UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended May 30, 1999
Commission File No. 0-3362
SI HANDLING SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact Name Of Registrant As Specified In Its Charter)
Pennsylvania 22-1643428
- ------------------------------- -------------------
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
600 Kuebler Road, Easton, PA 18040
- ---------------------------------------- ----------
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 610-252-7321
------------
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Number of shares of common stock, par value $1.00 per share, outstanding as of
May 30, 1999: 3,708,412.
---------
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
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SI Handling Systems, Inc.
Balance Sheets (Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
May February
30, 1999 28, 1999
---------- ----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents, principally
time deposits $ 2,118 1,829
------ ------
Receivables:
Trade 7,382 7,603
Notes and other receivables 141 51
------ ------
Total receivables 7,523 7,654
------ ------
Costs and estimated earnings in excess
of billings 3,709 7,709
Inventories:
Raw materials 1,129 1,002
Finished goods and work-in-process 2,270 1,613
------ ------
Total inventories 3,399 2,615
------ ------
Deferred income tax benefits 613 600
Prepaid expenses and other current assets 262 199
------ ------
Total current assets 17,624 20,606
------ ------
Property, plant and equipment, at cost:
Land 27 27
Buildings and improvements 3,485 3,485
Machinery and equipment 4,714 4,544
------ ------
8,226 8,056
Less: accumulated depreciation 6,658 6,426
------ ------
Net property, plant and equipment 1,568 1,630
------ ------
Deferred income tax benefits 276 175
Investment in joint venture 1,069 1,041
Other assets, at cost less accumulated
amortization of $101 in 2000 and $90
in 1999 572 128
------ ------
Total assets $ 21,109 23,580
====== ======
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
Item 1. Financial Statements (Continued)
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SI Handling Systems, Inc.
Balance Sheets (Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
May February
30, 1999 28, 1999
---------- ----------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Current installments of long-term debt $ 9 9
Accounts payable 3,191 4,079
Customers' deposits and billings in excess
of costs and estimated earnings 3,152 4,173
Accrued salaries, wages, and commissions 532 761
Income taxes payable 120 410
Accrued royalties payable 207 357
Accrued other liabilities 1,537 1,416
------ ------
Total current liabilities 8,748 11,205
------ ------
Long-term liabilities:
Long-term debt, excluding current installments:
Mortgage payable 14 16
------ ------
Total long-term debt 14 16
Deferred compensation 451 212
------ ------
Total long-term liabilities 465 228
------ ------
Stockholders' equity:
Common stock, $1 par value; authorized
20,000,000 shares; issued 3,708,412
shares in 2000 and 3,705,048 shares
in 1999 3,708 3,705
Additional paid-in capital 2,780 2,767
Retained earnings 5,408 5,675
------ ------
Total stockholders' equity 11,896 12,147
------ ------
Total liabilities and stockholders' equity $ 21,109 23,580
====== ======
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
Item 1. Financial Statements (Continued)
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SI Handling Systems, Inc.
Statements of Operations (Unaudited)
(In Thousands, Except Share And Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
May May
30, 1999 31, 1998
----------- ----------
<S> <C> <C>
Net sales $ 9,952 8,800
Cost of sales 8,115 6,487
--------- ---------
Gross profit on sales 1,837 2,313
--------- ---------
Selling, general and
administrative expenses 1,614 1,668
Product development costs 153 119
Interest expense 2 2
Interest income (29) (45)
Equity in income
of joint venture (28) (10)
Other income, net (43) (33)
--------- ---------
1,669 1,701
--------- ---------
Earnings before
income taxes 168 612
Income tax expense 64 235
--------- ---------
Net earnings $ 104 377
========= =========
Basic earnings
per share $ .03 .10
========= =========
Diluted earnings
per share $ .03 .10
========= =========
Cash dividends
per share $ .10 .10
========= =========
Average shares
outstanding 3,706,636 3,715,445
Dilutive effect of
stock options 16,161 35,853
Dilutive effect of
phantom stock units 14,135 9,499
--------- ---------
Average shares
outstanding
assuming dilution 3,736,932 3,760,797
========= =========
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------- --------------------
SI Handling Systems, Inc.
Statements of Cash Flows (Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
May May
30, 1999 31, 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 104 377
Adjustments to reconcile net earnings
to net cash provided
by operating activities:
Depreciation of plant and equipment 93 100
Amortization of intangibles 11 2
Gain on disposition of equipment (2) -
Equity in income of joint venture (28) (10)
Change in operating assets and liabilities,
net of effects of the acquisition of
Modular Automation Corp.:
Receivables 177 2,603
Costs and estimated earnings in
excess of billings 4,349 2,015
Inventories (615) (220)
Prepaid expenses and other
current assets (63) 43
Other noncurrent assets 39 -
Accounts payable (888) (2,172)
Customers' deposits and billings
in excess of costs and estimated
earnings (1,021) 1,497
Accrued salaries, wages, and
commissions (229) (880)
Income taxes payable (290) -
Accrued royalties payable (150) (244)
Accrued other liabilities (250) (93)
Deferred compensation (15) -
----- -----
Net cash provided by
operating activities 1,222 3,018
----- -----
Cash flows from investing activities:
Proceeds from the disposition of
equipment 2 -
Acquisition of Modular Automation Corp.,
net of cash acquired (919) -
Additions to property, plant and equipment (30) (36)
----- -----
Net cash used by
investing activities (947) (36)
----- -----
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------- --------------------
SI Handling Systems, Inc.
Statements of Cash Flows (Unaudited) (Continued)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
May May
30, 1999 31, 1998
---------- ---------
<S> <C> <C>
Cash flows from financing activities:
Sale of common shares in connection
with employee incentive stock
option plan 16 33
Repayment of long-term debt (2) (1)
Repayment of revolving credit
loan payable to bank - (1,000)
----- -----
Net cash provided (used) by
financing activities 14 (968)
----- -----
Increase in cash and
cash equivalents 289 2,014
Cash and cash equivalents, beginning
of period 1,829 752
----- -----
Cash and cash equivalents, end of period $ 2,118 2,766
===== =====
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1 3
===== =====
Income taxes $ 354 235
===== =====
Supplemental disclosures of
noncash financing activities:
Cash dividends declared in May but
payable in June $ 371 372
===== =====
Issuance of 14,886 common shares in
exchange for 5,978 common shares
delivered to the Company by officers
in connection with the employee
incentive stock option plan $ - 84
===== =====
</TABLE>
See accompanying notes to financial statements.
- 6 -
<PAGE>
Item 1. Financial Statements (Continued)
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SI Handling Systems, Inc.
Notes To Financial Statements
Three Months Ended May 30, 1999 and May 31, 1998
(1) The information contained in this 10-Q report is unaudited and is subject
to year-end adjustments and audit. However, in the opinion of management,
the interim financial statements furnished reflect all adjustments and
accruals which are necessary to a fair statement of results for the interim
periods presented. Results for interim periods are not necessarily
indicative of results expected for the fiscal year. Refer to the Company's
10-K for the year ended February 28, 1999 for more complete financial
information.
