PARAGON TECHNOLOGIES INC, DEF 14A, 2000-07-14

PARAGON TECHNOLOGIES INC
DEF 14A, 2000-07-14
CONSTRUCTION, MINING & MATERIALS HANDLING MACHINERY & EQUIP

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

[Amendment No. ..................]

Filed by the Registrant |X|
Filed by a Party other than the Registrant /_/

Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement o Definitive Additional Materials
/_/ Soliciting Material Pursuant to ss. 240.14a-11(C) or ss. 240.14a-12

Paragon Technologies, Inc. (formerly, "SI Handling Systems, Inc.")
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Ronald J. Semanick, Corporate Secretary
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and O-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ____________________________________________
2) Form Schedule or Registration Statement No.: _______________________
3) Filing Party: _______________________________________________________
4) Date Filed: ________________________________________________________

<PAGE>

PARAGON TECHNOLOGIES, INC.
(FORMERLY, "SI HANDLING SYSTEMS, INC.")

600 Kuebler Road, Easton, Pennsylvania 18040
Telephone (610) 252-7321

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders of Paragon Technologies, Inc. (formerly,
"SI Handling Systems, Inc."), a Pennsylvania corporation (the "Company"), will
be held at the GPU Energy Building, 2121 Sullivan Trail, Easton, Pennsylvania
18040 on Thursday, August 24, 2000, at 11:00 a.m., local time, for the following
purposes:

1. To elect six directors to the Board of Directors;

2. To consider and act upon a proposal to amend the 1997 Equity
Compensation Plan;

3. To consider and act upon the shareholder proposals presented in the
attached Proxy Statement; and

4. To transact such other business as may properly come before the meeting
or at any adjournment or adjournments thereof.

Shareholders amounting to less than a quorum attending a meeting that has
been previously adjourned for lack of a quorum shall, nevertheless, constitute a
quorum for the purpose of electing directors.

Shareholders amounting to less than a quorum attending a meeting that has
been previously adjourned for one or more periods aggregating at least 15 days
due to an absence of a quorum shall, nevertheless, constitute a quorum for the
purposes of acting upon any other matters.

IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.

July 14, 2000 RONALD J. SEMANICK
Easton, Pennsylvania Secretary

<PAGE>

PARAGON TECHNOLOGIES, INC.
(FORMERLY, "SI HANDLING SYSTEMS, INC.")

600 Kuebler Road, Easton, Pennsylvania 18040

Proxy Statement

This Proxy Statement and the accompanying form of proxy are being mailed on
or about July 14, 2000 to the shareholders of Paragon Technologies, Inc.
(formerly, "SI Handling Systems, Inc.") (the "Company"). They are being
furnished in connection with the solicitation by the Board of Directors of
proxies to be voted at the 2000 Annual Meeting of Shareholders to be held at the
GPU Energy Building, 2121 Sullivan Trail, Easton, Pennsylvania 18040 on
Thursday, August 24, 2000, 11:00 a.m., local time, and at any adjournment
thereof. The cost of such solicitation will be borne by the Company.

Only the shareholders of record at the close of business on June 26, 2000,
of the outstanding shares of common stock of the Company will be entitled to
vote at the meeting. A shareholder giving a proxy may revoke it at any time by
giving written notice of such revocation to the Secretary of the Company before
it is exercised. A proxy may also be revoked by executing a later proxy or by
attending the meeting and voting in person, provided written notice of such
actions are given to the Secretary of the Company before the enclosed proxy is
exercised.

At the close of business as of the above record date, there were
outstanding and entitled to vote 4,184,878 shares of the Company's common stock.
Each holder of shares entitled to vote has the right to one vote for each share
standing in the holder's name on the books of the Company.

The shares represented by each properly executed proxy will be voted in the
manner specified by the shareholder. If instructions are not given, the shares
will be voted by the persons named in the accompanying proxy in the election of
directors as specified below, for adoption of the amendment of the Company's
1997 Equity Compensation Plan, against each of the shareholder proposals, and in
their discretion on any other matters properly coming before the meeting.

Under Pennsylvania law and the Company's Bylaws, the presence, in person or
by proxy, of shareholders entitled to cast at least a majority of the votes that
all shareholders are entitled to cast will constitute a quorum for the purposes
of the Annual Meeting. Abstentions and broker non-votes will be treated as
present for purposes of determining the presence of a quorum. Directors are
elected by a plurality of the votes cast at the meeting. Accordingly, directions
to withhold authority, abstentions, and broker non-votes will have no effect on
the outcome of the vote. For the approval of all other proposals, the
affirmative vote of a majority of the votes cast on the proposals are required.
Abstentions and broker non-votes will not be counted as votes and, therefore,
will have no effect on the amendment to the Company's 1997 Equity Compensation
Plan or the shareholder proposals.

July 14, 2000

<PAGE>

Principal Shareholders

Security Ownership of Management and Certain Beneficial Owners

The following table sets forth certain information as of June 26, 2000
(unless otherwise noted) regarding the ownership of common stock (i) by each
person known by the Company to be the beneficial owner of more than five percent
of the outstanding common stock, (ii) by each director or nominee of the
Company, (iii) by the executive officers of the Company named in the Summary
Compensation Table included elsewhere in this Proxy Statement, and (iv) by all
current executive officers and directors of the Company as a group. Unless
otherwise stated, the beneficial owners exercise sole voting and/or investment
power over their shares.

<TABLE>
<CAPTION>
Right To
Number of Acquire
Shares Under Options Phantom
Beneficially Exercisable Percentage Stock
Beneficial Owner Owned Within 60 Days of Class (1) Units (2)
---------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>

Emerald Advisers, Inc. (3)............. 776,675 - 18.56% -
1857 William Penn Way
Lancaster, PA 17601

L. Jack Bradt (4)...................... 350,549 - 8.38% -
10 Ivy Court
Easton, PA 18045

Elmer D. Gates (5)..................... 28,400 - 8,934

Michael J. Gausling.................... - - 5,001

William R. Johnson..................... 10,000 10,000 -

Leon C. Kirschner...................... 160,650 - 3.84% -

Steven Shulman......................... 221,850 - 5.30% -

William J. Casey....................... 9,864 8,227 -

All current directors and
executive officers as a
group (9 persons) (4) (5)........... 793,034 29,029 19.50% 13,935
---------------------------

<PAGE>

<FN>
(1) The percentage for each individual, entity or group is based on the
aggregate number of shares outstanding as of June 26, 2000 (4,184,878) and
all shares issuable upon the exercise of outstanding stock options held by
each individual or group that are presently exercisable or exercisable
within 60 days after June 26, 2000. Percentages of less than one percent
are not shown.

(2) The Phantom Stock Units represent the investment of deferred directors'
fees in units equivalent to shares of common stock of the Company.
Benefits under the Paragon Technologies, Inc. (formerly, "SI Handling
Systems, Inc.") Directors' Deferred Compensation Plan may be paid in cash
or in shares of common stock of the Company at the election of the
directors upon retirement.

(3) This information is presented in reliance on information disclosed in a
Schedule 13G filed with the Securities and Exchange Commission on February
1, 2000.

(4) Includes 51,487 shares held by members of Mr. Bradt's immediate family.
Mr. Bradt disclaims beneficial ownership of such shares.

