a Company Material Adverse Effect.

(d) Except as set forth on Section 3.4(c) of the Company Disclosure Letter, no consent, approval, action, license, permit, order, certification, concession, franchise or authorization of, or registration, declaration, notice or filing with, any federal, state or local, U.S. or foreign court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority, agency or instrumentality (a “Governmental Entity”) is required by or with respect to the Company or any of its Subsidiaries in connection with the execution, delivery and performance of this Agreement by the

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Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the pre-merger notification requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and applicable foreign antitrust or merger control laws, (ii) the filing of the Certificate of Merger with the New Jersey Secretary of State and appropriate corresponding documents with the appropriate authorities of other states in which the Company is qualified as a foreign corporation to transact business in order to continue such qualification, (iii) the filing of the Proxy Statement with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and a Schedule 13E-3 of the Company relating to the Merger (the “Schedule 13E-3”), (iv) the filing of such reports, schedules or materials under Section 13 of or Rule 14a-12 under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (v) the filing of a notice with The Nasdaq Stock Market, (vi) the filing of a Form 15 with the SEC and appropriate documentation to effect the delisting of Company Common Stock from The Nasdaq Stock Market for trading upon consummation of the Merger, and (vii) such other consents, approvals, licenses, permits, orders, authorizations, registrations, declarations, notices and filings which, if not obtained or made, would not be, individually or in the aggregate, reasonably likely to result in a Company Material Adverse Effect.

(e) The affirmative vote in favor of the approval of this Agreement (the “Company Voting Proposal”) by the holders of a majority of the votes cast by the holders of the outstanding shares of Company Common Stock on the record date for the meeting of the Company’s shareholders (the “Company Meeting”) to consider the Company Voting Proposal (the “Required Company Shareholder Vote”) at the Company Meeting where a quorum is present is the only vote of the holders of any class or series of the Company’s capital stock or other securities necessary for the approval of this Agreement and for the consummation by the Company of the Merger and the other transactions contemplated by this Agreement. There are no bonds, Contracts, debentures, warrants, options, series of capital stock, notes or other Indebtedness of the Company or its Subsidiaries having the right to vote (“Voting Debt”) (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company or its Subsidiaries may vote.

(f) The shareholders of the Company are not entitled to any dissenters’, appraisal or similar rights under the NJBCA or otherwise in connection with the Merger.

3.5 SEC Reports; Financial Statements; Information Provided.

(a) The Company has filed all registration statements, forms, reports and documents with the SEC that have been required to be filed by it under applicable laws since December 31, 2002, and the Company will file after the date hereof and prior to the Effective Time all registration statements, forms, reports and documents with the SEC that are required to be filed by it under applicable laws on or prior to such time (all such registration statements, forms, reports and other documents, together with any other registration statements, forms, reports or other documents filed by the Company with the SEC prior to the Effective Time that are not required to be so filed, the “Company SEC Reports”). Except as set forth on Schedule 3.5 of the Company Disclosure Letter, each Company SEC Report (i) was or will be filed on a timely basis and (ii) complied, or will comply, as the case may be, as of its filing date, in all material respects with the applicable requirements of the Securities Act or the Exchange Act, and the rules and regulations promulgated thereunder, as the case may be, each as in effect on the date such Company SEC Report was, or will be, filed. True and correct copies of all Company SEC Reports filed prior to the date hereof, whether or not required under applicable laws, have been furnished to Parent or are publicly available in the Electronic Data Gathering, Analysis and Retrieval (EDGAR) database of the SEC. As of its filing date (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively), each Company SEC Report did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated in each such Company SEC Report or necessary in order to make the statements made therein (in the light of the circumstances

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under which they were made, with respect to Company SEC Reports filed pursuant to the Exchange Act only) not misleading. None of the Subsidiaries of the Company is required to file any registration statements, forms, reports or other documents with the SEC. No executive officer of the Company has failed to make the certifications required of him or her under Rule 13a-14 or Rule 15d-14 under the Exchange Act or Section 302 or Section 906 of the Sarbanes-Oxley Act with respect to any Company SEC Report, except as disclosed in certifications filed with the Company SEC Reports. Except as set forth in Section 3.5(a) of the Company Disclosure Letter, neither the Company nor any of its executive officers has received notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.

(b) The consolidated financial statements of the Company and its Subsidiaries filed in or furnished with the Company SEC Reports have been or will be, as the case may be, prepared in accordance with United States generally accepted accounting principles (“GAAP”) consistently applied during the periods and at the dates involved (except as may be indicated in the notes thereto), and fairly present in all material respects, or will present in all material respects, as the case may be, the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and the consolidated results of operations and changes in cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end audit adjustments in accordance with GAAP that are not material in amount. All of the Subsidiaries of the Company are consolidated for accounting purposes. The consolidated, audited balance sheet of the Company as of December 31, 2005 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 is referred to herein as the “Company Balance Sheet.”

(c) The Company and each of its Subsidiaries has established and maintains and adheres to a system of internal control over financial reporting (as defined in Rule 13a-15 of the Exchange Act) (“internal controls”) which are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, including policies and procedures that (i) require the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company and its Subsidiaries are being made only in accordance with appropriate authorizations of management and the Company Board and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries. Except as set forth in Section 3.5(c) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries (including any employee thereof) nor the Company’s independent auditors has identified or been made aware of (A) any significant deficiency or material weakness in the system of internal controls utilized by the Company and its Subsidiaries, (B) any fraud, whether or not material, that involves the Company’s management or other employees who have a role in the preparation of financial statements or the internal controls utilized by the Company and its Subsidiaries or (C) any claim or allegation regarding any of the foregoing.

(d) The Company has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure that information relating to the Company, including its consolidated Subsidiaries, required to be disclosed in the reports the Company files or submits under the Exchange Act is made known to the principal executive officer and the principal financial officer of the Company by others within those entities. Such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and principal financial officer to material information required to be included in the Company’s periodic reports required under the Exchange Act.

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(e) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Item 303(a)(4) of Regulation S-K of the SEC)) where the purpose or effect of such arrangement is to avoid disclosure of any material transaction involving the Company or any its Subsidiaries in the Company’s consolidated financial statements. The Company is in material compliance with the applicable listing and other rules and regulations of The Nasdaq Stock Market.

(f) The Company has made available to Parent a complete and correct copy of all exhibits, annexes, attachments, supplements, amendments or modifications that have not been filed with the SEC to Contracts that have previously been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act that have been requested by Parent.

3.6 No Undisclosed Liabilities. Except as and to the extent set forth on the Company Balance Sheet, neither the Company nor any of its Subsidiaries has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities and obligations (i) incurred in connection with the transactions contemplated hereby, (ii) incurred in the ordinary course of business and in a manner consistent with past practice since the Balance Sheet Date, including but not limited to, litigation expenses to the extent incurred in the ordinary course of business consistent with past practice, or (iii) that individually or in the aggregate could not reasonably be expected to have a Company Material Adverse Effect.

3.7 Absence of Certain Changes or Events. Since June 30, 2006, except as expressly contemplated by this Agreement (including the transaction contemplated by Section 5.1(e) of the Company Disclosure Letter) in compliance with Section 5.1(e)), the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course of business consistent with past practice and, since that date, (i) neither the Company nor any of its Subsidiaries has taken any action which, if taken as of or after the date hereof, would require the consent of Parent under Section 5.1 of this Agreement, (ii) neither the Company nor any of its Subsidiaries has suffered any damage, destruction or loss (whether or not covered by insurance), other than in the ordinary course of business, and (iii) there has not been any Effect that, individually or in the aggregate, has had or is reasonably likely to result in a Company Material Adverse Effect.

3.8 Taxes.

(a) Except as set forth on Section 3.8(a) of the Company Disclosure Letter, the Company and each of its Subsidiaries have timely filed all Tax Returns that they were required to file, and all such Tax Returns were correct and complete in all material respects. The Company and each of its Subsidiaries have paid on a timely basis all Taxes due and payable (whether or not shown on any such Tax Returns). The unpaid Taxes of the Company and its Subsidiaries for Tax periods through the date of the Company Balance Sheet do not exceed the accruals and reserves for Taxes set forth on the Company Balance Sheet exclusive of any accruals and reserves for “deferred taxes” or similar items that reflect timing differences between Tax and financial accounting principles. All liabilities for Taxes that arose since the date of the Company Balance Sheet arose in the ordinary course of business. All Taxes that the Company or any of its Subsidiaries is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity. There are no liens or encumbrances with respect to Taxes upon any of the assets or property of the Company or its Subsidiaries, other than liens for Taxes not yet due and payable. For purposes of this Agreement, (i) “Taxes” means (A) all taxes, charges, fees, levies or other similar assessments or liabilities, including income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, services,

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license alternative or add-on minimum, transfer, withholding, employment, payroll and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax with respect to such amounts; (B) any liability for the payment of any amounts of the type described in clause (A) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, and (C) any liability for the payment of any amounts of the type described in clauses (A) or (B) of this definition as a result of any express or implied obligation to indemnify any other Person or as a result of any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a predecessor or transferor entity; and (ii) “Tax Returns” means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

(b) There are no deficiencies for any amount of Taxes claimed, proposed or assessed by any taxing or other Governmental Entity in writing that have not been fully paid or settled. The Company has made available to Parent correct and complete copies of all U.S. federal income Tax Returns, examination reports, related correspondence and statements of deficiencies assessed against or agreed to by the Company since January 1, 2002. The U.S. federal income Tax Returns of the Company and each of its Subsidiaries have been audited by the Internal Revenue Service (the “IRS”) or are closed by the applicable statute of limitations for all taxable years through the taxable year specified in Section 3.8(b) of the Company Disclosure Letter. The Company has made available to Parent correct and complete copies of all other Tax Returns of the Company and its Subsidiaries together with all related examination reports, correspondence and statements of deficiency for all periods from and after January 1, 2002. Except as set forth in Section 3.8(a) of the Company Disclosure Letter, no examination or audit of any Tax Return of the Company or any of its Subsidiaries by any Governmental Entity is currently in progress or, to the knowledge of the Company, threatened or contemplated. Except as set forth in Section 3.8(b) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries has waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency. No written claim has ever been made by any Governmental Entity in a jurisdiction where neither the Company nor any of its Subsidiaries files Tax Returns that it is or may be subject to taxation by that jurisdiction.

(c) The Company is in compliance with all terms and conditions of any Tax incentives, Tax holidays, Tax rebates or special Tax rate relief or other favorable Tax benefits authorized by any Governmental Authority (collectively, “Tax Benefits”), and the transactions contemplated by this Agreement will not cause the Company to lose or no longer qualify for any such Tax Benefits to which the Company was entitled prior to the effectiveness of this Agreement. The Company is not required to provide any notice of the change in control of the Company to any Governmental Authority.

(d) There is no contract, agreement, plan or arrangement to which the Company or any of its Subsidiaries is a party, including the provisions of this Agreement, covering any employee, consultant or director of the Company or any of its Subsidiaries, which, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 404, or 162(m) of the Code.

(e) Neither the Company nor any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” in a distribution occurring during the last five years in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

(f) Neither the Company nor any of its Subsidiaries has engaged in any transaction that could give rise to (i) a disclosure obligation with respect to any Person under Section 6111 of the Code or the

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regulations thereunder, (ii) a list maintenance obligation with respect to any Person under Section 6112 of the Code or the regulations thereunder, or (iii) a disclosure obligation as a “reportable transaction” under Section 6011 of the Code and the regulations thereunder.

(g) Neither the Company nor any U.S. Subsidiary has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

3.9 Owned and Leased Real Properties.

(a) Section 3.9(a) of the Company Disclosure Letter sets forth a complete and accurate list as of the date of this Agreement of all real property owned by the Company or any of its Subsidiaries, or in which the Company or any of its Subsidiaries has a fee ownership interest, including, without limitation, any rights, contracts or options to acquire real property other than the Leased Real Property defined below (the “Owned Real Property”).

(b) Section 3.9(b)(i) of the Company Disclosure Letter sets forth a complete and accurate list as of the date of this Agreement of all real property leased, subleased or licensed (collectively, the “Leases”) by the Company or any of its Subsidiaries (the “Leased Real Property” and collectively with the Owned Real Property, the “Real Property”). Section 3.9(b)(ii) of the Company Disclosure Letter specifies (i) the use made of the Leased Real Property, (ii) the address of each Leased Real Property, and (iii) the identities of the parties under the Leases. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any other party to any Lease is in default with respect to a material provision of any Lease (including any provision the default of which would result in termination of the applicable Lease) or material breach under any of the Leases. Each Lease is a valid and binding obligation of, and is legally enforceable against, the respective parties thereto. Neither the Company nor any of its Subsidiaries leases, subleases or licenses any real property to any Person other than the Company and its Subsidiaries, except that Adaptive Optics Associates, Inc. (“AOA”) subleases a portion of its facility to a third party. Neither the Company nor any of its Subsidiaries is obligated under or bound by any option, right of first refusal, purchase contract or other contractual right to sell or purchase any Leased Real Property or any portions thereof or interests therein. The Company has made available to Parent complete copies of all Leases.

(c) The Real Property complies with the requirements of all applicable building, zoning, subdivision, health, safety and other land use statutes, laws, codes, ordinances, rules, orders and regulations as well as any easements, covenants or other matters of record affecting the Real Property, except where noncompliance, individually or in the aggregate, is not reasonably likely to result in a Company Material Adverse Effect.

(d) To the knowledge of the Company, there are no covenants, conditions, rights-of-way, easements and similar restrictions or any other conditions affecting all or any portion of the Real Property that materially impair the ability to use any such Real Property in the operation of the businesses of the Company as presently conducted or which would materially and adversely effect the development, financability or transferability of the Owned Real Property, and no material default or breach exists thereunder by the Company or any of its Subsidiaries.

(e) Neither the Company, nor any Subsidiary has received any notice from any insurance company of any defects or inadequacies in any Real Property or any part thereof which could materially and adversely affect the insurability of such property or the premiums for the insurance thereof, nor has any notice been given by any insurer of any such property requesting the performance of any repairs, alterations or other work with which compliance has not been made,

(f) There are no pending, or, to the knowledge of the Company, threatened condemnation or eminent domain actions or proceedings, or any special assessments or other activities of any public or quasi-public body that are reasonably likely to adversely affect the Owned Real Property.

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3.10 Title to Assets. The Company and its Subsidiaries have good and marketable title to, or valid and enforceable right to use under existing franchises, easements or licenses, or valid and enforceable leasehold interests in, all of its tangible personal properties, rights and assets necessary to carry on their businesses as is now being conducted, in each case free and clear of all Liens, except for Liens that secure indebtedness and that are properly reflected on the Company Balance Sheet and Liens that can be removed for a cost of less than $250,000 in the aggregate. The Real Property and the tangible personal property and assets of the Company and its Subsidiaries are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, are operated in accordance with all applicable licenses, permits, consents and governmental authorizations, and are usable in the regular and ordinary course of business, except as would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries has any legal obligation, absolute or contingent, to any other Person to sell or otherwise dispose of any of its tangible personal properties or assets (other than the sale of the Company’s products in the ordinary course of business) with an individual value in excess of $250,000 or an aggregate value in excess of $500,000.

3.11 Intellectual Property.

(a) For the purposes of this Agreement, the following terms have the following definitions:

(i) “Company Intellectual Property” shall mean any and all Intellectual Property Rights that are owned by, or exclusively licensed to, the Company or its Subsidiaries.

(ii) “Company Product” shall mean all products, technologies and services developed (including products, technologies and services under development), owned, made, sold or licensed by or on behalf of the Company and/or any of its Subsidiaries, other than products of third parties that are distributed by Company under a Trademark that is not owned by the Company.

(iii) “Intellectual Property Rights” shall mean common law and statutory rights anywhere in the world arising under or associated with (i) patents, patent applications and inventors’ certificates (“Patents”), (ii) copyrights, copyright registrations and copyright applications, and mask work rights and mask work registrations (“Copyrights”), (iii) trade and industrial secrets and rights in confidential information (“Trade Secrets”), (iv) trademarks, trade names and service marks (“Trademarks”), (iv) any other proprietary rights relating or with respect to the protection of technology, (vi) divisions, continuations, renewals, reissuances and extensions of the foregoing (as applicable), and (vii) the right to enforce and recover damages for the infringement or misappropriation of any of the foregoing.

(iv) “Open Source Materials” shall mean all software or other material that is distributed as “free software”, “open source software”, or under similar licensing or distribution terms (an “Open Source License”), including, but not limited to, the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), Berkeley Software Distribution licenses (BSD), the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL), the Sun Industry Standards License (SISL), and the Apache License.

(v) “Patent Contract” shall mean any Contract that includes a grant of an express license (or cross license) of Patents by a party to such Contract or that includes a covenant not to sue with respect to Patents.

(vi) “Registered Intellectual Property” shall mean applications, registrations and filings for Intellectual Property Rights that have been registered, filed, certified, or otherwise perfected, applied for, or recorded with, or by any state, government, or other public or quasi-public legal authority.

(vii) “Source Code” shall mean software or code, which may be printed or displayed in human readable form or from which object code can be derived by compilation or otherwise.

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(b) Section 3.11(b) of the Company Disclosure Letter sets forth a true, complete and correct list of all Registered Intellectual Property owned by or filed in the name of Company or any of its Subsidiaries as of the date hereof (collectively the “Company Registered Intellectual Property”). No Registered Intellectual Property that is or, since September 1, 2001, was Company Intellectual Property has been cancelled, declared invalid, or with respect to any material Company Intellectual Property, abandoned.

(c) All Company Intellectual Property is owned exclusively by Company or one or more of its Subsidiaries free and clear of any Liens. Neither the Company nor any of its Subsidiaries has transferred ownership of, or granted an exclusive license to, any third party, of any Intellectual Property Rights that are or were Company Intellectual Property Rights, other than in the ordinary course of business. All Company Intellectual Property is, and following the transactions contemplated hereby shall be, freely, transferable, alienable, without the consent of, or notice to any Governmental Entity or third party or the payment of any kind.

(d) To the Company’s knowledge, neither the conduct of the business of the Company and its Subsidiaries nor any Company Product has infringed upon, violated or constituted the unauthorized use of, or does, or will as of the Closing, infringe upon, violate or constitute the unauthorized use of any Intellectual Property Rights owned by any third Person. Except as set forth in Section 3.11(d) of the Company Disclosure Letter, there is no pending and at no time within the three years prior to the date of this Agreement has there been pending any, and Company has not received notice of any threatened, suit, arbitration or other adversarial proceeding before any court, commission, government agency or arbitral tribunal, or in any jurisdiction, alleging that the conduct of the business of the Company and its Subsidiaries or any Company Product infringes upon, violates or constitutes the unauthorized use of any Intellectual Property Rights owned by any third Person, or challenging the ownership, validity, enforceability, or registerability of any Company Intellectual Property.

(e) The Company and its Subsidiaries have taken reasonable measures to protect the proprietary nature of the Intellectual Property Rights owned by the Company or its Subsidiaries that are material to the business of the Company and its Subsidiaries as currently conducted.

(f) Except as set forth in Section 3.11(f) of the Company Disclosure Letter, (i) to the Company’s knowledge, no third party is misappropriating, infringing, diluting or violating any material Company Intellectual Property, and (ii) there is no pending, and at no time within the three years prior to the date hereof has there been pending any suit, arbitration or other adversarial proceeding before any court, commission, government agency or arbitral tribunal, or in any jurisdiction, in which the Company or any Subsidiary has alleged that any activities or conduct of any third Person, product or business infringes or will infringe upon, violate or constitute the unauthorized use of Company Intellectual Property, or challenging the ownership, validity, enforceability, or registerability of any third Person’s Intellectual Property Rights.

(g) Except as set forth in Section 3.11(g), neither the Company nor any of its Subsidiaries has any obligation to pay any third party any royalties or other fees in excess of $250,000 in the aggregate in the calendar year 2006 with respect to any Intellectual Property Rights of a third Person, and no obligation to pay such royalties or other fees will result from the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated by this Agreement.

(h) Section 3.11(g) of the Company Disclosure Letter lists (i) all Contracts pursuant to which a third Person has licensed to Company or any of its Subsidiaries any Intellectual Property Rights or technology that is material to the operation of the business of the Company or its Subsidiaries or necessary to the manufacture and sale of Company Products other than Contracts with respect to Intellectual Property Rights or technology that are commercially available for an aggregate fee of less than $500,000, and (ii) Patent Contracts to which Company or any of its Subsidiaries is a licensee or the grantee of any covenants with respect to any Patents (“In-Licenses”).

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(i) Section 3.11(i) of the Company Disclosure Letter lists all (i) all Contracts pursuant to which Company or any of its Subsidiaries has granted a third Person or affiliate any rights or licenses to any material Company Intellectual Property, other than non-exclusive licenses granted in the ordinary course in connection with the sale or distribution of the Company Products, and (ii) Patent Contracts to which Company or any of its Subsidiaries is a licensor or the grantor of any covenants with respect to any Patents (“Out-Licenses”; together with the In-Licenses, the “IP Licenses”).

(j) Each of the IP Licenses is legal, binding, valid and in full force and effect and is enforceable by the Company and its Subsidiaries in accordance with their respective terms. Neither the Company nor any of its Subsidiaries is in material violation of any IP License that is material to the business of Company or any of its Subsidiaries.