(2) SI Handling Systems, Inc. ("SI" or the "Company") and McKesson Automated
Prescription Systems, Inc. ("McKesson APS"), formerly known as Automated
Prescription Systems, Inc., are co-venturers in a joint venture named
SI/BAKER, INC. ("SI/BAKER" or the "joint venture"). On September 29, 1998,
McKesson Corporation [NYSE:MCK], a healthcare supply management company,
announced the completion of its acquisition of Automated Prescription
Systems, Inc. Automated Prescription Systems, Inc. was renamed McKesson
Automated Prescription Systems, Inc. The SI/BAKER joint venture draws upon
the automated materials handling systems experience of SI and the automated
pill counting and dispensing products of McKesson APS to provide automated
pharmacy systems. Each member company contributed $100,000 in capital to
fund the joint venture.
The joint venture designs and installs computer controlled, fully
automated, integrated systems for managed care pharmacy operations. The
joint venture's systems are viewed as labor saving devices which address
the issues of improved productivity and cost reduction. Systems can be
expanded as customers' operations grow and they may be integrated with a
wide variety of components to meet specific customer needs.
Schedule A contains the SI/BAKER, INC. financial statements. The
information contained in the SI/BAKER, INC. financial statements is
unaudited and is subject to year-end adjustments and audit. However, in the
opinion of management, the interim financial statements furnished reflect
all adjustments and accruals which are necessary to a fair statement of
results for the interim periods presented.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Liquidity And Capital Resources
- -------------------------------
The Company's cash and cash equivalents increased to $2,118,000 during the
first three months of fiscal 2000 from $1,829,000 at the end of fiscal 1999. The
increase resulted from cash provided by operating activities totaling $1,222,000
and proceeds of $16,000 from the sale of common stock in connection with the
employee incentive stock option plan. Partially offsetting the increase in cash
and cash equivalents from these sources were the repayment of long-term debt of
$2,000, the purchases of capital equipment of $30,000, and the acquisition of
Modular Automation Corp., net of cash acquired for $919,000. Funds provided by
operating activities during the first three months of fiscal 1999 were
$3,018,000.
- 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Liquidity and Capital Resources (Continued)
- -------------------------------
On April 13, 1999, the Company acquired all of the outstanding capital
stock of Modular Automation Corp. ("MAC") of Greene, New York for $1,957,000.
The purchase price of the acquisition was allocated to the assets acquired based
on fair value with the remainder representing goodwill. Since its formation in
1981, MAC was a respected supplier of Automated Guided Vehicle ("AGV") Systems.
The acquisition of the AGV technology complements and expands the Company's AGV
product offerings. The acquired AGV products and personnel have been integrated
into the Company's existing Easton, Pennsylvania facility.
The Company has a $5,000,000 committed revolving credit facility which is
secured by a lien position on accounts receivable, land, and buildings and
contains various restrictive covenants relating to additional indebtedness,
asset acquisitions or dispositions, and maintenance of certain financial ratios.
The Company was in compliance with all covenants during the first three months
of fiscal 2000. Currently, the committed revolving credit facility has an
expiration date of August 31, 2000. The Company did not have any borrowings
under the committed revolving credit facility during the first three months of
fiscal 2000.
On March 4, 1996, SI/BAKER established a $2,500,000 Line of Credit Facility
(the "Facility") with its principal bank (the "Bank"). Under terms of the
Facility, SI/BAKER's parent companies, SI and McKesson APS, have each provided a
limited guarantee and surety in an amount not to exceed $1,000,000 for a
combined guarantee of $2,000,000 to the Bank for the payment and performance of
the related note, including any further renewals or modifications of the
Facility. During fiscal 1998, the Bank increased the borrowing availability to
$3,000,000 and extended the expiration date of the Facility. On March 18, 1999,
SI/BAKER repaid its outstanding debt under the Facility of $500,000. As of May
31, 1999 SI/BAKER did not have any borrowings under the Facility. The Facility
has an expiration date of August 31, 1999.
On October 14, 1998, the Board of Directors of the Company authorized
management to purchase up to $400,000 of the Company's common stock through open
market transactions or negotiated transactions at prices not to exceed
prevailing market prices. During fiscal 1999, the Company spent $399,000 on
purchases of its common stock through open market transactions as part of the
stock purchase program.
The Company believes that its financial resources consisting of its current
assets, anticipated cash flow, and the available revolving credit facility will
adequately finance its operating requirements for the foreseeable future.
The Company plans to consider expansion opportunities as they arise,
although ongoing operating results of the Company, the economics of the
expansion, and the circumstances justifying the expansion will be key factors in
determining the amount of resources the Company will devote to further
expansion. At this time, the Company does not have any material capital
commitments.
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations (Continued)
---------------------
Results Of Operations
- ---------------------
Three Months Ended May 30, 1999 Versus Three Months Ended May 31, 1998
- ----------------------------------------------------------------------
The Company's net earnings for the first three months of fiscal 2000 were
$104,000 compared to net earnings of $377,000 for the first three months of
fiscal 1999.
Backlog at the end of the first three months of fiscal 2000 was
$28,254,000. During the first three months of fiscal 2000, the Company received
orders totaling approximately $18,300,000. Two orders, totaling approximately
$10,200,000, engage the Company to modernize and expand two distribution
facilities for a major government agency. These contracts, won under a
competitive bidding process, are scheduled to be completed by the second half of
fiscal 2001.
Net sales of $9,952,000 for the first three months of fiscal 2000 increased
13.1% compared to net sales of $8,800,000 for the first three months of fiscal
1999. The largest increases in sales occurred in the Order Selection and
Switch-Cart product lines. During the first three months of fiscal 2000, Order
Selection sales of approximately $4,825,000 rose approximately $2,450,000 when
compared to the first quarter of fiscal 1999 due primarily to progress made on a
systems integration contract aimed at expanding the distribution process at a
major health and beauty aids company. During the first three months of fiscal
2000, Switch-Cart sales of approximately $3,330,000 rose approximately $425,000
when compared to the first quarter of fiscal 1999 due primarily to progress made
on a contract with a major government agency. Partially offsetting the increase
in Order Selection and Switch-Cart sales during the first three months of fiscal
2000 was a decrease in sales of approximately $1,725,000 across the Company's
other products lines, with the majority of the decrease relating to sales of the
Company's Cartrac, Sortation, and Automated Guided Vehicle product lines.
Gross profit as a percentage of sales was 18.5% for the first three months
of fiscal 2000 compared to 26.3% for the first three months of fiscal 1999. The
decrease in the gross profit percentage for the first three months of fiscal
2000 was primarily attributable to competitive pressures as well as to
first-time design inefficiencies associated with the development of enhanced
products related to contracts in process. Also contributing to the higher gross
profit percentage in the first three months of fiscal 1999 was the favorable
performance on several contracts, principally for the Company's higher margin
proprietary products, initiated in the prior fiscal year that were nearing
completion during the first quarter of fiscal 1999.
Selling, general and administrative expenses of $1,614,000 were lower by
$54,000 in the first nine months of fiscal 2000 than in the comparable fiscal
1999 period. The decrease in selling, general, and administrative expenses was
primarily attributable to the fiscal 1999 comparable period containing a larger
amount of costs associated with product promotion and sales efforts aimed at
expanding the Company's customer base of business.