(5) Includes 2,000 shares held by members of Mr. Gates' immediate family.
Mr. Gates disclaims beneficial ownership of such shares.
</FN>
</TABLE>

<PAGE>

ELECTION OF DIRECTORS

At the meeting, six nominees will stand for election as directors of the
Company to hold office for a period of one year or until their successors have
been elected and qualify.

If the enclosed proxy is duly executed and received in time for the
meeting, it is the intention of the persons named therein to vote the shares
represented thereby for the six persons nominated for election as directors
unless authority is withheld.

If any nominee should refuse or be unable to serve, the proxy will be voted
for such other person as shall be designated by the Board of Directors.
Management has no knowledge that any of the nominees will refuse or be unable to
serve.

Information concerning the nominees for election as directors is set forth
below:

<TABLE>
<CAPTION>
Name, Other Positions Or Offices With The Company Director
and Principal Occupation For Past Five Years Since Age
--------------------------------------------------------------------------- -------- ---

<S> <C> <C>
L. Jack Bradt.............................................................. 1958 72
Former Northampton County Human Services Director, former
Entrepreneur in Residence at Lehigh University, and founder, former
CEO and Chairman of the Board of the Company.

Elmer D. Gates............................................................. 1996 70
Chairman of the Board of the Company, and former Vice
Chairman of Fuller Company, a company involved in the
design and manufacture of plants, machinery and equipment
used in the cement, paper, power and processing industries. (1)

Michael J. Gausling........................................................ 1995 42
President, CEO, and founder of STC Technologies, Inc.,
a manufacturer of clinical diagnostic products.

William R. Johnson......................................................... 1999 53
President and Chief Executive Officer of the Company, former
Senior Vice President of Rockwell Automation's Reliance Electric
Motor Group (1995 - 1998) and former General Manager of Rockwell
Automation's Engineered Motors and Generators Business (1993 - 1995).

Leon C. Kirschner.......................................................... 1999 61
Corporate Vice President of the Company and President of
Ermanco Incorporated since 1983.

Steven Shulman............................................................. 1999 59
Managing Director of Latona Associates, Inc., (2)
-----------------------------

<FN>
(1) Mr. Gates is a director of PP&L Corp., an electric utility providing
service to various counties in Central Eastern Pennsylvania. He was also
Vice Chairman and a director of Ambassador Bank.
(2) Mr. Shulman is Chairman of Terrace Food Group, Inc., a director of WPI
Group, Inc., and a director of Beacon Capital Partners, Inc. He was also
a director of Ermanco Incorporated at the time of its acquisition by the
Company on September 30, 1999.
</FN>
</TABLE>

<PAGE>

ADDITIONAL INFORMATION CONCERNING CERTAIN DIRECTORS AND COMMITTEES

There are three standing committees of the Board of Directors: the Audit
Committee, the Compensation Committee, and the Committee on Strategic
Alternatives.

The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
financial reports and other financial information provided by the Company to any
governmental body or the public, the Company's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board of Directors have established, and the Company's accounting and
financial reporting processes generally. Consistent with this function, the
Audit Committee encourages continuous improvement of, and fosters adherence to
the Company's policies, procedures, and practices at all levels. The Audit
Committee's primary duties and responsibilities are to serve as an independent
and objective party to monitor the Company's financial reporting process and
internal control system, review and appraise the audit efforts of the Company's
independent accountants, and provide an open avenue of communication among the
independent accountants, financial and senior management, and the Board of
Directors. The Audit Committee also reviews and discusses with the Company's
external auditors the scope of their annual audit and related fees as well as
any other services provided by them. It reviews with the auditors the results of
the audit and the year-end financial statements and recommends to the Board of
Directors matters related to the selection and engagement of the independent
auditors. The members of the Audit Committee during the ten months ended
December 31, 1999 were Mr. Bradt, Chairman, and Messrs. Gates and Gausling.

The Compensation Committee reviews and recommends to the Board of Directors
matters with respect to the remuneration arrangements for officers and directors
of the Company including salaries and other direct compensation and incentive
stock option awards. The members of the Compensation Committee during the ten
months ended December 31, 1999 were Mr. Gausling, Chairman, and Messrs. Bradt
and Gates, and Mr. Shulman since his appointment as a director on September 30,
1999.

On June 7, 1999, the Board of Directors established the Committee on
Strategic Alternatives and the Corporate Governance Committee.

The Committee on Strategic Alternatives' responsibilities include reviewing
the selection and performance of the Company's investment banking firm,
assessing alternate uses of capital, and studying strategic alternatives to
enhance shareholder value. The members of the Committee on Strategic
Alternatives during the ten months ended December 31, 1999 were Mr. Johnson,
Chairman, and Messrs. Bradt and Gausling, and Mr. Yurkovic (until his retirement
on September 8, 1999).

The Board of Directors effectively disbanded the Corporate Governance
Committee of the Board on May 10, 2000. The Corporate Governance Committee's
responsibilities included evaluating Board performance, monitoring adherence to
the requirements for serving as a director, reviewing the size and composition
of the Board and its committees, and soliciting and making recommendations for
candidates for the Board. The committee made recommendations to the Board on
matters concerning directorship practices, including Board tenure and retirement
policies, and rotation of Board members in their roles as Chairman of the Board
and its committees. The committee also reviewed and advised the full Board on
issues of corporate governance. The members of the Corporate Governance
Committee during the ten months ended December 31, 1999 were Mr. Fahey, Chairman
(until his retirement on March 1, 2000), and Mr. Gates. The function of the
Corporate Governance Committee is being conducted by the Company's directors on
an ongoing basis.

There was one meeting of the Audit Committee and four meetings of the
Compensation Committee, one meeting of the Corporate Governance Committee, and
one meeting of the

<PAGE>

Committee on Strategic Alternatives during the ten months ended December 31,
1999. The Board of Directors met nine times during the ten months ended December
31, 1999. Each director attended all of the meetings of the Board of Directors
and committees of the Board of Directors on which he served, with the exception
of Messrs. Bradt and Gates who each missed one meeting of the Board of Directors
and one Committee meeting.

COMPENSATION OF DIRECTORS

Directors who are also employees of the Company receive no additional
remuneration for their services as directors. The Chairman of the Board of
Directors and other non-employee directors receive an annual retainer of $12,000
and $6,000, respectively; a fee of $2,500 for each Board meeting attended; a fee
of $600 per day for all Company-related activities undertaken at the request of
the Chairman of the Board or the Chief Executive Officer of the Company; a fee
of $300 per interview for all Company-related activities undertaken in
connection with interviewing qualified candidates to fill vacancies in key
positions within the Company; and a fee of $200 for each Board meeting held by
telephone conference. There are no additional directors' fees paid for serving
on the Committees of the Board of Directors. Directors are also reimbursed for
their customary and usual expenses incurred in attending Board and Committee
Meetings including those for travel, food, and lodging.

The Company permits its directors, at their election, to defer receipt of
payment of directors' fees. During the ten months ended December 31, 1999,
$62,000 of directors' fees was deferred. Deferred directors' fees accrue
interest at the prime rate of interest charged by the Company's principal bank
or may be invested in units equivalent to shares of common stock of the Company.
During the ten months ended December 31, 1999, distributions under the
Directors' Deferred Compensation Plan totaled $18,986.

EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is comprised of Mr. Gausling, Chairman, and
Messrs. Bradt, Gates and Shulman. Mr. Bradt was formerly the CEO of the Company,
and is currently Chairman of the Audit Committee.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Compensation Philosophy and Practices

It is the Company's policy to offer internally and externally competitive
compensation opportunities for its employees based on a combination of factors,
including corporate performance and individual contribution to the business
consistent with corporate needs and objectives.