(k) The consummation of the transactions contemplated hereby will not result in or cause (i) the breach by Company, any of its Subsidiaries or the Surviving Corporation of any IP License, (ii) the termination of any IP License, (iii) the termination, impairment or restriction of any right or license granted to Company or any of its Subsidiaries under an In-License or the enjoyment by, or extension of such rights and licenses to, the Surviving Corporation, (iv) the Company, any of its Subsidiaries or the Surviving Corporation to grant, or expand the scope of a prior grant, to a third Person of any rights to any material Company Intellectual Property (including by release of any Source Code) or (v) the Company, any of its Subsidiaries or the Surviving Corporation being obligated to pay any royalties or other material amounts, or offer any discounts, to any third party in excess of those payable by, or required to be offered by, the Company or any of its Subsidiaries in the absence of this Agreement or the transactions contemplated hereby.

(l) Section 3.11(l) of the Company Disclosure Letter lists Contracts to which Company or any of its Subsidiaries is bound which include any non-compete, exclusivity, or other material restriction on the operation or scope of any material business or operations of Company or any of its Subsidiaries.

(m) Neither the Company nor any of its Subsidiaries has (i) granted, or is obligated to grant, access or rights to any of its Source Code in or for any Company Product, (ii) made its Source Code for any Company Product subject to any Open Source License, or combined or distributed any Company Products with Open Source Materials, or (iii) licensed or has granted a third party the right to obtain any Source Code in any Company Product (including in any such case, any conditional right to access, or under which the Company has established any escrow arrangement for the storage and conditional release of any Source Code).

3.12 Contracts.

(a) For purposes of this Agreement, “Contract” shall mean license, contract, subcontract, binding understanding, indenture, note, option, insurance policy, benefit plan or other agreement, instrument or obligation, written or oral. For purposes of this Agreement, a “Company Material Contract” shall mean: (i) any employment or consulting Contract (in each case, under which the Company has continuing obligations as of the date hereof) with any current or former executive officer or other employee of the Company or its Subsidiaries or member of the Company Board providing for an annual base compensation in excess of $150,000; (ii) any Contract limiting the freedom of the Company or any of its Subsidiaries, or following the Effective Time the Surviving Corporation, the Parent or any of their respective Subsidiaries, to engage in any line of business or sell, supply or distribute any service or product, or to compete with any entity or to conduct business in any geography, or to hire any individual or group of individuals; (iii) any Contract granting any exclusive rights to make, sell or distribute any Company Product; (iv) any Contract related to supply, manufacturing, distribution or development of Company Products in excess of $300,000 over the remaining term, except agreements with sales representatives or other resellers in the ordinary course of business; (v) any IP License; (vi) any Contract or plan, including any stock option plan, stock appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or the vesting

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of benefits of which will be accelerated, by the consummation of the transactions contemplated hereby or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, or otherwise relating to payments upon a change of control of the Company; (vii) any Contract or plan containing severance or termination pay liabilities related to termination of employment or services to the Company; (viii) any Contract relating to the disposition or acquisition by the Company or any of its Subsidiaries of any person or any business or any material amount of assets or rights or pursuant to which the Company or any of its Subsidiaries has any material ownership interest in any other person or other business enterprise, other than Contracts under which the Company and its Subsidiaries have no further liabilities or obligations and no continuing rights; (ix) any mortgages, indentures, guarantees, loans or credit agreements, security agreements, promissory notes or other Contracts relating to the borrowing of money, extension of credit or other Indebtedness, other than accounts receivables and payables in the ordinary course of business; (x) any settlement Contract, other than (A) releases immaterial in nature or amount entered into with former employees or independent contractors of the Company in the ordinary course of business in connection with the routine cessation of such employee’s or independent contractor’s employment with the Company, (B) settlement Contracts for cash only (which has been paid) and does not exceed $250,000 as to such settlement or (C) settlement Contracts entered into more than three (3) years prior to the date of this Agreement under which none of the Company or its Subsidiaries have any continuing obligations, liabilities, or rights (excluding releases); (xi) any partnership, joint venture or similar Contract to which the Company or any of its Subsidiaries is a party; (xii) any Contract obligating the Company or any of its Subsidiaries to provide indemnification other than that contained in a standard sales agreement or purchase order, the form of which has been provided to Parent; (xiii) any lease of real property providing for annual rentals of $150,000 or more; (xiv) any Contract (other than IP Licenses) providing for (A) aggregate noncontingent payments by or to the Company or any of its Subsidiaries in excess of $250,000, or (B) potential payments by or to the Company or any of its Subsidiaries reasonably expected to exceed $1,000,000; (xv) any Contract otherwise required to be filed as an exhibit to any periodic or current report under the Exchange Act pursuant to Item 601 of Regulation S-K promulgated under the Exchange Act; (xvi) any Contract which is reasonably likely to prohibit or materially delay the consummation of the transactions contemplated by this Agreement; and (xvii) any Contract, or group of Contracts with a person (or group of affiliated Persons), the termination or breach of which would be reasonably expected to have a material adverse effect on any material product or service offerings of the Company or otherwise have a Company Material Adverse Effect and is not disclosed pursuant to clauses (i) through (xvi) above.

(b) Section 3.12(b) of the Company Disclosure Letter sets forth a list of all Company Material Contracts to which the Company or any of its Subsidiaries is a party or is bound as of the date hereof. True and correct copies of the Company Material Contracts have been made available to Parent.

(c) Each Company Material Contract is valid and binding on the Company (and/or each such Subsidiary of the Company party thereto) and, to the knowledge of the Company, each other party thereto, is in full force and effect, and is enforceable by the Company (and each such Subsidiary of the Company party thereto) in accordance with its terms. The Company and each of its Subsidiaries have performed in all material respects all obligations required to be performed by them under each Company Material Contract and, to the knowledge of the Company, each other party to each Company Material Contract has performed in all material respects all obligations required to be performed by it under such Company Material Contract. Neither the Company nor any of its Subsidiaries knows of, or has received written notice of, any violation or default under (or any condition that with the passage of time or the giving of notice, or both, would cause such a violation of or default under) any Company Material Contract. The Company has complied with all material terms contained in any Company Material Contract that provide for pricing or other contract terms on a “most favored nation” or similar basis, and no material refunds of any past payments arising under any such Company Material Contracts are or are expected to become due, except as may have been reserved in the Company’s consolidated financial statements filed in the

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Company SEC Reports. To the knowledge of the Company, no circumstances exist that will adversely affect the Company’s ability to perform its obligations under the Company Material Contracts in all material respects.

3.13 Litigation. Except as set forth in Section 3.13 of the Company Disclosure Letter, there is no material action, suit, proceeding, claim, arbitration, charge or investigation (collectively, “Actions”) pending or, to the knowledge of the Company, threatened against or involving the Company, any of its Subsidiaries, any Company Plan or any of their assets, properties or rights. There are no material judgments, orders, settlements or decrees outstanding against the Company or any of its Subsidiaries. As of the date of this Agreement, no officer or director of the Company is a defendant in any Action or, to the knowledge of the Company, the subject of any investigation commenced by shareholders of the Company or any Governmental Entity with respect to the performance of his or her duties as an officer and/or director of the Company. Except as set forth in Section 3.12(b)(xii) of the Company Disclosure Letter, there exists no Contracts with any of the current or former directors and officers of the Company or its Subsidiaries that provide for indemnification by the Company or its Subsidiaries that are effective or have any ongoing obligations as of the date of this Agreement.

3.14 Environmental Matters.

(a) As of the Closing, except in compliance with Environmental Laws and in a manner that could not reasonably be expected to subject the Company or any of its Subsidiaries to material liability, no Hazardous Materials are present on any Business Facility currently owned, operated, occupied, controlled or leased by the Company or any of its Subsidiaries or were present on any other Business Facility at the time it ceased to be owned, operated, occupied, controlled or leased by the Company or any of its Subsidiaries. Except as set forth in Section 3.14(a) of the Company Disclosure Letter, there are no underground storage tanks, asbestos which is friable or likely to become friable or PCBs present on any Business Facility currently owned, operated, occupied, controlled or leased by the Company or any of its Subsidiaries or as a consequence of the acts of the Company or its agents.

(b) The Company and its Subsidiaries have conducted all Hazardous Material Activities in compliance in all material respects with all applicable Environmental Laws. The Hazardous Materials Activities of the Company and its Subsidiaries prior to the Closing have not resulted in the exposure of any Person to a Hazardous Material in a manner which, to the knowledge of the Company has caused, or could reasonably be expected to cause an adverse health effect to any such Person.

(c) Neither the Company nor its Subsidiaries has received (A) any written notice alleging that any of them has not complied with applicable Environmental Laws, and, to the knowledge of the Company, there are no facts existing that reasonably would give rise to such a notice or (B) any written notice, demand, claim or request for information alleging that the Company or any of its Subsidiaries may be in violation of, liable under or have obligations under any Environmental Law.

(d) Except as set forth in Section 3.14(d) of the Company Disclosure Letter, no action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or to the best of the Company’s knowledge, threatened, concerning or relating to any Environmental Permit or any Hazardous Materials Activity of the Company or any of its Subsidiaries, or any Business Facility.

(e) The Company is not aware of any fact or circumstance, which could result in any environmental liability which could reasonably be expected to result in a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries have entered into any agreement that may require it to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with respect to liabilities arising out of Environmental Laws, or the Hazardous Materials Activities of the Company, and of its Subsidiaries or any other individual or entity.

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(f) The Company has delivered to Parent or made available for inspection by Parent and its agents, representatives and employees all records in the Company’s and its Subsidiaries’ possession concerning the Hazardous Materials Activities of the Company and its Subsidiaries and all environmental audits and environmental assessments of any Business Facility conducted at the request of, or otherwise in the possession of the Company or any of its Subsidiaries. The Company has complied with all environmental disclosure obligations and all relevant Environmental Laws imposed by applicable law with respect to the transactions contemplated by this Agreement, including, without limitation, the New Jersey Industrial Site Recovery Act.

(g) For purposes of this Agreement, the following terms shall have the meanings ascribed to them below:

(i) “Hazardous Material” is any material, chemical, emission or substance that has been designated by any Governmental Entity to be radioactive, toxic, hazardous, a pollutant, a contaminant, “solid waste” or otherwise a danger to health, reproduction or the environment.

(ii) “Business Facility” is any property including the land, the improvements thereon, the groundwater thereunder and the surface water thereon, that is or at any time has been owned, operated, occupied, controlled or leased by the Company or any of its Subsidiaries.

(iii) “Disposal Site” is a landfill, disposal site, disposal agent, waste hauler or recycler of Hazardous Materials, or any real property other than a Business Facility receiving Hazardous Materials used or generated by a Business Facility.

(iv) “Environmental Laws” are all applicable laws (including common laws), directives, guidance, rules, regulations, orders, treaties, statutes, and codes promulgated by any Governmental Entity which prohibit, regulate or control any Hazardous Material or any Hazardous Material Activity, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the Occupational Safety and Health Act, the Clean Water Act, all as amended at any time.

(v) “Hazardous Materials Activity” is the transportation, transfer, recycling, storage, use, treatment, manufacture, removal, remediation, release, exposure of others to, sale, or distribution of any Hazardous Material or any product or waste containing a Hazardous Material, or product manufactured with Ozone depleting substances, including, without limitation, any required labeling, payment of waste fees or charges (including so-called e-waste fees) and compliance with any product take-back or product content requirements such as the European Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment.

(vi) “Environmental Permit” is any approval, permit, registration, certification, license, clearance or consent required to be obtained from any private Person or any Governmental Entity with respect to a Hazardous Materials Activity which is or was conducted by the Company or any of its Subsidiaries.

3.15 Employee Benefit Plans.

(a) Section 3.15(a) of the Company Disclosure Letter contains a true and complete list of each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including, without limitation, multiemployer plans within the meaning of Section 3(37) of ERISA, and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism now in effect or required in the future as a result

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of the transaction contemplated by this Agreement or otherwise), whether formal or informal, oral or written, legally binding or not, under which (i) any current, former or retired employee, director or consultant of the Company or its Subsidiaries (the “Company Employees”) has any present or future right to benefits and which are contributed to, required to be contributed to, sponsored by or maintained by the Company or any of its Subsidiaries or (ii) the Company or any of its Subsidiaries has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “Company Plans.”

(b) With respect to each Company Plan, the Company has provided or made available to Parent a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination letter, if applicable; (iii) any summary plan description and other written communications (or a description of any oral communications) by the Company or any of its Subsidiaries to the Company Employees concerning the extent of the benefits provided under a Company Plan; and (iv) for the three most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports.

(c) Each Company Plan has been established and administered in all material respects in accordance with its terms, and in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations. Each Company Plan which is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause such determination letter to be revoked. No event has occurred with respect to the Company Plans and to the knowledge of the Company no condition exists that would subject the Company or any of its Subsidiaries, either directly or by reason of their affiliation with any member of their “Controlled Group” (defined as any organization which is a member of a controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code), to any material tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable laws, rules and regulations (other than any such liability that may arise in the ordinary course of business). All contributions and other payments required by and due under the terms of each Company Plan have been made on a timely basis.

(d) Neither the Company, its Subsidiaries nor any member of their Controlled Group has ever maintained, established, sponsored, participated in, or contributed to, any (i) pension plan which is subject to Title IV of ERISA or Section 412 of the Code, (ii) a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA), (iii) a “multiple employer plan” (as defined in ERISA or the Code), or (iv) a “funded welfare plan” within the meaning of Section 419 of the Code. Except as provided in Section 3.15(d) of the Company Disclosure Letter, no Company Plan provides health benefits that are not fully insured through an insurance contract.

(e) With respect to any Company Plan, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Company’s knowledge, threatened, and (ii) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Internal Revenue Service or other governmental agency is pending or, to the Company’s knowledge, threatened.

(f) Except as set forth in Section 3.15(f) of the Company Disclosure Letter, no Company Plan exists that, as a result of the execution of this Agreement, shareholder approval of this Agreement, or the transactions contemplated by this Agreement (whether alone or in connection with any subsequent event(s)), (i) will result in severance pay or any increase in severance pay upon any termination of employment after the date of this Agreement, (ii) will accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or result in any other material obligation pursuant to, any of the Company Plans,

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(iii) will cause the Company to record additional compensation expense on its income statement with respect to any outstanding Company Stock Option or equity based award or (iv) will result in payments under any of the Company Plans which would not be deductible under Section 280G of the Code.

(g) Except as set forth in Section 3.15(g) of the Company Disclosure Letter, no Company Plan is maintained outside the jurisdiction of the United States, or covers any employee residing or working outside the United States (any such Company Plan set forth in Section 3.15(g) of the Company Disclosure Letter, “Foreign Benefit Plans”). With respect to any Foreign Benefit Plans, (i) all Foreign Benefit Plans have been established, maintained and administered in material compliance with their terms and all applicable statutes, laws, ordinances, rules, orders, decrees, judgments, writs, and regulations of any controlling governmental authority or instrumentality; (ii) all Foreign Benefit Plans that are required to be funded are fully funded, and with respect to all other Foreign Benefit Plans, adequate reserves therefore have been established on the accounting statements of the applicable Company or Subsidiary entity; and (iii) no material liability or obligation of the Company or its Subsidiaries exists with respect to such Foreign Benefit Plans that has not been disclosed on Section 3.15(g) of the Company Disclosure Letter.

(h) Section 3.15(h) of the Company Disclosure Letter lists each Company Plan that, based on current guidance, is reasonably characterized as a “nonqualified deferred compensation plan” (as described in Section 409A(d)(1) of the Code). All such Company Plans have been administered in good faith compliance with Section 409A of the Code the guidance issued thereunder.

(i) No Company Stock Option or other right to acquire Company Common Stock or other equity of the Company (i) has an exercise price that has been or may be less than the fair market value of the underlying equity as of the date such Company Stock Option or other equity right was granted, (ii) has any feature that would result in the deferral of recognition of income beyond the later of exercise or disposition of such Company Stock Options or other equity rights, or (iii) has been granted after December 31, 2004, with respect to any class of stock of the Company that is not “service recipient stock” (within the meaning of current guidance under Section 409A).

3.16 Compliance With Laws. The Company and each of its Subsidiaries has conducted its business and is in compliance with all applicable statutes, laws, settlements (including those with Governmental Entities), rules, orders, regulations and corporate policies and no written notice, action or assertion has been received by the Company or any of its Subsidiaries or, to the knowledge of the Company, has been filed, commenced or threatened against the Company or any of its Subsidiaries alleging any violation of any applicable statutes, laws, settlements (including those with Governmental Entities), rules, orders, regulations or corporate policies, except for failures to comply or violations that, individually or in the aggregate, are not reasonably likely to result in a Company Material Adverse Effect.

3.17 Permits. The Company and each of its Subsidiaries have all permits, licenses, franchises, certificates, approvals and authorizations, from Governmental Entities required to conduct their businesses, except for such permits, licenses, franchises, certificates, approvals and authorizations, the absence of which, individually or in the aggregate, are not reasonably likely to result in a Company Material Adverse Effect (the “Company Permits”). The Company and each of its Subsidiaries are in compliance with the terms of the Company Permits, and no suspension or cancellation of any such Company Permits is pending, or to the knowledge of the Company, threatened, except for such failures to comply or such suspensions or cancellations that, individually or in the aggregate, are not reasonably likely to result in a Company Material Adverse Effect.

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3.18 Labor Matters.

(a) Except as set forth on Section 3.18(a) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to any Contract or arrangement between or applying to, one or more employees and a trade union, works council, group of employees or any other employee representative body, for collective bargaining or other negotiating or consultation purposes or reflecting the outcome of such collective bargaining or negotiation or consultation with respect to their respective employees with any labor organization, union, group, association, works council or other employee representative body, or is bound by any equivalent national or sectoral agreement (“Collective Bargaining Agreements”). To the knowledge of the Company, there are no activities or proceedings by any labor organization, union, group or association or representative thereof to organize any such employees. There are no lockouts, strikes, slowdowns, work stoppages or, to the knowledge of the Company, threats thereof by or with respect to any employees of the Company or any of its Subsidiaries which would have a Company Material Adverse Effect nor have there been any such lockouts, strikes, slowdowns or work stoppages since December 31, 2002.

(b) To the knowledge of the Company, the Company: (i) is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Company Employees; (ii) has withheld and reported all amounts required by law or by agreement to be withheld and reported with respect to wages, salaries and other payments to Company Employees; (iii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and (iv) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for Company Employees (other than routine payments to be made in the normal course of business and consistent with past practice). To the Company’s knowledge, there are no pending, threatened or reasonably anticipated claims or actions against the Company under any worker’s compensation policy or long-term disability policy. To the Company’s knowledge, neither the Company, its Subsidiaries nor any member of its Controlled Group has direct or indirect liability with respect to any misclassification of any Person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer.

3.19 Insurance. Each of the Company and its Subsidiaries maintains insurance policies with reputable insurance carriers against all risks of a character and in such amounts as are usually insured against by similarly situated companies in the same or similar businesses. Summaries of the material terms of all such insurance policies have been made available to Parent. Except as set forth in Section 3.19 of the Company Disclosure Letter: (i) all such policies are in full force and effect and were in full force and effect during the periods of time such insurance policies are purported to be in effect, and (ii) neither the Company nor any of its Subsidiaries is in breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or modification, under any policy.

3.20 Opinion of Financial Advisor. The financial advisor of the Special Committee, Needham & Company, LLC, has delivered to the Special Committee and the Company Board an opinion dated the date of this Agreement to the effect, as of such date, that the Merger Consideration is fair to the holders of Company Common Stock from a financial point of view. An executed copy of this opinion has been delivered to Parent, and a true and correct copy of such opinion is set forth as Section 3.20 of the Company Disclosure Letter.

3.21 Anti-Takeover Laws. The Company Board has taken all actions necessary so that the restrictions contained in Section 14A:10A-1 et. seq. of the NJBCA applicable to a “business combination”

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(as defined in Section 14A:10A-3 of the NJBCA) shall not apply to the negotiation, execution, delivery or performance of this Agreement or Section 3.1 of the Contribution Agreements or the consummation of the Merger or the other transactions contemplated by this Agreement and the Contribution Agreements. There are no anti-takeover laws of any other state, federal or foreign jurisdiction that would apply to the negotiation, execution, delivery or performance of this Agreement or the consummation of the Merger or the other transactions contemplated this Agreement.

3.22 Brokers; Fees. No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of the Company or any of its Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with any of the transactions contemplated by this Agreement, except Needham & Company, LLC, whose fees and expenses shall be paid by the Company. Set forth on Section 3.22 of the Company Disclosure Letter is the Company’s reasonable itemized estimate, as of the date hereof, of all fees and expenses incurred or payable, or to be incurred or payable, by the Company or any of its Subsidiaries in connection with this Agreement and the consummation of the transactions contemplated hereby (including without limitation all financial advisory, legal and accounting fees and expenses). A true and correct copy of the engagement letter with Needham & Company, LLC in connection with this transaction has been delivered to Parent.