Product development costs of $153,000 were higher by $34,000 in the first
three months of fiscal 2000 than in the comparable fiscal 1999 period.
Development programs in the first three months of fiscal 2000 included
enhancements to the Switch-Cart and Order Selection product lines with efforts
directed towards unit picking techniques. Development programs in the first
three months of fiscal 1999 included enhancements to the Company's product
controls and features and improvements to the Sortation and Order Selection
product lines, with particular
- 9 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations (Continued)
---------------------
Results Of Operations
- ---------------------
Three Months Ended May 30, 1999 Versus Three Months Ended May 31, 1998
- ----------------------------------------------------------------------
(Continued)
emphasis aimed at the controls platform for Dispen-SI-matic Systems and unit
picking techniques.
Interest income of $29,000 was lower by $16,000 in the first three months
of fiscal 2000 than in the comparable fiscal 1999 period. The decrease in
interest income was primarily attributable to the lower level of funds available
for short-term investments during the first three months of fiscal 2000.
Equity in income of joint venture represents the Company's proportionate
share of its investment in SI/BAKER which is being accounted for under the
equity method. The favorable variance of $18,000 for the first three months of
fiscal 2000 in the equity in income of joint venture was attributable to
SI/BAKER's increase in sales to approximately $2,972,000, as compared to the
comparable fiscal 1999 period of approximately $2,074,000 and growth in the
gross profit percentage to 21%, as compared to the comparable fiscal 1999 gross
profit percentage of 16%. The sales increase in fiscal 2000 was primarily
attributable to a larger backlog of orders entering fiscal 2000 versus a smaller
backlog of orders at the beginning of fiscal 1999. The favorable variance in the
gross profit percentage was primarily attributable the fiscal 1999 first quarter
gross profit percentage being unfavorably impacted by difficulties in executing
and concluding several contracts as additional costs became necessary to meet
contractual throughput requirements. Partially offsetting the favorable variance
were SI/BAKER's increases of (1) $36,000 in revenue-based royalty costs due to
the parent companies, (2) $96,000 in product development expenses for software
and controls capabilities for various new products addressing changing market
requirements, and (3) $107,000 in selling, general and administrative expenses.
The increase in selling, general and administrative expenses was primarily
attributable to an increase of $36,000 of expenses based on revenue and profit
performance and an increase of $55,000 in costs associated with sales and
administrative efforts aimed at expanding SI/BAKER's customer base of business.
The favorable variance of $10,000 in other income, net, was primarily
attributable to an increase in the revenue-based royalty income related to the
SI/BAKER joint venture.
The Company incurred income tax expense of $64,000 during the first three
months of fiscal 2000 compared to income tax expense of $235,000 in the
comparable fiscal 1999 period. Income tax expense was generally recorded at
statutory federal and state tax rates expected to apply for each fiscal year.
Year 2000
- ---------
The Year 2000 issue relates to the ability of computer systems,
microprocessors, and other electronic devices to deal appropriately with dates
on or after January 1, 2000 and other dates used for special programmatic
functions (i.e. 9999). The effect of the Year 2000 issue may include computer
failures and business interruption.
The Company has assembled a team of internal staff to oversee the matter
and is underway in completing its Year 2000 assessment. Internally, the Company
has upgraded its business system to address the Year 2000 issue. Externally, the
Company has and will continue to survey its suppliers, financial institutions,
and other organizations to ensure that those parties have appropriate plans to
remediate Year
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations (Continued)
---------------------
Year 2000 (Continued)
- ---------
2000 issues where their systems or business activities may impact the Company's
operations. However, based on the response of its survey to date, the Company
cannot presently estimate the impact of the failure of third parties to be Year
2000 compliant. Also, customers may utilize the services, on a fee basis, of the
Company's customer support group to assess and upgrade their materials handling
systems purchased from the Company for Year 2000 compliance. Costs incurred to
date and estimated costs to complete the Company's Year 2000 compliance efforts
are not expected to be material.
The outline of the general phases of the Company's Year 2000 project is as
follows: (1) Year 2000 methodology and compliance training for key personnel;
(2) inventorying Year 2000 items, internally and externally; (3) assigning
priorities to identified Year 2000 items; (4) assessing the Year 2000 compliance
of items determined to be material to the Company; (5) remediating or replacing
material items that are determined not to be Year 2000 compliant; (6) testing
material items for Year 2000 compliance; and (7) designing and implementing
contingency plans to the extent deemed necessary. The Company has substantially
completed phases (1) through (5) relating to existing internal hardware,
software, facilities and equipment; however, testing is ongoing as hardware,
software, and equipment are remediated, upgraded or replaced. Additionally, the
Company continues to assess and test newly engaged suppliers and their products
for Year 2000 compliance as part of the Company's normal business operations.
The Company has not completed its external surveys or contingency plans in the
case that it is not Year 2000 compliant by the Year 2000. The Company will
continue to monitor its Year 2000 compliance program, address any material
issues and develop contingency planning as it deems appropriate.
The scheduled completion date for the Company's efforts to address the Year
2000 issue is August 1999. The failure to identify or correct a material Year
2000 problem could result in an interruption in, or a failure of, certain
business activities or operations such as the Company's ability to service its
customers. Such failures could materially and adversely affect the Company's
results of operations, liquidity, and financial condition. The Company's Year
2000 assessment process is expected to significantly reduce the Company's level
of uncertainty about the Year 2000 problem and, in particular, about the Year
2000 compliance and readiness of its material suppliers and customers. However,
due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity, and financial condition.
Cautionary Statement
- --------------------
Certain statements contained herein are not based on historical fact and
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 or by the Securities and Exchange Commission
rules, regulations, and releases. The Company intends that such forward-looking
statements be subject to the safe harbors created thereby. Among other things,
they regard the Company's earnings, liquidity, financial condition, and certain
operational matters. Words or phrases denoting the anticipated results of future
events, such as "anticipate," "believe," "estimate," "expect," "may," "will,"
"will likely," "are expected to," "will continue," "project," and similar
expressions that denote uncertainty, are
- 11 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations (Continued)
---------------------
Cautionary Statement (Continued)
- --------------------
intended to identify such forward-looking statements. The Company's actual
results, performance, or achievements could differ materially from the results
expressed in, or implied by, such "forward-looking statements": (1) as a result
of risks and uncertainties identified in connection with those forward-looking
statements, including those factors identified herein, and in the Company's
other publicly filed reports; (2) as a result of factors over which the Company
has no control, including the strength of domestic and foreign economies, sales
growth, competition, certain costs increases, and any potential exposures
relating to Year 2000 matters; or (3) if the factors on which the Company's
conclusions are based do not conform to the Company's expectations.
Quantitative and Qualitative Disclosures about Market Risk
- ----------------------------------------------------------
The Company does not believe that its exposures to interest rate risk or
foreign currency exchange risks, risks from commodity prices, equity prices and
other market changes that affect market risk sensitive instruments are material
to its results of operations.