The Compensation Committee of the Company, whose members are identified
above, annually reviews and recommends compensation for the Company's executive
officers to the Board of Directors. The annual compensation review permits an
ongoing evaluation of the link between the Company's performance and its
executive compensation in the context of the compensation programs of other
companies. A significant part of executive officers' compensation is dependent
upon the Company's annual financial performance, including pre- tax earnings,
basic earnings per share, effective management of the Company's operations, and
backlog adequacy.

There are four basic elements to executive officer compensation: salary,
bonus, auto allowance, and stock options granted at market value vesting over a
period of time, typically four years. The stock option program rewards executive
officers for successful long-term strategic

<PAGE>

management and enhancement of shareholder value by providing an opportunity to
acquire equity ownership in the Company stressing both annual and long-term
performance and supporting a performance-oriented environment which allows the
Company to attract and retain qualified management personnel. The Compensation
Committee believes equity ownership in the Company by management aligns the
interest of shareholders and management.

Salaries for executive officers are determined with reference to a position
rate for each officer. The position rates are determined annually by evaluating
the responsibilities of the position and taking into consideration, among other
things, salaries paid to other executives in comparable positions in
comparably-sized companies, levels of experience, and job responsibilities. The
Compensation Committee determines adjustments to executive officer salary based
on the recommendation of the Chief Executive Officer. The salary adjustment
recommendations are based on performance criteria such as financial performance,
strategic decisions, personnel development, individual performance, and
potential of the individual in the job.

The Compensation Committee awards bonuses to the Company's executive
officers pursuant to an existing Executive Officer Incentive Plan. The bonus
amounts for executive officers is at risk and will vary from year to year. The
bonus pool is calculated based on a formula tied principally to the Company's
profitability. The pool is allocated by the Compensation Committee, on the
recommendation of the Chief Executive Officer, among the executive officers,
based on a series of factors, including financial objectives, other business
objectives, and assessment of personal contribution. The financial objectives
include a pre-tax earnings target, basic earnings per share target, effective
management of the Company's operations, and backlog adequacy. However, in the
event the Company does not reach its financial objectives, the Board of
Directors has discretionary authority to award bonuses based on an executive
officer's individual performance and personal contribution to the business.

The Compensation Committee may grant stock options each year to executive
officers and other employees based on a variety of factors, including the
financial performance of the Company and an assessment of personal contribution.
The options are granted with an exercise price equal to the market price of the
Company's common stock on the date of grant, vest over a period of four years,
and expire after five years. The options provide value to the recipients as the
price of the Company's stock appreciates from the date when the options were
granted. Historically, stock options have been granted based on position rate.
The objective is to provide executive officers with equity ownership in the
Company and align closely executive interests with the longer term interests of
shareholders.

CEO Compensation

Salary and Stock Options
------------------------

The Company's most highly compensated officer was William R. Johnson,
President and CEO.

The Company entered into an executive employment agreement with Mr.
Johnson, commencing on March 29, 1999. Terms of the employment agreement include
a base salary of not less than $216,000 per year. The employment agreement
entitles Mr. Johnson to participate in the Company's Officer Incentive Plan that
provided for the opportunity to receive a bonus of up to one hundred percent
(100%) of base salary then in effect, based on the achievement of earnings
targets as defined for the ten months ended December 31, 1999 by the Board of
Directors. On June 1, 1999, in accordance with the employment agreement, Mr.
Johnson was granted stock options to purchase 40,000 shares of the Company's
common stock at an exercise price of $10.875 per share, the fair market value of
the Company's common stock on the date of grant under and subject to terms of
the Company's 1997 Equity Compensation Plan.

<PAGE>

In December 1999, Mr. Johnson's performance was reviewed by the
Compensation Committee and discussed with the Board of Directors and Mr.
Johnson. Although the Company did not achieve its earnings goals for the ten
months ended December 31, 1999, the Compensation Committee determined that a
$39,000 or 18.1% increase in the Chief Executive Officer's base salary to
$255,000 effective January 1, 2000, and a bonus of $50,000 for the ten months
ended December 31, 1999 was appropriate in light of the efforts made by Mr.
Johnson in completing the acquisition of Ermanco Incorporated on September 30,
1999 (the largest acquisition in the Company's history), reorganizing the
Company's Easton operations, streamlining operations, reducing overhead costs,
enhancing internal controls related to contracts in process, and also taking
into consideration salaries paid to other executives in comparable positions.

Mr. Johnson's bonus potential was predicated on the Company achieving its
corporate "performance hurdle" of planned net earnings; however, the Board of
Directors exercised discretionary authority to reward Mr. Johnson's personal
contribution to the business.

Conclusion

The Company's executive compensation program is designed to link the
performance of management to accomplishing both short and long-term earnings
goals, building shareholder value, and personal contribution to the business.
The individual elements are understandable and together provide compensation
that is well suited for a Company of our size. The management team understands
the linkage of operating performance, personal contribution to the business, and
their own compensation.

The foregoing constitutes the report of the Compensation Committee of the
Board of Directors for the Company's ten months ended December 31, 1999.

COMPENSATION COMMITTEE: Michael J. Gausling, Chairman
L. Jack Bradt
Elmer D. Gates
Steven Shulman

<PAGE>

Compensation

Set forth below is certain information relating to compensation received by
the Company's Chief Executive Officer and the other most highly compensated
executive officer (the "Named Executive Officers"). No other executive officer
earned over $100,000 in salary and bonus in the ten months ended December 31,
1999.

Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long-Term
Fiscal Comp.
---------
Year Other Annual Stock All Other
Ended Salary Bonus Compensation Options Compensation
Name and Position (1) ($)(2) ($) ($)(3) (#)(4) ($)(5)
--------------------- -------- -------- ------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>

William R. Johnson 12/31/99 $166,154 $50,000 $3,690 40,000 $150,000
President and
Chief Executive
Officer (6)

William J. Casey 12/31/99 82,885 25,000 4,100 10,000 3,315
Executive 02/28/99 88,876 20,000 4,920 3,354 6,325
Vice 03/01/98 87,423 83,280 4,895 6,600 8,754
President
------------------------

<FN>
(1) On September 30, 1999, the Board of Directors of Paragon Technologies, Inc.
(formerly, "SI Handling Systems, Inc.") (the "Company") approved an
amendment to Article 1, Section 1.03 of the Company's Bylaws to change the
fiscal year end of the Company from the Sunday nearest to the last day of
February to December 31. For the year ended December 31, 1999, the fiscal
year consisted of ten months. Prior to the recent change in the Company's
Bylaws, each of the fiscal years ended February 28, 1999 and March 1, 1998
consisted of 52 weeks.

(2) This column includes employee pre-tax contributions to the Company's 401(k)
Retirement Savings Plan.

(3) This column consists of an auto allowance of $410 per month for the
business usage of personal automobiles. Prior to April 1, 1997 the auto
allowance was $385 per month.

(4) Options become exercisable in increments of 25% on the anniversary date of
the grant. Thus at the end of four years the options are fully exercisable.
Currently, all options have a term of five years. All stock option amounts
have been adjusted to reflect stock splits and dividends.