3.23 Transactions with Affiliates. Except as set forth in Section 3.23 of the Company Disclosure Letter or disclosed in the Company SEC Reports, there are no currently enforceable Contracts or transactions between the Company or any of its Subsidiaries, on the one hand, and any (i) officer or director of the Company or any of its Subsidiaries, (ii) record or beneficial owner of five percent or more of the voting securities of the Company or (iii) affiliate or associate of any such officer, director or record or beneficial owner, on the other hand, except those of a type available to employees of the Company generally.

3.24 Proxy Statement and Schedule 13E-3. The proxy statement to be sent to the shareholders of the Company in connection with the Company Meeting (the “Proxy Statement”), the Schedule 13E-3 and any other soliciting materials of the Company shall not, on the date first filed with the SEC, in the case of the Schedule 13E-3, or the date first mailed to shareholders of the Company in the case of the Proxy Statement and any other soliciting material, at the time of the Company Meeting or at the Effective Time, contain at such time any untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. If at any time prior to the Company Meeting any fact or event relating to the Company or any of its Affiliates which should be set forth in a supplement to the Proxy Statement or the Schedule 13E-3 should be discovered by the Company or should occur, the Company shall, promptly after becoming aware thereof, inform Parent of such fact or event. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied or to be supplied by or on behalf of Parent for inclusion in the Proxy Statement, the Schedule 13E-3 or any other soliciting materials of the Company.

3.25 Complete Copies of Materials. Except as set forth in Section 3.25 of the Company Disclosure Letter, the Company has furnished or made available to Parent true and complete copies of each document that is referenced in the Company Disclosure Schedule.

Article IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub represent and warrant to the Company as follows:

4.1 Organization, Standing and Power. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation.

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4.2 Authority; No Conflict; Required Filings and Consents.

(a) Each of Parent and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no additional corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except that such enforceability (a) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating to creditors’ rights generally and (b) is subject to general principles of equity.

(b) The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of the transactions contemplated by this Agreement shall not, (i) conflict with, or result in any violation or breach of, any provision of the certificate of incorporation or bylaws of Parent or Merger Sub, (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit) under, require a consent or waiver under, require the payment of a penalty or increased liabilities, fees or the loss of a benefit under or result in the imposition of any Lien on Parent’s or Merger Sub’s assets under, any of the terms, conditions or provisions of any Contract to which Parent or Merger Sub is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to compliance with the requirements specified in clauses (i) and (ii) of Section 4.2(c), conflict with or violate any permit, concession, franchise, license, judgment, injunction, order, writ, decree, statute, law, ordinance, rule, determination, award or regulation applicable to Parent or Merger Sub or any of their properties or assets, except in the case of clauses (ii) and (iii) of this Section 4.2(b) for any such conflicts, violations, breaches, defaults, terminations, cancellations, modifications, accelerations, losses, penalties, increased fees, liabilities, losses of benefit or Liens, and for any consents or waivers not obtained, that, individually or in the aggregate, are not reasonably likely to result in a Parent Material Adverse Effect. For purposes of this Agreement, the term “Parent Material Adverse Effect” means any material adverse effect on the ability of Parent or Merger Sub to consummate the transactions contemplated by this Agreement.

(c) No consent, approval, action, license, permit, order, certification, consent, approval, concession, franchise or authorization of, or registration, declaration, notice or filing with, any Governmental Entity is required by or with respect to Parent or Merger Sub in connection with the execution, delivery and performance of this Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub of the transactions contemplated by this Agreement, except for (i) the pre-merger notification requirements under the HSR Act and applicable foreign antitrust or trade regulation laws, (ii) the filing of the Certificate of Merger with the New Jersey Secretary of State and appropriate corresponding documents with the appropriate authorities of other states in which the Company, Parent or Merger Sub is qualified as a foreign corporation to transact business in order to continue such qualification and (iii) such other consents, approvals, licenses, permits, orders, authorizations, registrations, declarations, notices and filings which, if not obtained or made, would not be reasonably likely to result in a Parent Material Adverse Effect.

4.3 Information Provided. The information to be supplied by or on behalf of Parent and Merger Sub for inclusion in the Proxy Statement, the Schedule 13E-3 or any other soliciting materials of the Company shall not, on the date first filed with the SEC, in the case of the Schedule 13E-3, or the date first mailed to shareholders of the Company in the case of the Proxy Statement and any other soliciting

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material, at the time of the Company Meeting or at the Effective Time, contain at such time any untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. If at any time prior to the Company Meeting any fact or event relating to Parent which should be set forth in a supplement to the Proxy Statement or the Schedule 13E-3 should be discovered by Parent or should occur, Parent shall, promptly after becoming aware thereof, inform the Company of such fact or event. Notwithstanding the foregoing, neither Parent nor Merger Sub makes any representation or warranty with respect to any information supplied or to be supplied by the Company for inclusion in the Proxy Statement, the Schedule 13E-3 or any other soliciting materials of the Company.

4.4 Operations of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement.

4.5 Litigation. There is no Action pending or, to the knowledge of Parent or Merger Sub, threatened against or involving Parent or Merger Sub or any of their assets, properties or rights that, individually or in the aggregate, has had or is reasonably likely to have a Parent Material Adverse Effect.

4.6 Financing.

(a) Parent has delivered to the Company complete and correct copies of (i) a fully executed commitment letter (the “Debt Commitment Letter”), from Morgan Stanley Senior Funding, Inc. (together, the “Senior Lenders”), pursuant to which such financial institutions have committed, upon the terms and subject to the conditions set forth therein, to provide credit facilities in the amount of $200 million in connection with the transactions contemplated by this Agreement and (ii) a fully executed commitment letter from FP-Metrologic, LLC (the “Equity Commitment Letter”), pursuant to which FP-Metrologic, LLC has committed, upon the terms and subject to the conditions set forth therein, to provide equity financing in the aggregate amount of up to $153 million in connection with the transactions contemplated by this Agreement. The Debt Commitment Letter and the Equity Commitment Letter are hereinafter referred to collectively as the “Commitment Letters.”

(b) As of the date hereof: (i) the Commitment Letters are in full force and effect; (ii) all commitment fees required to be paid thereunder will be duly paid by Parent in full when due; (iii) the Commitment Letters have not been amended or terminated; and (iv) excluding any breach caused by the Company or its Subsidiaries, there is no breach existing thereunder. Parent has not, as of the date hereof, been informed by the Senior Lenders of any fact, occurrence or condition unrelated to the Company that would cause the financing contemplated by the Debt Commitment Letter to not be consummated as contemplated therein. Assuming that the representations and warranties of the Company in this Agreement are true and correct and that the Rollover Investors contribute their shares of Company Common Stock in accordance with the terms of the Contribution Agreements, the aggregate proceeds contemplated by the Commitment Letters, if and when funded immediately prior to the Effective Time in accordance with the Commitment Letters, together with the available unrestricted cash and fully liquid cash equivalents in an amount sufficient to satisfy the condition set forth in Section 7.2(g), will be sufficient for Parent and the Surviving Corporation after Closing to pay the aggregate Merger Consideration, the aggregate consideration to be paid to holders of Company Stock Options pursuant to Section 2.3 hereof and the fees and expenses incurred in connection with the transactions contemplated hereby.

(c) Parent has not, as of the date hereof, been informed by the Senior Lenders of any fact, occurrence or condition that makes any of the assumptions or statements set forth in the Debt Commitment Letter inaccurate in any material respect or that would cause the commitments provided in the Debt Commitment Letter to be terminated or ineffective or any of the conditions contained therein not to be met.

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(d) The equity investment under the Equity Commitment Letter is not subject to any condition other than as set forth therein.

4.7 Contribution Agreements. As of the date hereof, Parent has delivered to the Company a true and correct copies of the Contribution Agreements as in effect on the date hereof.

Article V
CONDUCT OF BUSINESS

5.1 Covenants of the Company. Except as set forth in Section 5.1 of the Company Disclosure Letter or as consented to in writing by Parent, during the period commencing on the date of this Agreement and ending at the Effective Time or such earlier date as this Agreement is terminated in accordance with its terms (the “Pre-Closing Period”), the Company shall, and shall cause each of its Subsidiaries to, (i) maintain its existence in good standing under applicable law, (ii) act and carry on its business in the ordinary and usual course of business consistent with past practice, (iii) pay or perform all material obligations when due, and (iv) use commercially reasonable efforts to maintain and preserve its and each of its business organization, assets and properties, to keep available the services of its current officers and employees and preserve its business relationships with customers, strategic partners, suppliers, distributors and others having business dealings with it and maintain in full force and effect until the Effective Time substantially the same levels of coverage of insurance with respect to the assets, operations and activities of the Company and its Subsidiaries as are in effect as of the date of this Agreement. Without limiting the generality of the foregoing, except as set forth in Section 5.1 of the Company Disclosure Letter, during the Pre-Closing Period the Company shall not, and shall cause its Subsidiaries to not, directly or indirectly, do any of the following without the prior written consent of Parent:

(a) (i) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, securities or other property) in respect of any of the capital stock of the Company or any of its Subsidiaries (other than dividends and distributions by a direct or indirect wholly owned Subsidiary of the Company to its parent); (ii) adjust, split, combine or reclassify any of the capital stock of the Company or any of its Subsidiaries or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock or any other securities of the Company or any of its Subsidiaries; or (iii) purchase, redeem or otherwise acquire, or offer to purchase, redeem or otherwise acquire, any shares of capital stock or any other of securities of the Company or any of its Subsidiaries or any rights, warrants or options to acquire any such shares or other securities unless instructed to do so by Parent;

(b) issue, deliver, sell, grant, pledge or amend the terms of (whether by merger, consolidation or otherwise) any shares of capital stock of the Company or any of its Subsidiaries, any other voting securities or any securities convertible into or exchangeable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible or exchangeable securities (other than the issuance of shares of Company Common Stock upon the exercise of Company Stock Options or Company Warrants outstanding on the date of this Agreement);

(c) amend or cause, adopt or propose any amendments to the Company Charter Documents or the Subsidiary Charter Documents;

(d) propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than the transactions contemplated hereby);

(e) sell, license, mortgage, transfer, lease, assign, pledge, subject to any Lien or otherwise dispose of or encumber any properties or assets (including stock or other ownership interests of its Subsidiaries), other than (i) dispositions of obsolete inventory and sales of inventory in the ordinary course of business consistent with past practice, or (ii) the execution and performance of a binding agreement for the

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transaction contemplated by Section 5.1(e) of the Company Disclosure Letter, which shall require the prior written consent of Parent (which consent shall not be unreasonably withheld), provided that the consent of Parent shall not be required in connection with the execution and performance of such agreement if such agreement is on terms no less favorable than the agreement draft dated September 11, 2006, incorporating such provisions as provided by Parent on such date.

(f) acquire any business, assets or securities, other than acquisitions of inventory and components in the ordinary course of business consistent with past practice, acquisitions of investment-grade securities with a maturity date not later than December 1, 2006 and acquisitions of other assets with a purchase price that does not exceed $500,000 individually or $4,000,000 in the aggregate;

(g) sell, license, mortgage, transfer, lease, assign, pledge, subject to any Lien or otherwise dispose of or encumber any of the Intellectual Property of the Company or any of its Subsidiaries, except (x) pursuant to existing Contracts as in effect on the date hereof set forth in Section 3.12 of the Company Disclosure Letter, and (y) non-exclusive licenses extended to customers or clients in the ordinary course of business consistent with past practice;

(h) adopt, propose or implement any shareholder rights plan;

(i) (i) incur or assume any Indebtedness or issue any debt securities, except for Indebtedness incurred under existing lines of credit to fund operations of the business in the ordinary course of business consistent with past practice, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, or (iii) make any loans, advances or capital contributions to or investments in any other Person except for (A) advances for travel and other miscellaneous expenses in the ordinary course of business consistent with past practice to employees of the Company or any of its Subsidiaries or (B) capital contributions to or investments in Subsidiaries of the Company in the ordinary course of business consistent with past practice;

(j) make any changes in accounting methods, procedures, principles or practices, except insofar as may have been required by a change in GAAP or, except as so required, change any assumption underlying, or method of calculating, any bad debt, contingency or other reserve;

(k) alter, amend or create any obligations with respect to compensation, severance, benefits, change of control payments or any other payments to present or former employees, directors or Affiliates of the Company, other than alterations or amendments made with respect to non-officers and non-directors in the ordinary course of business consistent with past practice that do not involve severance or change of control payments or benefits and that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company;

(l) increase benefits payable under any existing severance or termination pay policies or employment agreements; enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with any director, officer or employee of the Company or any of its Subsidiaries; establish, adopt or amend (except as required by applicable law or as contemplated by this Agreement) any Collective Bargaining Agreement, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of the Company or any of its Subsidiaries; or increase compensation, bonus or other benefits payable to any director, officer or employee of the Company or any of its Subsidiaries, other than annual increases to non-officer employees in the ordinary course of business consistent with past practices and as contemplated by this Agreement;

(m) hire any new employees other than non-officer employees in the ordinary course of business consistent with past practice;

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(n) make or change any material Tax election, settle or compromise any material Tax liability, amend any material Tax Return, change any method of Tax accounting, enter into any material closing agreement with respect to any Tax, surrender any right to claim a material Tax refund, consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of any material Taxes, file any material Tax Return unless such Tax Return has been provided to Parent for review within a reasonable period prior to the due date for filing and Parent has consented to such filing, or take any other similar action relating to the filing of any Tax Return or the payment of any Tax;

(o) initiate, compromise or settle any material litigation (whether civil, criminal, administrative, in law or at equity) or arbitration proceeding (other than in connection with the enforcement of the Company’s rights under this Agreement);

(p) enter into any joint venture, partnership or other similar arrangement;

(q) (i) enter into any Contract that if existing on the date hereof would be a Company Material Contract, except for Contracts for the sale of inventory in the ordinary course of business consistent with past practice, or (ii) terminate, amend, supplement or modify in any material respect any Company Material Contract to which the Company or any of its Subsidiaries is a party;

(r) cancel any debts or waive any claims or rights of substantial value (including the cancellation, compromise, release or assignment of any Indebtedness owed to, or claims held by, the Company or any its Subsidiaries), except for cancellations made or waivers granted with respect to claims other than Indebtedness in the ordinary course of business consistent with past practice which does not exceed $250,000, in the aggregate;

(s) (i) fail to manage and retain cash and cash equivalents and investments in marketable securities in a manner consistent with past practice and in their current jurisdiction (provided that such cash and cash equivalents and investments in marketable securities shall be managed in a manner reasonably expected to avoid incurring any losses, expenses, penalties, costs or other liabilities (including, without limitation, any LIBOR-related “breakage costs”) upon liquidation at Closing) or (ii) fail to manage accounts payable or accounts receivable in a manner consistent with past practice;

(t) take any action that would reasonably be expected to result in any of the representations and warranties set forth in Article III becoming false or inaccurate such that the condition set forth in Section 7.2(a) would fail to be satisfied;

(u) take (or permit any of its Subsidiaries to take) any action or enter into any transaction, including any merger, acquisition, joint venture, disposition, lease, Contract or debt or equity financing, that could reasonably by expected to impair, delay or prevent Parent’s obtaining of financing contemplated by any Commitment Letter; or

(v) authorize any of, or commit or agree, in writing or otherwise, to take any of, the foregoing actions.

5.2 Confidentiality. The parties acknowledge that an Affiliate of Parent and the Company have previously executed a non-disclosure agreement, dated as of August 24, 2006 (the “Confidentiality Agreement”), which Confidentiality Agreement shall continue in full force and effect in accordance with its terms, except as expressly waived or modified as provided herein or therein.

5.3 Financing Commitments.

(a) Parent will use commercially reasonable efforts to fully satisfy, on a timely basis, all terms, conditions, representations and warranties set forth in the Commitment Letters. Parent will use commercially reasonable efforts to enter into definitive agreements with respect to the financings contemplated by the Commitment Letters on terms and conditions no less favorable to Parent in the

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aggregate than the Commitment Letters and on such other terms and conditions as shall be satisfactory to Parent as soon as commercially reasonable but in any event at or prior to the Closing. Parent will furnish correct and complete copies of such definitive agreements to the Company promptly following their execution.

(b) At the Company’s request, Parent shall keep the Company reasonably informed with respect to all material activity concerning the status of the financings contemplated by the Commitment Letters. Without limiting the foregoing, Parent agrees to notify the Company promptly, and in any event within two (2) Business Days, if at any time prior to the Closing Date (i) any Commitment Letter shall expire or be terminated for any reason or (ii) any financing source that is a party to any Commitment Letter notifies Parent that such source no longer intends to provide financing to Parent on the material terms set forth therein. Parent shall not amend or alter, or agree to amend or alter, any Commitment Letter in any manner that would materially impair or delay or prevent the transactions contemplated by this Agreement without the prior written consent of the Company.

(c) The Company agrees to provide, and shall cause its Subsidiaries to provide, and shall use its reasonable best efforts to cause their respective Representatives to provide, Parent with such reasonable cooperation in connection with the arrangement of the financings contemplated by the Debt Commitment Letter as may be reasonably requested by Parent, including, but not limited to, (i) participation in meetings, drafting sessions, due diligence sessions, management presentation sessions, “road shows” and sessions with rating agencies, (ii) preparation of business projections and financial statements (including pro forma financial statements) as are reasonably requested by Parent in connection with the Debt Financing, (iii) assisting with the preparation of materials for rating agency presentations, offering memoranda, private placement memoranda, bank information memoranda, prospectuses and similar documents required in connection with the Debt Financing; provided that any private placement memoranda or prospectuses in relation to a debt securities offering shall be issued only by Parent or Merger Sub, (iv) execution and delivery of any pledge documents, security documents, credit agreements, guarantees or other financing documents, including any certificates, legal surveys, title insurance or other documents as may be reasonably requested by Parent (including a certificate of the chief financial officer of the Company with respect to solvency matters); provided, however that no obligation of the Company or any of its Subsidiaries under any such document, agreement or certificate shall be effective until the Effective Time (or immediately prior to the Effective Time, if necessary to facilitate the Debt Financing), (v) obtaining customary comfort letters of accountants and consents of accountants for use of their reports in any materials relating to the financing to be used in connection with the transactions contemplated by this Agreement, and (vi) taking all corporate actions, subject to the occurrence of the Closing, reasonably requested by Parent to permit the consummation of the Debt Financing. The Company shall also take such further action as may be required to cause an independent auditor of the Company to provide any unqualified opinions, consents or customary comfort letters with respect to the financial statements. The Company shall allow Parent’s Representatives the opportunity to review and comment upon the financial statements (including pro forma financial statements) in draft form and to allow such representatives access to the Company and supporting documentation with respect to the preparation of such financial statements and the independent auditors’ work papers relating to such financial statements.

5.4 Investments. During the Pre-Closing Period, subject to Section 5.2(s), the Company shall, and the Company shall cause each of its Subsidiaries to, sell any investment securities as directed by Parent, and neither the Company nor any of its Subsidiaries shall purchase any investment securities or sell any investment securities without the prior written consent of Parent, other than purchases and sales of short-term government securities and auction-rate securities in the ordinary course of business, consistent with past practices.

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Article VI
ADDITIONAL AGREEMENTS

6.1 No Solicitation.

(a) The Company shall, and shall cause each of its Subsidiaries and its and their respective directors, officers or other employees, Affiliates, or any investment banker, attorney, accountant or other advisor or representative retained by any of them (such directors, officers, employees, Affiliates, investment bankers, attorneys, accountants, advisors and representatives, collectively, the “Representatives”) to, immediately cease any and all existing activities, discussions or negotiations with any Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, any Acquisition Proposal and shall request that all confidential information previously furnished to such Persons with respect thereto to be returned or destroyed.

(b) The Company shall not, and it shall cause each of its Subsidiaries and its and their respective Representatives to not, directly or indirectly, (i) solicit, initiate, encourage, or induce the making, submission or announcement of, any inquiry, proposal or offer with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (ii) furnish to any Person (other than Parent or any designees of Parent) any non-public information relating to the Company or any of its Subsidiaries, or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to any Person (other than Parent or any designees of Parent), or take any other action knowingly intended to assist or facilitate any inquiries or the making of any proposal or offer that constitutes, or that could reasonably be expected to lead to, an Acquisition Proposal, (iii) participate or engage in discussions or negotiations with any Person with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (iv) approve, endorse or recommend an Acquisition Proposal, (v) enter into any letter of intent, memorandum of understanding, agreement in principle or Contract contemplating or otherwise relating to an Acquisition Proposal or (vi) terminate, amend or waive any rights under any “standstill” or other similar agreement between the Company or any of its Subsidiaries and any Person (other than Parent). Notwithstanding the foregoing, if, prior to obtaining the Required Company Shareholder Vote, (A) the Company, its Subsidiaries and its Representatives have complied with this Section 6.1, (B) a third party has proposed a bona fide, written Acquisition Proposal that was not solicited, initiated, encouraged, induced, participated in or otherwise facilitated by the Company, any of its Subsidiaries or any of its or their Representatives since May 31, 2006, and (C) the Company Board or the Special Committee reasonably determines in good faith that such Acquisition Proposal constitutes or would reasonably be expected to lead to a Superior Proposal, then, to the extent required by the fiduciary obligations of the Company Board or the Special Committee, as determined in good faith by a majority of the members of the Company Board or the Special Committee, as the case may be, after consultation with the Company’s outside counsel and its financial advisor, the Company may, subject to the Company’s providing prior written notice to Parent of its decision to take such action and compliance by the Company with Section 6.1(d), furnish information with respect to the Company to, and participate in discussions and negotiations directly or through its Representatives with, such third party, subject to a confidentiality agreement not less favorable to the Company than the Confidentiality Agreement (a copy of which shall be provided to Parent for informational purposes only). Without limiting the generality of the foregoing, Parent and the Company acknowledge and hereby agree that any violation of the restrictions set forth in this Section 6.1 by any Subsidiary of the Company or any Representative of the Company or any of its Subsidiaries shall be deemed to be a breach of this Section 6.1 by the Company.