PART II - OTHER INFORMATION
Item 5. Other Information
- ------- -----------------
Effective July 21, 1999, Elmer D. Gates will become Chairman of the Board
of Directors and William R. Johnson will become President and CEO of the
Company.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibit 10.10 - Executive Employment Agreement with William Johnson dated
March 29, 1999.
Exhibit 27 - Financial Data Schedule
(b) During the quarter ended May 30, 1999, a Form 8-K was filed on April 29,
1999. The filing pertained to the election by the Board of Directors of
William R. Johnson as President and Director, effective March 29, 1999. As
President, Mr. Johnson succeeds Leonard S. Yurkovic who has led the Company
as President and CEO since 1988. Mr. Yurkovic will continue as Vice
Chairman of the Board of Directors, but will retire as CEO of the Company,
effective July 21, 1999.
- 12 -
<PAGE>
SI Handling Systems, Inc.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SI HANDLING SYSTEMS, INC.
/s/ Barry V. Mack
Barry V. Mack
Vice President - Finance
(Principal Financial Officer)
Dated: July 13, 1999
-------------
- 13 -
<PAGE>
Schedule A
SI/BAKER, INC.
Financial Statements
May 31, 1999
- 14 -
<PAGE>
SI/BAKER, INC.
Balance Sheets
May 31, 1999 and February 28, 1999
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
May February
31, 1999 28, 1999
-------- --------
Assets
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents, principally
time deposits $ 468 154
Receivables:
Trade 3,200 1,658
Other receivables 136 238
----- -----
Total receivables 3,336 1,896
----- -----
Costs and estimated earnings in
excess of billings 1,037 2,516
Deferred income tax benefits 258 258
Prepaid expenses and other current
assets 136 136
----- -----
Total current assets 5,235 4,960
----- -----
Machinery and equipment, at cost 186 176
Less: accumulated depreciation 104 95
----- -----
Net machinery and equipment 82 81
----- -----
Equipment leased to customer 487 487
Less: accumulated depreciation 420 370
----- -----
Net equipment leased to customer 67 117
----- -----
Deferred income tax benefits 51 51
----- -----
Other assets - 95
----- -----
Total assets $ 5,435 5,304
===== =====
</TABLE>
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<PAGE>
SI/BAKER, INC.
Balance Sheets
May 31, 1999 and February 28, 1999
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
May February
31, 1999 28, 1999
-------- --------
Assets
- ------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Note payable to bank $ - 500
Accounts payable:
Trade 626 510
Affiliated companies 66 15
----- -----
Total accounts payable 692 525
----- -----
Customers' deposits and billings in
excess of costs and estimated
earnings 1,341 1,104
Accrued salaries, wages, and
commissions 92 91
Income taxes payable 44 -
Accrued royalties payable 316 209
Accrued product warranties 712 660
Accrued other liabilities 29 10
----- -----
Total current liabilities 3,226 3,099
----- -----
Deferred compensation 72 123
----- -----
Stockholders' equity:
Common stock, $1 par value; authorized
1,000 shares; issued 200 shares - -
Additional paid-in capital 200 200
Retained earnings 1,937 1,882
----- -----
Total stockholders' equity 2,137 2,082
----- -----
Total liabilities and stockholders'
equity $ 5,435 5,304
===== =====
</TABLE>
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<PAGE>
SI/BAKER, INC.
Statements of Operations
Three Months Ended May 31, 1999 and 1998
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
May May
31, 1999 31, 1998
-------- --------
<S> <C> <C>
Net sales $ 2,972 2,074
Cost of sales 2,348 1,743
----- -----
Gross profit on sales 624 331
----- -----
Selling, general and
administrative
expenses 311 204
Product development
costs 96 -
Royalty expense
to parent companies 119 83
Interest income (5) (2)
Interest expense 4 14
Other income, net (2) (2)
----- -----
523 297
----- -----
Earnings before
income taxes 101 34
Income tax expense 46 14
----- -----
Net earnings $ 55 20
===== =====
</TABLE>
- 17 -
<PAGE>
SI/BAKER, INC.
Statements of Cash Flows
Three Months Ended May 31, 1999 and 1998
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
May May
31, 1999 31, 1998
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 55 20
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation of machinery and
equipment and leased equipment 59 38
Changes in operating assets and
liabilities:
Receivables (1,440) 1,387
Costs and estimated earnings
in excess of billings 1,479 (666)
Inventories - 118
Prepaid expenses and other
current assets - (163)
Other assets 95 (29)
Accounts payable 167 27
Customers' deposits and
billings in excess of costs
and estimated earnings 237 (481)
Accrued salaries, wages, and
commissions 1 (361)
Income taxes payable 44 (44)
Accrued royalties payable 107 1
Accrued product warranties 52 24
Accrued other liabilities 19 (8)
Deferred compensation (51) -
----- -----
Net cash provided (used)
by operating activities 824 (137)
----- -----
Cash flows from investing activities:
Additions to machinery and equipment (10) (25)
----- -----
Net cash used by investing activities (10) (25)
----- -----
Cash flows from financing activities:
Repayment of note payable to bank (500) -
----- -----
Net cash used by financing activities (500) -
----- -----
Increase (decrease) in cash and cash equivalents 314 (162)
Cash and cash equivalents,
beginning of period 154 388
----- -----
Cash and cash equivalents, end of period $ 468 226
===== =====
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes $ 2 207
===== =====
Interest $ 3 20
===== =====
</TABLE>
- 18 -
<PAGE>
SI HANDLING SYSTEMS, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit No.
- ----------
10.10 Executive Employment Agreement with William Johnson dated March 29,
1999.
27 Financial Data Schedule.
- 19 -
EXHIBIT 10.10
-------------
SI HANDLING SYSTEMS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the 29th day of
March , 1999 by and between William Johnson, a resident of Chagrin Falls, OH,
(the "Employee"), and SI Handling Systems, Inc., a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania (the "Company").
WHEREAS, the Company is engaged in the business of designing,
selling, installing and servicing integrated automated material handling systems
for industrial, warehousing and distribution customers (the "Business").
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company, upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, and intending to be legally bound, the parties,
subject to the terms and conditions set forth herein, agree as follows:
1. Employment and Term. The Company hereby employs the Employee as an
--------------------
"at will" employee and the Employee hereby accepts employment with the Company
as an "at will" employee, for a period commencing on March 29, 1999 (the
"Commencement Date") and continuing until terminated in accordance with the
provisions of Section 7 hereof (the "Term"), to hold the office of President of
the Company during the Term from and after the Commencement Date and, in
addition, to hold the office of Chief Executive Officer of the Company during
the Term from and after July 21, 1999 (such office, as applicable, referred to
herein as the "Position"). The Board of Directors of the Company at its meeting
on March 31, 1999 shall take such action as may be necessary to expand the size
of the Board of Directors by one (1) and to elect the Employee to be a member of
the Board of Directors; thereafter, for so long as the Employee continues to
serve in the Position, at each annual meeting of shareholders of the Company,
the Board of Directors shall use all reasonable efforts to cause the Employee to
be nominated for election as a member of the Board of Directors.