(5) This column includes the amounts expensed for financial reporting purposes
for Company contributions to the Company's 401(k) Retirement Savings Plan
pertaining to basic, matching, and profit sharing contributions relating to
Mr. Casey, and relocation costs relating to Mr. Johnson.

(6) Mr. Johnson became President and a Director of the Company on March 29, 1999.
</FN>
</TABLE>

<PAGE>

Stock Options Granted to Named Executive Officers During The Ten Months Ended
December 31, 1999

The following table sets forth certain information regarding options for
the purchase of the Company's common stock that were awarded to the Named
Executive Officers during the ten months ended December 31, 1999.

Option Grants In The Ten Months Ended December 31, 1999

<TABLE>
<CAPTION>
Potential
% of Total Realizable
Granted to Value at Assumed
Employees Annual Rates
In The Ten of Stock Price
Months Appreciation for
Options Ended Exercise Option Term (2)
Granted December Price Expiration -----------------
Name (#) (1) (2) 31, 1999 ($/Share) Date 5% ($) 10% ($)
------------------ ----------- ---------- --------- ------------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
William R. Johnson 40,000 23.2% $10.875 06/01/04 $120,182 $265,572

William J. Casey 10,000 5.8% 10.000 07/20/04 27,628 61,051
------------------------

<FN>
(1) Options vest in one-quarter increments over the four-year period following
the date of grant, with the first one-quarter of such options vested on
June 1, 2000 for Mr. Johnson and July 20, 2000 for Mr. Casey, respectively.

(2) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon the exercise of the options immediately
prior to the expiration of the term, assuming the specified rates of
appreciation on the Company's common stock over the term of the options.
These numbers do not take into account provisions for termination of the
option following termination of employment or vesting over a period of four
years. The dollar amounts under these columns are the result of
calculations at the 5% and 10% rates required by the SEC and, therefore,
are not intended to forecast possible future appreciation of the stock
price.
</FN>
</TABLE>

<PAGE>

Stock Options Exercised During The Ten Months Ended December 31, 1999 and Held
by Named Executive Officers as of December 31, 1999.

The following table sets forth certain information regarding options for
the purchase of the Company's common stock that were exercised and/or held by
the Company's Named Executive Officers during the ten months ended December 31,
1999.

Aggregated Option Exercises in the Ten Months Ended December 31, 1999
And Year-End Option Values
--------------------------

<TABLE>
<CAPTION>
Number of Value of
Shares Covered Unexercised
# of By Unexercised In-The-Money
Shares Options At Options At
Acquired December 31, 1999 December 31, 1999
On Value Exercisable/ Exercisable/
Name Exercise (1) Realized Unexercisable (1) Unexercisable
------------------------ ------------ -------- ------------------ -----------------
<S> <C> <C> <C> <C>
William R. Johnson - $ - 0/40,000 $ 0/0

William J. Casey 450 (2) 2,931 4,514/16,190 1,199/1,199
------------------------

<FN>
(1) All common shares, stock options, and price per share figures have been
adjusted to reflect stock splits and dividends.

(2) On June 21, 1999, Mr. Casey acquired 450 shares of common stock by exercising 450
options to obtain the shares.
</FN>
</TABLE>

Employment Agreement with William R. Johnson

The Company entered into an executive employment agreement with William R.
Johnson, its President, commencing on March 29, 1999. Effective July 21, 1999,
in accordance with the employment agreement, Mr. Johnson was elected Chief
Executive Officer of the Company. Terms of the employment agreement include a
base salary of not less than $216,000 per year. The employment agreement
entitles Mr. Johnson to participate in the Company's Officer Incentive Plan that
provides the opportunity to receive a bonus, based on the achievement of
earnings targets as defined for each fiscal year by the Board of Directors. On
June 1, 1999, Mr. Johnson was granted stock options to purchase 40,000 shares of
the Company's common stock at an exercise price of $10.875 per share, the fair
market value of the common stock on the date of grant under and subject to terms
of the Company's 1997 Equity Compensation Plan. The options vest at a rate of
twenty-five percent (25%) per year on each of the first four (4) anniversaries
of the June 1, 1999 grant date, or will immediately vest upon or change in
control of the Company. Effective January 1, 2000, the Board of Directors
increased Mr. Johnson's base salary to $255,000 per year. During the ten months
ended December 31, 1999, the Board of Directors exercised their discretionary
authority to reward Mr. Johnson's personal contribution to the business by
awarding Mr. Johnson a bonus of $50,000. On February 9, 2000, Mr. Johnson was
granted stock options to purchase 40,000 shares of the Company's common stock at
an exercise price of $7.063 per share, the fair market value of the common stock
on the date of grant under and subject to terms of the Company's Equity
Compensation Plan. The options vest at a rate of twenty-five percent (25%) per
year on each of the first four (4) anniversaries of the February 9, 2000 grant
date, or will immediately vest upon a change in control of the Company.

<PAGE>

The Company has the right to terminate Mr. Johnson's employment with or
without cause. Cause is defined as any material breach of the employment
agreement, disloyalty to the Company, willful misconduct, conviction of a felony
or other criminal act. Mr. Johnson has the right to terminate the employment
agreement voluntarily. The employment agreement may also be terminated upon a
change in control of the Company. The employment agreement provides for
severance benefits of one year's base salary in the event of termination of Mr.
Johnson's employment for termination without cause, and up to two year's base
salary in the event of termination upon a change in control.

Other benefits normally made available by the Company to executive
officers, including participation in any health plan, retirement savings plan,
and receipt of a monthly auto allowance and relocation costs, are also made
available to Mr. Johnson under the employment agreement.

Employment Agreement with Leon C. Kirschner

The Company entered into a three-year employment agreement with Leon C.
Kirschner, a former shareholder of Ermanco Incorporated, on October 1, 1999.
Effective October 1, 1999, in accordance with the employment agreement, Mr.
Kirschner was appointed Corporate Vice President and a director of the Company
and President of Ermanco Incorporated. Terms of the employment agreement include
a base salary of not less than $253,000 per year. The employment agreement
entitles Mr. Kirschner to participate in the Ermanco Management Incentive Plan
that provides the opportunity to receive a bonus based upon the achievement of
the sales, income, and cash generation goals set forth in the Ermanco Plan. From
October 1, 1999, the effective date of the employment agreement, to the December
31, 1999 year end, Mr. Kirschner was awarded a bonus of $35,316 in accordance
with the Ermanco Management Incentive Plan.

At the inception of the employment agreement, Mr. Kirschner was granted
incentive stock options to purchase 25,000 shares of the Company's common stock
at an exercise price of $8.25 per share, the fair market value of the common
stock on the date of grant under and subject to the terms of the Company's 1997
Equity Compensation Plan. The options vest at a rate of twenty-five percent
(25%) per year on each of the first four (4) anniversaries of the grant date, or
will immediately vest upon a change in control of the Company. On February 9,
2000, Mr. Kirschner was granted incentive stock options to purchase 25,000
shares of the Company's common stock at an exercise price of $7.063 per share,
the fair market value of the common stock on the date of grant under and subject
to the terms of the Company's 1997 Equity Compensation Plan. The options vest at
a rate of twenty-five percent (25%) per year on each of the first four (4)
anniversaries of the February 9, 2000 grant date, or will immediately vest upon
a change in control of the Company.