(i) withhold, withdraw or modify, or resolve or publicly propose to withhold, withdraw or modify, in a manner adverse to Parent or Merger Sub, the Company Recommendation;

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(ii) approve or recommend, or resolve or publicly propose to approve or recommend, any Acquisition Proposal;

(iii) approve or recommend, or resolve or publicly propose to approve or recommend, or execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, stock purchase agreement, asset purchase agreement, option agreement or other similar agreement (an “Alternative Acquisition Agreement”) with respect to any Acquisition Proposal;

(iv) approve or recommend, or resolve or publicly propose to approve or recommend, or execute or enter into, any agreement requiring it to abandon, terminate or fail to consummate the Merger, this Agreement or the transactions contemplated hereby or thereby;

(v) take any action necessary to render the provisions of any anti-takeover law inapplicable to any Acquisition Proposal;

(vi) approve or recommend, or resolve or publicly propose to approve or recommend, any position other than to recommend rejection (including withdrawing, or modifying in a manner adverse to Parent or Merger Sub, any recommendation of rejection) of any Acquisition Proposal; or

(vii) propose or agree to do any of the foregoing constituting or related to, or that is intended to lead to, any Alternative Proposal.

Notwithstanding the foregoing, the Company, the Company Board or the Special Committee may, prior to obtaining the Required Company Shareholder Vote only, to the extent failure to do so would be a violation of the fiduciary obligations of the Company Board under applicable law, as determined in good faith by the Special Committee or the Company Board after consultation with outside counsel, in response to a Superior Proposal received by the Special Committee or the Company Board after the date of this Agreement, withhold, withdraw or modify in a manner adverse to Parent or Merger Sub the Company Recommendation (a “Change in the Company Recommendation”) or take such other actions specified in Section 6.1(c) with respect to such Change in Company Recommendation immediately prior to or concurrent with a termination of this Agreement pursuant to and in compliance with Section 8.1(h) if (and only if):

(A) such Superior Proposal did not result from a breach by the Company of this Section 6.1;

(B) the Company has complied with this Section 6.1, including Section 6.1(d);

(C) the Special Committee or the Company Board shall have first provided prior written notice to Parent that it is prepared to effect a Change in the Company Recommendation in response to a Superior Proposal, which notice shall attach the most current version of any written agreement relating to the transaction that constitutes such Superior Proposal; and

(D) Parent does not make, within three Business Days after the receipt of such notice, a proposal that the Special Committee or the Company Board determines in good faith, after consultation with its financial advisor, is at least as favorable to the shareholders of the Company as such Superior Proposal.

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The Company agrees that, during the three Business Day period immediately prior to effecting a Change in the Company Recommendation, the Company and its Representatives shall negotiate in good faith with Parent and its Representatives regarding any revisions to the terms of the transaction contemplated by this Agreement that are proposed by Parent.

(d) Notices to Parent. The Company shall as promptly as possible (but in any event within 24 hours) provide oral and written notice to Parent of receipt by the Company or any of its Representatives of any Acquisition Proposal, any inquiry with respect to or any request for nonpublic information in connection with, any Acquisition Proposal, the material terms and conditions of any such Acquisition Proposal, inquiry or request and the identity of the Person making any such Acquisition Proposal, inquiry or request and shall keep Parent informed on a current basis of the status thereof and of any material modifications or developments with respect to such Acquisition Proposal, inquiry or request, including, without limitation, copies of all Acquisition Proposals, inquiries or requests and written information relating thereto. The Company agrees that it and its Subsidiaries will not enter into a confidentiality agreement or any other agreement with any Person subsequent to the date of this Agreement that prohibits the Company from providing such information to Parent.

(e) Certain Permitted Disclosure. Nothing in this Agreement shall be deemed to prohibit the Company from complying in good faith with respect to a tender or exchange offer contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act; provided, however, that neither the Company nor the Special Committee nor Company Board nor any committee thereof shall (i) recommend that the shareholders of the Company tender or exchange their shares of Company Common Stock in connection with any such tender or exchange offer (or otherwise approve or recommend any Acquisition Proposal) or (ii) withhold, withdraw or modify, in a manner adverse to Parent or Merger Sub, the Company Recommendation, except, in each case, in accordance with Section 6.1(c).

(f) The consummation of the transaction contemplated by Section 5.1(e) of the Company Disclosure Letter in accordance with Section 5.1(e)(ii) hereof shall not be subject to this Section 6.1.

(g) Definitions. For purposes of this Agreement:

“Acquisition Proposal” means any inquiry, proposal or offer (i) relating to a merger, reorganization, consolidation, dissolution, sale of substantial assets, tender offer, exchange offer, recapitalization, liquidation, dissolution, joint venture, share exchange or other business combination involving the Company or any of its Subsidiaries, (ii) for the issuance by the Company of 20% or more of its total outstanding voting securities or (iii) to acquire in any manner, directly or indirectly, 20% or more of the capital stock or assets of the Company or any of its Subsidiaries, in each case other than the transactions contemplated by this Agreement.

“Superior Proposal” means any unsolicited, bona fide written proposal made by a third party to acquire, directly or indirectly, more than 50% of the total outstanding voting securities of the Company or all of the assets of the Company, pursuant to a tender or exchange offer, a merger, a consolidation or a sale of its assets, (i) which the Special Committee or the Company Board determines in its good faith reasonable judgment (after consultation with its legal and financial advisors) to be (A) more favorable to the holders of Company Common Stock from a financial point of view than the transactions contemplated by this Agreement (including any proposal by Parent to amend the terms of this Agreement), taking into account all the terms and conditions of such proposal and this Agreement and (B) reasonably capable of being completed on the terms proposed within a reasonable time period, in each case taking into account all financial, regulatory, legal and other aspects of such proposal, and (ii) which either has no financing condition or has a debt financing condition (and no other financing condition) and is accompanied by commitment letters no less favorable to the Company than the Commitment Letters.

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6.2 Proxy Statement. As promptly as practicable after the execution of this Agreement, the Company, in cooperation with Parent, shall prepare and file with the SEC the Proxy Statement and the Schedule 13E-3. Subject to Section 6.1(c), the Company, acting through the Company Board, shall include in the Proxy Statement and the Schedule 13E-3 the recommendation of the Special Committee and the Company Board that the shareholders of the Company vote in favor of the Company Voting Proposal (the “Company Recommendation”). The Company shall respond to any comments of the SEC or its staff and shall cause the Proxy Statement to be mailed to its shareholders at the earliest practicable time after the resolution of any such comments. The Company shall notify Parent promptly upon the receipt of any comments from the SEC or its staff or any other government officials and of any request by the SEC or its staff or any other government officials for amendments or supplements to the Proxy Statement or the Schedule 13E-3 and shall supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC, or its staff or any other government officials, on the other hand, with respect to the Proxy Statement or Schedule 13E-3. The Company shall use reasonable best efforts to cause all documents that it is responsible for filing with the SEC or other regulatory authorities under this Section 6.2 to comply in all material respects with all applicable requirements of law and the rules and regulations promulgated thereunder. Whenever any event occurs which is required to be set forth in an amendment or supplement to the Proxy Statement or the Schedule 13E-3, Parent or the Company, as the case may be, shall promptly inform the other of such occurrence and cooperate in filing with the SEC or its staff or any other government officials, and/or mailing to shareholders of the Company, such amendment or supplement. Notwithstanding the foregoing, the Company shall not file with the SEC or mail to its shareholders the Proxy Statement, the Schedule 13E-3, any amendment thereto, any other soliciting material or any such other documents without Parent’s prior approval.

6.3 Nasdaq Quotation. The Company shall continue the quotation of the Company Common Stock on The Nasdaq Stock Market during the term of this Agreement.

6.4 Access to Information. During the Pre-Closing Period, the Company shall (and shall cause each of its Subsidiaries to) afford to Parent and its potential financing sources and their respective Representatives, reasonable access, upon reasonable notice, during normal business hours and in a manner that does not unreasonably disrupt or interfere with business operations, to all of its properties (including the Real Property for the purpose of performing such environmental tests and investigations as Parent may desire), books, contracts, commitments, personnel and records as Parent shall request, and, during such period, the Company shall (and shall cause each of its Subsidiaries to) (a) furnish promptly to Parent and its potential financing sources and their respective Representatives (x) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal or state securities laws that is not available immediately upon filing via EDGAR and (y) all other information concerning its business, finances, operations, properties, assets and personnel as Parent may reasonably request and (b) will instruct the Company’s employees and Representatives to cooperate with Parent in its investigation of the business of the Company and its Subsidiaries. Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries shall be required to provide access to or disclose information where the Company reasonably determines that such access or disclosure would jeopardize the attorney-client privilege of the Company or any of its Subsidiaries or violate any applicable law to which the Company or any of its Subsidiaries is subject (it being agreed that the Company shall use its commercially reasonable efforts to cause such information to be provided in a manner that does not cause such violation or jeopardization). Parent will hold any such information that is nonpublic in confidence in accordance with the Confidentiality Agreement. No investigation conducted or information obtained by Parent, pursuant to this Section 6.4 or otherwise, will be deemed to supplement, waive or otherwise modify any representation or warranty of the Company set forth herein.

6.5 Shareholders Meeting. The Company, acting through the Company Board, shall take all actions in accordance with applicable law, the Company Charter Documents and the rules of The Nasdaq

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Stock Market to promptly and duly call, give notice of, convene and hold as promptly as practicable the Company Meeting for the purpose of considering and voting upon the Company Voting Proposal. Subject to Section 6.1, (i) the Special Committee and the Company Board shall recommend approval of the Company Voting Proposal by the shareholders of the Company and include such recommendation in the Proxy Statement and (ii) the Special Committee and the Company Board shall not withhold, withdraw or modify in a manner adverse to Parent, or publicly propose or resolve to withhold, withdraw or modify in a manner adverse to Parent, the recommendation of the Special Committee or the Company Board that the Company’s shareholders vote in favor of the Company Voting Proposal. The Company shall take all action that is both reasonable and lawful to solicit from its shareholders proxies in favor of the Company Voting Proposal and shall take all other action reasonably necessary or advisable to secure the vote or consent of the shareholders of the Company required by the rules of The Nasdaq Stock Market or the NJBCA to obtain such approvals. Notwithstanding anything to the contrary contained in this Agreement, the Company, with the prior approval of Parent, may adjourn or postpone the Company Meeting to the extent necessary to ensure that any required supplement or amendment to the Proxy Statement is provided to the Company’s shareholders or, if as of the time for which the Company Meeting is originally scheduled (as set forth in the Proxy Statement) there are insufficient shares of Company Common Stock represented (either in Person or by proxy) to constitute a quorum necessary to conduct the business of the Company Meeting.

6.6 Legal Requirements.

(a) Subject to the terms hereof, including Section 6.6(b), the Company and Parent shall, and the Company shall cause its Subsidiaries to, each use their commercially reasonable efforts to:

(i) take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby as promptly as practicable;

(ii) as promptly as practicable, obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by the Company or Parent or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby; provided, that in connection therewith, without the prior written consent of Parent, none of the Company or its Subsidiaries will make or agree to make any payment or accept any material conditions or obligations, including amendments to existing conditions and obligations;

(iii) as promptly as practicable, make all necessary filings, notifications, and thereafter make any other required submissions, with respect to this Agreement and the Merger required under (A) the Exchange Act, and any other applicable federal or state securities laws, (B) the HSR Act and any related governmental request thereunder, and (C) any other applicable law; and

(iv) execute or deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.

The Company and Parent shall cooperate with each other in connection with the making of all such filings. The Company and Parent shall each use their commercially reasonable efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in the Proxy Statement and the Schedule 13e-3) in connection with the transactions contemplated by this Agreement. For the avoidance of doubt, Parent and the Company agree that nothing contained in this Section 6.6(a) shall modify or affect their respective rights and responsibilities under Section 6.6(b).

(b) Parent and the Company agree, and shall cause each of their respective Subsidiaries, to cooperate and to use their commercially reasonable efforts to obtain any government clearances or approvals required for Closing under the HSR Act and any other federal, state or foreign law, regulation

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or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade (collectively “Antitrust Laws”), to respond to any government requests for information under any Antitrust Law, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an “Antitrust Order”) that restricts, prevents or prohibits the consummation of the Merger or any other transactions contemplated by this Agreement under any Antitrust Law. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with, and provide to the other parties in advance, any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to any Antitrust Law.

(c) Notwithstanding anything in this Agreement to the contrary, neither Parent nor any of its Affiliates shall be under any obligation to take any action under this Section if the United States Department of Justice or the United States Federal Trade Commission authorizes its staff to seek a preliminary injunction or restraining order to enjoin consummation of the Merger.

(d) Subject to Section 6.6(c), each of Parent and the Company agree to use its commercially reasonable efforts to defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging, or seeking damages or other relief as a result of, the Merger, this Agreement or the transactions contemplated hereby, including seeking to have any order adversely affecting the ability of the parties to consummate the transactions contemplated hereby entered by any court or other Governmental Entity promptly vacated or reversed.

6.7 Public Disclosure. The Company and Parent shall consult with each other before issuing any press release or otherwise making any public statements (including scheduling a press conference or conference call with investors or analysts) with respect to this Agreement or any of the transactions hereby and shall not issue any such press release or make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that a party may, without the prior consent of the other party, issue such press release or make such public statement as may be required by applicable law, including federal securities laws, or the applicable rules of The Nasdaq Stock Market or any listing agreement if it has used its commercially reasonable efforts to consult with the other party and to obtain such party’s consent but has been unable to do so prior to the time such press release or public statement is so required to be issued, filed or made.

6.8 Indemnification.

(a) For a period of six (6) years after the Effective Time, the Surviving Corporation shall indemnify and hold harmless all past and present officers and directors of the Company (each, an “Indemnified Person”) for acts or omissions occurring at or prior to the Effective Time to the fullest extent permitted by the NJBCA or any other applicable law or provided under the Company Charter Documents in effect on the date hereof; provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law.

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(b) Parent or Surviving Corporation shall pay all expenses, including reasonable fees and expenses of counsel, that an Indemnified Person may incur in enforcing the indemnity and other obligations to which such Indemnified Person is entitled under this Section 6.8. Parent or Surviving Corporation shall be entitled to assume the defense of any action, suit, investigation or proceeding and Parent and Surviving Corporation shall not be liable to any Indemnified Person for any legal expenses of separate counsel or any other expenses subsequently incurred by such Indemnified Person in connection with the defense thereof, except that if Parent or Surviving Corporation elects not to assume such defense or in the reasonable judgment of the Indemnified Person, after consultation with counsel, the Indemnified Person determines that a conflict of interest exists between Parent or Surviving Corporation and the Indemnified Person, the Indemnified Person may assume the defense of such action and retain counsel of his or her choice, subject to the consent of Parent, which consent shall not be unreasonably withheld, and Parent or Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Person promptly as statements therefor are received; provided that Parent and Surviving Corporation shall not be liable for the fees of more than one counsel for all Indemnified Persons, other than local counsel, and provided further that Parent and Surviving Corporation shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld).

(c) The Surviving Corporation shall maintain, and Parent shall cause the Surviving Corporation to maintain, at no expense to the beneficiaries, in effect for six years after the Effective Time insurance “tail” or other insurance policies with respect to directors’ and officers’ liability insurance with respect to acts or omissions existing or occurring at or prior to the Effective Time in an amount and scope at least as favorable as the coverage applicable to directors and officers as of the Effective Time under the Company’s directors’ and officers’ liability insurance policy; provided, however, that if such “tail” or other policies are not available at an annual cost not greater than 200% of the last annual premium paid prior to the date hereof under such policy (the “Insurance Cap”) (which premium the Company hereby represents and warrants is as set forth on Section 6.8(a) of the Company Disclosure Letter), then the Surviving Corporation shall cause to be obtained as much comparable insurance as can reasonably be obtained in its good faith judgment at a cost up to but not exceeding the Insurance Cap.

(d) This Section 6.8 shall survive the consummation of the Merger, is intended to benefit the Company, the Surviving Corporation and each Indemnified Person, shall be binding on all successors and assigns of the Surviving Corporation and Parent, and shall be enforceable by each Indemnified Person. If Parent or Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all, substantially all or a substantial part of its business and/or assets to any Person, then, and in each such case, the Parent shall require and cause any such continuing or surviving corporation or entity or transferee to expressly assume the obligations set forth in this Section 6.8. The provisions of this Section 6.8 are intended to be for the benefit of, and will be enforceable by, each Indemnified Person, his or her heirs, and his or her representatives and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Indemnified Person may have by contract, law, the Company Charter Documents, the Subsidiary Charter Documents or otherwise.

6.9 Notification of Certain Matters.

(a) Each of the Company, on the one hand, and Parent and Merger Sub, on the other, shall promptly (and in any event within five (5) Business Days after becoming aware of any such breach) notify the other party in writing if it believes that such party has breached any representation, warranty, covenant or agreement contained in this Agreement that could, individually or in the aggregate, result in a failure of a condition set forth in Section 7.2 or Section 7.3 if continuing on the Closing Date. Notwithstanding the above, the delivery of any notice pursuant to this Section will not limit or otherwise affect the remedies

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available hereunder to the party receiving such notice or the conditions to such party’s obligation to consummate the Merger.

(b) The Company shall promptly notify Parent of (i) any written notice from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement, (ii) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement and (iii) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Company or any of its Subsidiaries, that, if pending on the date of this Agreement, would have been required to have been disclosed in the Company Disclosure Letter in response to the representations and warranties of the Company under Article III or that relate to the consummation of the transactions contemplated by this Agreement.

6.10 Exemption from Liability Under Section 16. Prior to the Closing, the Company shall take all such reasonable steps as may be required to cause to be exempt under Rule 16b-3 promulgated under the Exchange Act any dispositions of Company Common Stock (including derivative securities with respect to Company Common Stock) under such rule and result from the transactions contemplated by Article I and Article II of this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company.

6.11 Resignations. The Company shall use its reasonable best efforts to obtain and deliver to Parent at the Closing evidence reasonably satisfactory to Parent of the resignation, effective as of the Effective Time, of all directors of the Company and its Subsidiaries (except those designated by Parent to the Company in writing at least three (3) Business Days prior to the Closing).

6.12 Employee Benefit Matters.

(a) From and after the Effective Time, Parent shall cause the Surviving Corporation to honor and provide for payment of all accrued obligations and benefits under all Company Plans set forth, and identified as such, in the Company Disclosure Letter (including, without limitation, employment or severance agreements between the Company and Company Employees), all in accordance with their respective terms.

(b) Employees of the Company as of the Effective Time (“Continuing Employees”) shall receive credit for past service with the Company for purposes of accrual of vacation time and, to extent practicable and permitted under applicable benefit plans, for purposes of eligibility for participation and vesting under any employee benefit plan, program or arrangement established or maintained by Parent, the Surviving Corporation or any of their respective Subsidiaries under which Continuing Employees may be eligible to participate on or after the Effective Time.

(c) Notwithstanding anything in this Agreement to the contrary, from and after the Effective Time, the Surviving Corporation will have sole discretion over the hiring, promotion, retention, firing and other terms and conditions of the employment of the Continuing Employees. Nothing in this Agreement shall prevent Parent or the Surviving Corporation from amending or terminating any Company Plan in accordance with its terms.

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ARTICLE VII
CONDITIONS TO MERGER

7.1 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of the following conditions:

(a) Shareholder Approval. The Company Voting Proposal shall have been approved at the Company Meeting, at which a quorum is present, by the Required Company Shareholder Vote.

(b) HSR Act and Applicable Foreign Antitrust Laws. All waiting periods (and any extensions thereof) applicable to the consummation of the Merger under the HSR Act and applicable foreign Antitrust Laws shall have expired or otherwise been terminated.

(c) Governmental Approvals. Other than the filing of the Certificate of Merger, all material authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity in connection with the Merger and the consummation of the other transactions contemplated by this Agreement shall have been filed or been obtained.

(d) No Restraint. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (preliminary or permanent) or statute, rule or regulation which is in effect which would make the Merger illegal or prohibit the consummation of the Merger or the other transactions contemplated by this Agreement.

7.2 Additional Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following additional conditions, any of which may be waived, in writing, exclusively by Parent:(1)

(a) Representations and Warranties. The representations and warranties of the Company set forth in this Agreement (without regard to any materiality or Company Material Adverse Effect qualifications or exceptions contained therein) shall be true and correct as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties (without regard to any materiality or Company Material Adverse Effect qualifications or exceptions contained therein) shall be true and correct as of such date), in each case, except where the failure to be true and correct, individually or in the aggregate, has not had, and is not reasonably likely to result in, a Company Material Adverse Effect or adversely affect the capitalization of the Company or any of its Subsidiaries; and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or the chief financial officer of the Company to such effect.

