UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported)..............September 30, 1999
SI HANDLING SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-03362 22-1643428
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
600 Kuebler Road, Easton, PA 18040
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code................610-252-7321
...............................................................................
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
- ------ ------------------------------------
On September 30, 1999, SI Handling Systems, Inc. ("SI" or the "Company")
completed the acquisition of all of the outstanding capital stock of Ermanco
Incorporated, a Michigan corporation ("Ermanco").
Ermanco, headquartered in Spring Lake, Michigan, is a designer and installer of
complete conveying systems for a variety of manufacturing and warehousing
applications. Ermanco also manufactures conveyors and conveyor components.
Under the terms of the Stock Purchase Agreement, the Company acquired all of the
outstanding capital stock of Ermanco for a purchase price of $22,615,000
consisting $15,115,000 in cash, of which $1,365,000 is held in escrow,
$3,000,000 in promissory notes payable to the fourteen stockholders of Ermanco,
and 481,284 shares of the Company's common stock with a value of $4,500,000
based on the average closing price of $9.35 of the Company's common stock for
the five trading days immediately preceding the date of the Stock Purchase
Agreement, August 6, 1999.
On the closing date of the acquisition, the purchase price was adjusted upward
by $615,000 to $22,615,000 based upon Ermanco's projected net working capital.
The upward adjustment of $615,000 has been added to the escrow amount pending
the determination of the actual net working capital based on Ermanco's
definitive closing balance sheet. Upon receipt of the definitive closing balance
sheet, any net upward or downward adjustment shall either increase or decrease
the cash portion of the purchase price paid at closing. Any funds remaining in
escrow after eighteen months following the closing will be distributed to the
selling stockholders of Ermanco.
The acquisition of the Ermanco technology complements and expands the Company's
current product offerings. The acquired Ermanco products, property, equipment,
and personnel will continue to be located in Spring Lake, Michigan and operate
as a wholly owned subsidiary of the Company. Ermanco will continue to use its
assets in its ongoing operations.
On the closing date of the acquisition, the Company entered into employment
agreements with four employees of Ermanco, Leon C. Kirschner, Thomas C. Hubbell,
Lee F. Schomberg, and Gordon A. Hellberg. Mr. Kirschner and Steven Shulman,
another principal stockholder of Ermanco, joined the Board of Directors of the
Company.
In order to complete the acquisition of Ermanco, the Company obtained financing
from its principal bank, First Union National Bank ("First Union"). The Company
entered into a new three-year line of credit facility which may not exceed the
lesser of $6,000,000 or an amount based on a borrowing base formula tied
principally to accounts receivable, inventory, fair market value of the
Company's property and plant, and liquidation value of equipment, plus an amount
equal to $2,500,000, which amount shall be reduced by $625,000 every six months
during the first two years of the line of credit facility until such amount
reaches zero, minus the unpaid principal balance of the term loan described
below. The line of credit facility is to be used primarily for working capital
purposes and closing costs associated with the Ermanco acquisition. The line of
credit facility replaced the Company's former $5,000,000 committed revolving
credit facility with First Union.
The Company also received $14,000,000 in the form of a seven-year term loan from
First Union to finance the acquisition of Ermanco. During the first two years of
the term loan, the Company will repay First Union equal quarterly payments of
$312,500 plus accrued interest. After the second anniversary of the September
30, 1999 closing date of the acquisition, the Company will make equal quarterly
payments of $575,000 plus accrued interest. The interest rate on the term loan
is the three-month LIBOR Market Index Rate plus two and three-quarters percent.
In order to partially hedge the term loan's floating interest expense, the
Company entered into an interest rate swap agreement for a minimum of fifty
percent of the amount over the full term of the loan. Contemporaneously with the
closing of the term loan, the Company entered into a seven-year interest rate
swap for $7,000,000 of the term loan at a fixed rate of 9.38%.
In order to obtain the line of credit and term loan, the Company granted First
Union a security interest in all personal property, including, without
limitation, all accounts, deposits, documents, equipment, fixtures, general
intangibles, goods, instruments, inventory, letters of credit, money,
securities, and a first mortgage on all real estate owned by the Company and
Ermanco, and an assignment of the Company's right, title, and interest in the
SI/BAKER joint venture. The line of credit facility and term loan contain
various restrictive covenants relating to additional indebtedness, asset
acquisitions or dispositions, investments, guarantees, payment of dividends, and
maintenance of certain financial ratios.
The promissory notes issued to the fourteen stockholders of Ermanco total
$3,000,000, have a term of seven years, and bear interest at an annual rate of
ten percent in years one through three, twelve percent in years four and five,
and fourteen percent in years six and seven. Interest on the promissory notes
shall be payable quarterly, in cash, or under certain conditions, in the
Company's common stock upon approval of the Company's Board of Directors. The
promissory notes may be prepaid prior to the end of the seven-year term as long
as the Company has no debt outstanding under its line of credit facility and
term loan.
SI and Ermanco serve common North American marketplaces, such as
automotive/transportation, computer, newspaper/publishing,
pharmaceutical/cosmetic, entertainment, and warehousing. The Company believes
the acquisition of Ermanco will enhance SI's automated materials handling
capability in production and assembly and warehousing and distribution
environments.
Item 7. Financial Statements and Exhibits.
- ------ ----------------------------------
Audited financial statements of Ermanco and pro forma financial information will
be furnished no later than sixty (60) days after the date that the initial
report on Form 8-K must be filed (October 15, 1999) upon completion of an audit
by Ermanco's certified public accountants.
The following exhibits are filed as part of this report:
2.1. Stock Purchase Agreement dated as of August 6, 1999 among SI
Handling Systems, Inc., Ermanco Incorporated, and the
Stockholders of Ermanco Incorporated (Incorporated by
reference to Exhibit 2.1 to the Company's Form 10-Q filed on
October 13, 1999; File No. 0-03362).
4.1 Form of Subordinated Promissory Note payable to the
Stockholders of Ermanco Incorporated dated September 30, 1999.
10.11 Employment Agreement with Leon C. Kirschner.
10.12 Line of Credit Loan Agreement entered into September 30, 1999
by and between SI Handling Systems, Inc, Ermanco Incorporated,
and First Union National Bank.
10.13 Promissory Note related to the Line of Credit Loan Agreement
entered into September 30, 1999 by and between SI Handling
Systems, Inc, Ermanco Incorporated, and First Union National
Bank.
10.14 Term Loan Loan Agreement entered into September 30, 1999 by
and between SI Handling Systems, Inc, Ermanco Incorporated,
and First Union National Bank.
10.15 Promissory Note related to the Term Loan Loan Agreement
entered into September 30, 1999 by and between SI Handling
Systems, Inc, Ermanco Incorporated, and First Union National
Bank.
10.16 Escrow Agreement entered into September 30, 1999 by and among
SI Handling Systems, Inc, the stockholders of Ermanco
Incorporated, and First Union National Bank.
99.1 News Release dated September 30, 1999.
Item 8. Change in Fiscal Year.
- ------ ----------------------
On September 30, 1999, the Company determined to change its fiscal year ending
from the Sunday nearest to the last day of February to December 31. A report on
Form 10-K will be filed for the transition period ending on December 31, 1999.
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 hereunto duly authorized.
SI HANDLING SYSTEMS, INC.
/S/ Barry V. Mack
Barry V. Mack
Vice President - Finance
(Principal Financial Officer)
Dated: October 15, 1999
----------------
<PAGE>
SI HANDLING SYSTEMS, INC.
FORM 8-K
EXHIBIT INDEX
Exhibit No.
2.1 Stock Purchase Agreement dated as of August 6, 1999 among SI
Handling Systems, Inc., Ermanco Incorporated, and the
Stockholders of Ermanco Incorporated (Incorporated by
reference to Exhibit 2.1 to the Company's Form 10-Q filed on
October 13, 1999; File No. 0-03362).
4.1 Form of Subordinated Promissory Note payable to the
Stockholders of Ermanco Incorporated dated September 30, 1999.
10.11 Employment Agreement with Leon C. Kirschner.
10.12 Line of Credit Loan Agreement entered into September 30, 1999
by and between SI Handling Systems, Inc, Ermanco Incorporated,
and First Union National Bank.
10.13 Promissory Note related to the Line of Credit Loan Agreement
entered into September 30, 1999 by and between SI Handling
Systems, Inc, Ermanco Incorporated, and First Union National
Bank.
10.14 Term Loan Loan Agreement entered into September 30, 1999 by
and between SI Handling Systems, Inc, Ermanco Incorporated,
and First Union National Bank.
10.15 Promissory Note related to the Term Loan Loan Agreement
entered into September 30, 1999 by and between SI Handling
Systems, Inc, Ermanco Incorporated, and First Union National
Bank.
10.16 Escrow Agreement entered into September 30, 1999 by and among
SI Handling Systems, Inc, the stockholders of Ermanco
Incorporated, and First Union National Bank.
99.1 News Release dated September 30, 1999.
Exhibit 4.1
-----------
THE SECURITIES REPRESENTED BY THIS SUBORDINATED PROMISSORY NOTE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
THE SECURITIES ACT.
FORM OF
SUBORDINATED PROMISSORY NOTE
Due:
-------------------------
$
-------------------------
FOR VALUE RECEIVED, SI HANDLING SYSTEMS, INC., a Pennsylvania
corporation (the "Company"), hereby promises to pay to the order of (the
"Investor"), at the place designated by the Investor, the principal amount of
Dollars ($ ) in lawful money of the United States of America, and to pay
interest in like money on the terms set forth in Section 1 hereof. This
Subordinated Promissory Note (the "Note") is being delivered pursuant to the
terms and conditions of that certain Stock Purchase Agreement dated August 6,
1999 between the Company, the Investor and the other parties named therein (the
"Agreement"), and the Investor's rights under this Note are subject to the terms
and conditions of the Agreement. All capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
1. Payments of Interest and Principal. Payments of principal plus interest on
the unpaid principal balance hereof outstanding from time to time shall be
payable in accordance with the following:
(a) During the period of three (3) years commencing on the date hereof and
ending on the third anniversary of the date hereof, interest shall be payable
quarterly, in arrears, at a rate equal to ten percent (10%) per annum. Such
interest shall be paid to the Investor by the Company quarterly commencing on
the last day of December, 1999 and continuing thereafter on the last day of
March, June, September and December through September 30, 2002.
(b) During the period of two (2) years commencing on the third anniversary
of the date hereof and ending on the fifth anniversary of the date hereof,
interest shall be payable quarterly, in arrears, at a rate equal to twelve
percent (12%) per annum. Such interest shall be paid to the Investor by the
Company quarterly commencing on the last day of December, 2002 and continuing
thereafter on the last day of March, June, September and December through
September 30, 2004.
(c) During the period of two (2) years commencing on the fifth anniversary
of the date hereof and ending on the seventh anniversary of the date hereof,
interest shall be payable quarterly, in arrears, at a rate equal to fourteen
percent (14%) per annum. Such interest shall be paid to the Investor by the
Company quarterly commencing on the last day of December, 2004 and continuing
thereafter on the last day of March, June, September and December through
September 30, 2006.
(d) In the event the entire principal balance due hereunder is not paid on
or prior to September 30, 2006 as a result of the Company's agreement not to pay
and the Investor's agreement not to accept such payment as set forth in the
Subordination Agreement described in Section 4 hereof, during the period of two
(2) years commencing on the seventh anniversary of the date hereof and ending on
the ninth anniversary of the date hereof, interest shall be payable quarterly,
in arrears, at a rate equal to sixteen percent (16%) per annum. Such interest
shall be paid to the Investor by the Company quarterly commencing on the last
day of December, 2006 and continuing thereafter on the last day of March, June,
September and December for so long as any principal balance hereunder remains
unpaid through September 30, 2008.
(e) Interest on this Note shall be payable in cash unless (A) by making
such payment the Company will breach a covenant or otherwise go out of formula
with one of its financial lending institutions, (B) extraordinary events render
the Company unable to make such cash payment, or (C) the Company's subsidiary,
Ermanco Incorporated, has generated less than eighty-five percent (85%) of the
projected cash, as set forth in Schedule 1.2(b) to the Agreement, in the fiscal
quarter immediately preceding the date on which interest is due, in which event,
payment of such quarterly interest payment may be made in common stock of the
Company upon approval of the Board of Directors of the Company and based upon
the determination of the Board of Directors that the requirements for the
payment of interest in cash set forth in this sentence have not been met. Any
stock issued in payment of interest on this Note shall be subject to a shelf
registration statement filed with the Securities and Exchange Commission.
Interest shall be computed on the basis of the actual days elapsed over a
360-day year.
(f) The entire outstanding principal balance due under this Note and all
interest accrued and unpaid thereon shall be due and payable in full on
September 30, 2006, subject to earlier payment pursuant to Section 3 hereof and
subject to later payment pursuant to the Subordination Agreement described in
Section 4 hereof.
2. Payments. All payments of principal, interest, fees and other amounts due
under this Note shall be made by the Company to the Investor in lawful money of
the United States of America, in immediately available funds before 5:00 p.m. on
the business day on which any such amount is due at the address of the Investor
set forth in Section 6 hereof or such other office as the Investor shall direct
in accordance with Section 6 hereof.
3. Pre-Payment. This Note may be prepaid at any time in whole or in part without
premium or penalty.
4. Subordination. The indebtedness evidenced by this Note is subordinated to the
prior payment of the Bank Debt (as defined in the Subordination Agreement
hereinafter referred to) pursuant to, and to the extent provided in, that
certain Subordination Agreement dated September 30, 1999 by and among the
Company, the Investor and First Union National Bank, as may be amended from time
to time.
5. Set Off. The obligations of the Company hereunder are expressly subject to
the right of set off as provided in Section 1.2(b) of the Agreement.
6. Default and Acceleration. If the Company shall dissolve or make an assignment
for the benefit of creditors or if a voluntary or involuntary case in
bankruptcy, receivership or insolvency shall be commenced by or against the
Company (and, in the event of an involuntary case commenced against the Company,
such case has not been dismissed within sixty (60) days), the Investor or other
holder of this Note may declare all sums to be immediately due and payable
without further notice or demand. If the Company defaults in the timely payment
of any installment of principal or interest due on this Note, the Investor or
any holder of this Note may declare all sums to be due and payable, unless such
default is cured within fifteen (15) days following the delivery of notice of
such default. Any failure to exercise any of these options shall not constitute
a waiver of the right to exercise the same at any future time.
7. Collection Costs. Notwithstanding the above, the Investor or other holder of
this Note shall have all rights and remedies provided by law. If this Note (or
any installment of this Note ) is not paid when due and this Note is placed in
the hands of an attorney or attorneys for collection or enforcement, the Company
promises to pay, in addition to the amounts otherwise due, the reasonable costs
and expenses of such collection or enforcement, including reasonable attorneys'
fees through appellate and enforcement or collection proceedings on any judgment
obtained on this Note.
8. Notices. All notices or requests provided for or permitted to be given
pursuant to this Agreement must be in writing and may be given or served by (i)
depositing the same in the United States mail, addressed to the party to be
notified, postage paid, and registered or certified with return receipt
requested, or (ii) delivering such notice in person to such party. Notices so
deposited in the mail shall be deemed to have been given or served on the date
on which the party actually received or refused such written notice, as shown by
the date or postmark of any return receipt indicating the date of delivery or
attempted delivery to such receiving party.
The addresses of the parties hereto for all purposes of this Agreement are:
The Company: 600 Kuebler Road
P.O. Box 70
Easton, Pennsylvania 18040-9295
Attention: President and CEO
with a required copy to: Pepper Hamilton LLP
1235 Westlakes Drive, Suite 400
Berwyn, Pennsylvania 19312-2401
Attention: Jeffrey P. Libson, Esquire
The Investor: --------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
By giving to the other parties at least five (5) days written notice thereof,
any party hereto shall have the right from time to time and at any time during
the term of this Agreement to change its respective address to any address
within the United States of America.