The Company has the right to terminate Mr. Kirschner's employment with or
without cause. Cause is defined as any material breach of the employment
agreement, disloyalty to the Company, willful misconduct, conviction of a felony
or other criminal act. Mr. Kirschner has the right to terminate the employment
agreement voluntarily. The employment agreement may also be terminated upon a
change in control of the Company. The employment agreement provides for
severance benefits of up to two year's base salary in the event of termination
upon a change in control, and up to two year's base salary, average annual
bonus, and fringe benefits in the event of termination without cause.

Other benefits normally made available by the Company to executive
officers, including participation in any health plan, retirement savings plan,
and receipt of automobile benefits are also made available to Mr. Kirschner.

<PAGE>

STOCK PERFORMANCE CHART

The following graph illustrates the cumulative total shareholder return on
the Company's common stock during the ten months ended December 31, 1999, and
the four fiscal years ended February 28, 1999, March 1, 1998, March 2, 1997, and
March 3, 1996 with comparison to the cumulative total return on the Nasdaq Stock
Market - US Index, the Amex Market Value Index, and a Peer Group of Construction
and Related Machinery Companies [SIC Code 353]. This comparison assumes $100 was
invested on February 24, 1995 in the Company's common stock and in each of the
foregoing indexes and assumes reinvestment of dividends.

[GRAPHIC OMITTED - PERFORMANCE CHART]

Paragon Technologies, Inc.
(formerly, "SI Handling
Systems, Inc.") 100 104 260 327 281 232
Nasdaq Stock Market -
US Index 100 139 166 227 296 525
(1) Peer Group - SIC Code 353 100 116 198 260 152 140
(2) Amex Market Value Index 100 123 128 161 169 211

------------------------

<FN>
(1) The Peer Group of Construction and Related Machinery Companies from The 1999
Nasdaq-Amex Fact Book & Company Directory includes: A.S.V., Inc., Bolt Technology
Corporation, Columbus McKinnon Corporation, ERC Industries, Inc., Gradall Industries, Inc.,
Industrial Rubber Products, Inc., Lufkin Industries, Inc., OmniQuip International, Inc., Quipp,
Inc., Paragon Technologies, Inc. (formerly, SI Handling Systems, Inc.), and Tesco
Corporation. The total returns of each member of the Peer Group were determined in
accordance with Securities and Exchange Commission regulations; i.e., weighted according
to each such issuer's stock market capitalization.
(2) On March 9, 2000, the Company's common stock began trading on The American
Stock Exchange (Amex) under the symbol "PTG." Prior to this date, the
Company's common stock was traded on The Nasdaq Stock Market under the
symbol "SIHS."
</FN>
</TABLE>

<PAGE>

APPROVAL OF AMENDMENT TO EQUITY COMPENSATION PLAN

In May 1997, our Board unanimously approved the 1997 Equity Compensation Plan
(the "Plan"). The Plan was approved by our stockholders in July 1997. Under the
Plan, the Company may grant:
o options intended to qualify as incentive stock options ("ISOs"), under
Section 422(b) of the Internal Revenue Code;
o non-qualified stock options ("NSOs");
o restricted stock;
o stock appreciation rights ("SARs"); and
o performance units.

The Company can grant stock options, restricted stock, SARs and performance
units (collectively "Grants") under the plan to its employees, directors,
consultants and advisors. The Company filed a registration statement on Form S-8
to register the shares of Common Stock issuable under the Plan in September
1997.

Amendment to the Plan
---------------------

On June 21, 2000, the Board of Directors adopted an amendment to the 1997
Equity Compensation Plan to increase the number of shares of our common stock
reserved for Grants under the Plan by 300,000 from 412,500 to 712,500. Grants
under the plan are a vital component of compensation packages that the Company
can offer to attract high-caliber individuals. Importantly, Grants under the
plan also serve to ensure that the Company's employees' overall compensation is
tied to increases in stockholder value. The Board of Directors adopted this
amendment to ensure that, as the Company grows over the coming year, the Company
can meet these objectives and continue to make Grants under the plan to
employees at levels determined appropriate by the compensation committee.

As of June 26, 2000, 97,063 shares of the Company's common stock remained
available for Grants under the Plan and 315,437 shares of our common stock were
reserved for issuance under outstanding Grants, under the Plan. The number of
shares subject to the Plan is subject to adjustment in the case of a stock
split, stock dividend, combination, recapitalization or similar transaction.

As of June 26, 2000, ISOs to purchase 272,219 shares of our common stock were
outstanding under the Plan, with exercise prices ranging from $5.875 to $15.25.
NSOs to purchase 43,218 shares of common stock were outstanding under the Plan
on that date, with exercise prices ranging from $7.063 to $10.875. The Company
has not made any other grants under the Plan. Outstanding options have
expiration dates ranging from October 14, 2002 to May 9, 2005. On June 26, 2000,
the last sale price for our common stock reported on the American Stock Exchange
was $6.375.

The table below sets forth the number of shares of our common stock
underlying options granted under the Plan as of June 26, 2000 to: (1) the named
executive officers who hold options, (2) our current executive officers as a
group, (3) our current nonemployee directors as a group, and (4) our employees,
including current officers who are not executive officers, as a group.

<TABLE>
<CAPTION>
Stock Option Grants
Name Under the Plan
---- ------------------
<S> <C>
William R. Johnson 80,000
William J. Casey 34,954
All current executive officers as a group 206,408
All current nonemployee directors as a group -
All employees, including all current officers who are not
executive officers, as a group 109,209
</TABLE>

<PAGE>

Description of the Plan
-----------------------

Administration of the Plan. The Plan is administered and interpreted by a
committee (the "Committee") of the Board of Directors consisting of not less
than two persons appointed by the Board of Directors from among its members,
each of whom may be a "non-employee director" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934 and an "outside director" as defined by Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Committee has the authority to determine (i) the persons to whom Grants may be
made under the Plan, (ii) the type, size and other terms and conditions of each
Grant, (iii) the time when the Grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting, and (iv) any other matters arising under the
Plan. The Committee has full power and authority to administer and interpret the
Plan, to make factual determinations and to adopt or amend such rules,
regulations, agreements and instruments for implementing the Plan and for
conduct of its business as it deems necessary or advisable, in its sole
discretion. The members of the Compensation Committee currently serve as this
Committee. Notwithstanding the foregoing, the Board of Directors may ratify or
approve Grants, in which case references to the "Committee" shall be deemed to
include the Board of Directors.

Eligibility for Participation. Grants may be made to any employees (including
officers and directors) of, or key advisors (including consultants) to, the
Company or its subsidiaries and to non-employee directors of the Company.
Approximately 150 employees and 6 directors (including 4 non-employee directors)
are currently eligible for Grants under the Plan. During any fiscal year, no
participant may receive Grants under the Plan for more than 100,000 shares of
Common Stock.

Options. The exercise price of any ISO granted under the Plan will not be
less than the fair market value of the underlying shares of Common Stock on the
date of grant, except that the exercise price of an ISO granted to an employee
who owns more than 10% of the total combined voting power of all classes of the
stock of the Company or its subsidiaries may not be less than 110% of the fair
market value of the underlying shares of Common Stock on the date of grant. The
exercise price of an NSO may be greater than, equal to or less than the fair
market value of the underlying shares of Common Stock on the date of grant. The
Committee will determine the term of each Option; provided, however, that the
exercise period may not exceed ten years from the date of grant, and the
exercise period of an ISO granted to an employee who owns more than 10% of the
total voting power of all outstanding stock of the Company or its subsidiaries
may not exceed five years from the date of grant. A participant may pay the
exercise price (i) in cash, (ii) with the approval of the Committee, by
delivering shares of Common Stock owned by the participant and having a fair
market value on the date of exercise equal to the exercise price or (iii) by any
other method approved by the Committee. The Committee may permit a participant
to instruct the Company to deliver the shares of Common Stock due upon the
exercise to a designated broker instead of to the participant.