(b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement on or prior to the Closing Date; and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or the chief financial officer of the Company to such effect.

(1) Closing conditions subject to completion of due diligence.

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(c) No Proceedings. There shall not be instituted or pending any action or proceeding in which any Person or Governmental Entity seeks to, (A) make the Merger illegal or otherwise challenge, restrain or prohibit consummation of the Merger or the other transactions contemplated by this Agreement, (B) prohibit or limit in any material respect (x) Parent’s ability to vote, control, receive dividends with respect to or otherwise exercise ownership rights with respect to the stock of the Surviving Corporation or any of its Subsidiaries or (y) Parent’s ability to effectively control or otherwise exercise ownership rights with respect to the business or operations of the Company or its Subsidiaries, (C) obtain from Parent or any of its Subsidiaries any damages that are material or would be material to the Company and its Subsidiaries, taken as a whole, (D) cause the transactions contemplated by this Agreement to be rescinded following consummation or (E) compel the Company, Parent or any of their respective subsidiaries to dispose of or hold any significant portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, as a result of the Merger or any of the other transactions contemplated by this Agreement.

(d) No Material Adverse Effect. Since June 30, 2006, there shall not have occurred any state of facts, change, event, effect, condition, circumstance, occurrence or development that, individually or in the aggregate, has had or is reasonably likely to result in a Company Material Adverse Effect; and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or the chief financial officer of the Company to such effect.

(e) Contribution Agreements. The Rollover Investors shall have made the contributions of Company Common Stock to Parent as required by and in accordance with the terms of the Contribution Agreements.

(f) Financing. Parent shall have obtained an amount of financing not less than the amount set forth in the Debt Commitment Letter on terms and conditions as set forth therein or upon terms and conditions which are, in the reasonable judgment of Parent, at least as favorable to Parent as the terms and conditions set forth therein.

(g) Cash Balances. As of immediately prior to the Effective Time, the Company shall have unrestricted cash on hand and fully liquid cash equivalents of (i) in the event that the consummation of the transaction contemplated by Section 5.1(e) of the Company Disclosure Letter has not occurred, at least $60,000,000, and (ii) in the event that the consummation of the transaction contemplated by Section 5.1(e) of the Company Disclosure Letter has occurred, at least $90,000,000 (after deducting an amount equal to the reasonably estimated Tax obligations with respect to such sale and excluding any portion of the proceeds from such sale deposited in escrow with respect to any indemnity obligations).

7.3 Additional Conditions to Obligations of the Company. The obligation of the Company to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following additional conditions, any of which may be waived, in writing, exclusively by the Company:

(a) Representations and Warranties. The representations and warranties of Parent and Merger Sub (without regard to any materiality or Material Adverse Effect qualifications or exceptions contained therein) set forth in this Agreement shall be true and correct as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties (without regard to any materiality or Material Adverse Effect qualifications or exceptions contained therein) are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date), in each case, except where the failure to be true and correct, individually or in the aggregate, has not had, and is not reasonably likely to result in, a Parent Material Adverse Effect; and the Company shall have received a certificate signed on behalf of Parent by the chief executive officer or the chief financial officer of Parent to such effect.

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(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement on or prior to the Closing Date; and the Company shall have received a certificate signed on behalf of Parent by an officer of Parent to such effect.

Article VIII

TERMINATION AND AMENDMENT

8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time (whether or not the Required Company Shareholder Vote was obtained) (and with respect to Sections 8.1(b) through 8.1(g)) by written notice by the terminating party to the other party specifying the provision hereof pursuant to which such termination is effected):

(a) by mutual written consent of Parent and the Company, which consent shall have been approved by the action of their respective boards of directors;

(b) by either Parent or the Company if the Merger shall not have been consummated by March 31, 2007 (the “Outside Date”) (provided that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been a principal cause of, or results in, the failure of the Merger to occur on or before the Outside Date);

(c) by either Parent or the Company if a Governmental Entity of competent jurisdiction shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger or any other transaction contemplated hereby;

(d) by either Parent or the Company if at the Company Meeting (including any postponement or adjournment thereof), at which a vote on the Company Voting Proposal is taken, the Required Company Shareholder Vote in favor of the adoption of the Company Voting Proposal shall not have been obtained; provided that the right to terminate under this Section 8.1(d) shall not be available to the Company if the Company is in breach of its obligations under Sections 6.1, 6.2 or 6.5;

(e) by Parent, if: (i) (A) the Company Board or the Special Committee shall have failed to include the Company Recommendation in the Proxy Statement or (B) the Company Board or the Special Committee shall have effected a Change in the Company Recommendation; (ii) the Company Board or the Special Committee shall have authorized, approved or recommended to the shareholders of the Company an Acquisition Proposal; (iii) the Company is in breach of its obligations under Sections 6.1, 6.2 or 6.5; (iv) a tender offer or exchange offer for outstanding shares of Company Common Stock shall have been commenced (other than by Parent or an Affiliate of Parent) and the Company Board or the Special Committee recommends that the shareholders of the Company tender their shares in such tender or exchange offer or within ten (10) Business Days after the commencement of such tender or exchange offer, the Company Board and the Special Committee fails to recommend rejection (or subsequently withdraws or modifies in a manner adverse to Parent or Merger Sub a recommendation of rejection) of such offer; (v) the Company enters into an Alternative Acquisition Agreement with respect to any Acquisition Proposal; or (vi) any Person or Group (other than Parent, an Affiliate of Parent or a party to a Contribution Agreement) shall have acquired beneficial ownership of 40% or more of the outstanding Company Common Stock;

(f) by Parent, if there has been a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, which breach or failure to perform (i) would cause the conditions set forth in Section 7.2(a) or 7.2(b) not to be satisfied, and (ii) shall not have been cured within thirty (30) days following receipt by the Company of written notice of such

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breach or failure to perform from Parent or which by its nature or timing cannot reasonably be cured by the Outside Date;

(g) by the Company, if there has been a breach of or failure to perform any representation, warranty, covenant or agreement on the part of Parent set forth in this Agreement, which breach or failure to perform (i) would cause the conditions set forth in Section 7.3(a) or 7.3(b) not to be satisfied, and (ii) shall not have been cured within thirty (30) days following receipt by Parent of written notice of such breach or failure to perform from the Company or which by its nature or timing cannot reasonably be cured by the Outside Date; or

(h) by the Company, upon a Change in the Company Recommendation made in accordance with Section 6.1(c) in order to enter into a definitive agreement with respect to a Superior Proposal; provided, however, it is a condition precedent to the Company’s right to terminate this Agreement pursuant to this Section 8.1(h) that the Company shall have complied in all material respects with the provisions of Section 6.1 and 8.3(b).

8.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Parent, the Company, or their respective officers, directors, shareholders or Affiliates under this Agreement; provided that (a) any such termination shall not relieve any party from liability for any willful breach, misrepresentation or fraud in connection with this Agreement and (b) the provisions of Section 5.2 (Confidentiality), Section 8.3 (Fees and Expenses), this Section 8.2 (Effect of Termination) and Article IX (Miscellaneous) of this Agreement and the Confidentiality Agreement shall remain in full force and effect and survive any termination of this Agreement in accordance with its terms.

8.3 Fees and Expenses.

(a) Except as otherwise specified in this Section 8.3, all out-of-pocket costs and expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated hereby shall be paid by the party incurring such expenses; provided, however, that Parent and the Company shall share equally the expenses (other than attorneys’ and accountants’ fees and expenses) incurred (i) in connection with the filing, printing and mailing of the Proxy Statement (including any preliminary materials relating thereto) and the filing of the Schedule 13e-3 and (ii) in connection with the filings required under the HSR Act (including the HSR filing fee).

(b) The Company shall pay Parent or a designee of Parent a termination fee in an amount equal to $18,250,000 (the “Termination Fee”) if:

(i) this Agreement is terminated pursuant to Section 8.1(e); or

(ii) this Agreement is terminated pursuant to Section 8.1(h); or

(iii) (A) this Agreement is terminated pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f) and at any time after the date hereof and prior to such termination any Acquisition Proposal shall have been made known to the Company or publicly disclosed, and (B) within 12 months after any such termination, the Company or any of its Affiliates consummates, or becomes a party to any binding written Alternative Acquisition Agreement with respect to, any Company Acquisition (which need not be a Company Acquisition relating to the same Acquisition Proposal that was made known to the Company or publicly disclosed prior to the Company Meeting).

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The Termination Fee due under Section 8.3(b)(i) shall be paid to Parent by wire transfer of same-day funds within one Business Day following termination of this Agreement. The Termination Fee due under Section 8.3(b)(ii) shall be paid to Parent by wire transfer of same-day funds concurrently with (and as a condition precedent to) its right to terminate pursuant to Section 8.1(h). The Termination Fee due under Section 8.3(b)(iii) shall be paid to Parent by wire transfer of same-day funds within one Business Day following the entry into the Alternative Acquisition Agreement or, in the absence thereof, the consummation of the Company Acquisition, as applicable.

(c) Parent shall pay a termination fee in an amount equal $9,125,000 (the “Parent Termination Fee”) if this Agreement is terminated on or after the Outside Date pursuant to Section 8.1(b), if at such date all conditions set forth in Section 7.1 and Section 7.2 are satisfied (other than condition set forth in Section 7.2(f)), provided that no such fee shall be payable in the event the failure of the condition set forth in Section 7.2(f) to be satisfied is a result of a Market MAC or a material adverse development with respect to the ITC case. For purposes hereof, “Market MAC” shall mean (i) any general suspension of trading in, or limitation on prices for, securities on The Nasdaq Stock Market for three or more consecutive Business Days; (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States generally for three or more consecutive Business Days; (iii) any material disruption in the US commercial credit, debt, capital or commercial mortgage-backed securities markets (including the market for leveraged loans or high yield securities) which could be reasonably expected to materially and adversely affect the availability of the debt financing for the transactions contemplated by this Agreement and in an amount provided by the Debt Commitment Letters for three or more consecutive Business Days; or (iv) any limitation by any governmental, regulatory or administrative agency or authority which prohibits the extension of credit by banks or other lending institutions in the United States generally in a manner that prevents a lender from providing the debt financing pursuant to the Debt Commitment Letters for a period of three or more consecutive Business Days.

(d) The parties acknowledge that the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the parties would not enter into this Agreement. Payment of the Termination Fee or the Parent Termination Fee, as the case may be, shall not be in lieu of damages incurred in the event of a breach of this Agreement described in clause (a) of the proviso in Section 8.2 but is otherwise the sole and exclusive remedy of the parties in connection with any termination of this Agreement on the bases specified in Section 8.3(b).

(e) The Company shall pay all expenses, including reasonable attorneys’ fees, that may be incurred by Parent in connection with its enforcement of the rights provided in this Section 8.3 unless Parent shall be determined, in a final, nonappealable order of a court adjudicating the matter, not to have any right to receive any amounts from the Company under this Section 8.3.

(f) For purposes of this Section 8.3 only, “Company Acquisition” shall mean (i) a merger, reorganization, consolidation, dissolution, sale of substantial assets, tender offer, exchange offer, recapitalization, liquidation, dissolution, joint venture, share exchange or other business combination involving the Company or any of its Subsidiaries, (ii) the issuance by the Company of 50% or more of its voting securities or (iii) the acquisition by any person or group of 50% or more of the capital stock or assets of the Company or any of its Subsidiaries; provided that the sale by the Company of AOA in accordance with Section 5.1(e)(ii) shall not be deemed a Company Acquisition.

8.4 Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the shareholders of any party, but, after any such approval, no amendment shall be made which by law requires further approval by such shareholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

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8.5 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. Such extension or waiver shall not be deemed to apply to any time for performance, inaccuracy in any representation or warranty, or noncompliance with any agreement or condition, as the case may be, other than that which is specified in the extension or waiver. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

ARTICLE IX
MISCELLANEOUS

9.1 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the agreements contained in Article II, Section 6.8 and Article IX.

9.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) three (3) Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid, (ii) one Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service, or (iii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date of such receipt is not a Business Day) of transmission by facsimile, in each case to the intended recipient as set forth below:

(a) if to Parent or Merger Sub, to

Meteor Holding Corporation

c/o Francisco Partners
2882 Sand Hill Road, Suite 280
Menlo Park, CA 94025

Attn: Dipanjan Deb
Ann Savellano

Telecopy: 650-233-2999

with a copy to:

Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304

Attn: Larry W. Sonsini
John A. Fore
Robert T. Ishii

Telecopy: (650) 493-6811

(b) if to the Company, to

Metrologic Instruments, Inc.
90 Coles Road
Blackwood, New Jersey 08012

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Attn: Chief Executive Officer
Telecopy: (856) 228-0653

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
51st Floor
Philadelphia, Pennsylvania 19103

Attn: Justin P. Klein

Telecopy: (215) 864-8999

Any party to this Agreement may give any notice or other communication hereunder using any other means (including personal delivery, messenger service, ordinary mail or electronic mail), but no such notice or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party to this Agreement may change the address to which notices and other communications hereunder are to be delivered by giving the other parties to this Agreement notice in the manner herein set forth.

9.3 Entire Agreement. This Agreement (including the Exhibits hereto and the documents and instruments referred to herein that are to be delivered at the Closing) constitutes the entire agreement among the parties to this Agreement and supersedes any prior understandings, agreements or representations by or among the parties hereto, or any of them, written or oral, with respect to the subject matter hereof; provided that the Confidentiality Agreement shall remain in effect in accordance with its terms.

9.4 No Third Party Beneficiaries. Except as provided in Section 6.8 (with respect to which the past and present officers of the Company shall be third party beneficiaries), this Agreement is not intended, and shall not be deemed, to (i) confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns, (ii) create any agreement of employment with any Person or (iii) otherwise create any third-party beneficiary hereto.

9.5 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided that notwithstanding the foregoing, Parent or Merger Sub may assign their rights and obligations hereunder to any Affiliate without the prior written consent of the other parties hereto; provided further that no such assignment shall relieve Parent or Merger Sub of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns.

9.6 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity, legality or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid, illegal or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid, illegal or unenforceable term or provision with a term or provision that is valid, legal and enforceable and that comes closest to expressing the intention of the invalid, illegal or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid, illegal or unenforceable term or provision with a valid, legal and enforceable term or

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provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid, illegal or unenforceable term.

9.7 Counterparts and Signature. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties hereto and delivered to the other parties, it being understood that all parties need not sign the same counterpart. This Agreement may be executed and delivered by facsimile transmission.

9.8 Interpretation. When reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or Section of this Agreement, unless otherwise indicated. The table of contents, table of defined terms and headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” No summary of this Agreement prepared by any party shall affect the meaning or interpretation of this Agreement.

9.9 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware.

9.10 Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

9.11 Submission to Jurisdiction. Each of the parties to this Agreement (a) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Delaware in any action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or any of the transaction contemplated by this Agreement in any other court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Any party hereto may make service on another party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in Section 9.2. Nothing in this Section 9.11, however, shall affect the right of any party to serve legal process in any other manner permitted by law.

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9.12 Waiver of Jury Trial. EACH OF PARENT, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

[Remainder of Page Intentionally Left Blank]

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ANNEX C-1

CONTRIBUTION AND VOTING AGREEMENT

CONTRIBUTION AND VOTING AGREEMENT, dated as of September 12, 2006 (this “Agreement”), between (i) Meteor Holding Corporation, a Delaware corporation (“Parent”), on the one hand, and (ii) each of (A) C. Harry Knowles, an individual (“HK”), (B) Janet H. Knowles, an individual (“JK”, and together with HK, the “Founder Individuals”), (C) each of the Trust under Agreement of C. Harry Knowles dated 4/8/94 FBO Diann H. Lynmam, Trust under Agreement of C. Harry Knowles dated 4/8/94 FBO Donnah M. Starzynski, Trust under Agreement of C. Harry Knowles dated 4/8/94 FBO Harry H. Knowles, II, Trust under Agreement of C. Harry Knowles dated 4/8/94 FBO Marjorie B. Knowles, Trust under Agreement of C. Harry Knowles dated 4/8/94 FBO Robert H. Knowles, and The C. Harry Knowles Grantor Retained Annuity Trust No. 1 (collectively, the “Family Trusts”); and (D) Janet H. and C. Harry Knowles Foundation, Inc., a New Jersey nonprofit corporation, The Knowles Charitable Foundation, a New Jersey Nonprofit Corporation, a New Jersey nonprofit corporation, and The C. Harry Knowles Charitable Remainder Annuity Trust No. 1 (collectively, the “Charitable Entities”, and, together with the Family Trusts, the “Entity Parties”), on the other hand. The Founder Individuals and the Entity Parties are herein collectively referred to as the “Shareholder Parties.” Unless expressly provided otherwise in this Agreement, capitalized terms defined in the Merger Agreement when used in this Agreement shall have the same meanings set forth in the Merger Agreement (defined below).

WHEREAS, concurrently with the execution and delivery of this Agreement, Parent has entered into an Agreement and Plan of Merger, dated as of the date hereof (as may be amended from time to time, the “Merger Agreement”), with Metrologic Instruments, Inc., a New Jersey corporation (the “Company”) and Meteor Merger Corporation, a New Jersey corporation (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation (the “Merger”) and as a wholly owned subsidiary of Parent;

WHEREAS, in connection with the consummation of the Merger, HK shall become party to a stockholders’ agreement in the form attached hereto as Exhibit A (the “Stockholders Agreement”);

WHEREAS, in connection with the consummation of the Merger, Elliott Associates, L.P. and Elliott International, L.P. (the “EA Investors”) have entered into a Contribution and Voting Agreement with Parent dated as of the date hereof (the “EA Agreement”) pursuant to which, among other things, the EA Investors have agreed to contribute shares of Company Common Stock (as defined herein) (the “EA Company Shares”) in exchange for shares of Parent Common Stock (as defined herein) and Parent Junior Preferred Stock (as defined herein) (the “EA Shares”), in accordance with the terms and conditions of the EA Agreement;

WHEREAS, in connection with the execution of the Merger Agreement, Parent has received certain financing commitments and agreements from FP-Metrologic, LLC (the “FP Investor”) with respect to the provision of equity financing to effect the Merger (the “Equity Financing Commitments”);

WHEREAS, in connection with the execution of the Merger Agreement, Parent has received certain financing commitments and agreements from Morgan Stanley Senior Funding, Inc. (the “Lender”) with respect to the provision of debt financing to effect the Merger (the “Debt Financing Commitments”, and together with the Equity Financing Commitments, the “Financing Commitments”);

WHEREAS, HK desires to contribute certain property to Parent as provided herein in exchange for the HK Shares (as defined herein), and it is intended that the issuance of the HK Shares in exchange for such property, when taken together with the issuance of the EA Shares in exchange for the EA Company Shares and the FP Investor’s purchase of the FP Shares, will qualify as tax-free exchanges within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the parties hereto desire to make certain agreements, representations, warranties and covenants in connection with the Merger, the Merger Agreement, the Stockholders Agreement, the Financing Commitments and the transactions contemplated hereby and thereby (collectively, the “Transactions”).

NOW, THEREFORE, in consideration of the mutual covenants and conditions as hereinafter set forth, the parties hereto do hereby agree as follows:

I. CONTRIBUTIONS.

1.1 HK Contribution. At the Contribution Closing (as defined below), upon the terms and subject to the conditions of this Agreement, HK hereby agrees to transfer, contribute and deliver to Parent the number of shares of Common Stock, par value $0.01 per share, of the Company (the “Company Common Stock”) set forth opposite his name on Schedule I hereto (the “HK Contribution”). In exchange for the HK Contribution, Parent hereby agrees to issue at the Contribution Closing to HK the number of shares of Common Stock, par value $0.01 per share, of Parent (“Parent Common Stock”) and the number of shares of Junior Preferred Stock, par value $0.01 per share, of Parent (“Parent Junior Preferred Stock”) set forth opposite his name on Schedule II hereto (the “HK Shares”). The allocation of shares of Parent Common Stock and Parent Junior Preferred Stock to be issued to HK in exchange for the HK Contribution will be in the same relative proportion as the allocation of the shares of Parent Common Stock and Parent Junior Preferred Stock issued to the FP Investor in exchange for funding its Equity Financing Commitments (the “FP Shares”). The Parent Junior Preferred Stock shall have the rights, preferences, privileges and restrictions set forth in the restated certificate of incorporation of Parent in substantially the form attached as Exhibit B hereto (the “Restated Certificate”).

1.2 Delivery of Funds and Certificates. Subject to the satisfaction (or waiver by the parties entitled to the benefit thereof) of the conditions set forth in Section 1.3 of this Agreement, the closing of the transactions contemplated hereby (the “Contribution Closing”) will take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, or at such other location as the parties may mutually agree, immediately prior to the Closing (as defined in the Merger Agreement). At the Contribution Closing, Parent will deliver to HK duly executed certificates, registered in HK’s name, representing the HK Shares being issued to HK at the Contribution Closing, against the transfer, contribution and payment to Parent of the HK Contribution by HK (including the delivery of certificates evidencing the applicable number of shares of Company Common Stock with respect to HK duly endorsed to Parent or, if not held in certificated form, other evidence of transfer of Company Common Stock reasonably acceptable to Parent), which shall represent payment in full for such HK Shares.