9. Company's Waivers. The Company hereby waives presentment for payment, demand,
notice of demand, notice of nonpayment or dishonor, protest and notice of
protest of this Note, and all other notices in connection with the delivery,
acceptance, performance, default, or enforcement of the payment of this Note.
The Company agrees that the Company's liability shall be unconditional, without
regard to the liability of any other party, and shall not be affected in any
manner by any indulgence, extension of time, renewal, waiver or modification
granted or consented to by the Investor.
10. Severability. If any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, the other provisions of this
Note shall remain in full force and effect.
11. Remedies Cumulative. All rights and remedies of the Investor under this Note
and any applicable law are separate and cumulative, and the exercise of one
shall not limit or prejudice the exercise of any other such rights or remedies.
The enumeration in this Note of any waivers or consents by the Company shall not
be deemed exclusive of any additional waivers or consents by the Company which
may be deemed to exist in law or equity. No delay or omission by the Investor in
exercising any right or remedy shall operate as a waiver thereof. No waiver of
any rights and remedies hereunder, and no modification or amendment of this
Note, shall be deemed made by the Investor unless in writing and duly signed by
the Investor. Any such written waiver shall apply only to the particular
instance specified therein and shall not impair the further exercise of such
right or remedy or of any other right or remedy of the Investor, and no single
or partial exercise of any right or remedy under this Note shall preclude any
other or further exercise thereof or any other right or remedy.
12. Governing Law. This Note and all questions relating to its validity,
interpretation and performance shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without regard to conflicts
of laws principles.
13. Headings. The headings of the sections of this Note are inserted for
convenience only and do not constitute a part of this Note.
14. Assignment. This Note may be assigned in whole or in part without the
consent of the Company by the Investor or a holder hereof upon notice to the
Company; provided that any such assignment shall be subject to the right of set
off set forth in Section 5 hereof. The Company shall maintain a record of all
such assignments. The Company may not assign any of its obligations hereunder
without the prior written consent of the Investor.
15. Submission to Jurisdiction.
(a) The Company hereby irrevocable submits to the personal jurisdiction of
any appropriate court of original jurisdiction located in the Commonwealth of
Pennsylvania or the Federal District Court for the Eastern District of
Pennsylvania (if there exists subject matter jurisdiction) over any suit, action
or proceeding arising out of or relating to this Note. The Company hereby
irrevocable waives, to the fullest extent permitted by applicable law, any
objection which the Company may now have or hereafter have to the laying of the
venue of any such suits, action or proceeding brought in such court and any
claim that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Company agrees that, to the fullest extent
permitted by applicable law, a final judgment in any such suit, action, or
proceeding brought in such a court shall be conclusive and binding upon the
Company, and may be enforced in any courts in the jurisdiction of which the
Company is or may be subject by a suit upon such judgment, provided that service
of process is effected upon the Company in one of the manners specified in
subparagraph (b) below or as otherwise permitted by applicable law.
(b) The Company hereby consents to process being served in any suit, action
or proceeding of the nature referred to in Section 13(a) hereof by personal
service of process or in accordance with the procedures set forth for the giving
of notice in Section 6 hereof. The Company hereby irrevocably waives, to the
fullest extent permitted by applicable law, all claims of error by reason of any
such service pursuant to the terms hereof (but does not waive any right to
assert lack of subject matter jurisdiction) and agrees that such service (i)
shall be deemed in every respect effective service of process upon the Company
in any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by applicable law, be taken and held to be valid personal service upon
the Company.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, SI Handling Systems, Inc. has caused this
Note to be signed by its duly authorized officer under its corporate seal and to
be dated the day and year first above written.
SI HANDLING SYSTEMS, INC.
By:_____________________________
William Johnson
President and CEO
Exhibit 10.11
-------------
SI HANDLING SYSTEMS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the 7th day
of August, 1999 by and between Leon C. Kirschner, a resident of Grand Rapids
Michigan, (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 and the Employee
hereby accepts employment with the Company, for a period commencing on October
1, 1999 (the "Commencement Date") and continuing until the earlier of the third
anniversary of the Commencement Date (the "Expiration Date") or the termination
of this Agreement in accordance with the provisions of Section 7 hereof (the
"Term"), to hold the office of President of Ermanco Incorporated ("Ermanco") and
shall serve as a corporate officer of the Company with the title of Corporate
Vice President during the Term from and after the Commencement Date (such
office, referred to herein as the "Position"). The Board of Directors of the
Company at a regular or special meeting prior to the Commencement Date 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 President and CEO of the Company, the
Employee shall (i) have responsibility for the exercise of the executive
authority of Ermanco, being the general and active management of the business of
Ermanco and the carrying into effect of all orders and resolutions of the
President and CEO of the Company, which executive authority may be delegated by
the Employee to other officers and/or employees of Ermanco, and (ii) such duties
and responsibilities as may be assigned to him from time to time by the
President and CEO of the Company. The Employee shall report to the President and
CEO of the Company. The Employee shall perform his duties and responsibilities
hereunder at Ermanco's facility located in Spring Lake, Michigan or at such
other location as may be established from time to time by the President and CEO
of the Company; provided that the Employee may perform duties and
responsibilities hereunder at his residence in Telluride, Colorado for up to
eight (8) weeks per year (exclusive of vacation time), so long as (i) Ermanco
has achieved, through the preceding quarter, at least eighty-five percent (85%)
of the sales, income and cash generation goals set forth in a plan for the
applicable fiscal year approved by the President and CEO of the Company (the
"Plan") and (ii) no more than one week per month (exclusive of vacation time) is
spent in Telluride, Colorado. Ermanco shall reimburse the Employee for his
travel expenses between Spring Lake, Michigan and Telluride, Colorado for up to
twelve (12) trips per year up to a maximum of six hundred dollars ($600) per
trip.
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 Fifty-Three Thousand
Dollars ($253,000) (as the same may hereafter be adjusted, the "Salary") during
the term of this Agreement. The Salary shall not be reduced 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. The Salary shall be subject to increase in the
discretion of the President and CEO and the Board of Directors of the Company
based upon the achievement of the sales, income and cash generation goals set
forth in the Plan for the applicable fiscal year.
3.2 Bonus. The Employee shall be eligible to participate in Ermanco's existing
Management Incentive Plan in effect for a particular fiscal year which provides
an opportunity for an annual incentive bonus (the "Bonus") based upon the
achievement of the sales, income and cash generation goals set forth in the Plan
for the applicable fiscal year.
3.3 Equity Participation.
(a) Incentive Stock Options. Effective as of October 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 twenty-five thousand (25,000)
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 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 President and CEO and the Board of Directors
of the Company 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 orders, pre-tax
earnings, cash generation, and effective management of Ermanco's operations.
3.5 Fringe Benefits. During the Term, the Employee shall be entitled to
participate in standard Ermanco management benefits programs, including, without
limitation, Ermanco's standard program with respect to automobile benefits, as
amended from time to time (the "Benefits") (provided that in the event of an
amendment to the automobile benefits program, the automobile benefits received
by the Employee shall not be reduced during the term of the existing lease for
his company automobile), which benefits do not include any special 1099 tax
reimbursements, special insurance-tax reimbursements, special pension
incentives, or special insurance trusts. Employee shall be entitled to four (4)
weeks paid vacation per year.
3.6 Reimbursement of Expenses. 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.
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 and Ermanco, any confidential, proprietary, business and technical
information or trade secrets of the Company or of any subsidiary or affiliate of
the Company, including, without limitation, Ermanco (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, Ermanco 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 or Ermanco 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 and/or Ermanco. During the
Term, the Employee shall not remove from the Company's or Ermanco'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 or Ermanco,
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 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, including, without limitation, Ermanco, 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 or
Ermanco, 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 and/or Ermanco. 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
President and CEO 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;
(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, including, without limitation, Ermanco, 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 or Ermanco 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 or Ermanco 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 or Ermanco to terminate or modify any written or oral agreement or
course of dealing with the Company or Ermanco; 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 Ermanco, 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 or Ermanco as an employee, consultant, agent or distributor of
the Company or Ermanco 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 and Ermanco 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 any time, for
any reason or for no reason, 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 prior to the Expiration Date, 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
neither the Company nor Ermanco shall have any further 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 prior to the Expiration Date, the Employee shall be entitled, as
severance pay, to receive:
(i) an amount equal to (A) the sum of the Salary then in effect plus the average
of the Bonus paid to the Employee in the two years preceding the effective date
of such termination, multiplied by (B) the lesser of (i) two or (ii) the number
of years between the effective date of such termination and the Expiration Date
(pro rated for any partial year);
(ii) all Benefits for a period of years (including fractional years) years equal
to the lesser of (i) two or (ii) the number of years between the effective date
of such termination and the Expiration Date (pro rated for any partial year)
(the "Extended Coverage Period"); provided that such Benefits shall not include
any special 1099 tax reimbursements, special insurance-tax reimbursements,
special pension incentives, or special insurance trusts. In the Employee's sole
discretion, at the end of the Extended Coverage Period, the Company or Ermanco,
as the case may be, shall assign to him any assignable insurance policy owned by
the Company or Ermanco which relate to the Employee, at no cost to the Company,
Ermanco or the Employee;
(iii) in the event the Employee becomes self-employed after the termination of
his employment hereunder, reimbursement for the reasonable business travel
expenses incurred by the Employee in that endeavor for a period equal to the
Extended Coverage Period, up to a maximum amount equal to the amount budgeted by
the Company for his travel expenses for the fiscal year in which the date of
termination occurs (less any amounts budgeted for travel between Spring Lake,
Michigan and Telluride, Colorado);
(iv) a car benefits allowance in an amount equal to any car benefits allowance
available to the Employee as of the date of his termination, for a period equal
to the Extended Coverage Period.
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;
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, neither the Company nor Ermanco shall have any
further liability or obligation hereunder by reason of or subsequent to such
termination.
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, neither the Company nor Ermanco shall have any
further 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, neither the Company nor Ermanco
shall have any further 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.
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 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, 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.
(ii) in the event of the termination of the Employee's employment hereunder
pursuant to 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, 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 a Constructive Termination at any time after the second anniversary
of the Commencement Date and prior to the Expiration Date, 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, 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.
(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 and Ermanco, 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 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:
Leon C. Kirschner
757 Plymouth Road
Grand Rapids, MI 49506
Telecopier: 616-243-5539
with a copy to:
Mark Smith, Esq.
Nantz Litowich Smith & Girard
600 Weyhill Bldg., 2025 E. Beltline
Grand Rapids, MI 49546
Telecopier: 616-977-0529
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.
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 State of Michigan, 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 State of Michigan, 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 state court located in the County in the State in which
Ermanco's principal place of business is located, or if such court does not have
jurisdiction or will not accept jurisdiction, in any state or federal court of
general jurisdiction in the State of Michigan, and, for such purpose, the
Employee hereby consents to the personal and exclusive jurisdiction of such
court and hereby waives any objection 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 Grand Rapids,
Michigan 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]
<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/ William Johnson
--------------------------------
William Johnson, President & CEO
/s/ Leon C. Kirschner
--------------------------------
Leon C. Kirschner
Exhibit 10.12
-------------
LOAN AGREEMENT
(Line of Credit)
First Union National Bank
702 Hamilton Mall
Allentown, Pennsylvania 18101
(Hereinafter referred to as the "Bank")
SI Handling Systems, Inc.
600 Kuebler Road
Easton, Pennsylvania 18040
Ermanco Incorporated
6870 Grand Haven Road
Spring Lake, Michigan 49456
(Individually and collectively "Borrower")
This Loan Agreement ("Agreement") is entered into September 30, 1999, by and
between Bank and Borrower.
This Agreement applies to the loan or loans (individually and collectively, the
"Loan") evidenced by one or more promissory notes dated September 30, 1999 or
other notes subject hereto, as modified from time to time (whether one or more,
the "Note") and all Loan Documents. The terms "Loan Documents" and
"Obligations," as used in this Agreement, are defined in the Note.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
AVAILABILITY. Notwithstanding anything to the contrary contained herein, the
aggregate outstanding principal balance of Advances (as defined in the Note)
(the "Total Outstandings") at any one time shall not exceed the lesser of
$6,000,000.00 or the Borrowing Base (as hereinafter defined). In the event that
the Total Outstandings at any time exceeds the Borrowing Base, Borrower shall
pay to Bank the amount of such excess immediately upon receipt by Borrower of
written notice that the Borrowing Base has been exceeded.
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof,
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. Authorization; Non-Contravention. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized as may be required and, if
necessary, by making appropriate filings with any governmental agency or unit
and are the legal, binding, valid and enforceable obligations of Borrower and
any guarantors; and do not (i) contravene, or constitute (with or without the
giving of notice or lapse of time or both) a violation of any provision of
applicable law, a violation of the organizational documents of Borrower or any
guarantor, or a default under any agreement, judgment, injunction, order, decree
or other instrument binding upon or affecting Borrower or any guarantor, (ii)
result in the creation or imposition of any lien (other than the lien(s) created
by the Loan Documents) on any of Borrower's or any guarantor's assets, or (iii)
give cause for the acceleration of any obligations of Borrower or any guarantor
to any other creditor. Asset Ownership. Borrower has good and marketable title
to all of the properties and assets reflected on the balance sheets and
financial statements supplied Bank by Borrower, and all such properties and
assets are free and clear of mortgages, security deeds, pledges, liens, charges,
and all other encumbrances, except as otherwise disclosed to Bank by Borrower in
writing and approved by Bank ("Permitted Liens"). To the knowledge of Borrower's
senior management, no default has occurred under any Permitted Liens and no
claims or interests adverse to Borrower's present rights in its properties and
assets have arisen. Discharge of Liens and Taxes. Borrower has duly filed, paid
and/or discharged all taxes or other claims which may become a lien on any of
its property or assets, except to the extent that such items are being
appropriately contested in good faith and an adequate reserve for the payment
thereof is being maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Note and any other
Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. ss.
101(32). Compliance with Laws. Borrower is in compliance in all material
respects with all federal, state and local laws, rules and regulations
applicable to its properties, operations, business, and finances, including,
without limitation, any federal or state laws relating to liquor (including 18
U.S.C. ss. 3617, et seq.) or narcotics (including 21 U.S.C. ss. 801, et seq.)
and/or any commercial crimes; all applicable federal, state and local laws and
regulations intended to protect the environment; and the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), if applicable. Organization
and Authority. Each corporate or limited liability company Borrower and/or
guarantor, as applicable, is duly created, validly existing and in good standing
under the laws of the state of its organization, and has all powers,
governmental licenses, authorizations, consents and approvals required to
operate its business as now conducted. Each corporate or limited liability
company Borrower and/or guarantor, as applicable, is duly qualified, licensed
and in good standing in each jurisdiction where qualification or licensing is
required by the nature of its business or the character and location of its
property, business or customers, and in which the failure to so qualify or be
licensed, as the case may be, in the aggregate, could have a material adverse
effect on the business, financial position, results of operations, properties or
prospects of Borrower or any such guarantor. No Litigation. There are no pending
or, to the knowledge of Borrower's senior management, threatened suits, claims
or demands against Borrower or any guarantor that have not been disclosed to
Bank by Borrower in writing. Regulation U. None of the proceeds of the credit
extended pursuant to this Agreement shall be used directly or indirectly for the
purpose of purchasing or carrying any margin stock in violation of any of the
provisions of Regulation U of the Board of Governors of the Federal Reserve
System ("Regulation U"), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin stock or
for any other purchase which might render the Loan a "Purpose Credit" within the
meaning of Regulation U. ERISA. Each employee pension benefit plan, as defined
in ERISA, maintained by Borrower meets, as of the date hereof, the minimum
funding standards of ERISA and all applicable regulations thereto and
requirements thereof, and of the Internal Revenue Code of 1986, as amended. No
"Prohibited Transaction" or "Reportable Event" (as both terms are defined by
ERISA) has occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower will: Access to Books and Records. Allow Bank, or its agents,
during normal business hours, access to the books, records and such other
documents of Borrower as Bank shall reasonably require, and allow Bank to make
copies thereof at Bank's expense. Accounts Payable Aging. Deliver to Bank, from
time to time hereafter but not less than monthly within 15 days of the end of
each such period, a detailed payables report including aging of payables by
total, vendor names and addresses, a reconciliation statement, and the original
date of each invoice. Accounts Receivable Aging. Deliver to Bank, from time to
time hereafter but not less than monthly within 15 days of the end of each such
period, a detailed receivables report including totals, customer names and
addresses, a reconciliation statement, and the original date of each invoice.