Restricted Stock. The Committee may issue shares of Common Stock to
participants pursuant to the Plan. Shares may be issued for cash consideration
or for no cash consideration, as the Committee determines. The number of shares
of Common Stock granted to each participant shall be determined by the
Committee, subject to the maximum limit described above. Grants of restricted
stock will be made subject to such performance requirements, vesting provisions,
transfer restrictions or other restrictions and conditions as the Committee may
determine.

Stock Appreciation Rights. The Committee may grant SARs alone or in tandem
with any stock option pursuant to the Plan. Unless the Committee determines
otherwise, the base price of an SAR will be the exercise price of the related
stock option or, if there is no related option, the fair market value of a share
of Common Stock on the date of grant of the SAR. When the participant exercises
an SAR, the participant will receive the amount by which the fair market value
of the Common Stock on the date of exercise exceeds the base price of the SAR.
The Committee shall determine whether the appreciation will be paid in cash or
in shares of

<PAGE>

Common Stock, or in a combination of the two. To the extent a participant
exercises a tandem SAR, the related option shall terminate. Similarly, upon
exercise of a stock option, the related SAR, if any, shall terminate.

Performance Units. The Committee may grant performance units to employees or
key advisors. Performance units may be payable in cash or shares of Common Stock
at the end of a specified performance period. Payment will be contingent upon
achieving performance goals by the end of the performance period. The measure of
a performance unit may be based on the fair market value of a share of Common
Stock or such other measurement base as the Committee may determine. The
Committee will determine the performance criteria, the length of the performance
period, the maximum payment value of an award, and the minimum performance goals
required before payment will be made.

Section 162(m). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration
includes amounts received upon the exercise of stock options granted under the
Plan and the value of shares received when the shares of restricted stock became
transferable (or such other time when income is recognized). An exception
exists, however, for "qualified performance-based compensation." The Plan is
intended to allow Grants to meet the requirements of "qualified
performance-based compensation."

Stock options and SARs should generally meet the requirements of "qualified
performance-based compensation," if the exercise price or base price is at least
equal to the fair market value of the Common Stock on the date of grant and if
the Committee meets the Section 162(m) requirements. The Committee may grant
performance units and restricted stock that are intended to be "qualified
performance-based compensation" under Section 162(m) of the Code. In that event,
the Committee shall establish in writing the objective performance goals that
must be met and other conditions of the award before the beginning of the
performance period or during a period permitted by Section 162(m) of the Code.
The performance goals may relate to the employee's business unit or the
performance of the Company and its subsidiaries as a whole, or any combination
of the two. The Committee shall use objectively determinable performance goals
based on one or more of the following criteria: stock price, earnings per share,
net earnings, operating earnings, return on assets, shareholder return, return
on equity, growth in assets, unit volume, sales, market share, or strategic
business criteria consisting of one or more objectives based on meeting
specified revenue goals, market penetration goals, geographic business expansion
goals, cost targets or goals relating to acquisitions or divestitures. The
Committee shall not have discretion to increase the amount of compensation that
is payable upon achievement of performance goals. If restricted stock or
performance units measured with respect to the fair market value of Common Stock
are granted as "qualified performance-based compensation," not more than 100,000
shares of stock may be granted to an employee under the performance units or
restricted stock for any year of a performance period. If performance units are
measured with respect to other criteria, the maximum amount that may be paid to
an employee with respect to each year of a performance period is $200,000. At
the end of each performance period, the Committee shall certify the results of
the performance goals and the extent to which the performance goals have been
met.

Transferability. Grants are generally not transferable by the participant,
except in the event of death. However, the Committee may grant NSOs that allow
the participant to transfer the NSOs on such terms as the Committee deems
appropriate.

Amendment and Termination of the Plan. The Board of Directors may amend or
terminate the Plan at any time; provided, however, that the Board of Directors
may not, without shareholder approval, make any amendment that requires
shareholder approval pursuant to Section 162(m) of the Code. The Plan will
terminate on the date immediately preceding the tenth anniversary of its
effective date, unless terminated earlier by the Board of Directors or extended
by the Board of Directors with approval of the shareholders.

<PAGE>

Adjustment Provisions. In the event of certain transactions identified in the
Plan, the Committee may appropriately adjust: (i) the maximum number of shares
of Common Stock available for Grants and the individual share limits, (ii) the
number of shares covered by outstanding Grants, (iii) the kind of shares issued
under the Plan and (iv) the price per share or market value of Grants, and such
adjustments shall be effective and binding for all purposes of the Plan.

Change of Control of the Company. In the event of a change of control, unless
the Committee determines otherwise, all options, restricted stock and SARs will
become fully vested, and grantees holding performance units will receive payment
in settlement of the units based on the target payment for the performance
period and the portion of the performance period that precedes the change of
control. If the Company is not the surviving corporation following the change in
control, the successor company would assume any outstanding Grants. The
Committee could also require that holders of options or SARs surrender those
Grants in exchange for a cash payment based on the excess of the stock's fair
market value over the exercise price of the Grants.

A change of control shall occur if (i) any person becomes a beneficial owner
of more than 50% of the voting power of the Company's securities, (ii) the
stockholders approve a liquidation or a sale of substantially all the Company's
assets occurs, (iii) the stockholders approve the merger or consolidation of the
Company with any other corporation where the shareholders of the Company
immediately before the transaction will not own more than 50% of the voting
power of all securities of the Company immediately after the merger, or (iv)
after the Plan is approved by the stockholders, directors are elected such that
a majority of the members of the Board shall have been members of the Board for
less than two years, unless the election or nomination of each new director who
is not a director at the beginning of the two year period was approved by vote
of at least two-thirds of the directors still in office who were directors at
the beginning of such period.

Federal Income Tax Consequences. The current federal income tax treatment of
Grants under the Plan is generally described below. Local and state tax
authorities may also tax incentive compensation awarded under the Plan, and tax
laws are subject to change. Participants are urged to consult with their
personal tax advisors concerning the application of the general principles
discussed below to their own situations and the application of state and local
tax laws.

There are no federal income tax consequences to a participant or to the
Company upon the grant of an NSO under the Plan. Upon the exercise of an NSO, a
participant will recognize ordinary compensation income in an amount equal to
the excess of the fair market value of the shares at the time of exercise over
the exercise price of the NSO, and the Company generally will be entitled to a
corresponding federal income tax deduction. Upon the sale of shares acquired by
the exercise of an NSO, a participant will have a capital gain or loss
(long-term or short-term depending upon the length of time the shares were held)
in an amount equal to the difference between the amount realized upon the sale
and the participant's adjusted tax basis in the shares (the exercise price plus
the amount of ordinary income recognized by the participant at the time of
exercise of the NSO).