2. Duties. During the Term, the Employee shall serve the Company
------
faithfully and to the best of his ability and shall devote his full time,
attention, skill and efforts to the performance of the duties required by or
appropriate for the Position. Subject to the oversight of the Board of
Directors, the Employee shall (i) have responsibility for the exercise of the
executive authority of the Company, being the general and active management of
the business of the Company and the carrying into effect of all orders and
resolutions of the Board of Directors, which executive
- 1 -
<PAGE>
authority may be delegated by the Employee to other officers and/or employees of
the Company, and (ii) such duties and responsibilities as may be assigned to him
from time to time by the Board of Directors. The Employee shall report to the
Board of Directors. The Employee shall perform his duties and responsibilities
hereunder at the Company's facility located in Easton, Pennsylvania or at such
other location as may be established from time to time by the Board of
Directors.
3. Compensation. The Company shall pay the Employee, and the Employee
------------
hereby agrees to accept, as compensation for all services to be rendered to the
Company and for the Employee's intellectual property covenants and assignments
and covenant not to compete, as provided in Sections 5 and 6 hereof, the
compensation set forth in this Section 3.
3.1 Salary. Beginning on the Commencement Date, the Company shall pay
------
the Employee a base salary at the annual rate of Two Hundred Sixteen Thousand
Dollars ($216,000) (as the same may hereafter be adjusted, the "Salary") during
the term of this Agreement. The Salary shall be inclusive of all applicable
income, social security and other taxes and charges that are required by law to
be withheld by the Company (collectively, "Taxes") and shall be paid and
withheld in accordance with the Company's normal payroll practices for its
executive employees from time to time in effect.
3.2 Bonus. The Employee shall be eligible to participate in the
-----
Company's Officer Incentive Plan in effect for a particular fiscal year which
provides an opportunity for an annual bonus of up to one hundred percent (100%)
of the Salary then in effect based on the achievement of earnings targets as
defined for such fiscal year by the Board of Directors. For the 2000 Fiscal
Year, the earnings targets shall be as set forth in Fiscal Year 2000 Business
Plan which shall be prepared under the oversight of the Employee and shall be
submitted by the Employee of the Board of Directors prior to its May 1999
meeting for review and approval at such meeting by the Board of Directors in its
sole discretion.
3.3 Equity Participation.
--------------------
(a) Incentive Stock Options. Effective as of June 1, 1999 (the
-----------------------
"Grant Date"), the Employee shall be granted "Incentive Stock Options" (as such
term is defined in the Company's 1997 Equity Compensation Plan, as amended from
time to time (the "Equity Compensation Plan")) to purchase forty thousand
(40,000) shares of Common Stock under and subject to the terms of the Equity
Compensation Plan, which shall vest at a rate of twenty five percent (25%) per
year on each of the first four (4) anniversaries of the Grant Date; provided
that as an express condition of receipt of such Incentive Stock Options, the
Employee shall enter into and agree to be bound by the terms of the standard
"Grant Instrument" (as such term is defined in the Equity Compensation Plan)
applicable to the issuance of Incentive Stock Options under the Equity
Compensation Plan.
(b) Vesting. In the event of a "Change of Control" (as such
-------
term is defined in the Equity Compensation Plan), all rights to acquire Common
Stock pursuant to the Grant of Incentive Stock Options described in Section
3.3(a) hereof shall fully accelerate and be immediately vested and exercisable;
provided that, in the event such acceleration and vesting would make the Change
of Control ineligible for pooling of interests accounting treatment, in lieu of
such acceleration and vesting, the
- 2 -
<PAGE>
Company shall make a payment to the Employee in an amount equal to the benefit
that would have inured to the Employee if such acceleration and vesting had
occurred so long as such payment would not make the Change of Control ineligible
for pooling of interests accounting treatment or otherwise impose adverse tax
consequences on the Company. In no event shall any right to acquire Common Stock
pursuant to the Grant Incentive Stock Options described in Section 3.3(a) hereof
vest upon or following the termination of the Employee's employment with the
Company, except as provided in the Equity Compensation Plan (as amended from
time to time, including, without limitation, with respect to the vesting of
restricted stock or incentive stock options in event of the death or disability
of an employee of the Company) or the applicable Grant Instrument.
3.4 Annual Compensation Review. The Compensation Committee of the
----------------------------
Board of Directors shall review the Employee's compensation annually which
review shall include, without limitation, an evaluation of the Employee's
contribution to the Company's annual financial performance, including pre-tax
earnings, effective management of the Company's operations, and backlog
adequacy.
3.5 Fringe Benefits. During the Term:
---------------
(a) The Employee shall be entitled to participate in all
benefits programs made available to executive employees of the Company as
described in the Benefits Guide attached hereto as Exhibit 3.5(a), as amended
from time to time.
(b) The Employee shall be entitled to four (4) weeks paid
vacation per year.
(c) The Company shall pay the Employee an automobile allowance
of Four Hundred Ten Dollars ($410.00) per month; provided that the Employee
shall be responsible for the lease/purchase, maintenance and/or repair of such
automobile.
3.6 Reimbursement of Expenses.
-------------------------
(a) During the course of employment, the Employee shall be
reimbursed for items of travel, food and lodging and miscellaneous expenses
reasonably incurred by him on behalf of the Company, provided that such expenses
are incurred, documented and submitted to the Company, all in accordance with
the reimbursement policies of the Company as in effect from time to time.
(b) In connection with the Employee's relocation to the
Easton, Pennsylvania area, the Employee shall be entitled to (i) the benefits
set forth in the Company's Statement of Corporate Policy on Relocation of
Salaried Employees attached hereto as Exhibit 3.7 (b), as amended from time to
time, and (ii) additional relocation-related allowances; provided that the total
amount which the Employee shall receive under this Section 3.6(b) shall be equal
to an aggregate of One Hundred Fifty Thousand Dollars ($150,000) which amount
shall be paid by the Company to the Employee in three equal installments of
Fifty Thousand Dollars ($50,000) on April 30, 1999, May 31, 1999 and June 30,
1999.
- 3 -
<PAGE>
4. Confidentiality. The Employee recognizes and acknowledges that the
---------------
Proprietary Information (as hereinafter defined) is a valuable, special and
unique asset of the Company. As a result, both during the Term and thereafter,
the Employee shall not, without the prior written consent of the Company, for
any reason either directly or indirectly divulge to any third-party or use for
his own benefit, or for any purpose other than the exclusive benefit of the
Company, any confidential, proprietary, business and technical information or
trade secrets of the Company or of any subsidiary or affiliate of the Company
(the "Proprietary Information") revealed, obtained or developed in the course of
his employment with the Company. Proprietary Information shall include, but
shall not be limited to the intangible personal property described in Section
5(b) hereof and, in addition, technical information, including research design,
results, techniques and processes; apparatus and equipment design; and computer
software; technical management information, including project proposals,
research plans, status reports, performance objectives and criteria, and
analyses of areas for business development; and business information, including
project, financial, accounting and personnel information, business strategies,
plans and forecasts, customer lists, customer information and sales and
marketing plans, efforts, information and data. In addition, "Proprietary
Information" shall include all information and materials received by the Company
or the Employee from a third party subject to an obligation of confidentiality
and/or non-disclosure. Nothing contained herein shall restrict the Employee's
ability to make such disclosures during the course of the employment as may be
necessary or appropriate to the effective and efficient discharge of the duties
required by or appropriate for the Position or as such disclosures may be
required by law or by a governmental body or court. Furthermore, nothing
contained herein shall restrict the Employee from divulging or using for his own
benefit or for any other purpose any Proprietary Information that is readily
available to the general public so long as such information did not become
available to the general public as a direct or indirect result of the Employee's
breach of this Section 4. Failure by the Company to mark any of the Proprietary
Information as confidential or proprietary shall not affect its status as
Proprietary Information under the terms of this Agreement.
