SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 1 TO
FORM 10-K
---------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the ten months ended: Commission file number:
December 31, 1999 0-03362
PARAGON TECHNOLOGIES, INC. (formerly, "SI Handling Systems, Inc.")
---------------------------------------------------------------
(Exact Name Of Registrant As Specified In Its Charter)
Pennsylvania 22-1643428
------------ ----------
(State Or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation)
600 Kuebler Road, Easton, Pennsylvania 18040
-------------------------------------- -----
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 610-252-7321
Securities registered pursuant to Section 12(b) of the Act:
Title Of Class Name of Exchange on Which Registered
-------------- ------------------------------------
Common Stock, Par Value $1.00 Per Share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
(1) Has the registrant filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
with the Commission? Yes.
(2) Has the registrant been subject to such filing requirements for the past 90
days? Yes.
(3) Number of shares of common stock, par value $1.00 per share, outstanding as
of March 7, 2000 was: 4,184,878.
(4) The aggregate market value of the voting stock held by non-affiliates as
of March 7, 2000 was: $15,485,000.
(5) Indicate by check mark if disclosure of delinquent filers pursuant
to item 405 of Regulation S-K (ss. 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. |X]
Documents incorporated by reference. None.
<PAGE>
This annual report on Form 10-K amends the annual report on Form 10-K previously
filed by SI Handling Systems, Inc. on March 30, 2000 to the extent set forth
below.
PART III
--------
Item 10. Executive Officers of the Registrant
The names, ages, and offices with the Company of its executive officers are
as follows:
Name Age Office
---- --- ------
William R. Johnson 53 President and Chief Executive Officer, Director
Leon C. Kirschner 60 Corporate Vice President, President-Ermanco,
Director
William J. Casey 56 Executive Vice President
William F. Moffitt 50 Vice President - Finance, Chief Financial
Officer and Treasurer
James L. Thatcher 56 Vice President - Operations
Ronald J. Semanick 38 Controller and Secretary
Mr. Johnson was appointed President and a Director on March 29, 1999 and
Chief Executive Officer of the Company on July 21, 1999. From 1977 to 1998, Mr.
Johnson was employed by Rockwell Automation. He was Senior Vice President of
their Reliance Electric Motor Group. From 1968 to 1977, Mr. Johnson was employed
by Electric Machinery Manufacturing Company where he was an engineering manager.
Mr. Kirschner joined the Company upon the acquisition of Ermanco
Incorporated on September 30, 1999. He was appointed as Director and Corporate
Vice President of SI Handling Systems, Inc. and President of Ermanco.
Previously, he had served as President of Ermanco (1983 - 1999), and Senior Vice
President of W & H Systems, Inc. (1968 - 1983).
Mr. Casey was appointed Executive Vice President of the Company on November
10, 1999, and previously held the position of Vice President - Production &
Assembly Systems. He has served the Company in several capacities, including
Vice President - Sales, Director - Field Sales, Estimating Supervisor, Manager
of Lo-Tow Systems, and Mid-Atlantic Regional Sales Manager. Mr. Casey joined the
Company in February 1965.
Mr. Moffitt was appointed Vice President - Finance of the Company on
October 25, 1999. Prior to joining the Company, he was employed by Met-Pro (1986
- - 1998) as the Vice President - Finance, Secretary/Treasurer and Chief Financial
Officer, and as a Director. Previously, he was employed by IU International in
various capacities.
<PAGE>
Mr. Thatcher was appointed Vice President - Operations of the Company on
November 10, 1999 and previously held the position of Vice President -
Warehousing & Distribution Systems. He has served the Company in several key
positions including Vice President - Manufacturing & Assembly Services and
Customer & Software Services, Director-Operations, Project Engineer, Project
Manager, and Director-Customer Service. He joined the Company in August 1970 as
an engineer.
Mr. Semanick was appointed Secretary of the Company by the Board of
Directors on July 13, 1994. Currently, Mr. Semanick is the Company's Controller
and previously held the positions of Manager of Financial Accounting, Senior
Financial Accountant, and Financial Accountant. Prior to joining the Company in
1985, Mr. Semanick was employed as a Certified Public Accountant by Arthur
Andersen & Company of Philadelphia, Pennsylvania.
All executive officers hold office at the pleasure of the Board of
Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers and persons who beneficially own more than 10% of our
common stock (collectively, the "reporting persons") to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish us with copies of these reports. Based solely on our review of
those documents received by us, and written representations, if any, received
from reporting persons with respect to the filing of reports on Forms 3, 4 and
5, we believe that all filings required to be made by the reporting persons for
the ten months ended December 31, 1999 were made on a timely basis.