Business Continuity. Conduct its business in substantially the same manner and
locations as such business is now and has previously been conducted, with the
exception of the acquisition of Ermanco Incorporated as a subsidiary and the
operation of its facility in Michigan. Compliance with Laws. Comply, in all
material respects, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment, discrimination,
labor and other laws and regulations. Compliance with Other Agreements. Comply
with all terms and conditions contained in this Agreement, and any other Loan
Documents, and swap agreements in connection therewith, as defined in the 11
U.S.C. ss. 101. Estoppel Certificate. Furnish, within 15 days after request by
Bank, a written statement duly acknowledged of the amount due under the Loan and
whether offsets or defenses exist against the Obligations. Insurance. Maintain
adequate insurance coverage with respect to its properties and business against
loss or damage of the kinds and in the amounts customarily insured against by
companies of established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance, workers
compensation insurance, and business interruption insurance; all acquired in
such amounts and from such companies as Bank may reasonably require. Inventory
Reports. Deliver to Bank, from time to time hereafter but not less than monthly
within 15 days of the end of each such period, an inventory report showing
individual values for raw materials, work-in-progress, finished products and any
inventory obsolescence. Maintain Properties. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. Non-Default Certificate From Borrower. Deliver to Bank, with the
Financial Statements required below, a certificate signed by a principal
financial officer of Borrower in the form of Exhibit "A" attached hereto and
made a part hereof, stating that Borrower is in compliance with the financial
covenants certified herein, setting forth the applicable calculations, and
warranting that no "Default" as specified in the Loan Documents nor any event
which, upon the giving of notice or lapse of time or both, would constitute such
a Default, has occurred. Notice of Default and Other Notices. (a) Notice of
Default. Furnish to Bank immediately upon becoming aware of the existence of any
condition or event which constitutes a Default (as defined in the Loan
Documents) or any event which, upon the giving of notice or lapse of time or
both, may become a Default, written notice specifying the nature and period of
existence thereof and the action which Borrower is taking or proposes to take
with respect thereto. (b) Other Notices. Promptly notify Bank in writing of (i)
any material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which it
is a party or by which any of its properties are bound, or any acceleration of
the maturity of any indebtedness owing by Borrower; (iii) any material adverse
claim against or affecting Borrower or any part of its properties; (iv) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any governmental agency or unit affecting
Borrower in excess of $50,000.00; and (v) at least 30 days prior thereto, any
change in Borrower's name or address as shown above, and/or any change in
Borrower's structure. Other Financial Information. Deliver promptly such other
information regarding the operation, business affairs, and financial condition
of Borrower which Bank may reasonably request. Payment of Debts. Pay and
discharge when due, and before subject to penalty or further charge, and
otherwise satisfy at or before maturity or delinquency, all obligations, debts,
taxes, and liabilities of whatever nature or amount, except those which Borrower
in good faith disputes. Reports and Proxies. Deliver to Bank, promptly, a copy
of all financial statements, reports, notices, and proxy statements, sent by
Borrower to stockholders, and all regular or periodic reports required to be
filed by Borrower with any governmental agency or authority.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Change in Fiscal Year. Change its fiscal
year from December 31 without the consent of Bank. Encumbrances. Create, assume,
or permit to exist any mortgage, security deed, deed of trust, pledge, lien,
charge or other encumbrance on any of its assets, whether now owned or hereafter
acquired, other than: (i) security interests required by the Loan Documents;
(ii) liens for taxes contested in good faith; (iii) liens accruing by law for
employee benefits; or (iv) Permitted Liens. Guarantees. Guarantee or otherwise
become responsible for obligations of any other person or persons other than
guarantees made in favor of Bank for SI Baker Joint Venture obligations.
Investments. Purchase any stock, securities, or evidence of indebtedness of any
other person or entity except (a) investments in AIM Funds with Bank, (b)
investments in direct obligations of the United States Government, and (c)
certificates of deposit of United States commercial banks having a tier 1
capital ratio of not less than 6% and then in an amount not exceeding 10% of the
issuing bank's unimpaired capital and surplus. Dividends. Declare or pay
dividends in an amount in excess of twenty percent (20%) of its net income
during the fiscal years ending December 31, 1999 and December 31, 2000, or
declare or pay dividends in an amount in excess of fifteen percent (15%) of its
net income during the fiscal year ending December 31, 2001 and thereafter. Joint
Ventures. Invest or participate in or become a joint venturer in any new joint
venture or partnership. Default on Other Contracts or Obligations. Default on
any material contract with or obligation when due to a third party or default in
the performance of any obligation to a third party incurred for money borrowed
in an amount in excess of $50,000.00. Government Intervention. Permit the
assertion or making of any seizure, vesting or intervention by or under
authority of any government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective business or its
such business is curtailed or materially impaired. Judgment Entered. Permit the
entry of any monetary judgment or the assessment against, the filing of any tax
lien against, or the issuance of any writ of garnishment or attachment against
any property of or debts due Borrower in an amount in excess of $25,000.00 which
is not discharged or execution is not stayed within 30 days of entry. Prepayment
of Other Debt. Retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so. Retire or
Repurchase Capital Stock. Retire or otherwise acquire any of its capital stock.
FINANCIAL STATEMENTS. Borrower shall deliver to Bank within five (5) days after
filing with the appropriate governmental authority, each 10K and 10Q prepared in
conformity with generally accepted accounting principles consistently applied
and otherwise in form and substance satisfactory to Bank.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
hereof until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, and all financial covenants shall be calculated on
a consolidated basis, using the financial information for Borrower, its
subsidiaries and affiliates, including without limitation, Ermanco Incorporated,
but excluding SI Baker and Egimen: Funds Flow Coverage Ratio. Borrower shall, at
all times, maintain a Funds Flow Coverage Ratio of not less than 1.25 to 1.00,
measured quarterly on a rolling four quarters basis. "Funds Flow Coverage Ratio"
shall mean the sum of earnings before interest, taxes, depreciation and
amortization divided by the sum of all current maturities of long term debt and
capital lease obligations plus interest expense. Total Liabilities to Net Worth
Ratio.
Borrower shall, from closing until fiscal year-end December 31, 2000, maintain
a ratio of Total Liabilities to Net Worth of not more than 1.80 to 1.00, and at
all times thereafter, Borrower shall maintain a ratio of Total Liabilities to
Net Worth of not more than 1.75 to 1.00. "Net Worth" shall mean total assets
minus Total Liabilities. "Total Liabilities" shall mean all liabilities of
Borrower, excluding debt fully subordinated to Bank on terms and conditions
acceptable to Bank, and including capitalized leases and all reserves for
deferred taxes and other deferred sums appearing on the liabilities side of a
balance sheet, in accordance with generally accepted accounting principles
applied on a consistent basis. Current Ratio. Borrower shall, at all times,
maintain a Current Ratio of not less than 1.20 to 1.00. "Current Ratio" shall
mean the ratio of Current Assets to Current Liabilities. "Current Assets" shall
mean all assets which are so classified in accordance with generally accepted
accounting principles. "Current Liabilities" shall mean all liabilities which
are so classified in accordance with generally accepted accounting principles.
Limitation on Debt. Borrower shall not, directly or indirectly, create, incur,
assume or become liable for any additional indebtedness, whether contingent or
direct, if, giving effect to such additional debt on a pro forma basis causes
the aggregate amount of Borrower's debt to exceed $50,000.00, excluding (a)
obligations to Bank; (b) $250,000.00 to be invested in Egimen; and (c) amounts
payable to the former shareholders of Ermanco Incorporated in connection with
the acquisition for which the Loan was, in part, obtained, which amounts shall
not exceed $3,000,000.00 in the aggregate. Depository Relationship.
Borrower shall maintain its primary depository account with Bank.
BORROWING BASE. "Borrowing Base" means (a) 80% of the net amount of Eligible
Accounts, plus (b) 40% of the value of Eligible Inventory, plus (c) 80% of the
current fair market value of the Property (as hereinafter defined) as determined
by appraisal satisfactory to Bank, plus (d) 100% of the Orderly Liquidation
Value of Equipment, unencumbered by any liens other than in favor of Bank, plus
(e) an amount equal to $2,500,000.00, which amount shall be reduced by
$625,000.00 every 6 months during the first 2 years of this Loan, until such
amount reaches zero (0) on the second anniversary of the date of this Agreement,
minus (f) the unpaid principal balance of the Term Loan.
"Eligible Account" means an account receivable not more than 90 days from the
date of the original invoice that arises in the ordinary course of Borrower's
business and meets the following eligibility requirements: (a) the sale of goods
or services reflected in such account is final and such goods and services have
been delivered or provided and accepted by the account debtor and payment for
such is owing; (b) the invoices comprising an account are not subject to any
claims, returns or disputes of any kind; (c) the account debtor is not
insolvent; (d) the account debtor has its principal place of business in the
United States; (e) with the exception of SI Baker and Egimen (to the extent of
$350,000.00 each), the account debtor is not an Affiliate of Borrower and is not
a supplier to Borrower and the account is not otherwise exposed to risk of
set-off; (f) not more than thirty percent of the original invoices owing
Borrower by the account debtor are more than 90 days from the date of the
original invoice; (g) the account is not subject to any lien prior to the lien
of Bank; and (h) the account does not arise from any contract or agreement with
the United States of America or any agencies or representatives thereof unless
Bank has obtained full compliance to its complete satisfaction with all
provisions necessary to protect Bank's interests under The Assignment of Claims
Act of 1940, as amended, or any successor statute and all regulations
promulgated thereunder and all other federal procurement laws and regulations.
"Eligible Account" may include an account secured by a letter of credit issued
by a financial institution acceptable to Bank.
"Eligible Inventory" means inventory of raw material and finished goods in
Borrower's possession that is held for use or sale in the ordinary course of
Borrower's business and is not unmerchantable or obsolete and is subject to a
first priority perfected security interest in favor of Bank. The value of the
inventory will be determined by Bank and will be valued at the lower of cost or
market on a first-in, first-out basis.
"Orderly Liquidation Value" means the amount determined by Bank that might be
realized from a piecemeal disposition of the Equipment, assuming a reasonable
period of time in which to complete the transaction and assuming the Equipment
will be offered for sale on an "AS IS, WHERE IS" basis, with the buyer paying
the cost to dismantle and remove.
"Equipment" means equipment in Borrower's possession that is not unmerchantable
or obsolete and is subject to a first priority perfected security interest in
favor of Bank. The value of the equipment will be determined by Bank and will be
valued at the lower of cost or market.
"Property" means all real estate, including fixtures, located at (a) 600 Kuebler
Road, Easton, Pennsylvania 18040, and (b) 1160 Judson Road, Norton Shores,
Michigan.
"Affiliate" shall have the meaning as defined in 11 U.S.C. ss.101, except that
the term "Borrower" shall be substituted for the term "Debtor" therein.
"Term Loan" means that certain loan in the original principal amount of
$14,000,000.00 made by Bank to Borrower on the date hereof.
Required Reports. Borrower shall deliver to Bank, by the 15th day of each month,
a detailed report certified by Borrower on the aging of Eligible Accounts, the
value of Eligible Inventory, and other collateral, on the form attached hereto
as Exhibit "B" and made a part hereof, together with all details and supporting
documents requested by Bank. Bank may at any time and from time to time, during
Borrower's normal business hours, enter upon any business premises of Borrower
and audit Borrower's accounts, inventory, and other collateral. Bank's
determination of the amount of Eligible Accounts, the value of Eligible
Inventory, and the agreed value of other collateral shall at all times be
rebuttably presumed correct. Borrower, at all times, shall cooperate with Bank
by providing Bank information and access to Borrower's premises and business
records and shall be courteous to Bank's agents.
CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request. Opinion of Counsel. On or prior to
the date of any extension of credit hereunder, Bank shall have received a
written opinion of the counsel of Borrower acceptable to Bank that includes
confirmation of the following: (a) The accuracy of the representations set forth
in this Agreement in the Representations Subparagraphs entitled "Authorization;
Non-Contravention"; "Compliance with Laws", and "Organization and Authority".
(b) This Agreement and other Loan Documents have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms, subject to bankruptcy,
insolvency or other laws relating to enforcement of creditors' rights. (c) No
registration with, consent of, approval of, or other action by, any federal,
state or other governmental authority or regulatory body is required by law in
connection with the execution and delivery of this Agreement and the other Loan
Documents, or the extension of credit under this Agreement or the other Loan
Documents, or, if so required, such registration has been made, and such consent
or approval given or such other appropriate action taken. (d) The Loan Documents
create a first priority security interest in the Collateral (as defined in the
Loan Documents) consisting of personal property.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
SI Handling Systems, Inc.
CORPORATE By: /s/ William R. Johnson
----------------------------------
SEAL William R. Johnson, President
/s/ Ronald J. Semanick
----------------------------------
Ronald J. Semanick, Secretary
Ermanco Incorporated
CORPORATE By: /s/ Leon C. Kirschner
----------------------------------
SEAL Leon C. Kirschner, President
/s/ Mark R. Smith
----------------------------------
Mark R. Smith, Witness
First Union National Bank
By: /s/ Peter A. Gray
----------------------------------
Peter A. Gray, Vice President
<PAGE>
Exhibit "B"
Certification of Borrowing Base
Borrowers: SI Handling Systems, Inc. and Ermanco Incorporated
Account#______________
First Union National Bank No. ________________
702 Hamilton Mall
Allentown, Pennsylvania 18101 Date ________________
We hereby certify that as of __________________________ the following accounts
receivable, inventory and equipment were pledged as collateral for our loan:
1) Total Accounts Receivable . . . . . . . . . . . . . . . $_______________
Less: Unqualified Accounts Receivable (List)
Agings over 90 days _______________
Accounts with 30% or more of balance
over 90 days past due _______________
Foreign Debtor (excluding those secured by
Letter of Credit) _______________
Affiliates (excluding SI Baker and Egimen
[not to exceed $350,000.00 each] _______________
Government Contracts (excepting compliance
with Assignment of Claims Act) _______________
Other _______________
1) Total Unqualified Receivables . . . . . . . . .(_______________)
2) Qualified Accounts Receivable. . . . . . . . .$ _______________
Advance Rate X 80.00 %=
1) Loan Available on Accounts Receivable.. . . . . . . . $_______________
2) Total Raw Material Inventory . . . . . . . $ _______________
Total Finished Goods Inventory . . . . . . $ _______________
Less: Unqualified Inventory (List) _______________
Unmerchantable/Obsolete _______________
Other _______________
1) Total Unqualified Inventory . . . . . . . ..(______________)
2) Qualified Inventory . . . . . . . . . . . .$ ______________
Advance Rate X 40.00 %=
1) Loan Available on Inventory . . . . . . . . . . . . . $_______________
2) 80% of Current Fair Market Value of Property . . . . .$_______________
3) Total Equipment Inventory . . . . . . . . $ ______________
Less: Unqualified Equipment (List) ________________
1) Qualified Equipment . . . . . . . . . . . .$ ________________
2) 100% of Orderly Liquidation Value of Equipment . . . .$_______________
3) Loan Available on $2,500,000.00 . . . . . . . . . . . $_______________
[to be reduced by $625,000.00 every six months
until such amount reaches 0]
1) Total Loan Available as per Collateral . . . . . . . .$_______________
2) Total Line of Credit Outstanding . . . . . . . . . . .$_______________
3) Total Term Loan Outstanding . . . . . . . . . . . . . $_______________
4) Increase Available (14 less 15 and 16)
(or Increase Requested $_______________)
Payment Due and Enclosed . . . . . . . . . . . . . . .$_______________
** The total of items 15 and 17 is not to exceed the $6,000,000.00 line
of credit.