1.3 Conditions to the Obligations of the Parties Hereunder. The obligations of HK to Parent to consummate the transactions contemplated by this Article I of this Agreement shall be subject to and conditioned upon the following: (i) the representations and warranties of Parent set forth in this Agreement being true and correct in all material respects at and as of the Closing as if made at and as of the Closing, (ii) Parent’s compliance in all material respects with its obligations hereunder, (iii) the absence of any prohibition against the consummation of the transactions contemplated hereby by any applicable law, statute, rule, regulation, judgment or order of any governmental authority of competent jurisdiction, (iv) the filing by Parent of the Restated Certificate (which Restated Certificate shall provide that it is to be effective upon filing), (v) the furnishing of funds by the FP Investor to Parent in satisfaction of its obligations to Parent with respect to the Equity Financing Commitments and the execution by the FP Investor of the Stockholders Agreement; and (vi) the satisfaction or waiver by Parent (in accordance with this Agreement) and/or the Company, as applicable, of all of the conditions to the consummation of the Merger (as set forth in the Merger Agreement); provided that the satisfaction, or waiver by Parent, of the conditions to the consummation of the Merger set forth in Section 7.2(e) or Section 7.2(f) of the

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Merger Agreement shall not be a condition to the performance by HK of his obligations to Parent hereunder.

1.4 Termination. This Agreement shall automatically terminate and the Transactions shall be abandoned if at any time prior to the Contribution Closing the Merger Agreement shall have been terminated, and upon such termination this Agreement shall immediately become void and there shall be no liability or obligation on the part of Parent or any of the Shareholder Parties under this Agreement; provided however, that: (a) any such termination of this Agreement shall not relieve any party from liability for any willful breach of this Agreement; (b) in the event that the Merger Agreement is terminated (i) pursuant to Section 8.1(e) or (h) of the Merger Agreement or pursuant to Section 8.1(c) of the Merger Agreement in an action or proceeding brought with respect to an Acquisition Proposal, or (ii) pursuant to Section 8.1(b), (d) or (f) of the Merger Agreement and, after the date hereof and prior to such termination, any Acquisition Proposal shall have been made known to the Company or publicly disclosed, Article III (Voting and Exclusivity) of this Agreement shall remain in full force and effect and survive any termination of this Agreement until the 6-month anniversary of the date the Merger Agreement is terminated, provided that in the event that the Company has entered into an Alternative Acquisition Agreement prior to the 6-month anniversary of the date the Merger Agreement is terminated, then Article III of this Agreement shall remain in full force and effect with respect to the Acquisition Proposal contemplated by such Alternative Acquisition Agreement for an additional 4-month period; and (c) Section 4.4 (Fees and Expenses), this Section 1.4 (Termination) and Article V (Miscellaneous) of this Agreement shall remain in full force and effect and survive any termination of this Agreement in accordance with its terms.

II. REPRESENTATIONS AND WARRANTIES AND COVENANTS.

2.1 Representations and Warranties of Parent. Parent represents and warrants to HK as follows:

(a) Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to execute and deliver this Agreement and the agreements contemplated hereby and to perform its obligations hereunder and thereunder. The execution and delivery by Parent of this Agreement and the agreements contemplated hereby, the performance by Parent of its obligations hereunder and thereunder, and the consummation by Parent of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action, except for the approval of the Restated Certificate. This Agreement has been duly executed and delivered by Parent and, assuming the due authorizations, executions and deliveries thereof by the other parties hereto, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law). At the Contribution Closing, the Stockholders Agreement will have been duly executed and delivered by Parent and, assuming the due authorization, execution and delivery thereof by the other parties thereto, will constitute a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law).

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stockholders of the Restated Certificate and the effective filing of the Restated Certificate, violate the provisions of the certificate of incorporation or bylaws of Parent, or (iii) violate, conflict with or result in any breach, default or contravention of, or the creation of any Lien under, any note, bond, mortgage, contract, agreement, license or other instrument or obligation to which Parent is a party or by which it or any of its assets are bound, except for such violations, conflicts, breaches, defaults, contraventions or Liens, that, individually or in the aggregate, are not reasonably likely to result in a material adverse effect on the ability of Parent to consummate the Transactions, or (iv) violate any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to Parent or their properties or assets.

(c) No consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, governmental and quasi-governmental agencies, authorities and instrumentalities of competent jurisdiction) by Parent in order (i) for each of this Agreement and the Stockholders Agreement to constitute a legal, valid and binding obligation of Parent or (ii) to authorize or permit the consummation by Parent of the issuance of the HK Shares, except (A) to the extent required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”), and any similar applicable competition or antitrust laws, (B) the filing of the Restated Certificate with the Secretary of State of the State of Delaware and (C) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the HK Shares.

(d) As of the date hereof, the authorized capital stock of Parent consists of 1,000 shares of Parent Common Stock. As of the date hereof, one (1) share of Parent Common Stock is issued and outstanding and held of record by the FP Investor. There are no options, warrants or other rights to purchase capital stock of Parent, or securities convertible into or exercisable or exchangeable for capital stock of Parent, except pursuant to this Agreement, the EA Agreement and agreements to be entered into between Parent and the FP Investor to effect the Equity Financing Commitments. Parent has delivered to HK true and complete copies of its charter and bylaws as in effect on the date hereof.

(e) The HK Shares, when issued and delivered in accordance with the terms hereof and upon receipt of payment required to be made hereunder, will be duly authorized, validly issued, fully paid and nonassessable and free and clear of any mortgage, pledge, security interest, claim, encumbrance, lien or charge of any kind, excluding restrictions under applicable securities laws (each, a “Lien”), except as may be otherwise set forth in the Stockholders Agreement.

(f) Parent was organized solely for the purpose of effecting the Transactions and as of the Contribution Closing will have engaged in no activity other than in connection with the Transactions.

(g) Assuming (A) HK satisfies his obligations with respect to the HK Contribution, (B) the EA Investors satisfy their obligations with respect to contributing the EA Company Shares in accordance with the EA Agreement (the “EA Contributions”) and (C) the FP Investor funds its obligations pursuant to the Equity Financing Commitments, in each case at or prior to the Contribution Closing, (i) the FP Investor, the EA Investors and HK, when taken together, shall hold at least 80% of the voting stock of Parent and at least 80% of each class of nonvoting stock, if any, at the time of the Contribution Closing, and (ii) the HK Contributions, the EA Contributions, the equity financing provided by the FP Investor, and the debt financing provided by the Lender, together with cash and fully liquid cash equivalents on the Company’s balance sheet as of the Closing, will be sufficient to pay the Merger Consideration (as defined in the Merger Agreement) and all expenses of Parent, the FP Investor, HK and the EA Investors.

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(h) Parent has no current plan or intention to reacquire any of the FP Shares, the EA Shares or the HK Shares. Parent will not cause any action to be taken or fail to take any action that is reasonably likely to prevent the stock issuances to HK and EA contemplated by this Agreement from qualifying as tax-free exchanges under Section 351 of the Code; provided, however, that Parent shall not be prohibited from taking any action that is permitted by this Agreement or any other agreement referenced herein.

(i) Parent (i) is an “accredited investor” within the definition of Regulation D promulgated by the Securities and Exchange Commission pursuant to the Securities Act, (ii) is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that he is able to fend for itself, can bear the economic risk of its investment in the Company, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Subject Shares and can afford a complete loss of its investment, (iii) understands that no public market will exist for the Subject Shares and there is no assurance that a pubic market will ever exist for the Subject Shares and (iv) understands that the Subject Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Subject Shares or an available exemption from registration under the Securities Act, the Subject Shares must be held indefinitely.

2.2 Representations and Warranties of the Entity Parties. Each of the Entity Parties represents and warrants, severally and not jointly, to Parent that:

(a) The execution and delivery by such Entity Parties of this Agreement and the documents contemplated hereby and thereby, the performances by such Entity Party of its obligations hereunder and thereunder and the consummations by such Entity Party of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of such Entity Party. This Agreement has been duly executed and delivered by such Entity Party and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes a legal, valid and binding obligation of such Entity Party, enforceable against such Entity Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law).

(b) The execution, delivery and performance by such Entity Party of this Agreement and the agreements contemplated hereby and the consummation by such Entity Party of the transactions contemplated hereby and thereby does not and will not, with or without the giving of notice or the passage of time or both, (i) subject to the receipt of any required antitrust approvals, violate in any material respect the provisions of any law, rule or regulation applicable to such Entity Party or its properties or assets, (ii) violate the provisions of the constituent organizational documents or other governing instruments applicable to such Entity Party, as amended to date, (iii) violate, conflict with or result in any breach, default or contravention of, or the creation of any Lien under, any note, bond, mortgage, contract, agreement, license or other instrument or obligation to which such Entity Party is a party or by which it or any of its assets are bound, except for such violations, conflicts, breaches, defaults, contraventions or Liens, that, individually or in the aggregate, are not reasonably likely to result in a material adverse effect on the ability of such Entity Party to consummate the Transactions, or (iv) violate in any material respect any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to such Entity Party or its properties or assets.

(c) Such Entity Party’s total beneficial ownership of shares of outstanding Company Common Stock as of the date hereof is accurately set forth opposite such Entity Party’s name on Schedule III hereto.

(d) No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of such Entity Party or any of its Affiliates, to

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any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with any of the Transactions, except to the extent applicable, Morgan Stanley & Co. Incorporated (“Morgan Stanley”) as more particularly described in Section 2.3(f).

2.3 Representations and Warranties of HK. HK represents and warrants, severally and not jointly, to Parent that:

(a) HK is competent to execute and deliver this Agreement and the Stockholders Agreement and the documents contemplated hereby and thereby and to perform HK’s obligations hereunder and thereunder. This Agreement has been duly executed and delivered by HK and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes a legal, valid and binding obligation of HK, enforceable against HK in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law). At the Contribution Closing, the Stockholders Agreement will have been duly executed and delivered by HK and, assuming the due authorization, execution and delivery thereof by the other parties thereto, will constitute a legal, valid and binding obligation of HK, enforceable against HK in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law).

(b) The execution, delivery and performance by HK of this Agreement, the Stockholders Agreement and the agreements contemplated hereby and thereby and the consummation by HK of the transactions contemplated hereby and thereby does not and will not, with or without the giving of notice or the passage of time or both, (i) violate in any material respects the provisions of any law, rule or regulation applicable to HK or his properties or assets; (ii) violate, conflict with or result in any breach, default or contravention of, or the creation of any Lien under, any note, bond, mortgage, contract, agreement, license or other instrument or obligation to which HK is a party or by which he or any of his assets are bound, except for such violations, conflicts, breaches, defaults, contraventions or Liens, that, individually or in the aggregate, are not reasonably likely to result in a material adverse effect on the ability of HK to consummate the Transactions, or (iii) violate any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to HK or his properties or assets.

(c) HK (i) is an “accredited investor” within the definition of Regulation D promulgated by the Securities and Exchange Commission pursuant to the Securities Act, (ii) is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that he is able to fend for himself, can bear the economic risk of his investment in Parent, and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the investment in the HK Shares and can afford a complete loss of its investment, (iii) understands that no public market now exists for the HK Shares and there is no assurance that a pubic market will ever exist for the HK Shares and (iv) understands that the HK Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the HK Shares or an available exemption from registration under the Securities Act, the HK Shares must be held indefinitely.

(d) HK’s total beneficial ownership of shares of outstanding Company Common Stock as of the date hereof is accurately set forth opposite his name on Schedule III hereto, and each of such shares representing HK Contribution when transferred and delivered to Parent, upon the terms and subject to the conditions set forth herein, will be free and clear of all Liens.

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(e) HK (i) has no current plan to dispose of any of the HK Shares; and (ii) will not intentionally cause any action to be taken that is reasonably likely to prevent the transactions contemplated by this Agreement from qualifying as a tax-free exchange under Section 351 of the Code.

(f) No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of HK or any of his Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with any of the transactions contemplated by this Agreement, except Morgan Stanley. A true and correct copy of the engagement letter with Morgan Stanley in connection with this transaction has been delivered to Parent.

2.4 Representations and Warranties of JK. JK represents and warrants, severally and not jointly, to Parent that:

(a) JK is competent to execute and deliver this Agreement and the documents contemplated hereby and to perform JK’s obligations hereunder and thereunder. This Agreement has been duly executed and delivered by JK and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes a legal, valid and binding obligation of JK, enforceable against JK in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law).

(b) The execution, delivery and performance by JK of this Agreement and the agreements contemplated hereby and the consummation by JK of the transactions contemplated hereby and thereby does not and will not, with or without the giving of notice or the passage of time or both, (i) violate in any material respects the provisions of any law, rule or regulation applicable to JK or her properties or assets; (ii) violate, conflict with or result in any breach, default or contravention of, or the creation of any Lien under, any note, bond, mortgage, contract, agreement, license or other instrument or obligation to which JK is a party or by which she or any of her assets are bound, except for such violations, conflicts, breaches, defaults, contraventions or Liens, that, individually or in the aggregate, are not reasonably likely to result in a material adverse effect on the ability of JK to consummate the Transactions, or (iii) violate any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to JK or her properties or assets.

(c) JK’s total beneficial ownership of shares of outstanding Company Common Stock as of the date hereof is accurately set forth opposite her name on Schedule III hereto.

(d) No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of JK or any Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with any of the Transactions, except to the extent applicable, Morgan Stanley as more particularly described in Section 2.3(f).

III. VOTING AND EXCLUSIVITY.

3.1 Voting; Proxy.

(a) Each of the Shareholder Parties agrees to vote or consent (or cause to be voted or consented), in person or by proxy, all shares of Company Common Stock beneficially owned or held of record by such Shareholder Party or to which such Shareholder Party has, directly or indirectly, the right to vote or direct the voting (the “Subject Shares”) in favor of the Merger Agreement, the Merger and the other Transactions and any other matter required to effect the Transactions (including one or more adjournments if necessary to solicit additional proxies if there are insufficient votes at the time of any meeting held to approve the Merger Agreement) at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of the Company called to consider such

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matters; and in the event the approval of such matters is sought through an action by written consent of the stockholders in lieu of a meeting, to timely execute and deliver such written consent in favor of such matters.

(b) Each of the Shareholder Parties agrees to vote or consent (or cause to be voted or consented), in person or by proxy, all Subject Shares (i) against any Acquisition Proposal or any agreement or transaction with respect to any Acquisition Proposal and (ii) against any amendment of the Company’s certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its Subsidiaries (as defined in the Merger Agreement), which amendment or other proposal or transaction would in any manner delay, impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other Transactions or change in any manner the voting rights of Company Common Stock, in each case at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of the Company called to consider such matters; and in the event the approval of such matters is sought through an action by written consent of the stockholders in lieu of a meeting, to not consent to such action; provided, however, for all purposes of this Agreement, after the termination of the Merger Agreement, the “Subject Shares” shall be limited to the aggregate number of shares of Company Common Stock equal to 35% of the total outstanding shares of Company Common Stock as of the date the Merger Agreement is terminated (which Subject Shares will be allocated among the Shareholder Parties in their discretion).

(c) In order to effectuate the parties’ intent under Section 3.1(a) and Section 3.1(b), each Shareholder Party hereby grants to Dipanjan Deb, David ibnAle and Andrew Kowal, with full power of substitution and resubstitution, an irrevocable proxy, which proxy is coupled with an interest, to exercise all voting, consent and similar rights of the Shareholder Party with respect to the Subject Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special, adjourned or postponed meeting of stockholders of the Company and in every written consent in lieu of such meeting: (i) in favor of the Merger Agreement, the Merger and the other Transactions and any other matter required to effect the Transactions (including in favor of one or more adjournments if necessary to solicit additional proxies if there are insufficient votes at the time of any meeting held to approve the Merger Agreement); (ii) against any Acquisition Proposal or any agreement or transaction with respect to any Acquisition Proposal; and (iii) against any amendment of the Company’s certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its Subsidiaries, which amendment or other proposal or transaction would in any manner delay, impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other Transactions or change in any manner the voting rights of Company Common Stock.

3.2 Transfer. Except for the HK Contribution to Parent, the proxy granted pursuant to Section 3.1(c) and the transfer of the Subject Shares pursuant to the Merger Agreement, each Shareholder Party agrees not to, directly or indirectly, sell, transfer, pledge, hypothecate, distribute or otherwise dispose of any Subject Shares or grant any proxies, deposit any Subject Shares into any voting trust, or enter into any voting agreement, with respect to such Subject Shares, provided, however, that (A) a Shareholder Party may transfer or assign Subject Shares to a Permitted Transferee so long as (i) Parent is given written notice prior to said transfer or assignment, stating the name and address of the Permitted Transferee and specifying the number of Subject Shares that are intended to be transferred or assigned and (ii) the Permitted Transferee assumes in writing the obligations of the transferring Shareholder Party under this Agreement and (B) the Family Trusts may transfer up to 10,000 Subject Shares per calendar quarter if and to the extent such transfers are required pursuant to the terms of The Family Settlement Agreement entered into in 2003 among HK and the trustees and beneficiaries of the Family Trusts; provided, further, that after the termination of the Merger Agreement, a Shareholder Party may transfer Subject Shares (x) pursuant to Rule 144, or (y) so long as the Subject Shares are voted or consented against any Acquisition Proposal or any agreement or transaction with respect to any Acquisition Proposal, by operation of law pursuant to a merger that constituted such Acquisition Proposal. For purposes of this

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Section 3.2, “Permitted Transferee” shall mean (i) HK’s or JK’s spouse, lineal descendant or antecedent, sibling, adopted child or adopted grandchild, (ii) a trust or trusts for the exclusive benefit of HK or JK or those members of HK’s or JK’s family specified in 3.2(i), (iii) the Charitable Entities or (iv) another charitable foundation established by HK.

3.3 Exclusivity. Each Shareholder Party shall not, and it shall cause each of its Subsidiaries, Affiliates (except the Company) and its and their respective Representatives acting on their behalf to not, directly or indirectly, (i) solicit, initiate, encourage, or induce the making, submission or announcement of, any inquiry, proposal or offer with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (ii) furnish to any Person (other than to its Representatives or to Parent or any designees of Parent) any non-public information relating to the Company or any of its Subsidiaries, or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to any Person (other than to its Representatives or to Parent or any designees of Parent), or take any other action intended to assist or facilitate any inquiries or the making of any proposal or offer that constitutes, or that could reasonably be expected to lead to, an Acquisition Proposal, (iii) participate or engage in discussions or negotiations with any Person with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (iv) approve, endorse or recommend an Acquisition Proposal, or (v) enter into any letter of intent, memorandum of understanding, agreement in principle or Contract (as defined in the Merger Agreement) contemplating or otherwise relating to an Acquisition Proposal. Each Shareholder Party shall, and shall cause each of its Subsidiaries and its and their respective Representatives acting on its behalf to, immediately cease any and all existing activities, discussions or negotiations with any Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, any Acquisition Proposal.

3.4 Certain Definitions. For purposes of this Agreement, the following terms will have the following meanings:

“Acquisition Proposal” means any proposal or offer (i) relating to a merger, reorganization, consolidation, dissolution, sale of substantial assets, tender offer, exchange offer, recapitalization, liquidation, dissolution, joint venture, share exchange or other business combination involving the Company or any of its Subsidiaries, (ii) for the issuance by the Company of 20% or more of its total outstanding voting securities or (iii) to acquire in any manner, directly or indirectly, 20% or more of the capital stock or assets of the Company or any of its Subsidiaries, in each case other than the Merger and the other Transactions.

“Affiliate” means, when used with respect to any party, any Person who is an “affiliate” of that party within the meaning of Rule 405 promulgated under the Securities Act.

“Person” means any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity (as defined in the Merger Agreement).

“Representative” means, with respect to any Person, its directors, officers or other employees, Affiliates, or any investment banker, attorney, accountant or other advisor or representative retained by such Person.

“Subsidiary” means, with respect to any Person, any corporation, partnership, trust, limited liability company or other non-corporate business enterprise in which such party (or another Subsidiary of such party) holds stock or other ownership interests representing (A) more that 50% of the voting power of all outstanding stock or ownership interests of such entity, (B) the right to receive more than 50% of the net assets of such entity available for distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution of such entity or (C) a general or managing partnership interest in such entity.

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3.5 Fiduciary Duties. For the avoidance of doubt, if at any time prior to the termination of this Agreement, a Founder Individual is a member of the Board of Directors of the Company (a “Director”) or an officer of the Company (an “Officer”), nothing in this Agreement shall limit or restrict the Founder Individual in acting in his or her capacity as a Director or Officer, as the case may be, and exercising his or her fiduciary duties and responsibilities as such, it being agreed and understood by the parties hereto that this Agreement shall apply to each Founder Individual solely in his or her capacity as a stockholder of the Company and shall not apply to his or her actions, omissions, judgments or decisions as a Director or Officer, as the case may be.

IV. OTHER COVENANTS.

4.1 Merger Agreement. The parties hereto acknowledge and agree that Parent will have sole discretion with respect to (a) determining whether the conditions set forth in the Merger Agreement have been satisfied by the appropriate parties thereto and/or whether to waive any of such conditions pursuant to the terms of the Merger Agreement, and (b) the manner and timing of Parent’s compliance with the covenants applicable to Parent under the Merger Agreement.