5. Property.
--------
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, the Employee shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company, unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for the Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
their proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. The Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever, except as may be necessary in the discharge of the assigned duties
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he may
have access or with which for any reason he may become familiar, except as
disclosure shall be necessary in the performance of the duties; and upon the
termination of his employment with the Company, he shall return to the Company
all originals and
- 4 -
<PAGE>
copies of the foregoing then in his possession or under his control, whether
prepared by the Employee or by others.
(b) (i) The Employee acknowledges that all right, title and
interest in and to any and all writings, documents, inventions, discoveries,
ideas, developments, information, computer programs or instructions (whether in
source code, object code, or any other form), algorithms, formulae, plans,
memoranda, tests, research, designs, innovations, systems, analyses,
specifications, models, data, diagrams, flow charts, and/or techniques (whether
patentable or non-patentable or whether reduced to written or electronic form or
otherwise) relating to the Business or any other business in which the Company
or any of the Company's subsidiaries or affiliates is engaged during the Term
that the Employee creates, makes, conceives, discovers or develops, either
solely or jointly with any other person, at any time during the Term, during
working hours or using any property or facility of the Company, and whether upon
the request or suggestion of the Company or otherwise, (collectively,
"Intellectual Work Product") shall be the sole and exclusive property of the
Company. The Employee shall promptly disclose to the Company all Intellectual
Work Product, and the Employee shall have no claim for additional compensation
for the Intellectual Work Product.
(ii) The Employee acknowledges that all the Intellectual
Work Product that is copyrightable shall be considered a work made for hire
under United States Copyright Law. To the extent that any copyrightable
Intellectual Work Product may not be considered a work made for hire under the
applicable provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an interest in
any Intellectual Work Product, the Employee hereby irrevocably assigns and
transfers to the Company any and all right, title, or interest that the Employee
may have in the Intellectual Work Product under copyright, patent, trade secret
and trademark law, in perpetuity or for the longest period otherwise permitted
by law, without the necessity of further consideration. The Company shall be
entitled to obtain and hold in its own name all copyrights, patents, trade
secrets, and trademarks with respect thereto.
(iii) The Employee shall reveal promptly all
information relating to any Intellectual Work Product to the Board of Directors
of the Company, cooperate with the Company and execute such documents as may be
necessary or appropriate (A) in the event that the Company desires to seek
copyright, patent or trademark protection, or other analogous protection,
thereafter relating to the Intellectual Work Product, and when such protection
is obtained, renew and restore the same, or (B) to defend any opposition
proceedings in respect of obtaining and maintaining such copyright, patent or
trademark protection, or other analogous protection.
6. Covenant not to Compete. The Employee shall not, during the Term
-----------------------
(except in the performance of the Employee's duties hereunder) and for a period
of two (2) years immediately following the termination of the Employee's
employment hereunder do any of the following directly or indirectly without the
prior written consent of the Board of Directors in its sole discretion:
(a) engage or participate, directly or indirectly, in any
business activity substantially competitive with the Business;
- 5 -
<PAGE>
(b) become interested (as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) in any
person, firm, corporation, association or other entity engaged in any business
that is competitive with the Business, or become interested in (as owner,
stockholder, lender, partner, co-venturer, director, officer, employee, agent,
consultant or otherwise) any portion of the business of any person, firm,
corporation, association or other entity where such portion of such business is
competitive with the Business or any other business in which the Company or any
of the Company's subsidiaries or affiliates is engaged during the Term
(notwithstanding the foregoing, the Employee may hold not more than five percent
(5%) of the outstanding securities of any class of any publicly-traded
securities of a company that is engaged in the Business);
(c) engage, either directly or indirectly, in any business
activity substantially competitive with the Business with any (A) customer with
whom the Company shall have dealt at any time during the one (1) year period
immediately preceding the termination of the Employee's employment hereunder, or
(B) corporate partner, collaborator, independent contractor or supplier with
whom the Company shall have dealt at any time during the one (1) year period
immediately preceding the termination of the Employee's employment hereunder;
(d) influence or attempt to influence any then current or
prospective supplier, customer, corporate partner, collaborator, or independent
contractor of the Company to terminate or modify any written or oral agreement
or course of dealing with the Company; or
(e) initiate any contract with any person with the purpose of
influencing or attempting to influence any person either (i) to terminate or
modify an employment, consulting, agency, distributorship or other arrangement
with the Company, or (ii) to employ or retain, or arrange to have any other
person or entity employ or retain, any person who has been employed or retained
by the Company as an employee, consultant, agent or distributor of the Company
at any time during the one (1) year period immediately preceding the termination
of the Employee's employment hereunder.
The Employee acknowledges that he has carefully read and considered
the provisions of this Section 6. The Employee acknowledges that the foregoing
restrictions may limit his ability to earn a livelihood in a business similar to
the Business, but he nevertheless believes that he has received and will receive
sufficient consideration and other benefits in connection with the payment by
the Company of the compensation set forth in Sections 3 and 7 hereof to justify
such restrictions, which restrictions the Employee does not believe would
prevent him from earning a living in businesses that are not competitive with
the Business and without otherwise violating the restrictions set forth herein.
7. Termination. Upon termination of the Employee's employment
-----------
hereunder, the Employee shall be entitled only to such compensation and benefits
as described in this Section 7.
7.1 Termination by the Company Without Cause.
----------------------------------------
(a) Notwithstanding anything to the contrary set forth herein,
the Company shall have the right to terminate the Employee's employment
hereunder at
- 6 -
<PAGE>
any time, for any reason or for no reason, with or without cause, effective upon
the date designated by the Company upon written notice to the Employee.
(b) In the event of a termination of the Employee's employment
hereunder pursuant to Section 7.1(a) hereof, the Employee shall be entitled to
receive all accrued but unpaid (as of the effective date of such termination)
Salary and the severance payments in the manner set forth in Section 7.1(c)
hereof; provided that the Employee has complied with all of his obligations
under this Agreement and continues to comply with all of his surviving
obligations hereunder listed in Section 9 hereof. Except as specifically set
forth in this Section 7.1, all Salary and Benefits shall cease at the time of
such termination, except as required under applicable law and the Company shall
have no liability or obligation hereunder by reason of or subsequent to such
termination.