I hereby certify to the best of the undersigned's knowledge, information, and
belief, this above financial information, as derived from each Borrower's
accounting records, as true and correct, and that no material adverse change in
the financial condition of either Borrower has occurred since the date of this
certification.
SI Handling Systems, Inc. Ermanco Incorporated
By: _________________________ By: _____________________________________
Name:____________________ Name:________________________________
Title:___________________ Title:_______________________________
Exhibit 10.13
-------------
PROMISSORY NOTE
$6,000,000.00
September 30, 1999
SI Handling Systems, Inc.
600 Kuebler Road
Easton, Pennsylvania 18040
Ermanco Incorporated
6870 Grand Haven Road
Spring Lake, Michigan 49456
(Individually and collectively "Borrower")
First Union National Bank
702 Hamilton Mall
Allentown, Pennsylvania 18101
(Hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Six Million and No/100 Dollars ($6,000,000.00) or such sum
as may be advanced and outstanding from time to time, with interest on the
unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof,
this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, (i) real
property collateral described in those two (2) certain Mortgages of even date
herewith; (ii) personal property collateral described in those two (2) certain
Security Agreements of even date herewith; and (iii) collateral described in
that certain Assignment of Interest in Joint Venture of even date herewith.
INTEREST RATE DEFINITIONS.
Prime-Based Rate. The rate of Bank's Prime Rate, as that rate may change from
time to time with changes to occur on the date Bank's Prime Rate changes
("Prime-Based Rate"). "Bank's Prime Rate" shall be that rate announced by Bank
from time to time as its prime rate and is one of several interest rate bases
used by Bank. Bank lends at rates both above and below Bank's Prime Rate, and
Borrower acknowledges that Bank's Prime Rate is not represented or intended to
be the lowest or most favorable rate of interest offered by Bank.
LIBOR Market Index-Based Rate. LIBOR Market Index Rate plus 2.00%, as LIBOR
Market Index Rate may change from day to day ("LIBOR Market Index-Based Rate").
"LIBOR Market Index Rate", for any day, is the rate for 1 month U.S. dollar
deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on
such day, or if such day is not a London business day, then the immediately
preceding London business day (or if not so reported, then as determined by Bank
from another recognized source or interbank quotation).
INTEREST RATE SELECTION AND ADJUSTMENT.
Interest Rate Options. At the election of Borrower, the unpaid principal balance
of each Advance (as defined herein) shall bear interest from the date such
Advance is made available to the Borrower at the LIBOR Market Index-Based Rate
or the Prime-Based Rate selected by Borrower in accordance herewith (each, an
"Interest Rate"). Borrower shall select the Interest Rate pursuant to the
subparagraph entitled "Notice and Manner of Borrowing and Rate Conversion"
below; provided, the first Interest Period shall commence on the date of such
Advance and end on the first date thereafter that interest in respect of such
Advance is due. There shall be no more than one Interest Rate for an Advance in
effect at any time.
When the Prime-Based Rate is selected for an Advance, it shall be adjusted daily
as applicable to reflect Bank's Prime Rate and the Prime-Based Rate shall
continue to apply until another Interest Rate option for that Advance is
selected pursuant to the subparagraph entitled "Notice and Manner of Borrowing
and Rate Conversion". When the LIBOR Market Index-Based Rate is selected for an
Advance, it shall be adjusted daily as applicable to reflect LIBOR Market Index
Rate and the LIBOR Market Index-Based Rate shall continue to apply until another
Interest Rate option for that Advance is selected pursuant to the subparagraph
entitled "Notice and Manner of Borrowing and Rate Conversion." Until the
Borrower selects an initial Interest Rate as provided herein, the Advance shall
bear interest at the Prime-Based Rate.
Default Rate. In addition to all other rights contained in this Note, if a
Default occurs, and as long as a Default continues, all outstanding Obligations
shall bear interest at the Prime-Based Rate plus 3% ("Default Rate"). The
Default Rate shall also apply from acceleration until the Obligations or any
judgment thereon is paid in full.
Notice and Manner of Borrowing and Rate Conversion. Borrower shall give Bank
irrevocable telephonic notice of each proposed Advance or rate conversion not
later than 11:00 a.m. local time at the office of Bank first shown above on the
same business day as each proposed Advance or rate conversion to the Prime-Based
Rate or LIBOR Market Index-Based Rate. Each such notice shall specify (i) the
date of such Advance or rate conversion, which shall be a business day, (ii) the
amount of each Advance or the amount to be converted, and (iii) the Interest
Rate selected by Borrower. Notices received after 11:00 a.m. local time at the
office of Bank first shown above shall be deemed received on the next business
day.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective rate exceeding that of
the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only, commencing on October 30, 1999, and
continuing on the same day of each month thereafter until fully paid. In any
event, all principal and accrued interest shall be due and payable on September
30, 2002. Bank will review this facility on an annual basis, and if such review
is satisfactory in Bank's sole discretion, Bank will extend the term of this
facility for an additional period of one year on an annual basis.
AUTOMATIC DEBIT OF CHECKING ACCOUNT FOR LOAN PAYMENT. Borrower authorizes Bank
to debit demand deposit account number 2100017073313 or any other account with
Bank (routing number 031000503) designated in writing by Borrower, beginning
October 30, 1999 for any payments due under this Note. Borrower further
certifies that Borrower holds legitimate ownership of this account and
preauthorizes this periodic debit as part of its right under said ownership.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and the
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and any prior notes which evidence all or any
portion of the loan evidenced by this Note, and any letters of credit issued
pursuant to any loan agreement to which this Note is subject, any applications
for such letters of credit and any other documents executed in connection
therewith, and may include, without limitation, a commitment letter that
survives closing, a loan agreement, this Note, guaranty agreements, security
agreements, security instruments, financing statements, mortgage instruments,
any renewals or modifications, whenever any of the foregoing are executed, but
does not include swap agreements (as defined in 11 U.S.C. ss. 101). Obligations.
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements (as defined in 11
U.S.C. ss. 101) between Borrower and Bank whenever executed. Certain Other
Terms. All terms that are used but not otherwise defined in any of the Loan
Documents shall have the definitions provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 10 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note and the late charge shall be the highest amount allowable under such
laws. If no amount is stated thereunder, the late charge shall be 5% of each
payment past due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. False Warranty. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or the
holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "Borrower" shall be substituted for the term "Debtor"
therein; "Subsidiary" shall mean any business in which Borrower holds, directly
or indirectly, a controlling interest). Cessation; Bankruptcy. The death of,
appointment of a guardian for, dissolution of, termination of existence of, loss
of good standing status by, appointment of a receiver for, assignment for the
benefit of creditors of, or commencement of any bankruptcy or insolvency
proceeding by or against Borrower, its Subsidiaries or Affiliates, if any, or
any general partner of or the holder(s) of the majority ownership interests of
Borrower, or any party to the Loan Documents. Material Capital Structure or
Business Alteration. Without prior written consent of Bank, (i) a material
alteration in the kind or type of Borrower's business or that of Borrower's
Subsidiaries or Affiliates, if any; (ii) the sale of substantially all of the
business or assets of Borrower, any of Borrower's Subsidiaries or Affiliates or
any guarantor, or a material portion (10% or more) of such business or assets if
such a sale is outside the ordinary course of business of Borrower, or any of
Borrower's Subsidiaries or Affiliates or any guarantor, or more than 50% of the
outstanding stock or voting power of or in any such entity in a single
transaction or a series of transactions; (iii) the acquisition of substantially
all of the business or assets or more than 50% of the outstanding stock or
voting power of any other entity; or (iv) should any Borrower, or any of
Borrower's Subsidiaries or Affiliates or any guarantor enter into any merger or
consolidation, other than a merger of SI Handling Systems, Inc. and Ermanco
Incorporated.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien. Foreclose its security interest or lien against Borrower's accounts
without notice. Acceleration Upon Default. Accelerate the maturity of this Note
and, at Bank's option, any or all other Obligations, whereupon this Note and the
accelerated Obligations shall be immediately due and payable. Cumulative.
Exercise any rights and remedies as provided under the Note and other Loan
Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure that
Borrower's computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000. At the request of Bank,
Borrower shall provide Bank assurance acceptable to Bank of Borrower's Year 2000
compatibility.
CONFESSION OF JUDGMENT. THE FOLLOWING PARAGRAPH SETS FORTH A POWER OF AUTHORITY
FOR ANY ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER. IN GRANTING THIS WARRANT
OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER, THE BORROWER, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR BORROWER AND
WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY KNOWINGLY, INTENTIONALLY,
VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE
BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER
THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF AMERICA,
COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE INCLUDING, WITHOUT LIMITATION, A
HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF THE BORROWER'S BANK ACCOUNT AND
OTHER ASSETS. BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT BY ENTERING INTO THIS
NOTE CONTAINING A CONFESSION OF JUDGMENT CLAUSE THAT BORROWER IS VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL RIGHTS, INCLUDING
CONSTITUTIONAL RIGHTS, THAT BORROWER HAS OR MAY HAVE TO NOTICE AND A HEARING
BEFORE JUDGMENT CAN BE ENTERED AGAINST BORROWER AND BEFORE THE BORROWER'S
ASSETS, INCLUDING, WITHOUT LIMITATION, ITS BANK ACCOUNTS, MAY BE GARNISHED,
LEVIED, EXECUTED UPON AND/OR ATTACHED. BORROWER UNDERSTANDS THAT ANY SUCH
GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL RENDER THE PROPERTY
GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY UNAVAILABLE TO
BORROWER. IT IS SPECIFICALLY ACKNOWLEDGED BY BORROWER THAT THE BANK HAS RELIED
ON THIS WARRANT OF ATTORNEY AND THE RIGHTS WAIVED BY BORROWER HEREIN IN
RECEIVING THIS NOTE AND AS AN INDUCEMENT TO GRANT FINANCIAL ACCOMMODATIONS TO
THE BORROWER.
If a Default occurs under this Note or any other Loan Documents, each Borrower
hereby jointly and severally authorizes and empowers any attorney of any court
of record or the prothonotary or clerk of any county in the Commonwealth of
Pennsylvania, or in any jurisdiction where permitted by law or the clerk of any
United States District Court, to appear for Borrower in any and all actions
which may be brought hereunder and enter and confess judgment against the
Borrower or any of them in favor of the Bank for such sums as are due or may
become due hereunder or under any other Loan Documents, together with costs of
suit and actual collection costs including, without limitation, reasonable
attorneys' fees but in no event less than $5,000.00, with or without
declaration, without prior notice, without stay of execution and with release of
all procedural errors and the right to issue executions forthwith. To the extent
permitted by law, Borrower waives the right of inquisition on any real estate
levied on, voluntarily condemns the same, authorizes the prothonotary or clerk
to enter upon the writ of execution this voluntary condemnation and agrees that
such real estate may be sold on a writ of execution; and also waives any relief
from any appraisement, stay or exemption law of any state now in force or
hereafter enacted. Borrower further waives the right to any notice and hearing
prior to the execution, levy, attachment or other type of enforcement of any
judgment obtained hereunder, including, without limitation, the right to be
notified and heard prior to the garnishment, levy, execution upon and attachment
of Borrower's bank accounts and other property. If a copy of this Note verified
by affidavit of any officer of the Bank shall have been filed in such action, it
shall not be necessary to file the original thereof as a warrant of attorney,
any practice or usage to the contrary notwithstanding. The authority herein
granted to confess judgment shall not be exhausted by any single exercise
thereof, but shall continue and may be exercised from time to time as often as
the Bank shall find it necessary and desirable and at all times until full
payment of all amounts due hereunder and under any other Loan Documents. The
Bank may confess one or more judgments in the same or different jurisdictions
for all or any part of the Obligations arising hereunder or under any other Loan
Documents to which Borrower is a party, without regard to whether judgment has
theretofore been confessed on more than one occasion for the same Obligations.
In the event that any judgment confessed against the Borrower is stricken or
opened upon application by or on behalf of Borrower or any obligor for any
reason, the Bank is hereby authorized and empowered to again appear for and
confess judgment against Borrower for any part or all of the Obligations owing
under this Note and/or for any other liabilities, as herein provided.
LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may
advance and readvance under this Note respectively from time to time until the
maturity hereof (each an "Advance" and together the "Advances"), so long as the
total principal balance outstanding under this Note at any one time does not
exceed the principal amount stated on the face of this Note, subject to the
limitations described in any loan agreement to which this Note is subject.
Bank's obligation to make Advances under this Note shall terminate if Borrower
is in Default. As of the date of each proposed Advance, Borrower shall be deemed
to represent that each representation made in the Loan Documents is true as of
such date.
If Borrower subscribes to Bank's cash management services and such services are
applicable to this line of credit, the terms of such service shall control the
manner in which funds are transferred between the applicable demand deposit
account and the line of credit for credit or debit to the line of credit.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period,
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Applicable Law; Conflict
Between Documents. This Note and the other Loan Documents shall be governed by
and construed under the laws of the state named in Bank's address shown above
without regard to that state's conflict of laws principles. If the terms of this
Note should conflict with the terms of the Loan Agreement or any commitment
letter that survives closing, the terms of this Note shall control. Borrower's
Accounts. Except as prohibited by law, Borrower grants Bank a security interest
in all of Borrower's accounts with Bank and any of its affiliates. Jurisdiction.
Borrower irrevocably agrees to non-exclusive personal jurisdiction in the state
named in Bank's address shown above. Severability. If any provision of this Note
or of the other Loan Documents shall be prohibited or invalid under applicable
law, such provision shall be ineffective but only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note or other such document. Notices. Any
notices to Borrower shall be sufficiently given, if in writing and mailed or
delivered to the Borrower's address shown above or such other address as
provided hereunder, and to Bank, if in writing and mailed or delivered to Bank's
office address shown above or such other address as Bank may specify in writing
from time to time. In the event that Borrower changes Borrower's address at any
time prior to the date the Obligations are paid in full, Borrower agrees to
promptly give written notice of said change of address by registered or
certified mail, return receipt requested, all charges prepaid. Plural; Captions.
All references in the Loan Documents to Borrower, guarantor, person, document or
other nouns of reference mean both the singular and plural form, as the case may
be, and the term "person" shall mean any individual, person or entity. The
captions contained in the Loan Documents are inserted for convenience only and
shall not affect the meaning or interpretation of the Loan Documents. Advances.
Bank may, in its sole discretion, make other advances which shall be deemed to
be advances under this Note, even though the stated principal amount of this
Note may be exceeded as a result thereof. Posting of Payments. All payments
received during normal banking hours after 2:00 p.m. local time at the office of
Bank first shown above shall be deemed received at the opening of the next
banking day. Joint and Several Obligations. Each person who signs this Note is a
Borrower and is jointly and severally obligated. Fees and Taxes. Borrower shall
promptly pay all documentary, intangible recordation and/or similar taxes on
this transaction whether assessed at closing or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. Special Rules. All arbitration hearings shall be conducted in the
city named in the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall conclude within
120 days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. The parties do not waive applicable Federal or
state substantive law except as provided herein. Preservation and Limitation of
Remedies. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale or under applicable law by judicial foreclosure
including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment. Any
claim or controversy with regard to any party's entitlement to such remedies is
a Dispute. Waiver of Exemplary Damages. The parties agree that they shall not
have a remedy of punitive or exemplary damages against other parties in any
Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute
whether the Dispute is resolved by arbitration or judicially. Waiver of Jury
Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Agreement
and the Loan Documents were executed in the State of Pennsylvania and delivered
to Bank in the State of Pennsylvania.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
SI Handling Systems, Inc.