<PAGE>
Item 11. Executive Compensation
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 $100,000 in salary and bonus in the ten months ended December 31,
1999.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long-Term
Comp.
Fiscal ---------
Year Other Annual Stock All Other
Ended Salary Bonus Compensation Options Compensation
Name and Position (1) ($)(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 $385 per month.
(4) Options become exercisable in increments of 25% on the anniversary date of
the grant. Thus at the end of four years the options are fully exercisable.
Currently, all options have a term of five years. All stock option amounts
have been adjusted to reflect stock splits and dividends.
(5) This column includes the amounts expensed for financial reporting purposes
for Company contributions to the Company's 401(k) Retirement Savings Plan
pertaining to basic, matching, and profit sharing contributions relating to
Mr. Casey, and relocation costs relating to Mr. Johnson.
(6) Mr. Johnson became President and a Director of the Company on March 29,
1999.
</FN>
</TABLE>
<PAGE>
Stock Options Granted to Named Executive Officers During The Ten Months Ended
December 31, 1999
The following table sets forth certain information regarding options for
the purchase of the Company's common stock that were awarded to the Named
Executive Officers during the ten months ended December 31, 1999.
<TABLE>
<CAPTION>
Option Grants In The Ten Months Ended December 31, 1999
Potential
% of Total Realizable
Granted to Value at Assumed
Employees Annual Rates
In The Ten of Stock Price
Months Appreciation for
Options Ended Exercise Option Term (2)
Granted December Price Expiration -----------------
Name (#) (1) (2) 31, 1999 ($/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.
<TABLE>
<CAPTION>
Aggregated Option Exercises in the Ten Months Ended December 31, 1999
And Year-End Option Values
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 of up to one hundred percent (100%)
of the base salary then in effect, 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 incentive 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 incentive 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 as 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. 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>
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.
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 the 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 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 incentive 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.
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>
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.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
2/24/95 3/01/96 2/28/97 2/27/98 2/26/99 12/31/99
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
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 National Market under the
symbol "SIHS."
</FN>
</TABLE>
<PAGE>
Item 12. Security Ownership of Management and Certain Beneficial Owners
The following table sets forth certain information as of March 31, 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 - 7,609
Michael J. Gausling............................. - - 3,932
William R. Johnson.............................. 10,000 - -
Leon C. Kirschner............................... 160,650 - 3.84% -
Steven Shulman.................................. 221,850 - 5.30% -
William J. Casey................................ 9,864 5,727 -
All current directors and
executive officers as a
group (11 persons) (4) (5)................... 793,034 13,529 19.21% 11,541
<FN>
_____________________________
(1) The percentage for each individual, entity or group is based on the
aggregate number of shares outstanding as of March 31, 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 March 31, 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>
Item 13. Certain Relationships and Related Transactions
- ------- ----------------------------------------------
To complete the acquisition of Ermanco on September 30, 1999, the Company
issued $3,000,000 in subordinated promissory notes to the stockholders of
Ermanco, including notes in the amounts of $1,382,861 and $1,001,382 to Steven
Shulman and Leon C. Kirschner, respectively. Both Mr. Shulman and Mr. Kirschner
are directors of the Company, and Mr. Kirschner also serves as the president of
Ermanco. Note 4 of the Notes to Consolidated Financial Statements provides
additional information regarding the promissory notes issued to the fourteen
stockholders of Ermanco, thirteen of whom continue to be employees of Ermanco.
Ermanco, a wholly-owned subsidiary of the Company, has its principal
offices and manufacturing facility located in a 113,000 square foot steel
building in Spring Lake, Michigan. The building is leased from a limited
liability company of which Leon C. Kirschner, a director of the Company and the
president of Ermanco, is a member. The leasing agreement requires fixed monthly
rentals of $29,418 (with annual increases of 2.5%) plus a variable portion based
on the lessor's borrowing rate and the unpaid mortgage balance. The terms of the
lease require the payment of all taxes, insurance, and other ownership related
costs of the property. The lease expires on September 30, 2004.
<PAGE>
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
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(a) 1. and 2. An index to the consolidated financial statements of the
Company and the consolidated financial statement schedule is included in Item 8.
In addition, Schedule A relating to the SI/BAKER, INC. joint venture is filed
under 14(c) below.
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3. Exhibits:
<S> <C> <C>
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 Form 10-Q for the quarterly period ended
August 29, 1999).
3.1 Amended and Restated Articles (incorporated by reference to Exhibit 3.1 to Form 10-Q
for the quarterly period ended August 31, 1997).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 99.2 to the
Company's Registration Statement on Form S-8, filed on August 14, 1996 [No. 333-
10181]).
4.1 Form of Subordinated Promissory Note payable to the Stockholders of Ermanco
Incorporated dated September 30, 1999 (incorporated by reference to Exhibit 4.1 to
Form 8-K filed on October 15, 1999).