(c) In the event of the termination of the Employee's
employment under Section 7.1(a) hereof, the Employee shall be entitled, as
severance pay, to continue to receive his Salary for a period of twelve (12)
months, subject to all applicable Taxes, as calculated on the basis of the
Salary in effect at the date of termination and paid in the same manner as
Salary was then paid hereunder.
7.2 Termination for Cause.
---------------------
(a) The Company shall have the right to terminate the
Employee's employment hereunder at any time for "cause" upon written notice to
the Employee.
For purposes of this Agreement, "cause" shall mean:
(i) any material breach by the Employee of Sections
4, 5 or 6 hereof;
(ii) any material breach by the Employee of any
material obligations under this Agreement, which breach has not been cured
within thirty (30) days of written notice by the Company to the Employee;
(iii) conduct of the Employee involving disloyalty to
the Company or willful misconduct with respect to the Company, including without
limitation fraud, embezzlement, theft or proven dishonesty in the course of the
employment, which conduct or willful misconduct, if capable of cure, has not
been cured within thirty (30) days of written notice by the Company to the
Employee; or
(iv) conviction of a felony or other criminal act,
provided that in the case of such other criminal act the Employee is sentenced
to a term of more than one (1) year in prison.
(b) In the event of a termination of the Employee's employment
hereunder pursuant to Section 7.2(a) hereof, the Employee shall be entitled to
receive all accrued but unpaid (as of the effective date of such termination)
Salary and such other benefits as are normally provided by the Company upon the
death of an employee; provided that the Employee has complied with all of his
obligations under this Agreement. All Salary and Benefits shall cease at the
time of such termination, subject to the requirements of applicable law, and,
except as specifically set forth in this Section 7.2, the Company shall have no
liability or obligation hereunder by reason of or subsequent to such
termination.
- 7 -
<PAGE>
7.3 Termination by the Employee.
---------------------------
(a) Voluntary Termination. In the event of a voluntary
----------------------
termination by the Employee of his employment hereunder, the Employee will be
entitled to receive all accrued and unpaid (as of the effective date of such
termination) Salary; provided that the Employee has complied with all of his
obligations under this Agreement. Except as specifically set forth in this
Section 7.3(a) or as provided by applicable law, the Company shall have no
liability or obligation to the Employee for compensation or benefits hereunder
by reason of or subsequent to such termination.
(b) Termination by Death. In the event that the Employee dies
--------------------
during the Term, the Employee's employment hereunder shall be terminated thereby
and the Company shall pay to the Employee's executors, legal representatives or
administrators an amount equal to all accrued and unpaid (as of the date of
death) Salary and any such other benefits as are normally provided by the
Company upon the death of an employee; provided that the Employee has complied
with all of his obligations under this Agreement. Except as specifically set
forth in this Section 7.3(b) or as provided by applicable law, the Company shall
have no liability or obligation hereunder to the Employee's executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him by reason of or subsequent to the Employee's death.
(c) Termination Following a Failure to make the Employee Chief
----------------------------------------------------------
Executive Officer. In the event (i) the Board of Directors fails to make the
- ------------------
Employee the Chief Executive of the Company effective July 21, 1999 as required
by Section 1 hereof and (ii) thereafter the Employee voluntarily terminates his
employment hereunder, the Employee shall be entitled to receive all accrued but
unpaid (as of the effective date of such termination) Salary and, as severance
pay, to continue to receive his Salary for a period of twenty-four (24) months,
subject to all applicable Taxes and paid in the same manner as Salary was then
paid hereunder, provided that the Employee has complied with all of his
obligations under this Agreement and continues to comply with all of his
surviving obligations hereunder listed in Section 9 hereof. Except as
specifically set forth in this Section 7.3(c), all Salary and Benefits shall
cease at the time of such termination, except as required under applicable law
and the Company shall have no liability or obligation hereunder by reason of or
subsequent to such termination.
7.4 Termination upon a Change of Control.
------------------------------------
(a) During the one (1) year period following a Change of
Control and:
(i) in the event of the termination of the Employee's
employment hereunder pursuant to Section 7.1(a) hereof or of a Constructive
Termination (as defined in Section 7.4(b) hereof) during the period commencing
on the Commencement Date and ending on the first anniversary of the Commencement
Date, in lieu of the severance pay described in Section 7.1(c) hereof, the
Employee shall be entitled, as severance pay, to continue to receive his Salary
for a period of twenty-four (24) months, subject to all applicable Taxes,
calculated on the basis of the Salary in effect on the date of termination and
paid in the same manner as Salary was then paid hereunder.
- 8 -
<PAGE>
(ii) in the event of the termination of the Employee's
employment hereunder pursuant to Section 7.1(a) hereof or of a Constructive
Termination during the period commencing on the first anniversary of the
Commencement Date and ending on the second anniversary of the Commencement Date,
in lieu of the severance pay described in Section 7.1(c) hereof, the Employee
shall be entitled, as severance pay, to continue to receive his Salary for a
period of eighteen (18) months, subject to all applicable Taxes, calculated on
the basis of the Salary in effect on the date of termination and paid in the
same manner as Salary was then paid hereunder.
(iii) in the event of the termination of the Employee's
employment hereunder pursuant to Section 7.1(a) hereof or of a Constructive
Termination at any time after the second anniversary of the Commencement Date,
the Employee shall be entitled to receive the severance pay described in Section
7.1(c) hereof.
(b) For purposes of this Section 7.4, "Constructive
Termination" shall mean the termination of the Employee's employment hereunder
by the Employee within one year of a Change of Control as a result of any of the
following: (i) the Employee is demoted; (ii) the Employee's duties hereunder are
materially altered in a manner unacceptable to the Employee at the sole
discretion of the Employee; or (iii) the Salary is reduced.
8. Representations, Warranties and Covenants of the Employee.
---------------------------------------------------------
(a) The Employee represents and warrants to the Company that:
(i) to the best of the Employee's knowledge, there
are no restrictions, agreements or understandings whatsoever to which the
Employee is a party which would prevent or make unlawful the Employee's
execution of this Agreement or the Employee's employment hereunder, or which is
or would be inconsistent or in conflict with this Agreement or the Employee's
employment hereunder, or would prevent, limit or impair in any way the
performance by the Employee of the obligations hereunder; and
(ii) the Employee has disclosed to the Company all
restraints, confidentiality commitments or other employment restrictions that he
has with any other employer, person or entity.
(b) The Employee covenants that in connection with his
provision of services to the Company, he shall not breach any obligation (legal,
statutory, contractual or otherwise) to any former employer or other person,
including, but not limited to obligations relating to confidentiality and
proprietary rights.
9. Survival of Provisions. The provisions of this Agreement set forth
----------------------
in Sections 3.6, 4, 5, 6, 7, 8, 18 and 19 hereof shall survive the termination
of the Employee's employment hereunder.
10. Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and/or assigns; provided that the
- 9 -
<PAGE>
Employee shall not make any assignment of this Agreement or any interest herein,
by operation of law or otherwise, without the prior written consent of the
Company.