Taxpayer Identification Number: 22-1643428
-----------
CORPORATE By: /s/ William R. Johnson
---------------------------------------
SEAL William R. Johnson, President
/s/ Ronald J. Semanick
---------------------------------------
Ronald J. Semanick, Secretary
Ermanco Incorporated
Taxpayer Identification Number: 38-1796809
-----------
CORPORATE By: /s/ Leon C. Kirschner
--------------------------------------
SEAL Leon C. Kirschner, President
/s/ Mark R. Smith
--------------------------------------
Mark R. Smith, Witness
Exhibit 10.14
-------------
LOAN AGREEMENT
(Term Loan)
First Union National Bank
702 Hamilton Mall
Allentown, Pennsylvania 18101
(Hereinafter referred to as the "Bank")
SI Handling Systems, Inc.
600 Kuebler Road
Easton, Pennsylvania 18040
Ermanco Incorporated
6870 Grand Haven Road
Spring Lake, MI 49456
(Individually and collectively "Borrower")
This Loan Agreement ("Agreement") is entered into September 30, 1999, by and
between Bank and Borrower.
This Agreement applies to the loan or loans (individually and collectively, the
"Loan") evidenced by one or more promissory notes dated September 30, 1999 or
other notes subject hereto, as modified from time to time (whether one or more,
the "Note") and all Loan Documents. The terms "Loan Documents" and
"Obligations," as used in this Agreement, are defined in the Note.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof,
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. Authorization; Non-Contravention. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized as may be required and, if
necessary, by making appropriate filings with any governmental agency or unit
and are the legal, binding, valid and enforceable obligations of Borrower and
any guarantors; and do not (i) contravene, or constitute (with or without the
giving of notice or lapse of time or both) a violation of any provision of
applicable law, a violation of the organizational documents of Borrower or any
guarantor, or a default under any agreement, judgment, injunction, order, decree
or other instrument binding upon or affecting Borrower or any guarantor, (ii)
result in the creation or imposition of any lien (other than the lien(s) created
by the Loan Documents) on any of Borrower's or any guarantor's assets, or (iii)
give cause for the acceleration of any obligations of Borrower or any guarantor
to any other creditor. Asset Ownership. Borrower has good and marketable title
to all of the properties and assets reflected on the balance sheets and
financial statements supplied Bank by Borrower, and all such properties and
assets are free and clear of mortgages, security deeds, pledges, liens, charges,
and all other encumbrances, except as otherwise disclosed to Bank by Borrower in
writing and approved by Bank ("Permitted Liens"). To the knowledge of Borrower's
senior management, no default has occurred under any Permitted Liens and no
claims or interests adverse to Borrower's present rights in its properties and
assets have arisen. Discharge of Liens and Taxes. Borrower has duly filed, paid
and/or discharged all taxes or other claims which may become a lien on any of
its property or assets, except to the extent that such items are being
appropriately contested in good faith and an adequate reserve for the payment
thereof is being maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Note and any other
Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. ss.
101(32). Compliance with Laws. Borrower is in compliance in all material
respects with all federal, state and local laws, rules and regulations
applicable to its properties, operations, business, and finances, including,
without limitation, any federal or state laws relating to liquor (including 18
U.S.C. ss. 3617, et seq.) or narcotics (including 21 U.S.C. ss. 801, et seq.)
and/or any commercial crimes; all applicable federal, state and local laws and
regulations intended to protect the environment; and the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), if applicable. Organization
and Authority. Each corporate or limited liability company Borrower and/or
guarantor, as applicable, is duly created, validly existing and in good standing
under the laws of the state of its organization, and has all powers,
governmental licenses, authorizations, consents and approvals required to
operate its business as now conducted. Each corporate or limited liability
company Borrower and/or guarantor, as applicable, is duly qualified, licensed
and in good standing in each jurisdiction where qualification or licensing is
required by the nature of its business or the character and location of its
property, business or customers, and in which the failure to so qualify or be
licensed, as the case may be, in the aggregate, could have a material adverse
effect on the business, financial position, results of operations, properties or
prospects of Borrower or any such guarantor. No Litigation. There are no pending
or, to the knowledge of Borrower's senior management, threatened suits, claims
or demands against Borrower or any guarantor that have not been disclosed to
Bank by Borrower in writing. Regulation U. None of the proceeds of the credit
extended pursuant to this Agreement shall be used directly or indirectly for the
purpose of purchasing or carrying any margin stock in violation of any of the
provisions of Regulation U of the Board of Governors of the Federal Reserve
System ("Regulation U"), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin stock or
for any other purchase which might render the Loan a "Purpose Credit" within the
meaning of Regulation U. ERISA. Each employee pension benefit plan, as defined
in ERISA, maintained by Borrower meets, as of the date hereof, the minimum
funding standards of ERISA and all applicable regulations thereto and
requirements thereof, and of the Internal Revenue Code of 1986, as amended. No
"Prohibited Transaction" or "Reportable Event" (as both terms are defined by
ERISA) has occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower will: Access to Books and Records. Allow Bank, or its agents,
during normal business hours, access to the books, records and such other
documents of Borrower as Bank shall reasonably require, and allow Bank to make
copies thereof at Bank's expense. Accounts Payable Aging. Deliver to Bank, from
time to time hereafter but not less than monthly within 15 days of the end of
each such period, a detailed payables report including aging of payables by
total, vendor names and addresses, a reconciliation statement, and the original
date of each invoice. Accounts Receivable Aging. Deliver to Bank, from time to
time hereafter but not less than monthly within 15 days of the end of each such
period, a detailed receivables report including totals, customer names and
addresses, a reconciliation statement, and the original date of each invoice.
Business Continuity. Conduct its business in substantially the same manner and
locations as such business is now and has previously been conducted, with the
exception of the acquisition of Ermanco Incorporated as a subsidiary and the
operation of its facility in Michigan. Compliance with Laws. Comply, in all
material respects, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment, discrimination,
labor and other laws and regulations. Compliance with Other Agreements. Comply
with all terms and conditions contained in this Agreement, and any other Loan
Documents, and swap agreementsin connection therewith, as defined in the 11
U.S.C. ss. 101. Estoppel Certificate. Furnish, within 15 days after request by
Bank, a written statement duly acknowledged of the amount due under the Loan and
whether offsets or defenses exist against the Obligations. Insurance. Maintain
adequate insurance coverage with respect to its properties and business against
loss or damage of the kinds and in the amounts customarily insured against by
companies of established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance, workers
compensation insurance, and business interruption insurance; all acquired in
such amounts and from such companies as Bank may reasonably require. Inventory
Reports. Deliver to Bank, from time to time hereafter but not less than monthly
within 15 days of the end of each such period, an inventory report showing
individual values for raw materials, work-in-progress, finished products and any
inventory obsolescence. Maintain Properties. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. Non-Default Certificate From Borrower. Deliver to Bank, with the
Financial Statements required below, a certificate signed by a principal
financial officer of Borrower in the form of Exhibit "A" attached hereto and
made a part hereof, stating that Borrower is in compliance with the financial
covenants certified herein, setting forth the applicable calculations, and
warranting that no "Default" as specified in the Loan Documents nor any event
which, upon the giving of notice or lapse of time or both, would constitute such
a Default, has occurred. Notice of Default and Other Notices. (a) Notice of
Default. Furnish to Bank immediately upon becoming aware of the existence of any
condition or event which constitutes a Default (as defined in the Loan
Documents) or any event which, upon the giving of notice or lapse of time or
both, may become a Default, written notice specifying the nature and period of
existence thereof and the action which Borrower is taking or proposes to take
with respect thereto. (b) Other Notices. Promptly notify Bank in writing of (i)
any material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which it
is a party or by which any of its properties are bound, or any acceleration of
the maturity of any indebtedness owing by Borrower; (iii) any material adverse
claim against or affecting Borrower or any part of its properties; (iv) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any governmental agency or unit affecting
Borrower in excess of $50,000.00; and (v) at least 30 days prior thereto, any
change in Borrower's name or address as shown above, and/or any change in
Borrower's structure. Other Financial Information. Deliver promptly such other
information regarding the operation, business affairs, and financial condition
of Borrower which Bank may reasonably request. Payment of Debts. Pay and
discharge when due, and before subject to penalty or further charge, and
otherwise satisfy at or before maturity or delinquency, all obligations, debts,
taxes, and liabilities of whatever nature or amount, except those which Borrower
in good faith disputes. Reports and Proxies. Deliver to Bank, promptly, a copy
of all financial statements, reports, notices, and proxy statements, sent by
Borrower to stockholders, and all regular or periodic reports required to be
filed by Borrower with any governmental agency or authority.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Change in Fiscal Year. Change its fiscal
year from December 31 without the consent of Bank. Encumbrances. Create, assume,
or permit to exist any mortgage, security deed, deed of trust, pledge, lien,
charge or other encumbrance on any of its assets, whether now owned or hereafter
acquired, other than: (i) security interests required by the Loan Documents;
(ii) liens for taxes contested in good faith; (iii) liens accruing by law for
employee benefits; or (iv) Permitted Liens. Guarantees. Guarantee or otherwise
become responsible for obligations of any other person or persons other than
guarantees made in favor of Bank for SI Baker Joint Venture obligations.
Investments. Purchase any stock, securities, or evidence of indebtedness of any
other person or entity except (a) investments in AIM Funds with Bank, (b)
investments in direct obligations of the United States Government, and (c)
certificates of deposit of United States commercial banks having a tier 1
capital ratio of not less than 6% and then in an amount not exceeding 10% of the
issuing bank's unimpaired capital and surplus. Dividends. Declare or pay
dividends in an amount in excess of twenty percent (20%) of its net income
during the fiscal years ending December 31, 1999 and December 31, 2000, or
declare or pay dividends in an amount in excess of fifteen percent (15%) of its
net income during the fiscal year ending December 31, 2001 and thereafter. Joint
Ventures. Invest or participate in or become a joint venturer in any new joint
venture or partnership. Default on Other Contracts or Obligations. Default on
any material contract with or obligation when due to a third party or default in
the performance of any obligation to a third party incurred for money borrowed
in an amount in excess of $50,000.00. Government Intervention. Permit the
assertion or making of any seizure, vesting or intervention by or under
authority of any government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective business or its
such business is curtailed or materially impaired. Judgment Entered. Permit the
entry of any monetary judgment or the assessment against, the filing of any tax
lien against, or the issuance of any writ of garnishment or attachment against
any property of or debts due Borrower in an amount in excess of $25,000.00 which
is not discharged or execution is not stayed within 30 days of entry. Prepayment
of Other Debt. Retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so. Retire or
Repurchase Capital Stock. Retire or otherwise acquire any of its capital stock.
FINANCIAL STATEMENTS. Borrower shall deliver to Bank within five (5) days after
filing with the appropriate governmental authority, each 10K and 10Q prepared in
conformity with generally accepted accounting principles consistently applied
and otherwise in form and substance satisfactory to Bank.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
hereof until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, and all financial covenants shall be calculated on
a consolidated basis, using the financial information for Borrower, its
subsidiaries and affiliates, including without limitation, Ermanco Incorporated,
but excluding SI Baker and Egimen: Funds Flow Coverage Ratio. Borrower shall, at
all times, maintain a Funds Flow Coverage Ratio of not less than 1.25 to 1.00,
measured quarterly on a rolling four quarters basis. "Funds Flow Coverage Ratio"
shall mean the sum of earnings before interest, taxes, depreciation and
amortization divided by the sum of all current maturities of long term debt and
capital lease obligations plus interest expense. Total Liabilities to Net Worth
Ratio.
Borrower shall, from closing until fiscal year-end December 31, 2000, maintain
a ratio of Total Liabilities to Net Worth of not more than 1.80 to 1.00, and at
all times thereafter, Borrower shall maintain a ratio of Total Liabilities to
Net Worth of not more than 1.75 to 1.00. "Net Worth" shall mean total assets
minus Total Liabilities. "Total Liabilities" shall mean all liabilities of
Borrower, excluding debt fully subordinated to Bank on terms and conditions
acceptable to Bank, and including capitalized leases and all reserves for
deferred taxes and other deferred sums appearing on the liabilities side of a
balance sheet, in accordance with generally accepted accounting principles
applied on a consistent basis. Current Ratio. Borrower shall, at all times,
maintain a Current Ratio of not less than 1.20 to 1.00. "Current Ratio" shall
mean the ratio of Current Assets to Current Liabilities. "Current Assets" shall
mean all assets which are so classified in accordance with generally accepted
accounting principles. "Current Liabilities" shall mean all liabilities which
are so classified in accordance with generally accepted accounting principles.
Limitation on Debt. Borrower shall not, directly or indirectly, create, incur,
assume or become liable for any additional indebtedness, whether contingent or
direct, if, giving effect to such additional debt on a pro forma basis causes
the aggregate amount of Borrower's debt to exceed $50,000.00, excluding (a)
obligations to Bank; (b) $250,000.00 to be invested in Egimen; and (c) amounts
payable to the former shareholders of Ermanco Incorporated in connection with
the acquisition for which the Loan was, in part, obtained, which amounts shall
not exceed $3,000,000.00 in the aggregate. Depository Relationship.
Borrower shall maintain its primary depository account with Bank.
CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request. Opinion of Counsel. On or prior to
the date of any extension of credit hereunder, Bank shall have received a
written opinion of the counsel of Borrower acceptable to Bank that includes
confirmation of the following: (a) The accuracy of the representations set forth
in this Agreement in the Representations Subparagraphs entitled "Authorization;
Non-Contravention"; "Compliance with Laws", and "Organization and Authority".
(b) This Agreement and other Loan Documents have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms, subject to bankruptcy,
insolvency or other laws relating to enforcement of creditors' rights. (c) No
registration with, consent of, approval of, or other action by, any federal,
state or other governmental authority or regulatory body is required by law in
connection with the execution and delivery of this Agreement and the other Loan
Documents, or the extension of credit under this Agreement or the other Loan
Documents, or, if so required, such registration has been made, and such consent
or approval given or such other appropriate action taken. (d) The Loan Documents
create a first priority security interest in the Collateral (as defined in the
Loan Documents) consisting of personal property.
<PAGE>
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
SI Handling Systems, Inc.