4.2 Amendment of Certificate of Incorporation of Parent. At or prior to the Contribution Closing, Parent agrees to cause its certificate of incorporation to be amended and restated to read as set forth in the Restated Certificate and to file the Restated Certificate with the Secretary of State of the State of Delaware.

4.3 Financing Documents. The parties hereto acknowledge and agree that Parent will have sole discretion with respect to the negotiation of definitive debt financing documents with the Lender (or any other debt financing sources) and any supporting lenders based upon the Debt Financing Commitments.

4.4 Fees and Expenses.

(a) Subject to Section 4.4(b), the Expenses incurred by each party hereto will be borne by the party incurring such Expenses.

(b) Parent shall reimburse each Shareholder Party for its reasonable out-of-pocket Expenses; provided, however, that Parent shall have no obligation under this Section 4.4(b) to the Shareholder Parties in the event HK fails to make the HK Contribution at the Contribution Closing if such HK Contribution is required to be made by the terms hereof.

(c) For purposes of this Agreement, “Expenses” shall mean, with respect to a party, the fees and expenses incurred by that party in connection with the authorization, preparation, negotiation, execution and performance of this Agreement, the Restated Certificate, the Stockholders Agreement, any related agreements and the transactions contemplated hereby and thereby (including the fees and expenses of counsel, accountants, investment bankers, financing sources and consultants).

4.5 Agreement to Cooperate; Further Assurances. Subject to the terms and conditions of this Agreement, each party hereto shall use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to satisfy its obligations hereunder.

4.6 Notification of Certain Matters. Each Shareholder Party shall give prompt notice to Parent, and Parent shall give prompt notice to each Shareholder Party, as the case may be, of (a) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of such Shareholder Party or Parent, as the case may be, contained in this Agreement to be untrue or inaccurate at or prior to the Contribution Closing and (b) any failure of Parent or such Shareholder Party, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any

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notice pursuant to this Section 4.6 shall not limit or otherwise affect any remedies available to the party receiving such notice. No disclosure by any party pursuant to this Section 4.6 shall prevent or cure any misrepresentations, breach of warranty or breach of covenant.

4.7 Public Statements. Before any of the Shareholder Parties shall release any statements concerning this Agreement, the Merger Agreement, the Stockholders Agreement, the Financing Commitments, the Transactions or any of the matters contemplated hereby and thereby which is intended for or may result in public dissemination thereof, such Shareholder Party shall cooperate with the other parties hereto and provide the other parties the reasonable opportunity to review and comment upon any such statements and, unless otherwise required by law, shall not release or permit release of any such information without the consent of the other parties, which shall not be unreasonably withheld.

4.8 Execution of Stockholders’ Agreement. At the Contribution Closing, each of the Shareholder Parties shall execute and deliver to the other parties thereto the Stockholders Agreement.

4.9 Tax Matters. Parent and each of the Shareholder Parties agree to report the transactions contemplated by this Agreement in a manner consistent with the intent of the parties hereto that such transactions qualify as a tax-free exchange within the meaning of Section 351 of the Code, and each such party agrees that it will not take a position inconsistent therewith. Parent and each of HK and the EA Parties hereby agrees to timely file the information required by Treas. Reg. Section 1.351-3 with its income tax return for the year in which the transactions contemplated by this Agreement occur and to comply with the record keeping requirements of Treas. Reg. Section 1.351-3.

4.10 Senior Preferred Stock. Parent agrees that it will not issue any shares of its Senior Preferred Stock, par value $0.01 per share, to be authorized in the Restated Certificate, unless the Company fails to consummate the transaction contemplated by Section 5.1(e) of the Company Disclosure Letter in accordance with the terms of the Merger Agreement prior to the Contribution Closing.

V. MISCELLANEOUS.

5.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy, telegraph or telex), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, or, in the case of telegraphic notice, when delivered to the telegraph company, or, in the case of telex notice, when sent, answerback received, addressed as follows to Parent and the Shareholder Parties, or to such other address as may be hereafter notified by the parties hereto:

(a) if to Parent or Merger Sub, to it at the following address:

Meteor Holding Corporation
c/o Francisco Partners
2882 Sand Hill Road, Suite 280
Menlo Park, CA 94025

Attn: Dipanjan Deb
Ann Savellano

Telecopy: 650-233-2999

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with a copy to:

Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304

Attn: Larry W. Sonsini
John A. Fore
Robert T. Ishii

Telecopy: 650-493-6811

(b) If to a Shareholder Party, to it at its address set forth in the Stockholders Agreement.

5.2 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of New York. Each of the parties to this Agreement (a) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York in any action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or any of the transaction contemplated by this Agreement in any other court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Each of the parties hereby consents to service of process in any such proceeding in any manner permitted by applicable law, and agrees that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 5.1 hereof is reasonably calculated to give actual notice.

5.3 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

5.4 Successors. All of the terms, agreements, covenants, representations, warranties, and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties and their respective successors.

5.5 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided that notwithstanding the foregoing, Parent may assign its rights and obligations hereunder to any Affiliate without the prior written consent of the other parties hereto; provided further that (a) no such assignment shall relieve Parent of its obligations hereunder and (b) any such assignment shall be economically neutral to the Shareholder Parties. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns.

5.6 Counterparts. This Agreement may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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5.7 Interpretation. The article and section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement.

5.8 Survival. The representations and warranties contained herein will survive the Contribution Closing.

5.9 Amendments and Waivers. No amendment, modification or supplement to the Agreement shall be enforced against any party unless such amendment, modification or supplement is in writing and signed by Parent and each of the Shareholder Parties. Any waiver by any party of any term of this Agreement shall not operate as or be construed to be a waiver of any other term of this Agreement. Any waiver must be in writing and signed by the Party charged therewith.

5.10 Integration. This Agreement, the Merger Agreement, the Stockholders Agreement and the documents referred to herein and therein or delivered pursuant hereto or thereto contain the entire understanding of the parties with respect to the subject matter hereof and thereof. There are no agreements, representations, warranties, covenants or undertakings with respect to the subject matter hereof and thereof other than those expressly set forth herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to this subject matter. There are no third party beneficiaries having rights under or with respect to this Agreement.

5.11 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof.

5.12 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they are entitled at law or in equity.

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ANNEX C-2

CONTRIBUTION AND VOTING AGREEMENT

CONTRIBUTION AND VOTING AGREEMENT, dated as of September 12, 2006 (this “Agreement”), between (i) Meteor Holding Corporation, a Delaware corporation (“Parent”), on the one hand, and (ii) each of (A) Elliott Associates, L.P., a Delaware limited partnership (“EA”) and (B) Elliott International, L.P., a Cayman Islands limited partnership (“EI”, and together with EA, the “Co-Investors”), on the other hand. Unless expressly provided otherwise in this Agreement, capitalized terms defined in the Merger Agreement when used in this Agreement shall have the same meanings set forth in the Merger Agreement (defined below).

WHEREAS, in connection with the consummation of the Merger, each of the Co-Investors shall become parties to a stockholders’ agreement in the form attached hereto as Exhibit A (the “Stockholders Agreement”);

WHEREAS, in connection with the consummation of the Merger, C. Harry Knowles (the “HK Investor”) and certain other parties have entered into a Contribution and Voting Agreement with Parent dated as of the date hereof (the “HK Agreement”) pursuant to which, among other things, the HK Investor has agreed to contribute shares of Company Common Stock (as defined herein) (the “HK Company Shares”) in exchange for shares of Parent Common Stock (as defined herein) and Parent Junior Preferred Stock (as defined herein) (the “HK Shares”), in accordance with the terms and conditions of the HK Agreement;

WHEREAS, the Co-Investors desire to contribute certain property to Parent as provided herein in exchange for the Co-Investor Shares (as defined herein), and it is intended that the issuance of the Co-Investor Shares in exchange for such property, when taken together with the issuance of the HK Shares in exchange for the HK Company Shares and the FP Investor’ purchase of the FP Shares, will qualify as tax-free exchanges within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”); and

NOW, THEREFORE, in consideration of the mutual covenants and conditions as hereinafter set forth, the parties hereto do hereby agree as follows:

I. CONTRIBUTIONS.

1.1 Co-Investor Contributions. At the Contribution Closing (as defined below), upon the terms and subject to the conditions of this Agreement, each of the Co-Investors hereby agrees, severally and not jointly, to transfer, contribute and deliver to Parent the number of shares of Common Stock, par value $0.01 per share, of the Company (the “Company Common Stock”) set forth opposite its name on Schedule I hereto (the “Co-Investor Contributions”). In exchange for the Co-Investor Contributions, Parent hereby agrees to issue at the Contribution Closing to each of the Co-Investors the number of shares of Common Stock, par value $0.01 per share, of Parent (“Parent Common Stock”) and the number of shares of Junior Preferred Stock, par value $0.01 per share, of Parent (“Parent Junior Preferred Stock”) set forth opposite its name on Schedule II hereto (the “Co-Investor Shares”). The allocation of shares of Parent Common Stock and Parent Junior Preferred Stock to be issued to each Co-Investor in exchange for the Co-Investor Contribution will be in the same relative proportion as the allocation of the shares of Parent Common Stock and Parent Junior Preferred Stock issued to the FP Investor in exchange for funding its Equity Financing Commitments (the “FP Shares”). The Parent Junior Preferred Stock shall have the rights, preferences, privileges and restrictions set forth in the restated certificate of incorporation of Parent in substantially the form attached as Exhibit B hereto (the “Restated Certificate”).

1.2 Delivery of Funds and Certificates. Subject to the satisfaction (or waiver by the parties entitled to the benefit thereof) of the conditions set forth in Section 1.3 of this Agreement, the closing of the transactions contemplated hereby (the “Contribution Closing”) will take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, or at such other location as the parties may mutually agree, immediately prior to the Closing (as defined in the Merger Agreement). At the Contribution Closing, Parent will deliver to each of the Co-Investors duly executed certificates, registered in the Co-Investor’s name, representing the Co-Investor Shares being issued to such Co-Investor at the Contribution Closing, against the transfer, contribution and payment to Parent of the Co-Investor Contribution by such Co-Investor (including the delivery of certificates evidencing the applicable number of shares of Company Common Stock with respect to such Co-Investor duly endorsed to Parent or, if not held in certificated form, other evidence of transfer of such Company Common Stock reasonably acceptable to Parent), which shall represent payment in full for such Co-Investor Shares.

1.3 Conditions to the Obligations of the Parties Hereunder. The respective obligations of the Co-Investors to Parent to consummate the transactions contemplated by this Article I of this Agreement shall be several, and not joint, and shall be subject to and conditioned upon the following: (i) the representations and warranties of Parent set forth in this Agreement being true and correct in all material respects at and as of the Closing as if made at and as of the Closing; (ii) Parent’s compliance in all material respects with its obligations hereunder; (iii) the absence of any prohibition against the consummation of the transactions contemplated hereby by any applicable law, statute, rule, regulation, judgment or order of any governmental authority of competent jurisdiction; (iv) the filing by Parent of the Restated Certificate (which Restated Certificate shall provide that it is to be effective upon filing); (v) the furnishing of funds by the FP Investor to Parent in satisfaction of its obligations to Parent with respect to the Equity Financing Commitments and the execution by the FP Investor of the Stockholders Agreement; and (vi) the satisfaction or waiver by Parent (in accordance with this Agreement) and/or the Company, as applicable, of all of the conditions to the consummation of the Merger (as set forth in the Merger Agreement); provided that the satisfaction, or waiver by Parent, of the conditions to the consummation of the Merger set forth in Section 7.2(e) or Section 7.2(f) of the Merger Agreement shall not be a condition to the performance by the Co-Investors of their respective obligations to Parent hereunder. Parent’s agreement with each

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Co-Investor is a separate agreement, and the issuance of Shares to each Co-Investor in exchange for such Co-Investor’s contribution in accordance with the terms hereof is a separate issuance of Shares.

II. REPRESENTATIONS AND WARRANTIES.

2.1 Representations and Warranties of Parent. Parent represents and warrants to the Co-Investors as follows:

(b) The execution, delivery and performance by Parent of this Agreement and the Stockholders Agreement and the agreements contemplated hereby and thereby and the consummation by Parent of the transactions contemplated hereby and thereby do not and will not, with or without the giving of notice or the passage of time or both, (i) violate the provisions of any law, rule or regulation applicable to Parent or its properties or assets, (ii) upon obtaining the requisite approval of Parent’s board of directors and stockholders of the Restated Certificate and the effective filing of the Restated Certificate, violate the provisions of the certificate of incorporation or bylaws of Parent, (iii) violate, conflict with or result in any breach, default or contravention of, or the creation of any Lien under, any note, bond, mortgage, contract, agreement, license or other instrument or obligation to which Parent is a party or by which it or any of its assets are bound, except for such violations, conflicts, breaches, defaults, contraventions or Liens, that, individually or in the aggregate, are not reasonably likely to result in a material adverse effect on the ability of Parent to consummate the Transactions, or (iv) violate any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to Parent or their properties or assets.

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(c) No consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, governmental and quasi-governmental agencies, authorities and instrumentalities of competent jurisdiction) by Parent in order (i) for each of this Agreement and the Stockholders Agreement to constitute a legal, valid and binding obligation of Parent or (ii) to authorize or permit the consummation by Parent of the issuance of the Co-Investor Shares, except (A) to the extent required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”), and any similar applicable competition or antitrust laws, (B) the filing of the Restated Certificate with the Secretary of State of the State of Delaware and (C) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the Co-Investor Shares.

(d) As of the date hereof, the authorized capital stock of Parent consists of 1,000 shares of Parent Common Stock. As of the date hereof, one (1) share of Parent Common Stock is issued and outstanding and held of record by the FP Investor. There are no options, warrants or other rights to purchase capital stock of Parent, or securities convertible into or exercisable or exchangeable for capital stock of Parent, except pursuant to this Agreement, the HK Agreement and agreements to be entered into between Parent and the FP Investor to effect the Equity Financing Commitments. Parent has delivered to the Co-Investors true and complete copies of its charter and bylaws as in effect on the date hereof.

(e) The Co-Investor Shares, when issued and delivered in accordance with the terms hereof and upon receipt of payment required to be made hereunder, will be duly authorized, validly issued, fully paid and nonassessable and free and clear of any mortgage, pledge, security interest, claim, encumbrance, lien or charge of any kind, excluding restrictions under applicable securities laws (each, a “Lien”), except as may be otherwise set forth in the Stockholders Agreement.

(f) Parent was organized solely for the purpose of effecting the Transactions and as of the Contribution Closing will have engaged in no activity other than in connection with the Transactions.

(g) Assuming (A) the Co-Investors satisfy their obligations with respect to the Co-Investor Contributions, (B) the HK Investor satisfy his obligations with respect to contributing the HK Company Shares in accordance with the HK Agreement (the “HK Contributions”) and (C) the FP Investor fund its obligations pursuant to the Equity Financing Commitments, in each case at or prior to the Contribution Closing, (i) the FP Investor, the HK Investor and the Co-Investors, when taken together, shall hold at least 80% of the voting stock of Parent and at least 80% of each class of nonvoting stock, if any, at the time of the Contribution Closing, and (ii) the Co-Investor Contributions, HK Contributions, the equity financing provided by the FP Investor, and the debt financing provided by the Lender, together with cash and fully liquid cash equivalents on the Company’s balance sheet as of the Closing, will be sufficient to pay the Merger Consideration (as defined in the Merger Agreement) and all expenses of Parent, the FP Investor, the HK Investor and the Co-Investors.

(h) Parent has no current plan or intention to reacquire any of the FP Shares, the HK Shares or the Co-Investor Shares. Parent will not cause any action to be taken or fail to take any action that is reasonably likely to prevent the stock issuances to the Co-Investors and the HK Investor contemplated by this Agreement from qualifying as tax-free exchanges under Section 351 of the Code; provided, however, that Parent shall not be prohibited from taking any action that is permitted by this Agreement or any other agreement referenced herein.

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2.2 Representations and Warranties of the Co-Investors. Each of the Co-Investors represents and warrants, severally and not jointly, to Parent that:

(a) The execution and delivery by such Co-Investor of this Agreement and the Stockholders Agreement and the documents contemplated hereby and thereby, the performances by such Co-Investor of its obligations hereunder and thereunder and the consummations by such Co-Investor of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of such Co-Investor. This Agreement has been duly executed and delivered by such Co-Investor and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes a legal, valid and binding obligation of such Co-Investor, enforceable against such Co-Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law). At the Contribution Closing, the Stockholders Agreement will have been duly executed and delivered by such Co-Investor and, assuming the due authorization, execution and delivery thereof by the other parties thereto, will constitute a legal, valid and binding obligation of such Co-Investor, enforceable against such Co-Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or in law).

(b) The execution, delivery and performance by such Co-Investor of this Agreement and the Stockholders Agreement and the agreements contemplated hereby and thereby and the consummation by such Co-Investor of the transactions contemplated hereby and thereby does not and will not, with or without the giving of notice or the passage of time or both, (i) subject to the receipt of any required antitrust approvals, violate in any material respect the provisions of any law, rule or regulation applicable to such Co-Investor or its properties or assets, (ii) violate the provisions of the constituent organizational documents or other governing instruments applicable to such Co-Investor, as amended to date, (iii) violate, conflict with or result in any breach, default or contravention of, or the creation of any Lien under, any note, bond, mortgage, contract, agreement, license or other instrument or obligation to which such Co-Investor is a party or by which it or any of its assets are bound, except for such violations, conflicts, breaches, defaults, contraventions or Liens, that, individually or in the aggregate, are not reasonably likely to result in a material adverse effect on the ability of such Co-Investor to consummate the Transactions, or (iv) violate in any material respect any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to such Co-Investor or its properties or assets.

(c) Such Co-Investor (i) is an “accredited investor” within the definition of Regulation D promulgated by the Securities and Exchange Commission pursuant to the Securities Act, (ii) is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of

C-2-5

development and acknowledges that it is able to fend for itself, can bear the economic risk of such Co-Investor’s investment in Parent, and has such knowledge and experience in financial and business matters that such Co-Investor is capable of evaluating the merits and risks of the investment in the Co-Investor Shares and can afford a complete loss of its investment, (iii) has not been organized for the purpose of acquiring the Co-Investor Shares, (iv) understands that no public market now exists for the Co-Investor Shares and there is no assurance that a pubic market will ever exist for the Co-Investor Shares and (v) understands that the Co-Investor Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Co-Investor Shares or an available exemption from registration under the Securities Act, the Co-Investor Shares must be held indefinitely.

(d) Such Co-Investor’s total beneficial ownership of shares of outstanding Company Common Stock as of the date hereof is accurately set forth opposite such Co-Investor’s name on Schedule III hereto, and each of such shares representing Co-Investor Contributions when transferred and delivered to Parent, upon the terms and subject to the conditions set forth herein, will be free and clear of all Liens.

(e) Such Co-Investor (i) has no binding commitment to dispose of any of the Co-Investor Shares; (ii) has not engaged in any discussions with third parties concerning the potential sale of the Co-Investor Shares; and (iii) will not intentionally cause any action to be taken that is reasonably likely to prevent the transactions contemplated by this Agreement from qualifying as a tax-free exchange under Section 351 of the Code.

(f) No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of such Co-Investor or any of its Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with any of the Transactions.

III. VOTING AND EXCLUSIVITY.

3.1 Voting; Proxy.

(a) Each of the Co-Investors agrees to vote or consent (or cause to be voted or consented), in person or by proxy, all shares of Company Common Stock beneficially owned or held of record by such Co-Investor or to which such Co-Investor has, directly or indirectly, the right to vote or direct the voting (the “Subject Shares”) in favor of the Merger Agreement, the Merger and the other Transactions and any other matter required to effect the Transactions (including one or more adjournments if necessary to solicit additional proxies if there are insufficient votes at the time of any meeting held to approve the Merger Agreement) at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of the Company called to consider such matters; and in the event the approval of such matters is sought through an action by written consent of the stockholders in lieu of a meeting, to timely execute and deliver such written consent in favor of such matters.

(b) Each of the Co-Investors agrees to vote or consent (or cause to be voted or consented), in person or by proxy, all Subject Shares (i) against any Acquisition Proposal or any agreement or transaction with respect to any Acquisition Proposal and (ii) against any amendment of the Company’s certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its Subsidiaries (as defined in the Merger Agreement), which amendment or other proposal or transaction would in any manner delay, impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other Transactions or change in any manner the voting rights of Company Common Stock, in each case at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of the Company called to consider such matters; and in the event the approval of such matters is sought through an action by written consent of the stockholders in lieu of a meeting, to not consent to such action.