11. Notice. Any notice hereunder by either party shall be given by
------
personal delivery or by sending such notice by certified mail, return-receipt
requested, or telecopied, addressed or telecopied, as the case may be, to the
other party at its address set forth below or at such other address designated
by notice in the manner provided in this section. Such notice shall be deemed to
have been received upon the date of actual delivery if personally delivered or,
in the case of mailing, two (2) days after deposit with the U.S. mail, or, in
the case of facsimile transmission, when confirmed by the facsimile machine
report.
(i) if to the Company, to:
SI Handling Systems, Inc.
600 Kuebler Road
P.O. Box 70
Easton, Pennsylvania 18040-9295
Attention: Chairman of the Board
Telecopier: (610) 253-0254
with a copy to:
Jeffrey P. Libson, Esquire
Pepper Hamilton LLP
1235 Westlakes Drive - Suite 400
Berwyn, Pennsylvania 19312-2401
Telecopier: (610) 640-7835
(ii) if to the Employee, to:
William Johnson
-------------------------------------------------------
-------------------------------------------------------
Telecopier:
-------------------------------------------
with a copy to:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Telecopier:
-------------------------------------------
12. Entire Agreement; Amendments. This Agreement contains the entire
-----------------------------
agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature between the parties hereto
relating to the employment of the Employee with the Company. This Agreement may
not be changed or modified, except by an agreement in writing signed by each of
the parties hereto.
- 10 -
<PAGE>
13. Waiver. The waiver of the breach of any term or provision of this
------
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
14. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
the principles of conflicts of laws of any jurisdiction.
15. Invalidity. If any provision of this Agreement shall be determined
----------
to be void, invalid, unenforceable or illegal for any reason, the validity and
enforceability of all of the remaining provisions hereof shall not be affected
thereby. If any particular provision of this Agreement shall be adjudicated to
be invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
amendment to apply only to the operation of such provision in the particular
jurisdiction in which such adjudication is made; provided that, if any provision
contained in this Agreement shall be adjudicated to be invalid or unenforceable
because such provision is held to be excessively broad as to duration,
geographic scope, activity or subject, such provision shall be deemed amended by
limiting and reducing it so as to be valid and enforceable to the maximum extent
compatible with the applicable laws of such jurisdiction, such amendment only to
apply with respect to the operation of such provision in the applicable
jurisdiction in which the adjudication is made.
16. Section Headings. The section headings in this Agreement are for
----------------
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
17. Number of Days. In computing the number of days for purposes of
--------------
this Agreement, all days shall be counted, including Saturdays, Sundays and
legal holidays; provided that, if the final day of any time period falls on a
Saturday, Sunday or day which is a legal holiday in the Commonwealth of
Pennsylvania, then such final day shall be deemed to be the next day which is
not a Saturday, Sunday or legal holiday.
18. Specific Enforcement; Consent to Suit. The Employee acknowledges
--------------------------------------
that the restrictions contained in Sections 4, 5 and 6 hereof are reasonable and
necessary to protect the legitimate interests of the Company and its affiliates
and that the Company would not have entered into this Agreement in the absence
of such restrictions. The Employee also acknowledges that any breach by him of
Sections 4, 5 or 6 hereof will cause continuing and irreparable injury to the
Company for which monetary damages would not be an adequate remedy. The Employee
shall not, in any action or proceeding to enforce any of the provisions of
Section 4, 5 or 6 hereof, assert the claim or defense that an adequate remedy at
law exists. In the event of such breach by the Employee, the Company shall have
the right to enforce the provisions of Section 4, 5 or 6 hereof by seeking
injunctive or other relief in any court, and this Agreement shall not in any way
limit remedies of law or in equity otherwise available to the Company. Any legal
proceeding to enforce the provisions of Section 4, 5 or 6 hereof shall be
instituted in the Court of Common Pleas of Northampton County, Pennsylvania, or
if such court does not have jurisdiction or will not accept jurisdiction, in any
state or federal court of general jurisdiction in the Commonwealth of
Pennsylvania, and, for such purpose, the Employee hereby consents to the
personal and exclusive jurisdiction of such court and hereby waives any
objection
- 11 -
<PAGE>
that the Employee may have to the laying of venue of any such proceeding and any
claim or defense of inconvenient forum. Notwithstanding the foregoing to the
contrary, the Company shall have the right to institute legal proceedings to
enforce the provisions of Section 4, 5 or 6 hereof in any court with
jurisdiction over the Employee. In any legal proceeding seeking to enforce or
interpret the terms of Section 4, 5 or 6 hereof, each party shall be responsible
for its own costs, expenses and disbursements, including attorneys' fees.
19. Arbitration. Subject to the last sentence of this Section 19, if
-----------
any dispute arises over the terms of this Agreement between the parties to this
Agreement, either the Employee or the Company shall submit the dispute to
binding arbitration within thirty (30) days after such dispute arises, to be
governed by the evidentiary and procedural rules of the American Arbitration
Association (Commercial Arbitration). The Employee and the Company shall
mutually select one (1) arbitrator within ten (10) days after a dispute is
submitted to arbitration. In the event that the parties do not agree on the
identity of the arbitrator within such period, the arbitrator shall be selected
by the American Arbitration Association. The arbitrator shall hold a hearing on
the dispute in Northampton County, Pennsylvania within thirty (30) days after
having been selected and shall issue a written opinion within fifteen (15) days
after the hearing. The arbitrator shall also decide on the allocation of the
costs of the arbitration to the respective parties, but the Employee and the
Company shall each be responsible for paying the fees of their own legal
counsel, if legal counsel is obtained. Either the Employee or the Company, or
both parties, may file the decision of the arbitrator as a final, binding and
unappealable judgment in a court of appropriate jurisdiction. Notwithstanding
the foregoing provisions of this Section 19 to the contrary, matters in which an
equitable remedy or injunctive relief is sought by a party, including but not
limited to the remedies referred to in Section 18 hereof, shall not be required
to be submitted to arbitration, if the party seeking such remedy or relief
objects thereto, but shall instead be subject to the provisions of Section 18
hereof.
20. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
[one signature page follows]
- 12 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Executive Employment
Agreement to be executed the day and year first written above.
SI HANDLING SYSTEMS, INC.
By: /s/ Edward J. Fahey
-------------------------------------
Title: Chairman of the Board of Directors
-------------------------------------
/s/ William Johnson
-------------------------------------
William Johnson
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FORM 10-Q FOR
THE QUARTER ENDED MAY 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000090045
<NAME> SI HANDLING SYSTEMS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-27-2000
<PERIOD-END> MAY-30-1999
<CASH> 2,118
<SECURITIES> 0
<RECEIVABLES> 7,382
<ALLOWANCES> 0
<INVENTORY> 3,399
<CURRENT-ASSETS> 17,624
<PP&E> 8,226
<DEPRECIATION> 6,658
<TOTAL-ASSETS> 21,109
<CURRENT-LIABILITIES> 8,748
<BONDS> 14
0
0
<COMMON> 3,708
<OTHER-SE> 8,188
<TOTAL-LIABILITY-AND-EQUITY> 21,109
<SALES> 9,952
<TOTAL-REVENUES> 9,952
<CGS> 8,115
<TOTAL-COSTS> 8,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 168
<INCOME-TAX> 64
<INCOME-CONTINUING> 104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