CORPORATE By: /s/ William R. Johnson
---------------------------------
SEAL William R. Johnson, President
/s/ Ronald J. Semanick
---------------------------------
Ronald J. Semanick, Secretary
Ermanco Incorporated
CORPORATE By: /s/ Leon C. Kirschner
---------------------------------
SEAL Leon C. Kirschner, President
By: /s/ Mark R. Smith
---------------------------------
Mark R. Smith, Witness
First Union National Bank
By: /s/ Peter A. Gray
---------------------------------
Peter A. Gray, Vice President
<PAGE>
Exhibit "A"
Compliance Certificate
Borrowers: SI Handling Systems, Inc. and Ermanco Incorporated
Account#______________
First Union National Bank No. ________________
702 Hamilton Mall
Allentown, Pennsylvania 18101 Date ________________
We hereby certify that as of ___________________________, the Borrowers are in
full and complete compliance with all terms, conditions and covenants contained
in that certain Loan Agreement dated September 30, 1999 between First Union
National Bank and the Borrowers, and all Loan Documents as referenced therein,
including without limitation, the following financial covenants:
1. Funds Flow Coverage Ratio is _________ to 1.00, calculated as follows:
(a) Earnings before interest, taxes,
depreciation and amortization . . . . . . . . . . . . . $_______________
Minus: Non-cash income . . . . . . $_______________
(a) Current maturities of long-term debt as
of period end date .. . . . . . . . . .$_______________
Capital Lease Obligations as of
period end date . . . . . . . . . . . $_______________
Interest Expense . . . . . . . . . . . $_______________
(a) Total . . . . . . . . . . . . . . . . . . . . . . $_______________
(a) Divided by (c) = ________ to 1.00 [must be not less than 1.25 to 1.00]
1. Total Liabilities to Tangible Net Worth Ratio is ________ to 1.00,
calculated as follows:
(a) Total Assets . . . . . . . . . . . . . . . . . . . . . . $_______________
(b) Total Liabilities (excluding subordinated debt). . . . . $_______________
(c) Net Worth (a less b) . . . . . . . . . .$_______________
Total Liabilities to Tangible Net Worth Ratio
(b divided by c) is __________ to 1.00
[before 12/31/00 not more than 1.80 to 1.00]
[after 12/31/00 not more than 1.75 to 1.00]
1. Current Ratio is __________ to 1.00, calculated as follows:
(a) Current Assets . . . . . . . . . . . . . . . . . . . . .$_______________
(b) Current Liabilities . . . . . . . . . . . . . . . . . . .$_______________
(a) Divided by (b) = ________ to 1.00 [must be not less than 1.20 to 1.00]
1. Borrower's Aggregate Debt
Borrower's Outstanding Debt (List)
Obligations to Bank . . . . . . . . . . . $_______________
Obligations to Other Institutional Lenders $_______________
Obligations to Trade Creditors . . . . . . $_______________
Obligations to Shareholders,
Subsidiaries and Other Affiliates . . . . $_______________
Capital Lease Obligations . . . . . . . . .$_______________
Other . . . . . . . . . . . . . . . . . . .$_______________
(a) Total Outstanding Obligations . . . . . . . . . . . . . .$_______________
(b) Less Bank Obligations ($___________)
Egemin Investments ($___________)
[not to exceed $250,000.00]
Subordinated Notes to former Ermanco shareholders ($__________)
[not to exceed $3,000,000.00]
Total . . . . . . . . . . . . . . . . . . . . . . . . . .$_______________
[not to exceed $50,000.00]
I hereby certify to the best of the undersigned's knowledge, information, and
belief, this above financial information, as derived from each Borrower's
accounting records, as true and correct, and that no material adverse change in
the financial condition of either Borrower has occurred since the date of this
certification.
SI Handling Systems, Inc.
By: ____________________________________
Name:________________________________
Title:_______________________________
Exhibit 10.15
-------------
PROMISSORY NOTE
$14,000,000.00
September 30, 1999
SI Handling Systems, Inc.
600 Kuebler Road
Easton, Pennsylvania 18040
Ermanco Incorporated
6870 Grand Haven Road
Spring Lake, Michigan 49456
(Individually and collectively "Borrower")
First Union National Bank
702 Hamilton Mall
Allentown, Pennsylvania 18101
(Hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Fourteen Million and No/100 Dollars ($14,000,000.00) or such
sum as may be advanced and outstanding from time to time, with interest on the
unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof,
this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, (i) real
property collateral described in those two (2) certain Mortgages of even date
herewith; (ii) personal property collateral described in those two (2) certain
Security Agreements of even date herewith; and (iii) collateral described in
that certain Assignment of Interest in Joint Venture of even date herewith.
INTEREST RATE DEFINITIONS.
LIBOR-Based Rate. 3-months LIBOR plus 2.75% for one-half of the unpaid principal
balance and 2.65% for the remaining one-half of the unpaid principal balance
(collectively, "LIBOR-Based Rate"). "LIBOR" is the rate for U.S. dollar deposits
of that many months maturity as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on the second London business day before the relevant Interest
Period begins (or if not so reported, then as determined by the Bank from
another recognized source or interbank quotation).
INTEREST RATE TO BE APPLIED.
Interest Rate. The unpaid principal balance of this Note shall bear interest
from the date hereof at the LIBOR-Based Rate, as determined by Bank prior to the
commencement of each consecutive interest period of 3-months (each an "Interest
Period") during the term of the Note; provided, the first Interest Period shall
commence on the date of this Note and end on the first date thereafter that
interest is due. Each LIBOR-Based Rate shall remain in effect for the entire
Interest Period until redetermined for the next successive Interest Period.
Indemnification. Borrower shall indemnify Bank against Bank's loss or expense in
employing deposits as a consequence of (a) Borrower's failure to make any
payment when due under this Note, or (b) any payment, prepayment or conversion
of any loan on a date other than the last day of the Interest Period
("Indemnified Loss or Expense"). The amount of such Indemnified Loss or Expense
shall be determined by Bank based upon the assumption that Bank funded 100% of
that portion of the loan in the London interbank market.
Default Rate. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the LIBOR-Based Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
that of the nominal rate.
REQUIRED HEDGE. Borrower shall hedge this Note's floating interest expense by
entering into an interest rate swap (the "Swap") with Bank (or other
counterparty acceptable to Bank) contemporaneously with the closing of this
loan, pursuant to which Borrower shall receive the amount necessary to pay the
interest expense due under this loan (exclusive of default interest or other
adjustments provided for in the Loan Documents) and shall pay the amount that
would be equal to the interest that would accrue on this loan at a fixed rate.
Borrower shall maintain the Swap for a minimum of 50% of the amount and full
term of this loan. The Swap will be governed by an ISDA Master Agreement and
shall be secured by the collateral described in the Loan Documents.
PREPAYMENT. Borrower may prepay the term loan in whole or in part without
penalty, except Borrower shall pay such additional amounts deemed necessary by
Bank to compensate Bank for any losses, costs or expenses which Bank may be
deemed to incur as a result of such prepayments pursuant to the compensation
provisions which shall be more fully set out in the ISDA Master Agreement for
the Swap. Any prepayment in whole or in part shall include accrued interest and
all other sums then due under any of the Loan Documents. No partial prepayment
shall affect the obligation of Borrower to make any payment of principal or
interest due under this Note on the due dates specified.
REPAYMENT TERMS. For the first two (2) years following the date hereof, this
Note shall be due and payable in consecutive quarterly payments of principal of
$312,500.00, plus accrued interest, commencing on December 31, 1999, and
continuing on each quarterly anniversary thereafter until the second anniversary
of the date of this Note. Commencing on December 31, 2001, and continuing on
each quarterly anniversary thereafter, this Note shall be due and payable in
consecutive quarterly payments of principal of $575,000.00, together with
accrued interest. In any event, all principal and accrued interest shall be due
and payable on September 30, 2006.
AUTOMATIC DEBIT OF CHECKING ACCOUNT FOR LOAN PAYMENT. Borrower authorizes Bank
to debit demand deposit account number 2100017073313 or any other account with
Bank (routing number 031000503) designated in writing by Borrower, beginning
December 31, 1999 for any payments due under this Note. Borrower further
certifies that Borrower holds legitimate ownership of this account and
preauthorizes this periodic debit as part of its right under said ownership.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and the
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and any prior notes which evidence all or any
portion of the loan evidenced by this Note, and any letters of credit issued
pursuant to any loan agreement to which this Note is subject, any applications
for such letters of credit and any other documents executed in connection
therewith, and may include, without limitation, a commitment letter that
survives closing, a loan agreement, this Note, guaranty agreements, security
agreements, security instruments, financing statements, mortgage instruments,
any renewals or modifications, whenever any of the foregoing are executed, but
does not include swap agreements (as defined in 11 U.S.C. ss. 101). Obligations.
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements (as defined in 11
U.S.C. ss. 101) between Borrower and Bank whenever executed. Certain Other
Terms. All terms that are used but not otherwise defined in any of the Loan
Documents shall have the definitions provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 10 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note and the late charge shall be the highest amount allowable under such
laws. If no amount is stated thereunder, the late charge shall be 5% of each
payment past due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. False Warranty. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or the
holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "Borrower" shall be substituted for the term "Debtor"
therein; "Subsidiary" shall mean any business in which Borrower holds, directly
or indirectly, a controlling interest). Cessation; Bankruptcy. The death of,
appointment of a guardian for, dissolution of, termination of existence of, loss
of good standing status by, appointment of a receiver for, assignment for the
benefit of creditors of, or commencement of any bankruptcy or insolvency
proceeding by or against Borrower, its Subsidiaries or Affiliates, if any, or
any general partner of or the holder(s) of the majority ownership interests of
Borrower, or any party to the Loan Documents. Material Capital Structure or
Business Alteration. Without prior written consent of Bank, (i) a material
alteration in the kind or type of Borrower's business or that of Borrower's
Subsidiaries or Affiliates, if any; (ii) the sale of substantially all of the
business or assets of Borrower, any of Borrower's Subsidiaries or Affiliates or
any guarantor, or a material portion (10% or more) of such business or assets if
such a sale is outside the ordinary course of business of Borrower, or any of
Borrower's Subsidiaries or Affiliates or any guarantor, or more than 50% of the
outstanding stock or voting power of or in any such entity in a single
transaction or a series of transactions; (iii) the acquisition of substantially
all of the business or assets or more than 50% of the outstanding stock or
voting power of any other entity; or (iv) should any Borrower, or any of
Borrower's Subsidiaries or Affiliates or any guarantor enter into any merger or
consolidation, other than a merger of SI Handling Systems, Inc. and Ermanco
Incorporated.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien. Foreclose its security interest or lien against Borrower's accounts
without notice. Acceleration Upon Default. Accelerate the maturity of this Note
and, at Bank's option, any or all other Obligations, whereupon this Note and the
accelerated Obligations shall be immediately due and payable. Cumulative.
Exercise any rights and remedies as provided under the Note and other Loan
Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure that
Borrower's computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000. At the request of Bank,
Borrower shall provide Bank assurance acceptable to Bank of Borrower's Year 2000
compatibility.
CONFESSION OF JUDGMENT. THE FOLLOWING PARAGRAPH SETS FORTH A POWER OF AUTHORITY
FOR ANY ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER. IN GRANTING THIS WARRANT
OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER, THE BORROWER, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR BORROWER AND
WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY KNOWINGLY, INTENTIONALLY,
VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE
BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER
THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF AMERICA,
COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE INCLUDING, WITHOUT LIMITATION, A
HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF THE BORROWER'S BANK ACCOUNT AND
OTHER ASSETS. BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT BY ENTERING INTO THIS
NOTE CONTAINING A CONFESSION OF JUDGMENT CLAUSE THAT BORROWER IS VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL RIGHTS, INCLUDING
CONSTITUTIONAL RIGHTS, THAT BORROWER HAS OR MAY HAVE TO NOTICE AND A HEARING
BEFORE JUDGMENT CAN BE ENTERED AGAINST BORROWER AND BEFORE THE BORROWER'S
ASSETS, INCLUDING, WITHOUT LIMITATION, ITS BANK ACCOUNTS, MAY BE GARNISHED,
LEVIED, EXECUTED UPON AND/OR ATTACHED. BORROWER UNDERSTANDS THAT ANY SUCH
GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL RENDER THE PROPERTY
GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY UNAVAILABLE TO
BORROWER. IT IS SPECIFICALLY ACKNOWLEDGED BY BORROWER THAT THE BANK HAS RELIED
ON THIS WARRANT OF ATTORNEY AND THE RIGHTS WAIVED BY BORROWER HEREIN IN
RECEIVING THIS NOTE AND AS AN INDUCEMENT TO GRANT FINANCIAL ACCOMMODATIONS TO
THE BORROWER.
If a Default occurs under this Note or any other Loan Documents, each Borrower
hereby jointly and severally authorizes and empowers any attorney of any court
of record or the prothonotary or clerk of any county in the Commonwealth of
Pennsylvania, or in any jurisdiction where permitted by law or the clerk of any
United States District Court, to appear for Borrower in any and all actions
which may be brought hereunder and enter and confess judgment against the
Borrower or any of them in favor of the Bank for such sums as are due or may
become due hereunder or under any other Loan Documents, together with costs of
suit and actual collection costs including, without limitation, reasonable
attorneys' fees but in no event less than $5,000.00, with or without
declaration, without prior notice, without stay of execution and with release of
all procedural errors and the right to issue executions forthwith. To the extent
permitted by law, Borrower waives the right of inquisition on any real estate
levied on, voluntarily condemns the same, authorizes the prothonotary or clerk
to enter upon the writ of execution this voluntary condemnation and agrees that
such real estate may be sold on a writ of execution; and also waives any relief
from any appraisement, stay or exemption law of any state now in force or
hereafter enacted. Borrower further waives the right to any notice and hearing
prior to the execution, levy, attachment or other type of enforcement of any
judgment obtained hereunder, including, without limitation, the right to be
notified and heard prior to the garnishment, levy, execution upon and attachment
of Borrower's bank accounts and other property. If a copy of this Note verified
by affidavit of any officer of the Bank shall have been filed in such action, it
shall not be necessary to file the original thereof as a warrant of attorney,
any practice or usage to the contrary notwithstanding. The authority herein
granted to confess judgment shall not be exhausted by any single exercise
thereof, but shall continue and may be exercised from time to time as often as
the Bank shall find it necessary and desirable and at all times until full
payment of all amounts due hereunder and under any other Loan Documents. The
Bank may confess one or more judgments in the same or different jurisdictions
for all or any part of the Obligations arising hereunder or under any other Loan
Documents to which Borrower is a party, without regard to whether judgment has
theretofore been confessed on more than one occasion for the same Obligations.
In the event that any judgment confessed against the Borrower is stricken or
opened upon application by or on behalf of Borrower or any obligor for any
reason, the Bank is hereby authorized and empowered to again appear for and
confess judgment against Borrower for any part or all of the Obligations owing
under this Note and/or for any other liabilities, as herein provided.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period,
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Applicable Law; Conflict
Between Documents. This Note and the other Loan Documents shall be governed by
and construed under the laws of the state named in Bank's address shown above
without regard to that state's conflict of laws principles. If the terms of this
Note should conflict with the terms of the Loan Agreement or any commitment
letter that survives closing, the terms of this Note shall control. Borrower's
Accounts. Except as prohibited by law, Borrower grants Bank a security interest
in all of Borrower's accounts with Bank and any of its affiliates. Jurisdiction.
Borrower irrevocably agrees to non-exclusive personal jurisdiction in the state
named in Bank's address shown above. Severability. If any provision of this Note
or of the other Loan Documents shall be prohibited or invalid under applicable
law, such provision shall be ineffective but only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note or other such document. Notices. Any
notices to Borrower shall be sufficiently given, if in writing and mailed or
delivered to the Borrower's address shown above or such other address as
provided hereunder, and to Bank, if in writing and mailed or delivered to Bank's
office address shown above or such other address as Bank may specify in writing
from time to time. In the event that Borrower changes Borrower's address at any
time prior to the date the Obligations are paid in full, Borrower agrees to
promptly give written notice of said change of address by registered or
certified mail, return receipt requested, all charges prepaid. Plural; Captions.
All references in the Loan Documents to Borrower, guarantor, person, document or
other nouns of reference mean both the singular and plural form, as the case may
be, and the term "person" shall mean any individual, person or entity. The
captions contained in the Loan Documents are inserted for convenience only and
shall not affect the meaning or interpretation of the Loan Documents. Advances.