10.1 Revolving Credit Agreement dated July 22, 1993 (incorporated by reference to Exhibit
10.1 to Annual Report on Form 10-K for the fiscal year ended February 26, 1995).
10.2 Amendment to Revolving Credit Agreement dated April 28, 1995 (incorporated by
reference to Exhibit 10.2 to Annual Report on Form 10-K for the fiscal year ended
February 26, 1995).
10.4 1992 Incentive Stock Option Plan, Amended and Restated, Effective as of July 16,
1997* (incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarterly period
ended August 31, 1997).
10.5 Executive Officer Incentive Plan* (incorporated by reference to Exhibit 10.5 to Annual
Report on Form 10-K for the fiscal year ended February 26, 1995).
10.6 Directors' Deferred Compensation Plan* (incorporated by reference to Exhibit 10.6
to the Company's Registration Statement on Form S-8 [No. 333-10181]).
10.7 1997 Equity Compensation Plan* (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-8 [No. 333-36397]).
10.8 Joint Venture Agreement and Governing Documents Relating to SI/BAKER, INC.
(incorporated by reference to Exhibit 21.1 to Annual Report on Form 10-K for the
fiscal year ended February 26, 1995).
10.9 Second Amendment to the Joint Venture Agreement Relating to SI/BAKER, INC.
(incorporated by reference to Exhibit 10.9 to Annual Report on Form 10-K for the
fiscal year ended February 28, 1999).
10.10 Executive Employment Agreement with William R. Johnson dated March 29, 1999*
(incorporated by reference to Exhibit 10.10 to Form 10-Q for the quarterly period
ended May 30, 1999).
10.11 Employment Agreement with Leon C. Kirschner* (incorporated by reference to Exhibit
10.11 to Form 8-K filed on October 15, 1999).
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
(incorporated by reference to Exhibit 10.12 to Form 8-K filed on October 15, 1999).
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 (incorporated by reference to Exhibit
10.13 to Form 8-K filed on October 15, 1999).
10.14 Term Loan Agreement entered into September 30, 1999 by and between SI Handling
Systems, Inc., Ermanco Incorporated, and First Union National Bank (incorporated
by reference to Exhibit 10.14 to Form 8-K filed on October 15, 1999).
10.15 Promissory Note related to the Term Loan Agreement entered into September 30,
1999 by and between SI Handling Systems, Inc., Ermanco Incorporated, and First
Union National Bank (incorporated by reference to Exhibit 10.15 to Form 8-K filed on
October 15, 1999).
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 (incorporated by reference to Exhibit 10.16 to Form 8-K filed on October 15,
1999).
11.1 Statement regarding computation of per share earnings (loss) (see Note 1 of Notes
to Consolidated Financial Statements).
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule (in electronic format only).
<FN>
* Management contract or compensatory plan or arrangement required to be filed as an
Exhibit pursuant to Item 14(c) of this report.
</FN>
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(b) Reports on Form 8-K.
During the quarter ended December 31, 1999, Form 8-K/A's were filed
on December 14, 1999 and December 17, 1999. The filings pertained
to the pro forma financial information and audited financial
statements of Ermanco Incorporated. Closing of the acquisition
occurred on September 30, 1999.
(c) Exhibits 21, 23, and 27 were filed with the initial filing of this
report.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PARAGON TECHNOLOGIES, INC.
(formerly, "SI Handling Systems, Inc.")
Dated: May 1, 2000 By /s/ Elmer D. Gates
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Elmer D. Gates
Chairman of the Board of Directors
Dated: May 1, 2000 By /s/ William R. Johnson
------------------------------------
William R. Johnson
President and Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. This Annual Report
may be signed in multiple identical counterparts, all of which taken together,
shall constitute a single document.
Dated: May 1, 2000 /s/ Elmer D. Gates
-------------------------------------------------
Elmer D. Gates
Chairman of the Board of Directors
Dated: May 1, 2000 /s/ William R. Johnson
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William R. Johnson
President & Chief Executive Officer, Director
Dated: May 1, 2000 /s/ William F. Moffitt
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William F. Moffitt
Vice President-Finance, Chief Financial
Officer and Treasurer
(Principal Accounting and Financial Officer)
Dated: May 1, 2000 /s/ Leon C. Kirschner
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Leon C. Kirschner
Corporate Vice President, and
President of Ermanco Incorporated, Director
Dated: May 1, 2000 /s/ L. Jack Bradt
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L. Jack Bradt
Director
Dated: May 1, 2000 /s/ Michael J. Gausling
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Michael J. Gausling
Director
Dated: May 1, 2000 /s/ Steven Shulman
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Steven Shulman
Director