C-2-6

(c) In order to effectuate the parties’ intent under Section 3.1(a) and Section 3.1(b), each Co-Investor hereby grants to Dipanjan Deb, David ibnAle and Andrew Kowal, with full power of substitution and resubstitution, an irrevocable proxy, which proxy is coupled with an interest, to exercise all voting, consent and similar rights of the Co-Investor with respect to the Subject Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special, adjourned or postponed meeting of stockholders of the Company and in every written consent in lieu of such meeting: (i) in favor of the Merger Agreement, the Merger and the other Transactions and any other matter required to effect the Transactions (including in favor of one or more adjournments if necessary to solicit additional proxies if there are insufficient votes at the time of any meeting held to approve the Merger Agreement); (ii) against any Acquisition Proposal or any agreement or transaction with respect to any Acquisition Proposal; and (iii) against any amendment of the Company’s certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its Subsidiaries, which amendment or other proposal or transaction would in any manner delay, impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other Transactions or change in any manner the voting rights of Company Common Stock.

3.2 Transfer. Except for the Co-Investor Contributions to Parent, the proxy granted pursuant to Section 3.1(c), and the transfer of the Subject Shares pursuant to the Merger Agreement, each Co-Investor agrees not to, directly or indirectly, sell, transfer, pledge, hypothecate, distribute or otherwise dispose of any Subject Shares or grant any proxies, deposit any Subject Shares into any voting trust, or enter into any voting agreement, with respect to such Subject Shares, provided, however, that a Co-Investor may transfer or assign Subject Shares to a Permitted Transferee (as such term is defined in the Stockholders Agreement with respect to the Co-Investors) so long as (i) Parent is given written notice prior to said transfer or assignment, stating the name and address of the Permitted Transferee and specifying the number of Subject Shares that are intended to be transferred or assigned and (ii) the Permitted Transferee assumes in writing the obligations of the transferring Co-Investor under this Agreement.

3.3 Exclusivity. Each Co-Investor shall not, and it shall cause each of its Subsidiaries, Affiliates (except the Company) and its and their respective Representatives acting on their behalf to not, directly or indirectly, (i) solicit, initiate, encourage, or induce the making, submission or announcement of, any inquiry, proposal or offer with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (ii) furnish to any Person (other than to its Representatives or to Parent or any designees of Parent) any non-public information relating to the Company or any of its Subsidiaries, or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to any Person (other than to its Representatives or to Parent or any designees of Parent), or take any other action intended to assist or facilitate any inquiries or the making of any proposal or offer that constitutes, or that could reasonably be expected to lead to, an Acquisition Proposal, (iii) participate or engage in discussions or negotiations with any Person with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (iv) approve, endorse or recommend an Acquisition Proposal, or (v) enter into any letter of intent, memorandum of understanding, agreement in principle or Contract (as defined in the Merger Agreement) contemplating or otherwise relating to an Acquisition Proposal. Each Co-Investor shall, and shall cause each of its Subsidiaries and its and their respective Representatives acting on its behalf to, immediately cease any and all existing activities, discussions or negotiations with any Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, any Acquisition Proposal.

3.4 Certain Definitions. For purposes of this Agreement, the following terms will have the following meanings:

C-2-7

Company or any of its Subsidiaries, (ii) for the issuance by the Company of 20% or more of its total outstanding voting securities or (iii) to acquire in any manner, directly or indirectly, 20% or more of the capital stock or assets of the Company or any of its Subsidiaries, in each case other than the Merger and the other Transactions.

“Affiliate” means, when used with respect to any party, any Person who is an “affiliate” of that party within the meaning of Rule 405 promulgated under the Securities Act.

IV. OTHER COVENANTS.

4.4 Fees and Expenses.

(a) Subject to Section 4.4(b), the Expenses incurred by each party hereto will be borne by the party incurring such Expenses.

(b) Parent shall reimburse each Co-Investor for its reasonable out-of-pocket Expenses; provided, however, that Parent shall have no obligation under this Section 4.4(b) to a Co-Investor in the event the Co-Investor fails to make the Co-Investor Contribution at the Contribution Closing if such Co-Investor Contribution is required to be made by the terms hereof.

C-2-8

(c) For purposes of this Agreement, “Expenses” shall mean, with respect to a party, the fees and expenses incurred by that party in connection with the authorization, preparation, negotiation, execution and performance of this Agreement, the Restated Certificate, the Stockholders Agreement, any related agreements and the transactions contemplated hereby and thereby (including the fees and expenses of counsel, accountants, investment bankers, financing sources and consultants).

4.6 Notification of Certain Matters. Each Co-Investor shall give prompt notice to Parent, and Parent shall give prompt notice to each Co-Investor, as the case may be, of (a) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of such Co-Investor or Parent, as the case may be, contained in this Agreement to be untrue or inaccurate at or prior to the Contribution Closing and (b) any failure of Parent or such Co-Investor, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 4.6 shall not limit or otherwise affect any remedies available to the party receiving such notice. No disclosure by any party pursuant to this Section 4.6 shall prevent or cure any misrepresentations, breach of warranty or breach of covenant.

4.7 Public Statements. Before any of the Co-Investors shall release any statements concerning this Agreement, the Merger Agreement, the Stockholders Agreement, the Financing Commitments, the Transactions or any of the matters contemplated hereby and thereby which is intended for or may result in public dissemination thereof, such Co-Investor shall cooperate with the other parties hereto and provide the other parties the reasonable opportunity to review and comment upon any such statements and, unless otherwise required by law, shall not release or permit release of any such information without the consent of the other parties, which shall not be unreasonably withheld.

4.8 Execution of Stockholders’ Agreement. At the Contribution Closing, each of the Co-Investors shall execute and deliver to the other parties thereto the Stockholders Agreement.

4.9 Tax Matters. Parent and each of the Co-Investors agree to report the transactions contemplated by this Agreement in a manner consistent with the intent of the parties hereto that such transactions qualify as a tax-free exchange within the meaning of Section 351 of the Code, and each such party agrees that it will not take a position inconsistent therewith. Parent and each of the Co-Investors hereby agrees to timely file the information required by Treas. Reg. Section 1.351-3 with its income tax return for the year in which the transactions contemplated by this Agreement occur and to comply with the record keeping requirements of Treas. Reg. Section 1.351-3.

V. MISCELLANEOUS.

C-2-9

when sent, answerback received, addressed as follows to Parent and the Co-Investors, or to such other address as may be hereafter notified by the parties hereto:

(a) if to Parent or Merger Sub, to it at the following address:

Meteor Holding Corporation
c/o Francisco Partners
2882 Sand Hill Road, Suite 280
Menlo Park, CA 94025
Attn:	Dipanjan Deb
	Ann Savellano
Telecopy: 650-233-2999
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn:	Larry W. Sonsini
	John A. Fore
	Robert T. Ishii
Telecopy: 650-493-6811

(b) If to a Co-Investor, to it at its address set forth in the Stockholders Agreement.

C-2-10

5.5 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided that notwithstanding the foregoing, Parent may assign its rights and obligations hereunder to any Affiliate without the prior written consent of the other parties hereto; provided further that (a) no such assignment shall relieve Parent of its obligations hereunder, and (b) any such assignment shall be economically neutral to the Co-Investors. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns.

5.8 Survival. The representations and warranties contained herein will survive the Contribution Closing.

5.9 Amendments and Waivers. No amendment, modification or supplement to the Agreement shall be enforced against any party unless such amendment, modification or supplement is in writing and signed by Parent and each of the Co-Investors. Any waiver by any party of any term of this Agreement shall not operate as or be construed to be a waiver of any other term of this Agreement. Any waiver must be in writing and signed by the Party charged therewith.

5.10 Integration. This Agreement, the Merger Agreement, the Stockholders Agreement, the letter agreement between Parent and EA of even date herewith regarding sharing of certain fees, and the documents referred to herein and therein or delivered pursuant hereto or thereto contain the entire understanding of the parties with respect to the subject matter hereof and thereof. There are no agreements, representations, warranties, covenants or undertakings with respect to the subject matter hereof and thereof other than those expressly set forth herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to this subject matter. There are no third party beneficiaries having rights under or with respect to this Agreement.

[Remainder of page intentionally left blank]

C-2-11

Preliminary Copy

METROLOGIC INSTRUMENTS, INC.

PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON

, 2006

SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints and , and either of them, each with full power of substitution, as proxies to represent and to vote as designated on the reverse of this card all shares of stock which the undersigned is entitled to vote at the special meeting of shareholders of Metrologic Instruments, Inc., to be held at 90 Coles Road, Blackwood, New Jersey, 08012 on , 2006 at .m., local time, and at any adjournment thereof.

Shares of common stock of Metrologic Instruments, Inc. will be voted as specified. Unless otherwise specified, this proxy will be voted “FOR” the proposal to adopt the Agreement and Plan of Merger by and among Meteor Holding Corporation, Meteor Merger Corporation and Metrologic Instruments, Inc. dated as of September 12, 2006 and “FOR” the proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. If any other matter is properly presented at the special meeting, this proxy will be voted in accordance with the judgment of the persons appointed as proxies. If you do not sign and return a proxy, submit a proxy through the Internet, or attend the special meeting and vote by ballot, shares that you own cannot be voted.

The undersigned hereby acknowledges receipt of the Notice of Special Meeting of Shareholders and Proxy Statement, dated , prior to the execution of this Proxy and hereby expressly revokes any and all proxies heretofore given or executed by the undersigned shares of stock represented by this Proxy and by filing this Proxy with the Secretary of the Corporation gives notice of such revocation.

This proxy may be revoked at any time prior to the time it is voted.

Please complete, date and sign this proxy and return it promptly in the enclosed envelope.


SEE REVERSE SIDE	CONTINUED AND TO BE SIGNED ON REVERSE SIDE	SEE REVERSE SIDE

	Address Change/Comments (Mark the corresponding box on the reverse side)

Fold and detach here

		Mark Here for Address Change or Comments	o
		PLEASE SEE REVERSE SIDE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING:
	FOR	AGAINST	ABSTAIN
1. To approve the Agreement and Plan of Merger, dated as of September 12, 2006, by and between Meteor Holding Corporation, Meteor Merger Corporation and Metrologic Instruments, Inc.	o	o	o

	FOR	AGAINST	ABSTAIN
2. To approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve Proposal 1.	o	o	o

3. In their judgment, the proxy holders are authorized to vote upon any other matter unknown a reasonable time before this solicitation that may properly come before the special meeting of shareholders or any adjournment or postponement thereof.


Signature:	Date:	Signature:	Date:


Please date and sign exactly as your name or names appear hereon. Corporate or partnership proxies should be signed in full corporate or partnership name by an authorized person. Persons signing in a fiduciary capacity should indicate their full titles. If shares are held by joint tenants or as community property, each should sign.


Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.

	Sincerely,


	C. Harry Knowles
	Chairman and
	Interim Chief Executive Officer

Annex A—Agreement and Plan of Merger
Annex B—Needham & Company, LLC Opinion
Annex C-1—Knowles Contribution and Voting Agreement
Annex C-2—Elliott Contribution and Voting Agreement

METEOR HOLDING CORPORATION
By:	/s/ DAVID T. IBNALE
	Name:	David T. ibnAle
	Title:	Vice President and Treasurer
METEOR MERGER CORPORATION
By:	/s/ ANDREW KOWAL
	Name:	Andrew Kowal
	Title:	Vice President and Secretary
METROLOGIC INSTRUMENTS, INC.
By:	/s/ C. HARRY KNOWLES
	Name:	C. Harry Knowles
	Title:	Interim Chief Executive Officer

	METROLOGIC INSTRUMENTS, INC.
	By:
		Name:
		Title: President

METEOR HOLDING CORPORATION
	By:	/s/ DAVID T. IBNALE
		Name: David T. ibnAle
		Title: Vice President and Treasurer

	By Order of the Board of Directors,

	Janet H. Knowles
	Corporate Secretary
	Blackwood, New Jersey
	, 2006

		Page
SUMMARY TERM SHEET	1
The Merger and Related Matters	1
The Special Meeting and Related Matters	5
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING	7
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION	15
SPECIAL FACTORS	16
Background of the Merger	16
Recommendations of the Special Committee and the Board of Directors	25
Reasons for the Special Committee’s Recommendation	26
Reasons for the Board’s Recommendation	30
Opinion of Needham & Company, LLC	30
Position of C. Harry Knowles as to Fairness	36
Position of Meteor Holding Corporation and Meteor Merger Corporation as to Fairness	37
Purposes, Reasons and Plans for Metrologic After the Merger	38
Certain Effects of the Merger	39
Effects on the Company if the Merger is Not Completed	41
Financing of the Merger	42
Interests of Certain Persons in the Merger	46
Material U.S. Federal Income Tax Consequences	51
Accounting Treatment	53
Regulatory Approvals	53
Fees and Expenses of the Merger	54
Litigation Related to the Merger	54
Certain Financial Projections	55
Provisions for Unaffiliated Shareholders	59
THE PARTIES TO THE MERGER	60
Metrologic Instruments, Inc.	60
Meteor Holding Corporation	60
Meteor Merger Corporation	60
CURRENT EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY	61
THE SPECIAL MEETING	64
Time, Place and Purpose of the Special Meeting	64
Record Date, Quorum and Voting Power	64
Required Vote	64
Voting by Directors and Executive Officers	65
Proxies; Revocation	65
Proxy Solicitation; Expenses of Proxy Solicitation	65
Adjournments	66
THE MERGER AGREEMENT (PROPOSAL NO. 1)	67
Effective Time	67
Structure	67
Treatment of Stock, Options and Warrants	67
Exchange and Payment Procedures	68
Certificate of Incorporation and Bylaws	69
Directors and Officers	69
Representations and Warranties	69
Conduct of Our Business Pending the Merger	71

Financing		74
No Solicitation of Transactions		74
Indemnification		77
Resignations		77
Employee Benefits		77
Agreement to Take Further Action and to Use Commercially Reasonable Efforts		78
Conditions to Completion of the Merger		78
Termination		80
Fees and Expenses		81
Material Adverse Effect		82
Amendment and Waiver		83
OTHER AGREEMENTS RELATING TO OUR SECURITIES		84
Contribution and Voting Agreements		84
Confidentiality and Standstill Agreement		86
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA		87
MARKET PRICES OF THE COMPANY’S COMMON STOCK		89
DIVIDEND POLICY		89
TRANSACTIONS IN THE COMPANY’S STOCK		90
PERSONS OWNING MORE THAN FIVE PERCENT OF STOCK		91
SECURITY OWNERSHIP BY MANAGEMENT		93
ADJOURNMENT OF THE SPECIAL MEETING (PROPOSAL NO. 2)		98
SHAREHOLDER PROPOSALS		99
OTHER MATTERS		99
WHERE YOU CAN FIND ADDITIONAL INFORMATION		100
INCORPORATION BY REFERENCE		100

			Page
ARTICLE I THE MERGER		A-2
1.1	Effective Time of the Merger	A-2
1.2	Closing	A-2
1.3	Effects of the Merger; Structure	A-2
1.4	Certificate of Incorporation	A-2
1.5	Bylaws	A-3
1.6	Directors and Officers of the Surviving Corporation	A-3
ARTICLE II CONVERSION OF SECURITIES		A-3
2.1	Conversion of Capital Stock	A-3
2.2	Exchange of Certificates	A-4
2.3	Company Stock Options	A-5
2.4	Warrants	A-6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY		A-6
3.1	Organization, Standing and Power	A-6
3.2	Capitalization	A-7
3.3	Subsidiaries	A-9
3.4	Authority; No Conflict; Required Filings and Consents	A-10
3.5	SEC Reports; Financial Statements; Information Provided	A-11
3.6	No Undisclosed Liabilities	A-13
3.7	Absence of Certain Changes or Events	A-13
3.8	Taxes	A-13
3.9	Owned and Leased Real Properties	A-15
3.10	Title to Assets	A-16
3.11	Intellectual Property	A-16
3.12	Contracts	A-18
3.13	Litigation	A-20
3.14	Environmental Matters	A-20
3.15	Employee Benefit Plans	A-21
3.16	Compliance With Laws	A-23
3.17	Permits	A-23
3.18	Labor Matters	A-24
3.19	Insurance	A-24
3.20	Opinion of Financial Advisor	A-24
3.21	Anti-Takeover Laws	A-24
3.22	Brokers; Fees	A-25

3.23	Transactions with Affiliates	A-25
3.24	Proxy Statement and Schedule 13E-3	A-25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		A-25
4.1	Organization, Standing and Power	A-25
4.2	Authority; No Conflict; Required Filings and Consents	A-26
4.3	Information Provided	A-26
4.4	Operations of Merger Sub	A-27
4.5	Litigation	A-27
4.6	Financing	A-27
4.7	Contribution Agreement	A-28
ARTICLE V CONDUCT OF BUSINESS		A-28
5.1	Covenants of the Company	A-28
5.2	Confidentiality	A-30
5.3	Financing Commitments	A-30
5.4	Investments	A-31
ARTICLE VI ADDITIONAL AGREEMENTS		A-32
6.1	No Solicitation	A-32
6.2	Proxy Statement	A-35
6.3	Nasdaq Quotation	A-35
6.4	Access to Information	A-35
6.5	Shareholders Meeting	A-35
6.6	Legal Requirements	A-36
6.7	Public Disclosure	A-37
6.8	Indemnification	A-37
6.9	Notification of Certain Matters	A-38
6.10	Exemption from Liability Under Section 16	A-39
6.11	Resignations	A-39
6.12	Employee Benefit Matters	A-39
ARTICLE VII CONDITIONS TO MERGER		A-40
7.1	Conditions to Each Party’s Obligation to Effect the Merger	A-40
7.2	Additional Conditions to Obligations of Parent and Merger Sub	A-40
7.3	Additional Conditions to Obligations of the Company	A-41
ARTICLE VIII TERMINATION AND AMENDMENT		A-42
8.1	Termination	A-42
8.2	Effect of Termination	A-43
8.3	Fees and Expenses	A-43

8.4	Amendment	A-44
8.5	Extension; Waiver	A-45
ARTICLE IX MISCELLANEOUS		A-45
9.1	Nonsurvival of Representations, Warranties and Agreements	A-45
9.2	Notices	A-45
9.3	Entire Agreement	A-46
9.4	No Third Party Beneficiaries	A-46
9.5	Assignment	A-46
9.6	Severability	A-46
9.7	Counterparts and Signature	A-47
9.8	Interpretation	A-47
9.9	Governing Law	A-47
9.10	Remedies	A-47
9.11	Submission to Jurisdiction	A-47
9.12	Waiver of Jury Trial	A-48
EXHIBIT A—FORM OF HK CONTRIBUTION AGREEMENT
EXHIBIT B—FORM OF EA CONTRIBUTION AGREEMENT
EXHIBIT C—FORM OF RESTATED CERTIFICATE OF INCORPORATION

	Very truly yours,
	/s/ NEEDHAM & COMPANY, LLC
	NEEDHAM & COMPANY, LLC

/s/ C. HARRY KNOWLES
C. Harry Knowles
/s/ JANET H. KNOWLES
Janet H. Knowles
TRUST UNDER AGREEMENT OF C. HARRY KNOWLES DATED 4/8/94 FBO DIANN H. LYNMAM
By	/s/ ED PLASKY
	Name: Ed Plasky
	Title: Trustee
TRUST UNDER AGREEMENT OF C. HARRY KNOWLES DATED 4/8/94 FBO DONNAH M. STARZYNSKI
By		/s/ ED PLASKY
		Name: Ed Plasky
		Title: Trustee
TRUST UNDER AGREEMENT OF C. HARRY KNOWLES DATED 4/8/94 FBO HARRY H. KNOWLES, II
By		/s/ ED PLASKY
		Name: Ed Plasky
		Title: Trustee
TRUST UNDER AGREEMENT OF C. HARRY KNOWLES DATED 4/8/94 FBO MARJORIE B. KNOWLES
By	/s/ ED PLASKY
	Name: Ed Plasky
	Title: Trustee

	HK Contribution (shares of Company Common Stock)
C. Harry Knowles		1,680,578	(1)

	Shares of Parent Common Stock			Shares of Parent Junior Preferred Stock
C. Harry Knowles		12,436,280	(1)		27,982	(1)

Shareholder Party	Beneficial Ownership (Shares of Company Common Stock)
C. Harry Knowles		3,475,928
Janet H. Knowles		0
The C. Harry Knowles Charitable Remainder Annuity Trust No.1		648,650
The Knowles Charitable Foundation		648,650
Janet H. and C. Harry Knowles Foundation, Inc.		4,049,460
Trust under Agreement of C. Harry Knowles dated 4/8/94 FBO:
Diann H. Lynmam		100,179
Donnah M. Starzynski		100,179
Harry H. Knowles, II		59,798
Marjorie B. Knowles		59,798
Robert H. Knowles		60,598
C. Harry Knowles Grantor Retained Annuity Trust No.1		203,891
Total Shares		9,407,131

ELLIOTT ASSOCIATES, L.P.
By:	ELLIOTT CAPITAL ADVISORS, L.P. its General Partner
By:	BRAXTON ASSOCIATES, INC. its General Partner
By	/s/	ELLIOT GREENBERG
		Name:		Elliot Greenberg
		Title:		Vice President
ELLIOTT INTERNATIONAL, L.P.
By:	ELLIOTT INTERNATIONAL CAPITALADVISORS INC.
	as Attorney-in-Fact
By	/s/		ELLIOT GREENBERG
			Name:		Elliot Greenberg
			Title:		Vice President

Co-Investor	Co-Investor Contribution (shares of Company Common Stock)
Elliott Associates, L.P.		681,553
Elliott International, L.P.		1,022,332