Bank may, in its sole discretion, make other advances which shall be deemed to
be advances under this Note, even though the stated principal amount of this
Note may be exceeded as a result thereof. Posting of Payments. All payments
received during normal banking hours after 2:00 p.m. local time at the office of
Bank first shown above shall be deemed received at the opening of the next
banking day. Joint and Several Obligations. Each person who signs this Note is a
Borrower and is jointly and severally obligated. Fees and Taxes. Borrower shall
promptly pay all documentary, intangible recordation and/or similar taxes on
this transaction whether assessed at closing or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. Special Rules. All arbitration hearings shall be conducted in the
city named in the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall conclude within
120 days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. The parties do not waive applicable Federal or
state substantive law except as provided herein. Preservation and Limitation of
Remedies. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale or under applicable law by judicial foreclosure
including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment. Any
claim or controversy with regard to any party's entitlement to such remedies is
a Dispute. Waiver of Exemplary Damages. The parties agree that they shall not
have a remedy of punitive or exemplary damages against other parties in any
Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute
whether the Dispute is resolved by arbitration or judicially. Waiver of Jury
Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Agreement
and the Loan Documents were executed in the State of Pennsylvania and delivered
to Bank in the State of Pennsylvania.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
SI Handling Systems, Inc.
Taxpayer Identification Number: 22-1643428
----------
CORPORATE By: /s/ William R. Johnson
--------------------------------------
SEAL William R. Johnson, President
/s/ Ronald J. Semanick
--------------------------------------
Ronald J. Semanick, Secretary
Ermanco Incorporated
Taxpayer Identification Number: 38-1796809
----------
CORPORATE By: /s/ Leon C. Kirschner
--------------------------------------
SEAL Leon C. Kirschner, President
/s/ Mark R. Smith
--------------------------------------
Mark R. Smith, Witness
Exhibit 10.16
-------------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (the "Agreement") is entered into as of this 30th day of
September, 1999, by and among SI HANDLING SYSTEMS, INC., a Pennsylvania
corporation (the "Buyer"), the stockholders of ERMANCO INCORPORATED, a Michigan
corporation (the "Sellers"), and First Union National Bank (together with any
replacement therefor as provided in Section 9 hereof, the "Escrow Holder").
Background
----------
A. The Buyer and the Sellers are parties to that certain Stock Purchase
Agreement dated August 6, 1999 (the "Stock Purchase Agreement"). All terms used
herein which are defined in the Stock Purchase Agreement and not in this
Agreement shall have the meanings set forth in the Stock Purchase Agreement.
B. Pursuant to the terms of the Stock Purchase Agreement, the parties
have agreed to enter into and execute this Escrow Agreement on the Closing Date.
C. The Buyer and the Sellers have agreed that Seven Hundred Fifty
Thousand Dollars ($750,000) of the Purchase Price shall be deposited with the
Escrow Holder for a period of eighteen (18) months commencing on the Closing
Date and continuing through the date eighteen (18) months following the Closing
Date (the "Escrow Period") to provide funds to pay or reimburse the Buyer for
any Losses for which the Sellers have agreed to indemnify the Buyer pursuant to
the Stock Purchase Agreement (any such amounts referred to collectively herein
as "Post Closing Claims Expenses").
D. The Buyer and the Sellers have further agreed that the sum of $
615,000 , representing an adjustment to the Purchase Price based on the
Preliminary Closing Balance Sheet pursuant to Section 1.2(c) of the Stock
Purchase Agreement, shall be deposited with the Escrow Holder until a definitive
Closing Balance Sheet is determined pursuant to Section 1.2(d)(iii) of the Stock
Purchase Agreement.
E. The respective portion of the amount placed in escrow hereunder by
each Seller shall be equal to the amount set forth opposite the name of such
Seller on Schedule A attached hereto.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and in the Stock Purchase Agreement and as a condition to the Buyer's
obligation to consummate the transactions contemplated in the Stock Purchase
Agreement, the parties, each intending to be legally bound, hereby agree as
follows:
1. Sellers' Representative. Each of the Sellers hereby
appoints Lee F. Schomberg and, in the event of his death, incapacity or
resignation, Thomas C. Hubbell, as its agent (the "Sellers' Representative") and
collectively authorize the Sellers' Representative to represent and act for each
of them in all matters pertaining to this Escrow Agreement. The Buyer and the
Escrow Holder shall be entitled to rely upon any statements or other
communications by the Sellers' Representative on behalf of each of the Sellers
without the necessity of determining the validity of the actions taken. Actions
taken (or failures to act) by the Sellers' Representative shall be deemed
binding and conclusive on the Sellers.
2. Appointment of Escrow Holder.
(a) The Buyer and the Sellers appoint the Escrow Holder as their agent and
custodian to hold, invest and disburse the Escrowed Funds, as defined below, in
accordance with the terms of this Escrow Agreement.
(b) The Buyer and the Sellers acknowledge and agree that this Escrow
Agreement shall be subject to the terms of the Stock Purchase Agreement.
Notwithstanding the foregoing, the duties and obligations of the Escrow Holder
will be determined solely by this Escrow Agreement and any subsequent amendments
or supplemental instructions agreed to in writing as provided below. Except as
otherwise expressly provided herein, the Escrow Holder shall not refer to, and
shall not be bound by, the provisions of any other agreement.
(c) The Escrow Holder hereby accepts its appointment and agrees to act as
the Escrow Holder according to the terms and conditions of this Escrow
Agreement. The Escrow Holder represents that it has the legal power and
authority to enter into this Escrow Agreement and perform its duties and
obligations hereunder. The Escrow Holder further agrees that all property held
by the Escrow Holder hereunder shall be segregated from all other property held
by the Escrow Holder and identified as being held in connection with this Escrow
Agreement. Such segregation may be accomplished by appropriate identification on
the books and records of the Escrow Holder. The Escrow Holder agrees that its
documents and records with respect to the transactions contemplated hereby will
be available for examination by authorized representatives of the Buyer and the
Sellers' Representative during the Escrow Holder's regular business hours. (d)
The Escrow Holder shall not in any way be bound or affected by any modification
or cancellation of this Escrow Agreement unless notice thereof is jointly given,
in writing, to the Escrow Holder by the Sellers' Representative and the Buyer.
The obligations of the Escrow Holder shall not be modified unless the Escrow
Holder has consented to the modification in writing, which consent shall not be
unreasonably withheld. (e) Upon termination of this Escrow Agreement, the Escrow
Holder may request from any and all of the parties hereto such additional
assurances, certificates, satisfactions, releases and/or other documents as it
may reasonably deem appropriate to evidence the termination of this Escrow
Agreement.
3. Establishment of Escrow Fund. On the Effective Date, the
Buyer shall deliver (i) Seven Hundred Fifty Thousand Dollars ($750,000) in
immediately available funds (the "Claims Expense Escrow") and (ii) $ 615,000 in
immediately available funds (the "Purchase Price Adjustment Escrow") to the
Escrow Holder which shall be invested and reinvested as provided below. The
Escrow Holder shall deposit, upon receipt, the Initial Escrow into an interest
bearing account (the "Account"); the Escrow Holder shall be the sole signatory
on the Account. The Claims Expense Escrow and the Purchase Price Adjustment
Escrow, together with all interest and profits earned thereon or in connection
therewith, less the amount of the distributions made hereunder from time to
time, shall be referred to herein as the "Escrowed Funds."
4. Distribution of the Escrowed Funds.
(a) Purchase Price Adjustment Escrow.
(i) Upon determination of the adjustments to the Purchase Price pursuant to
Section 1.2(d) of the Stock Purchase Agreement, the Sellers' Representative
shall provide written notice (the "Notice") to the Escrow Holder and the Buyer
as to the allocation of the distribution of the Purchase Price Adjustment Escrow
to each of the Sellers and/or the Buyer as a result of such adjustments. The
Escrow Holder shall distribute the Purchase Price Adjustment Escrow to the
Sellers and/or the Buyer in accordance with the amounts set forth in the Notice
either (1) immediately upon receipt of Buyer's written confirmation that it
concurs with the allocation of the Purchase Price Adjustment Escrow set forth in
the Notice or (ii) on the thirtieth (30th) day following the Escrow Holder's
receipt of the Notice, unless the Buyer has notified the Escrow Holder and the
Seller in writing within twenty (20) days following the Buyer's receipt of the
Notice that the Buyer disputes such allocation (a "Notice of Objection"). The
Notice of Objection shall set forth in reasonable detail the basis for the
Buyer's dispute with such allocation.
(ii) If the Escrow Holder receives a Notice of Objection, then the Escrow Holder
shall pay to the Sellers and the Buyer that portion of the amounts set forth in
the Notice, if any, not disputed by the Notice of Objection and shall not pay
the disputed portion of such amounts until it receives (1) joint written
instructions from the Buyer and the Sellers' Representative as to their agreed
disposition of the disputed portion of such amounts or (2) a final court or
arbitration order disposing of the disputed portion of such amounts (either of
(1) or (2) is referred to herein for purposes of this Section 4(a) as a
"Disposition Document"). Upon receipt of a Disposition Document as to any
amounts set forth in the Notice, the Escrow Holder shall pay such amounts
allowed to the Sellers and the Buyer by the Disposition Document.
(iii) Any interest earned on the Purchase Price Adjustment Escrow funds from the
date hereof until the date of the final distribution of any Purchase Price
Adjustment Escrow amount, shall be distributed on the date of such final
distribution pro rata to each Seller and the Buyer in proportion to their
respective share of all distributions of the Purchase Price Adjustment Escrow.
(iv) Nothing set forth in this Agreement is intended to limit the amounts due
and payable to the Sellers or the Buyer pursuant to the Post Closing Adjustments
set forth in Section 1.2(d) of the Stock Purchase Agreement; provided that, in
the event the amounts due and payable pursuant to such Post Closing Adjustments
exceed the amount of the Purchase Price Adjustment Escrow, such excess may be
recovered pursuant to the provisions of such Section 1.2(d), and shall not be
paid out of the remaining Escrowed Funds.
(b) Claims Expense Escrow.
(i) In the event the Buyer incurs any Post Closing Claims Expenses during the
Escrow Period, as reasonably evidenced by supporting documentation delivered by
the Buyer to the Escrow Holder and to the Sellers' Representative (the "Claim"),
then, subject to Section 4(b)(ii) hereof, the Escrow Holder shall pay an amount
equal to the aggregate amount of the Post Closing Claims Expenses reflected in
such Claim to the Buyer from the Escrowed Funds on the thirtieth (30th) day
following its receipt of such Claim. The Buyer may file a separate Claim each
time it incurs a Post Closing Claims Expense or may assert two or more Post
Closing Claims Expenses in a single Claim.
(ii) In the event the Sellers' Representative disputes a Claim against the
Escrowed Funds received from the Buyer, then the Sellers' Representative shall,
within twenty (20) days following his receipt of the Claim, give written notice
of his dispute with the Buyer's Claim (a "Notice of Objection") to the Escrow
Holder and the Buyer. The Notice of Objection shall set forth in reasonable
detail the basis for the Sellers' Representative's dispute with the Claim. If
the Escrow Holder receives a Notice of Objection, then the Escrow Holder shall
pay to the Buyer that portion of the Claim, if any, not disputed by the Notice
of Objection and shall not pay the disputed portion of such Claim until it
receives (i) joint written instructions from the Buyer and the Sellers'
Representative as to their agreed disposition of the disputed portion of such
Claim or (ii) a final court or arbitration order disposing of the disputed
portion of such Claim (either of (i) or (ii) is referred to herein as a
"Disposition Document"). Upon receipt of a Disposition Document as to any Claim,
the Escrow Holder shall pay the amount, if any, of the disputed portion of the
Claim allowed to the Buyer by the Disposition Document, plus any interest or
profits earned thereon from the date of the Notice of Objection until the date
of payment to the Buyer.
(iii) Promptly following termination of the Escrow Period, the Escrow Holder
shall deliver to the Sellers any remaining Escrowed Funds other than (i) amounts
stated in a Claim recorded prior to such date for which a Notice of Objection
has not been received and (ii) amounts in controversy subject to a Notice of
Objection which shall only be released by the Escrow Holder in accordance with
the procedures described in Section 4(b)(ii) hereof. Any amount stated in a
Claim for which a Notice of Objection has not been received within twenty (20)
days following receipt of such Claim shall be paid to the Buyer. In the event
that amounts in controversy are retained in the Account following termination of
the Escrow Period, then promptly following receipt of a Disposition Document
with respect to such controversy, the Escrow Holder shall deliver to the Buyer
the amount to which the Buyer is entitled to receive pursuant to such
Disposition Document and shall deliver to the Sellers any remaining Escrowed
Funds other than any remaining amounts in controversy. All distributions of
Escrowed Funds to the Sellers shall be made pro rata in proportion to their
respective contributions as shown on Schedule A attached hereto.
(iv) Except for any amounts distributed to the Buyer pursuant to a Claim after
first exhausting the entire amount of the Initial Escrow, interest earned on and
profits arising from the Escrowed Funds (collectively, "Escrow Interest") shall
be disbursed to the Sellers upon the termination of this Escrow Agreement.
(v) The parties hereto agree that amounts paid to the Buyer hereunder shall be
treated as adjustments to the Purchase Price.
(vi) No provision in this Escrow Agreement shall limit the amount that the Buyer
can assert as a Claim for indemnification for any Post Closing Claims Expense.
5. Investment of Escrowed Funds.
(a) The Escrow Holder shall invest and reinvest the Escrowed Funds in a
"First Union High Performance Money Market Account." The Escrow Holder shall
have the right to liquidate any investments of Escrowed Funds to provide funds
necessary to make required payments under this Agreement. The Escrowed Funds
shall remain invested as provided herein until distributed and paid pursuant to
the terms and conditions of this Escrow Agreement. The Escrow Holder will
provide to both the Buyer and the Sellers' Representative the number and branch
location of the Account promptly after the Account is established, and,
thereafter, a monthly report regarding the activity and balances of the Account
and the investment of the Escrowed Funds.
(b) All investments of the Escrowed Funds shall be held by, or registered
in the name of, the Escrow Holder or its nominee.
(c) The Sellers shall be deemed to be the owner of the Escrowed Funds for
tax purposes in proportion to their respective contributions as set forth on
Schedule A attached hereto. Escrow Interest for each taxable period shall be
deemed to be earned by the Sellers. Each Seller represents that its social
security number is as set forth on Schedule B attached hereto. All Escrow
Interest earned under this Escrow Agreement shall be allocated and paid as
provided herein and reported by the recipient to the Internal Revenue Service as
having been so allocated and paid. The Escrow Holder agrees to keep the social
security number of each Seller confidential and shall not use such number for
any purpose other than as provided in this Agreement. Neither the Buyer nor the
Escrow Holder shall have any responsibility for the payment of taxes arising
from or related to the Escrowed Funds.
(d) The Escrow Holder shall not be required to institute or defend any
action involving any matters referred to herein or which affect it or its duties
or liabilities hereunder, unless or until requested to do so by any party to
this Escrow Agreement and then only upon receiving full indemnity, in a
character reasonably satisfactory to the Escrow Holder, against any and all
claims, liabilities and expenses, including the reasonable fees of its outside
counsel, in relation thereto.
6. Compensation of Escrow Holder. The Escrow Holder shall not
charge or impose any fee for serving as the Escrow Holder hereunder or for
performing the services set forth herein. The provisions of this Section shall
survive the termination of this Escrow Agreement.