A participant who is granted an ISO will not recognize taxable income for
purposes of the regular income tax, upon either the grant or exercise of the
ISO. However, for purposes of the alternative minimum tax imposed under the
Code, in the year in which an ISO is exercised, the amount by which the fair
market value of the shares acquired upon exercise exceeds the exercise price
will be treated as an item of adjustment and included in the computation of the
recipient's alternative minimum taxable income in the year of exercise. A
participant who disposes of the shares acquired upon exercise of an ISO after
two years from the date the ISO was granted and after one year from the date
such shares were transferred to him or her upon exercise of the ISO will
recognize long-term capital gain or loss in the amount of the difference between
the amount realized on the sale and the exercise price (or the participant's
other tax basis in the shares), and the Company will not be entitled to any tax
deduction by reason of the grant or exercise of the ISO. As a general rule, if a
participant disposes of the shares acquired

<PAGE>

upon exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), his or her gain recognized on such a disposition
will be taxed as ordinary income to the extent of the difference between the
fair market value of such shares on the date of exercise and the exercise price,
and the Company will be entitled to a deduction in that amount. The gain, if
any, in excess of the amount recognized as ordinary income on such a
disqualifying disposition will be long-term or short-term capital gain,
depending upon the length of time the participant held his or her shares prior
to the disposition.

A participant normally will not recognize taxable income upon receiving
restricted stock, and the Company will not be entitled to a deduction, until
such stock is transferable by the participant or no longer subject to a
substantial risk of forfeiture for federal tax purposes, whichever occurs
earlier. When the stock is either transferable or is no longer subject to a
substantial risk of forfeiture, the participant will recognize ordinary
compensation income in an amount equal to the fair market value of the shares
(less any amounts paid for such shares) at that time, and the Company will be
entitled to a deduction in the same amount. A participant may, however, elect to
recognize ordinary compensation income in the year the restricted stock is
awarded in an amount equal to the fair market value of the shares subject to the
restricted stock grant (less any amounts paid for such shares) at that time,
determined without regard to the restrictions. In such event, the Company
generally will be entitled to a corresponding deduction in the same year. Any
gain or loss recognized by the participant upon subsequent disposition of the
shares will be capital gain or loss.

There are no federal income tax consequences to a participant or to the
Company upon the grant of an SAR under the Plan. Upon the exercise of an SAR, if
the participant receives the appreciation inherent in the SAR in cash, the
participant will recognize ordinary compensation income in an amount equal to
the cash received. If the participant receives the appreciation in shares, the
participant will recognize ordinary compensation income in an amount equal to
the fair market value of the shares received. The Company generally will be
entitled to a corresponding federal income tax deduction at the time of the
exercise of the SAR. Upon the sale of any shares acquired by the exercise of an
SAR, a participant will have a capital gain or loss (long-term or short-term
depending upon the length of time the shares were held) in an amount equal to
the difference between the amount realized upon the sale and the participant's
adjusted tax basis in the shares (the amount of ordinary income recognized by
the participant at the time of exercise of the SAR).

There are no federal income tax consequences to a participant or to the
Company upon the grant of performance units under the Plan. If the participant
receives payment of the performance units in cash, the participant will
recognize ordinary compensation income in an amount equal to the cash received.
If the participant receives payment of the performance units in shares, the
participant will recognize ordinary compensation income in an amount equal to
the fair market value of the shares received. The Company generally will be
entitled to a corresponding federal income tax deduction at the time of the
payment of the performance units. Upon the sale of any shares acquired upon
payment of the performance units, a participant will have a capital gain or loss
(long-term or short-term depending upon the length of time the shares were held)
in an amount equal to the difference between the amount realized upon the sale
and the participant's adjusted tax basis in the shares (the amount of ordinary
income recognized by the participant at the time of the payment of the
performance units).

The Company's income tax deduction in any of the foregoing cases may be
limited by the $1,000,000 limit of Section 162(m) of the Code if the Grant does
not qualify as "qualified performance-based compensation" under Section 162(m)
of the Code (see "Section 162(m)" above).

Tax Withholding. The Company has the right to deduct from all amounts paid in
cash under the Plan or from other wages paid to an employee of the Company, any
federal, state or local taxes required by law to be withheld with respect to
Grants, and the participant or other person receiving shares under the Plan will
be required to pay to the Company the amount of any such

<PAGE>

taxes which the Company is required to withhold with respect to such shares. A
participant may elect to satisfy the Company's income tax withholding obligation
by withholding shares received from the exercise of a stock option or a
restricted stock or performance unit Grant. The shares withheld may not exceed
the participant's maximum marginal tax rate for federal, state and local tax
liabilities.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF THE AMENDMENT TO THE PLAN.

***

SHAREHOLDER PROPOSALS

Certain shareholders have submitted the two proposals set forth below. The
following proposals have been carefully considered by the Board, which has
concluded that their adoption would not be in the best interests of the Company
or its shareholders. For the reasons stated after each proposal, the Board
recommends a vote AGAINST each proposal.

Shareholder Proposal One
(Proxy Item No. 3)

Statement of Shareholder Proponent

Mr. Lee H. Lovejoy, Hideaway Farm, 170 Bryan's Road, Hampton, NJ 08827, owner
of 3,847 shares of common stock, has informed the Company that he plans to
introduce the following resolution (the "Shareholder Proposal") at the meeting:

RESOLVED: "The shareholders recommend that the Board of Directors take the
necessary steps to reincorporate the Company from Pennsylvania to Delaware."

----------------------------------------

Statement of the Board of Directors

The Board of Directors recommends that you vote AGAINST this Proposal.

Paragon Technologies, Inc., headquartered in Pennsylvania, has been a
Pennsylvania corporation since it was founded 42 years ago in 1958. The
Shareholder Proposal seeks to have the Board reincorporate into the state of
Delaware.

The Board has, as recently as February 9, 2000, discussed the possibility of
establishing a new corporate structure which would have resulted in the Company
reincorporating into Delaware. During these discussions, the Board identified
several concerns about reincorporation at this time and did not identify
measurable benefits to the Company or its shareholders from such a move.

During the past year, the Company's Board has put into place new senior
management which has been tasked with restructuring the Company's entire
operating system and reorganizing the Company's businesses. The Company has
begun to realize the results of these changes as evidenced by its greater
effectiveness and efficiency, business control systems, and an improving bottom
line. The Board of Directors desires to maintain the focus of the executives on
operating the business and does not want the executives to be distracted by
activities which neither enhance the Company's financial performance, nor
increase shareholder value.

<PAGE>

Reincorporation into the state of Delaware could cause the Company to incur
(i) the expenses related to soliciting shareholder approval through the calling
of a special meeting of shareholders and (ii) a variety of legal and accounting
costs, and also subject the Company to Delaware state franchise taxes without a
corresponding reduction in existing Pennsylvania taxes, and burden the Company's
administrative personnel with additional non-core business concerns.

The Board of Directors will continue to consider the issue of reincorporation
into the state of Delaware; however, at the present time, the Board recommends a
vote against this proposal.

***

Shareholder Proposal Two
(Proxy Item No. 4)

Statement of Shareholder Proponent

Mr. Anthony W. Schweiger, 240 Trianon Lane, Villanova, PA, 19085, owner of
19,000 shares of common stock (the "Proponent"), has informed the Company that
he plans to introduce the following resolution (the "Shareholder Proposal") at
the meeting:

BE IT RESOLVED, that Section 3.03 of the Bylaws of the Company ("Current
Bylaws") concerning Special Meetings of the Shareholders be amended and replaced
by the corresponding provision of the Bylaws as they were in effect in 1996
("Prior Bylaws").