7. Liability of Escrow Holder. Unless otherwise expressly
provided in this Escrow Agreement, the Escrow Holder shall:
(a) not be held liable for any action or failure to act under or in
connection with this Escrow Agreement, except for its own gross negligence,
willful misconduct, bad faith or fraud;
(b) have no liability for investment losses suffered by the Escrowed Funds
so long as the investments were made in accordance with the terms of this
Agreement;
(c) have no responsibility to inquire into or determine the genuineness,
authenticity or sufficiency of any securities, checks, notices or other
documents or instruments submitted to it in connection with its duties pursuant
to this Escrow Agreement or to confirm the identity, authority or rights of any
person or legal entity executing or delivering or purporting to execute or
deliver this Escrow Agreement;
(d) be entitled to deem (unless it has actual knowledge to the contrary)
the signatories of any documents or instruments submitted to it pursuant to this
Escrow Agreement as being those of persons authorized to sign such documents or
instruments on behalf of the other parties to this Escrow Agreement and shall be
entitled to rely (unless it has actual knowledge to the contrary) upon the
genuineness of the signatures of such signatories without inquiry and without
requiring substantiating evidence of any kind;
(e) be entitled to rely upon any judgment, certification, demand or other
writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any facts stated therein, the propriety or
validity of the service thereof, or the jurisdiction issuing any judgment;
(f) be entitled to refrain from taking any action contemplated by this
Escrow Agreement in the event that it becomes aware of any disagreement between
the other parties hereto as to any material facts or as to the happening of any
contemplated event precedent to such action;
(g) have no duties or responsibilities except those expressly set forth
herein; and
(h) be entitled, if a dispute between the parties arises or if the Escrow
Holder shall be uncertain as to its rights or duties under this Escrow
Agreement, to pay the Escrowed Funds into a court of competent jurisdiction, in
which case the Escrow Holder shall have no further obligation under this Escrow
Agreement.
The Escrow Holder may act in reliance upon advice of its outside counsel in
reference to any matter connected herewith, and shall not be liable for any
mistake of fact or error of judgment, or for any acts or omissions of any kind
except as such act or omission constitutes willful misconduct, bad faith, gross
negligence or fraud.
8. Indemnification of Escrow Holder. The Escrow Holder shall
not be liable, responsible or accountable in damages or otherwise to the Buyer
or the Sellers or any of their respective affiliates for any conflicts, acts or
omissions arising, performed or omitted to be performed by it within the scope
of the authority confirmed upon the Escrow Holder by this Escrow Agreement,
provided that the Escrow Holder's conduct or omission to act was taken in good
faith and, provided further, that the Escrow Holder shall not be guilty of
fraud, willful misconduct or gross negligence. Except with respect to claims
based upon the Escrow Holder's bad faith, gross negligence, fraud or willful
misconduct, the Buyer and the Sellers shall severally indemnify and hold
harmless the Escrow Holder from any claim of any of them or any third party,
arising out of or relating to this Escrow Agreement, such indemnification to
include all costs and expenses incurred by the Escrow Holder, including, but not
limited to, the reasonable fees of its outside counsel. The provisions of this
Section shall survive the termination of this Escrow Agreement. Anything in this
Agreement to the contrary notwithstanding, in no event shall the Escrow Holder
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Escrow
Holder has been advised of the likelihood of such loss or damage and regardless
of the form of action.
9. Replacement of Escrow Holder.
(a) The Escrow Holder may resign effective thirty (30) days after it gives
written notice thereof to the Buyer and the Sellers' Representative. Similarly,
the Escrow Holder may be removed and replaced following thirty (30) days joint
written notice from the Buyer and the Sellers' Representative to the Escrow
Holder. Notwithstanding the foregoing, no such resignation or removal shall be
effective until a successor escrow holder has acknowledged its appointment as
such in writing. In either event, upon the effective date of such resignation or
removal, the Escrow Holder shall deliver the Escrowed Funds to the successor
escrow holder appointed by the Buyer and the Sellers' Representative in writing.
If the Buyer and the Sellers' Representative cannot agree upon a successor
escrow holder, or fail to appoint a successor escrow holder within thirty (30)
days following the date of the notice of such resignation or removal, the
then-acting Escrow Holder may petition any court of competent jurisdiction for
the appointment of a successor escrow holder, or other appropriate relief, and
tender the Escrowed Funds into the registry of the court. Any such resulting
appointment shall be binding upon all of the parties to this Escrow Agreement.
The Escrow Holder shall have the right to withhold from the Escrowed Funds an
amount equal to the amount due and owing to the Escrow Holder in connection with
the termination of the Escrow Agreement.
(b) Upon acknowledgment by any successor escrow holder, appointed in
accordance with Section 9(a) hereof, of the receipt of the Escrowed Funds and
its written acceptance to serve as the Escrow Holder in accordance with this
Escrow Agreement, the then-acting Escrow Holder shall be fully released from and
relieved of all duties, responsibilities and obligations under this Escrow
Agreement.
10. Notices. All notices and other communications hereunder
shall be in writing and shall be hand delivered, or sent by U.S. certified mail,
postage prepaid, return receipt requested; by an overnight express courier
service that provides written confirmation of delivery; or by facsimile with
written confirmation by the sending machine or with telephone confirmation of
receipt (provided that a confirming copy is sent by an overnight express courier
service that provides written confirmation of delivery), addressed as follows:
If to the Sellers'
Representative: Lee F. Schomberg c/o Ermanco Incorporated
6870 Grand Haven Road
Spring Lake, Michigan 49456
Telecopier No.: 231-798-8322
With a copy to: Nantz, Litowich, Smith & Girard
600 Weyhill Building
2025 East Beltline, S.E.
Grand Rapids, Michigan 49546-7671
Telecopier No.: (616) 977-0529
Attention: Mark R. Smith, Esquire
If to the Buyer: SI Handling Systems, Inc.
600 Kuebler Road
Easton, Pennsylvania 18040
Telecopier No.: (610) 250-9677
Attention: President
With a copy to: Pepper Hamilton LLP
1235 Westlakes Drive, Suite 400
Berwyn, Pennsylvania 19312-2401
Telecopier No.: (610) 640-7835
Attention: Jeffrey P. Libson, Esq.
If to Escrow Holder: First Union National Bank
PA2109
702 Hamilton Mall
Allentown Mall
Telecopier No.: (610) 821-2287
Attention: Peter Gray
Any such notice or communication shall be effective upon the earlier of actual
receipt or deemed delivery. Delivery shall be deemed to have occurred as
follows: if hand delivered, on the day so delivered; if mailed, three business
day after the date so mailed; if telecopied, upon written confirmation by the
sending machine of effective transmission or upon telephone confirmation of
receipt; and if sent by overnight express courier service, the next business
day. Any party may at any time change its address for such notices or
communication from time to time by giving notice in accordance with this
Section.
11. Miscellaneous.
(a) This Escrow Agreement shall automatically terminate on the date when
all of the Escrowed Funds held by the Escrow Holder have been distributed in
accordance with the provisions of Section 4 hereof.
(b) This Escrow Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Pennsylvania without regard to conflicts of
laws principles of any jurisdiction.
(c) The parties hereto agree to execute and deliver any and all documents
and to take such further action as shall be reasonably required to effectuate
the provisions of this Escrow Agreement.
(d) This Escrow Agreement contains the entire understanding of the parties
hereto with respect to the subject matter herein contained. This Escrow
Agreement may only be amended by a writing signed by the Buyer and the Sellers'
Representative.
(e) Neither the Sellers nor the Buyer shall have any right, title or
interest in or to the Escrowed Funds until (and then only to the extent that)
the Escrowed Funds are distributed to such party. The parties hereto intend
that, in the event of the filing of any petition in bankruptcy by or against any
Seller or the Buyer, the bankruptcy estate of any Seller or the Buyer, as the
case may be, shall have no right, title or interest in or to the Escrowed Funds
until (and then only to extent that) the same is actually received by such
Seller or the Buyer.
(f) This Escrow Agreement shall not be assigned by any party without the
written consent of the other parties and any attempted assignment without such
written consent shall be null and void and without legal effect, except that the
Buyer may assign its benefits under this Escrow Agreement to any of its
affiliates without the consent of the other parties hereto. This Escrow
Agreement shall be binding upon and inure to the benefit of the respective
parties hereto, their heirs, legal representatives, successors and, provided any
consent required by this Section is duly obtained, assigns. Nothing herein is
intended or shall be construed to give any other person any right, remedy or
claim under, in or with respect to this Escrow Agreement or any property held
hereunder.
(g) This Escrow Agreement may be executed in one or more counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute one instrument binding on all the parties, notwithstanding that all
the parties are not signatories to the original or the same counterpart.
[three signature pages follow]
<PAGE>
IN WITNESS WHEREOF, this Escrow Agreement has been duly
executed by the parties hereto as of the day and year first above written.
SI HANDLING SYSTEMS, INC.
By: /s/ William Johnson
William Johnson, President & CEO
SELLERS:
/s/ Steven Shulman
Steven Shulman
/s/ Leon C. Kirschner
Leon C. Kirschner
/s/ Thomas C. Hubbell
Thomas C. Hubbell
/s/ Lee F. Schomberg
Lee F. Schomberg
/s/ Guy G. Hollister
Guy G. Hollister
/s/ Wilton W. Wyman, Jr.
Wilton W. Wyman, Jr.
[signatures continue on following page]
<PAGE>
/s/ Gordon A. Hellberg
Gordon A. Hellberg
/s/ Andrew Knaut
Andrew Knaut
/s/ Thomas L. Bergy
Thomas L. Bergy
/s/ Donald H. Kloosterhouse
Donald H. Kloosterhouse
/s/ Robert R. Nezbeth
Robert R. Nezbeth
/s/ James J. Bronsema
James J. Bronsema
/s/ John R. Planteroth
John R. Planteroth
/s/ William C. Pipp
William C. Pipp
[signatures continue on following page]
<PAGE>
ESCROW HOLDER:
FIRST UNION NATIONAL BANK
By: /s/ Peter A. Gray
Name: Peter A. Gray
Title: Vice President
<PAGE>
SCHEDULE A
Sellers' Contribution to Escrowed Funds
<TABLE>
<CAPTION>
Claims Expense Purchase Price
Seller Escrow Adjustment Escrow
- ------ -------------- -----------------
<S> <C> <C>
Steven Shulman $345,715.20 $283,486.49
Leon C. Kirschner 250,345.50 205,283.34
Thomas C. Hubbell 44,056.65 36,126.48
Lee F. Schomberg 43,020.00 35,276.43
Guy G. Hollister 13,994.40 11,475.44
Wilton W. Wyman, Jr. 13,476.15 11,050.47
Gordon A. Hellberg 9,329.62 7,650.32
Andrew Knaut 6,738.07 5,525.25
Thomas L. Bergy 6,219.78 5,100.23
Donald H. Kloosterhouse 5,183.20 4,250.17
Robert R. Nezbeth 6,219.85 5,100.23
James J. Bronsema 4,146.55 3,400.12
John R. Planteroth 1,036.68 850.02
William C. Pipp 518.35 425.01
---------- ----------
TOTAL 750,000.00 615,000.00
</TABLE>
<PAGE>
SCHEDULE B
Sellers' Social Security Number
Seller Social Security Number
------ ----------------------
Steven Shulman
Leon C. Kirschner
Thomas C. Hubbell
Lee F. Schomberg
Guy G. Hollister
Wilton W. Wyman, Jr.
Gordon A. Hellberg
Andrew Knaut
Thomas L. Bergy
Donald H. Kloosterhouse
Robert R. Nezbeth
James J. Bronsema
John R. Planteroth
William C. Pipp
EXHIBIT 99.1
------------
Contact: Bill Johnson
President and CEO
(610) 252-7321
(610) 250-9677 Fax
www.sihs.com
600 Kuebler Road . PO Box 70 . Easton, PA 18044-0070
News Release
- ------------
EASTON, PA, September 30, 1999 -- SI Handling Systems, Inc. [Nasdaq NM:SIHS],
today announced the acquisition of Ermanco Incorporated.
The Company stated that it has completed its planned acquisition of Ermanco
Incorporated. Ermanco will be a wholly owned subsidiary, beginning October 1,
1999, and SI will begin to consolidate its financial results as of that date.
The Company expects that Ermanco's sales for their fiscal year ended September
30, 1999 will be in excess of $30 million, with EBITDA of $3.5 million.
Ermanco's compounded annual revenue growth rate has exceeded 12% since 1991. The
compounded annual earnings growth rate has exceeded 36% for the same period.
Compared to fiscal year 1999, SI's revenue growth rate, with the addition of
Ermanco, will approximate 75%.
Under the terms of the acquisition agreement, SI paid approximately $22.6
million in cash, equity, and debt for Ermanco. The acquisition is expected to be
accretive to SI's fiscal year 2000 earnings. Schroder & Co. acted as financial
advisor to SI and provided a fairness opinion to SI's Board of Directors in
connection with the transaction. First Union National Bank provided financing
for the transaction. ING Barings served as financial advisor to Ermanco.
The acquisition is a major milestone for SI. It is the Company's largest
acquisition in its 41-year history. Ermanco will not only enhance SI's customer
base, but will also add to it a highly experienced team. Leon C. Kirschner,
President of Ermanco, and Steven Shulman, an investment banker and major
shareholder of Ermanco, have both joined the Board of SI. As a result, the Board
has added investment banking experience, augmented industry experience, and
increased its ownership stake to approximately 17% of the outstanding shares of
the Company.
Ermanco, based in Spring Lake, Michigan, is a designer and installer of complete
conveying systems for a variety of manufacturing and warehousing applications.
In addition, it also manufactures conveyors and conveyor components.
SI's Chief Executive Officer and President, Bill Johnson, stated, "SI is making
solid progress in transitioning itself to a much larger high-tech, integrated
materials handling systems company. We are delighted to have Ermanco as part of
our operations. This combination will help build and strengthen both SI's and
Ermanco's position in the marketplace by being able to serve customers better
with enhanced system integration capabilities. An added strength of Ermanco is
its sales channel with over 100 knowledgeable distributors. We expect to
generate revenue synergies with the increased proprietary product content of our
systems offerings, resulting in improved margins."
Leon C. Kirschner, President and SI's Corporate Vice President, added, "This is
a very exciting opportunity for both companies. We are looking forward to
becoming a part of SI and working towards the same goal of increasing our
leadership presence in the integrated materials handling systems industry."
SI, based in Easton, PA, markets, designs, manufactures, installs, and services
fully automated integrated materials handling systems and component products
that improve productivity in manufacturing and automate order fulfillment.
#
- ------------------------
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 and the Securities and Exchange
Commission rules, regulations, and releases. SI intends that such
forward-looking statements be subject to the safe harbors created thereby. Among
other things, the forward-looking statements regard SI's acquisition activities,
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," "should," and
similar expressions that denote uncertainty, are intended to identify such
forward-looking statements. SI'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
associated with the Ermanco acquisition, including the failure to close such
acquisition, the failure to realize anticipated benefits of such acquisition,
the failure to integrate Ermanco successfully with SI and any unforeseen
complications related to the Ermanco acquisition; (2) as a result of factors
over which SI has no control, including the strength of domestic and foreign
economies, sales growth, competition, certain cost increases, and its potential
exposures relating to the Year 2000 matter; or (3) if the factors on which SI's
conclusions are based do not conform to its expectations.
<PAGE>
CONFERENCE CALL
[NASDAQ: SIHS]
================================================================================
SI HANDLING COMPLETES ERMANCO ACQUISITION
================================================================================
Bill Johnson, President and CEO, will host a teleconference call on
Monday, October 4, 1999, at 4:00 P.M. (Eastern Time) to discuss the completion
of the Ermanco acquisition. He will also be available to respond to your
questions.
The teleconference dial-in number is 888-273-9885. Please phone in no
later than 3:55 P.M. on Monday, October 4, to participate. The operator will ask
you to identify yourself and your firm.
You have the opportunity to listen to the conference call over the
Internet through Vcall at http://www.vcall.com. To listen to the live call,
please go to the web site at least fifteen minutes early to register, download,
and install any necessary audio software. For those who cannot listen to the
live broadcast, a replay will be available shortly after the call, and a
transcript will be available 24 to 48 hours later.
Thank you for your interest in SI Handling Systems, Inc.