In the opinion of the proponent shareholder, the Current Bylaws are not
shareholder friendly and do not allow shareholders adequate representation.
Shareholders have no rights to call a special meeting or have a reasonable
process by which they may bring issues or concerns about the Company to the
attention of other shareholders. Under the Current Bylaws, only the Board of
Directors or the Chief Executive Officer may determine what and when issues may
be presented to the shareholders. The Prior Bylaws provided shareholders with
substantially greater due process under which they could engage in corporate
governance. In particular, the Prior Bylaws provided that special meetings of
the shareholders could be called by the President, Board of Directors, and the
holders of the majority of shares entitled to vote.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN THE 1996 AND CURRENT
BYLAWS OF SI HANDLING SYSTEMS, INC./PARAGON TECHNOLOGIES, INC. REGARDING
SPECIAL MEETINGS

Special Meetings of Shareholders

The Prior Bylaws provide that a special meeting of the shareholders might be
called at any time by the President, the Board of Directors or the holders of a
majority of the shares entitled to vote. The Current Bylaws permit special
meetings only if they are called by the President or Board of Directors; no
number of shares is permitted to call for a special meeting of the shareholders.

----------------------------------------

<PAGE>

Statement of the Board of Directors

The Board of Directors recommends that you vote AGAINST the Shareholder
Proposal.

The Board of Directors conducted a review of the Company's Bylaws in the
spring of 1996 and determined that the Bylaws should be amended to update and
modernize the then existing Bylaws in order to give effect to a number of
changes in the Pennsylvania Business Corporation Law which had taken place over
the prior ten years. The Board of Directors carefully considered each revision
in 1996 and determined that the revisions were in the best interest of the
Company and its shareholders. In addition, the revisions to the Prior Bylaws,
including the provision regarding the special meetings of shareholders, were
described in the Company's proxy statement for the 1996 annual meeting of
shareholders and approved by a vote of the Company's shareholders at the annual
meeting on July 17, 1996.

The Proponent now suggests that shareholders do not have a reasonable process
by which they may bring issues or concerns about the Company to other
shareholders. In the opinion of the Board of Directors, shareholders do have the
ability to bring concerns about the Company to the attention of other
shareholders through shareholder proposals made in accordance with federal
securities laws, rules, and regulations. The procedures establish a process for
shareholders to make proposals and voice their concerns. In fact, the Securities
and Exchange Commission has in the past decade enacted many reforms that the
Board of Directors believes to have provided shareholders effective ways to
voice concerns. These range from expanding the ability to conduct "vote no"
campaigns, to lowering the costs and regulatory impediments to conducting proxy
contests.

Returning to the Prior Bylaws would permit a special meeting of shareholders
to be called by a majority of the shares entitled to vote. The practical
difficulties of obtaining a majority of the shares entitled to vote in a public
company such as Paragon Technologies is such that the provision would be rarely,
if ever, used. In fact, no special meetings of shareholders were called by
shareholders during at least the ten years prior to the 1996 amendments.

In addition, the process of calling a special meeting of shareholders is time
consuming and costly. The process diverts the attention of management and other
Company resources away from management's core focus of running the business and
results in printing, mailing, and legal fees and expenses.

The Board of Directors believes that the Company's Current Bylaws and the
procedures established by the SEC provide shareholders with the ability to bring
concerns about the Company to the attention of other shareholders. The Board of
Directors therefore recommends a vote against this proposal.

***

<PAGE>

--------------------------------------------------------------

INDEPENDENT ACCOUNTANTS

The Company's independent public accountants beginning in 1968 have been
KPMG LLP. Representatives of that firm are expected to be present at the
shareholders' meeting and available for questions and will be given an
opportunity to make a statement if they so desire.

2001 SHAREHOLDER PROPOSALS

Appropriate shareholder proposals which are intended to be presented at the
2001 Annual Shareholders' Meeting must be received by the Company no later than
January 15, 2001, in order to be included in the 2001 proxy materials. With
respect to shareholder proposals not included in the Company's proxy statement,
the Company may utilize discretionary authority conferred by proxy voting on any
such proposals if the shareholder does not give the Company notice of such
matter by March 30, 2001. Proxy proposals are to be sent to the attention of
Corporate Secretary, Paragon Technologies, Inc., 600 Kuebler Road, Easton, PA
18040.

OTHER MATTERS

The Company may pay brokers, nominees, fiduciaries, or other custodians for
their reasonable expenses in sending proxy materials to, and obtaining
instructions from, persons for whom they hold stock of the Company. The Company
expects to solicit proxies primarily by mail, but directors, officers, and
regular employees of the Company may also solicit in person, by telephone,
telegraph, or telefax.

As of the date of this Proxy Statement, management has no knowledge of any
matters to be presented at the meeting other than those referred to above. If
any other matters properly come before the meeting, the persons named in the
accompanying form of proxy intend to vote such proxy in accordance with their
best judgement.

THE COMPANY WILL PROVIDE WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY
SHAREHOLDER, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE TEN MONTHS ENDED DECEMBER 31, 1999. REQUESTS
SHOULD BE DIRECTED TO THE CORPORATE SECRETARY, 600 KUEBLER ROAD, EASTON,
PENNSYLVANIA 18040.

<PAGE>

PARAGON TECHNOLOGIES, INC.
(FORMERLY, "SI HANDLING SYSTEMS, INC.")

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Elmer D. Gates and Ronald J. Semanick,
or either of them acting in the absence of the other, as proxy holders, each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all shares of common
stock of Paragon Technologies, Inc. (formerly, "SI Handling Systems, Inc."),
held of record by the undersigned on June 26, 2000, at the Annual Meeting of
Shareholders to be held on August 24, 2000, at 11:00 a.m., local time, or at any
adjournment thereof.

This proxy when properly executed will be voted in the manner directed
on the reverse side. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND MATTER NO. 2 AND AGAINST MATTERS NO. 3 AND 4. This
proxy may be voted, in the discretion of the proxy holders, upon such other
business as may properly come before the Annual Meeting of Shareholders or any
adjournment thereof. The Board of Directors does not presently know of any other
matters to be presented at the meeting.

Please vote and sign on the other side. No postage is required if this
proxy is returned in the enclosed envelope and mailed in the United States.

SEE
(To Be Signed On Reverse Side) REVERSE
SIDE

--------------------------------------------------------------------------------
X Please mark your vote as in this example.

This proxy is solicited by the Board of Directors. Management recommends a vote
FOR the Directors nominated and Matter No. 2 and AGAINST Matters No. 3 and 4.

<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF /_/ /_/ NOMINEES: L. Jack Bradt 5. In their discretion, the Proxies are authorized to vote
DIRECTORS Elmer D. Gates upon such other matters as may properly come before the
Michael J. Gausling meeting or at any adjournments thereof.
William R. Johnson
Leon C. Kirschner
Steven Shulman
</TABLE>

For, except vote withheld from the following
nominee(s):
(INSTRUCTION: To withhold authority to vote
for any individual nominee, print that
nominee's name on the line below.)
--------------------------------------------- PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE.

I plan to attend the meeting. /_/

2. Amendment to Equity Compensation Plan
FOR AGAINST ABSTAIN
/_/ /_/ /_/

3. Shareholder FOR AGAINST ABSTAIN
Proposal No. 1 /_/ /_/ /_/

4. Shareholder FOR AGAINST ABSTAIN
Proposal No. 2 /_/ /_/ /_/

SIGNATURE(S) _______________________________ DATE_______________________________
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please provide full title and capacity.